For today’s piece, I want to introduce an interview with Dr. Liu Zongyi, Director of the Center for South Asia Studies at the Shanghai Institutes for International Studies (SIIS), who shares firsthand observations from a four-day visit to Kabul at the invitation of the Taliban’s Ministry of Foreign Affairs. There, he held extensive discussions with Taliban diplomats.

Dr. Liu holds a bachelor’s degree from Shandong University of Finance and Economics, and a master’s and doctoral degree in International Relations from China Foreign Affairs University. He has served as a visiting scholar at the German Institute of Development and Sustainability (IDOS, formerly DIE), the OECD Heiligendamm Process Support Unit, the Center for Strategic and International Studies (CSIS) in Washington, D.C., the National Institute of Public Finance and Policy (NIPFP) in India, and the Institute of Strategic Studies Islamabad (ISSI).

He observed that while the Taliban seeks investment from China, it refuses to cooperate on Beijing’s core security concern to expel the presence of the East Turkistan Islamic Movement (ETIM) on Afghan soil.

The Taliban government, it seems, has inherited the aid-dependent mentality of its predecessors. During the visit, a Foreign Ministry official handling China affairs even asked: “Look how much the US and the EU give us every year — what China has given us over the past five years doesn’t even amount to a fraction of that. Have you no shame?”

Yet for all the Western money that has flowed into Afghanistan, little of it appears to have reached ordinary people. Liu talked with Chinese citizens in Afghanistan, who described the system as the Americans took most of the share, while Afghan middlemen, involved in procurement, logistics, and translation services for the Americans, seized the opportunity to enrich themselves, amassing considerable personal fortunes in the process.

On the ground, Dr. Liu describes a Kabul where armed men roam the streets, beggars are everywhere, women have largely vanished from universities and workplaces, and the few Chinese nationals remaining operate small restaurants. Basically, the commercial is shrinking.

Dr.Liu was shocked that the Taliban’s young, many Western-educated diplomats, with PhDs from universities in Malaysia and New Zealand, who nonetheless defer completely to the ultraconservative religious authority in Kandahar. There’s tension between the Taliban’s desire for international recognition and its commitment to building what its clerical leadership envisions as “the world’s purest Islamic state.”

This interview was originally done in Chinese by Guancha Net. Thanks to Dr.Liu’s authorization, I can put the English version here. (Dr. Liu also provided some pictures he took, but due to the length limit of the newsletter, I couldn’t include them all here)

Guancha Net: In your exchanges with Afghan government officials, did you get a sense of what concerns them most?

Dr. Liu: In our conversations, the issue they raised most frequently was their hope that China would come and invest.

Their current foreign policy doctrine centers on what might be called “economy-first balanced diplomacy.” They subscribe to the notion that economics is politics, and seek to leverage economic cooperation as a platform to normalize bilateral relations with China, Central Asia, and other countries and regions. According to them, they are willing to establish formal diplomatic relations with anyone willing to engage — regardless of past grievances, no questions asked.

Guancha Net: It has been over four years since the Taliban returned to Kabul in August 2021. We know they previously generated revenue through opium cultivation, but in 2022 their supreme leader, Hibatullah Akhundzada, issued a decree banning poppy cultivation and the trade of related products nationwide. What is the situation now? And what steps has the Taliban government taken on the economic front over these years?

Dr. Liu: Drug cultivation has not been entirely eradicated. Their economy currently rests on two main pillars: agriculture and livestock on the one hand, and international aid on the other. That said, assistance from the US and other Western nations has been drastically reduced. Funding from the World Bank and the United Nations, however, continues to flow — large sums arrive in Kabul every month to sustain the basic livelihoods of the population.

On the whole, the Afghan economy has shown modest but steady improvement since the Taliban’s return to power. However, overall output has yet to recover to the levels seen under the former Ghani government prior to 2020.

Guancha Net: Based on everything you have observed, what is the single greatest bottleneck preventing Afghanistan from achieving self-sustaining economic development? Is it a shortage of capital, a lack of technology, international isolation, weak domestic governance — or something else entirely?

Dr. Liu: All of the above. A major reason many countries are reluctant to invest in Afghanistan is that the United States has yet to lift its financial sanctions on the country. This means foreign capital struggles to enter, and even when it does, any profits earned are extremely difficult to repatriate. Beyond that, Afghanistan’s domestic investment environment remains deeply inhospitable, with security being the single most formidable obstacle.

Under the Karzai and Ghani governments, terrorist attacks were rampant across Afghanistan — the majority of which were carried out by the Taliban themselves. Now that the Taliban are back in power, the overall security situation has improved noticeably compared to those years. Yet serious challenges remain. Organizations such as ISIS-Khorasan Province (ISIS-K), the Eastern Turkistan Islamic Movement (ETIM), Tehrik-i-Taliban Pakistan (TTP), and the Balochistan Liberation Army (BLA) continue to operate on Afghan soil. Some have even relocated their headquarters back into the country and are in a position to expand further.

Guancha Net: Ambassador Fu Cong made a point of raising this very issue in his remarks at the UN Security Council open debate on Afghanistan on March 9, stating that “eradicating terrorism is the foundation of security.” What is the Taliban’s posture on this question?

Dr. Liu: Security — and the ETIM issue in particular — has become the thorniest sticking point in our exchanges with the Taliban. They expressed confidence that ETIM is now entirely under their control, yet at the same time made clear they are unwilling to fully accommodate China’s demands on the matter.

They offered us several reasons. Historically, many members of these organizations fought alongside the Taliban against the Soviet invasion, creating bonds of so-called “battlefield brotherhood.” On the religious front, they share the Islamic faith. Under Pashtun tribal custom, they are duty-bound to protect those who seek refuge rather than hand them over. And at the societal level, these individuals have forged ties with local Afghans through intermarriage and other social bonds. For all these reasons, the Taliban indicated they are unwilling to make easy concessions on this issue.

Complicating matters further, ETIM has now pledged allegiance to the Taliban government and is helping maintain order in certain areas — a reality that makes the diplomatic equation all the more intractable.

Guancha Net: There seems to be something inherently contradictory about refusing to cooperate on security while simultaneously expecting large-scale Chinese investment.

Dr. Liu: Indeed. And this is precisely why their society remains so heavily dependent on international aid. During our visit, the Foreign Ministry official responsible for China affairs said to us point-blank: “Look how much the US and the EU give us every year — what China has given us over the past five years doesn’t even amount to a fraction of that. Have you no shame?” We pushed back on the spot: “Your problems are not of our making. Afghanistan’s current predicament has nothing to do with us. Whatever aid we provide is purely humanitarian — you can hardly compare us to the very Western powers that wreaked havoc in your country.” He seemed to realize he had overplayed his hand and dropped the subject after that.

According to some Chinese nationals familiar with the local scene, Afghanistan’s historical position astride major trade routes has bred a distinctive national trait: the people are remarkably skilled at what might politely be called “creative persuasion.” Over its twenty-year occupation, the United States poured roughly two trillion dollars into Afghanistan, yet barely managed to build a single decent road. A large part of the reason is that funding was siphoned off at every level — the Americans took the lion’s share, while locals involved in procurement, logistics, translation services, and other support roles seized the opportunity to enrich themselves, amassing considerable personal fortunes. These figures need further verification, but Kabul has undeniably seen the emergence of quite a number of ultra-wealthy individuals.

Guancha Net: Do you have a sense of what industries Chinese nationals in Afghanistan are currently engaged in? And how are they faring?

Dr. Liu: I specifically asked officials at the Chinese Embassy in Afghanistan about the exact number of Chinese citizens currently in the country, but even they were unable to provide a precise figure. There are two main reasons: first, Afghanistan’s customs system is not yet digitally interconnected, making accurate tracking difficult; second, Chinese travelers do not necessarily fly directly from China — we ourselves, for instance, flew to Dubai first and then connected to Kabul, which further complicates the count.

As for the industries in which Chinese nationals are active, state-owned enterprises have very little presence in Afghanistan from what I understand. A mining project originally slated to commence development after the Spring Festival was shelved following the terrorist attack on a Chinese restaurant in Kabul on January 19. The Taliban, fearing the incident would spook foreign investors, initially tried to cover it up by claiming it was a gas explosion. Additionally, the Taliban previously terminated a 25-year exclusive development contract awarded to a Chinese firm for the Amu Darya oil field — reportedly in exchange for an EU aid package, one of whose conditions was the cancellation of that very partnership with the Chinese company.

Among Chinese enterprises in Afghanistan, not only are state-owned firms scarce, but private ones are few and far between as well — only a handful of private companies maintain representative offices. Overall, formal commercial activity is steadily contracting, with some operations having ceased altogether. At the individual level, apart from small-scale entrepreneurs running restaurants or trading in Chinese herbal medicines, there are also a number of risk-takers lured by the prospect of fortune in dangerous lands — people hoping to try their luck in mining or prospecting.

Guancha Net: From what you personally observed on the streets of Kabul, what is the most honest picture you can paint of local social order and everyday life?

Dr. Liu: For this trip, the Afghan Foreign Ministry provided us with two armored SUVs. On certain occasions, armed police from the Chinese Embassy also provided on-site security to guard against potential attacks. On the streets of Kabul, armed individuals are a ubiquitous sight. On the one hand, the Taliban currently have no standardized military uniforms, so their soldiers are largely indistinguishable from civilians — most wear turbans and traditional robes. On the other, after decades of war, virtually every household in Afghanistan is said to possess firearms.

Moreover, given Afghanistan’s dire economic conditions and extremely high unemployment, beggars are a common sight on the streets. People familiar with the local situation warned us that because of the proliferation of weapons, a short visit without any financial commitment is one thing — but if you actually invest money, certain locals may begin to take a calculating interest in you.

Guancha Net: The rights of women and girls are among the international community’s primary concerns regarding Afghanistan — Ambassador Fu Cong addressed this in his remarks as well. Did you have any opportunity to observe the real living conditions of women, whether on the streets of Kabul or in specific settings? Since returning to power, the Taliban have enacted numerous bans restricting women’s access to education and employment. From your observations, is there any “room for flexibility” in how these bans are actually enforced?

Dr. Liu: The Afghan government’s cabinet is based in Kabul, but the supreme leader Akhundzada resides year-round in Kandahar, his birthplace, and all major national decisions are made from there. Akhundzada is surrounded by a circle of theological clerics who are deeply devout and aspire to build Afghanistan into “the purest Islamic state on earth” — ideologically, they gravitate toward something resembling a return to the medieval era. In other words, they are profoundly conservative, which is precisely why policies such as the ban on girls’ education have been enacted.

From my own observations during this trip, women were still visible on the streets. Most wore black abayas and headscarves; some had their faces covered rather thoroughly, while others — particularly younger women — did not veil their faces at all. Some women were out on their own, though more commonly it was mothers accompanied by their children.

At Kabul University, however, we did not see a single woman. At the hotel where we stayed for four days, we encountered only one female staff member — the front desk was manned exclusively by men for the first three days, and it was not until checkout on the final day that a woman suddenly appeared to process our bill. In today’s Afghanistan, women are generally not permitted to work. As for why she was allowed to, we did not dare ask.

Guancha Net: If I recall correctly, when the Taliban first returned to power, they co-opted a number of technocrats from the broader society. At the time, many scholars and observers hoped these individuals might help modernize the Taliban’s governance capacity. Yet judging from the subsequent marginalization of these figures and from your analysis, reality appears to have diverged sharply from those initial expectations.

Dr. Liu: One thing that genuinely surprised me on this trip was that the Foreign Ministry officials we dealt with — directors-general, deputy directors-general, and the like — were mostly born in the 1980s and 1990s. Some had received higher education abroad, in countries like Malaysia and New Zealand; a few even held doctoral degrees. And yet their deference and obedience to Kandahar was absolute.

This speaks volumes about Akhundzada: not only is he a hardened political operator, but he enforces an exceptionally rigorous standard of ideological discipline. My personal sense is that the reason these Western-educated young officials display such reverence for religious authority has everything to do with the family and social environments in which they were raised.

Guancha Net: And how do they view international concern over women’s rights in Afghanistan?

Dr. Liu: They believe the outside world has it wrong. In their view, the Taliban face two principal challenges on the international stage since returning to power. The first is the narrative battle over their international image — they are convinced that their negative reputation is entirely a Western construct. The second is what they see as a fundamental gap in the outside world’s political understanding. They regard themselves as a revolutionary government, one bound by a strong internal cultural identity with its own framework for understanding ideology and international relations — and yet the world insists on treating them as a problem to be solved.

Frankly, I believe the Taliban leadership suffers from certain cognitive blind spots. They have a limited understanding of the outside world and seem disinclined to learn more, which has left them without an objective assessment of their own standing. For example, they are well aware that India is an unreliable partner, yet they have deliberately courted New Delhi in order to pressure Pakistan — a move that has deeply antagonized Islamabad. Or take the case I mentioned earlier: terminating an oil field development partnership with a Chinese company in exchange for an EU aid package. In my view, these are profoundly short-sighted decisions.

Below is Dr. Liu's analysis of how this crisis intersects with the US–Iran confrontation, published in another piece:

Against the backdrop of ongoing US and Israeli military strikes on targets inside Iran, the risk of conflict spillover poses multiple direct threats to Pakistan.

First, Pakistan and Afghanistan remain in a state of active hostilities. Although China-brokered trilateral talks among China, Afghanistan, and Pakistan are currently underway in Xinjiang, whether a ceasefire can be achieved remains uncertain. The principal obstacle lies on the Afghan side. Beyond the reasons we analyzed in our previous conversation, there is another important factor behind the Afghan Taliban’s sheltering of insurgent and terrorist organizations such as the TTP and ETIM: ETIM’s headquarters is located in Afghanistan, and Western countries — seeking to undermine China’s unity and stability — have funneled substantial funds to the group. In other words, ETIM effectively operates a global fundraising network, and the Taliban are able to tap into a steady stream of revenue through their so-called “protection.” The TTP, too, enjoys the backing of regional or international actors. If Afghanistan and Pakistan cannot reach an agreement on the issue of terrorist organizations, the war between them will be exceedingly difficult to bring to a definitive end.

Second, should the conflict spill over further, the United States and Saudi Arabia may seek to use Pakistan as a corridor for deploying forces against Iran. Pakistan shares a long border with Iran — in particular, Pakistan’s Balochistan province abuts Iran’s Sistan-Baluchestan province to the southeast. The Balochistan issue is an existential concern for Pakistan. If insurgent groups such as the Balochistan Liberation Army exploit the chaos of a US–Israeli–Iranian war and the Afghan–Pakistani conflict to secure support from countries like India and expand their strength — and then link up with Baloch populations inside Iran — Pakistan could face a genuine risk of territorial disintegration.

Furthermore, Pakistan is home to a substantial Shia population. Should Pakistan be drawn into a war against Iran, its Shia citizens would clearly not side with the government, compounding the risk of national fracture.

On top of all this, Pakistan is heavily dependent on oil imports from Gulf states such as the UAE and Saudi Arabia. An escalation of the war would trigger a severe energy crisis — and given that Pakistan’s domestic economy is already struggling, an energy crisis is the last thing its leadership wants to see.

Pakistan thus finds itself squeezed between Saudi and American pressure. Its goal is to avoid antagonizing either side while giving all parties a satisfactory account of its actions. This is why it has stepped forward as a mediator: by passing messages that help shield Saudi Arabia’s critical infrastructure from attack, it deflects Riyadh’s demands for direct involvement; by easing the awkwardness for Trump, it extends the US–Pakistan honeymoon; and all the while, it safeguards its own oil supply.

1. The High-Level Configuration of the National Services Sector Conference

The background to Xi’s directive was the National Services Sector Conference held on April 7–8. The seniority of the attendees alone signals the weight Beijing is placing on the sector: following Xi’s directive, Premier Li Qiang attended and delivered a speech, while Vice Premier Ding Xuexiang gave the concluding remarks. The combination of “General Secretary’s directive + Premier’s speech + Vice Premier’s summary” represents a relatively high-level configuration for a specialized economic conference. It’s an especially high one when applied to a specific sector like services.

2. Xi Jinping’s Directive on the Services Sector

Xi first framed the role of the services sector:

“It has played an important role in supporting industrial upgrading, meeting the needs of people’s livelihoods, and driving employment expansion.”

In a sense, the ordering of these three functions may reflect their respective weight in the leadership’s thinking. This is consistent with the priority structure embedded in the recent official narrative around the “modernized industrial system”

On the direction of services sector development, Xi stated:

“Highlight demand-driven growth, reform breakthroughs, technological empowerment, and opening-up and cooperation; deeply implement the services sector capacity-expansion and quality-upgrading initiative; advance producer services toward specialization and the high end of the value chain; promote high-quality, diversified, and convenient development of consumer services; and cultivate more ‘China Services’ brands.”

What stands out here is that “China Services” is singled out as a branding concept. This, in a sense, suggests that its importance has been elevated to a level comparable to that of “Made in China” (I avoid the word “equal”, cause from a first-principles standpoint, manufacturing remains the top priority within all industrial sectors). This formulation is reiterated in the State Council’s document and echoes the quantitative target of “pushing the total scale of the services sector above the 100-trillion-yuan threshold by 2030.”

3. Li Qiang’s Speech: Strategic Positioning and “Balancing Openness with Regulation”

Li Qiang followed with a speech calling for the need to “consciously deepen our understanding of the services sector from a strategic and holistic perspective” — a phrasing that in itself reaffirms the policy standing now accorded to the sector.

In terms of wording, Li Qiang’s emphasis centered on “capacity expansion and quality upgrading.” It’s a distinctly supply-side orientation, indicating that policy is focused primarily on the industry itself rather than on stimulating demand.

Also worth noting are several parallel formulations that immediately follow:

“Coordinate development and regulation… ensuring that the sector is both vibrant and healthily ordered.”

And later, this is reiterated as:

“Adhere to both ‘letting it flow freely’ and ‘governing it well.’”

The repetition of these paired phrases emphasizes that as the services sector is “opened up,” regulation must keep pace. This reflects a cautious attitude toward the potential risks that may accompany the services sector’s development.

4. The State Council’s Opinion

The Opinion on Promoting Capacity Expansion and Quality Upgrading of the Services Sector issued yesterday carries forward this supply-side approach. It sets the target of pushing the total scale of the services sector above 100 trillion yuan by 2030, meaning that services sector policy during the 15th Five-Year Plan period will have explicit quantitative benchmarks, making assessment and evaluation more operational.

The Opinion divides the services sector into producer services and consumer services.

Producer services (six sub-items) cover: technology services, modern logistics, software and information services, supply-chain finance, energy conservation and environmental protection, and business services. The emphasis here is on “shoring up weak links,” with the phrase “extending toward specialization and the high end of the value chain” appearing repeatedly. In my view, this targets the sector’s supporting role for manufacturing and the broader modernized industrial system.

Consumer services (four sub-items) cover: household services, elderly care and childcare, health, and culture/tourism/sports. The emphasis here is on “increasing high-quality supply,” corresponding to Xi’s call for development that is “high-quality, diversified, and convenient.”

An interesting feature appears in Part V (”Improving the Supporting Policy System”), where the first and last provisions form a closed loop. The first provision calls for clearing out unreasonable standards and restrictive measures in the services sector, corresponding to “letting it flow freely.”

While the final provision specifically addresses unfair contract terms (”overlord clauses”), false advertising, food safety, and the rights of workers in new forms of employment, corresponding to “governing it well.” And I think the final one is primarily a response to recent public concerns surrounding the platform economy and sectors such as food and beverage services, and it basically translates Li Qiang’s “letting it flow freely, governing it well”(放得活，管得好) principle.

Below is the full translation of the document I made with the help of AI

State Council Opinion on Promoting Capacity Expansion and Quality Upgrading of the Services Sector

To: The People’s Governments of all provinces, autonomous regions, and municipalities directly under the Central Government; all ministries and commissions of the State Council; and all directly subordinate agencies:

In order to promote capacity expansion and quality upgrading of the services sector, to foster the high-quality and efficient development of the sector, and to better bring into play the role of services in supporting industrial upgrading, meeting the needs of people’s livelihoods, and driving employment expansion, the following Opinion is hereby issued.

I. Overall Requirements

Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, thoroughly implementing the spirit of the 20th Party Congress and of all plenary sessions of the 20th Central Committee, earnestly carrying out the arrangements of the Fourth Plenary Session, fully and faithfully applying the new development philosophy in all respects, upholding the integration of an effective market and a capable government, pursuing capacity expansion and quality upgrading in parallel, coordinating development with regulation, and highlighting demand-pull, reform breakthroughs, technological empowerment, and opening-up and cooperation — we will coordinate the optimization of new increments with the revitalization of existing stock, deeply implement the services-sector capacity-expansion and quality-upgrading initiative, remove the institutional and mechanism-related barriers constraining services-sector development, advance producer services toward specialization and the high end of the value chain, promote the high-quality, diversified, and convenient development of consumer services, and provide robust support for accelerating the building of a modernized industrial system.

By 2030, notable progress shall be achieved in the high-quality development of the services sector: the total scale of the services sector shall climb past the 100-trillion-yuan threshold; a development pattern featuring higher quality, a better structure, finer grade, and greater vitality shall have taken basic shape; more “China Services” brands shall be cultivated; the global competitiveness and influence of China’s services sector shall be markedly enhanced; and the people’s sense of gain shall continue to grow.

II. Shoring Up Weak Links in Producer Services Across the Full Chain

(1) Strengthening the Supporting Role of Science and Technology Services

R&D and design. Cultivate leading industrial-design enterprises and raise their professional and international standing. Enhance the service capacity of the national network management platform for major research infrastructure and large-scale scientific instruments, and improve the evaluation and assessment mechanisms for open sharing of research facilities and instruments. Upgrade full-process services such as engineering survey, design, and supervision.

Intellectual property. Develop IP-related services such as strategic consulting and patent navigation, and screen for high-value patents. Support the establishment of patent pools in key industries, systematically raise IP service standards, and strengthen the capacity to respond to foreign-related IP risks and provide legal services. Strengthen the international-operations capacity of copyright services.

Transformation of scientific and technological achievements. Enhance policy support for the high-quality development of incubators, and set up incubators oriented toward emerging industries and industries of the future. Build a pilot-scale service network for the manufacturing sector, cultivate manufacturing pilot-testing platforms in a tiered fashion, and develop, to a high standard, the National Pilot Base for Artificial Intelligence Applications. Improve the network of technology-trading service platforms, and build high-caliber technology-transfer and dissemination institutions. Establish regional technology-transfer and commercialization centers at universities, and promote the clustering of scientific and technological innovation factors.

Inspection, testing, and certification. Benchmarking against world-class standards, upgrade inspection and testing service capabilities and push for international mutual recognition of results. Advance the construction of laboratories for industrial-product quality control and technical evaluation, quality inspection and testing centers, and industrial metrology and testing centers. Strengthen testing and assessment capabilities for infrastructure conditions, agricultural-product quality, and the like. Strengthen R&D on high-end metrological instruments and inspection and testing equipment.

(2) Enhancing the Comprehensive Competitiveness of Modern Logistics

Freight transport. Improve the multimodal-transport system and promote the implementation of “one-document” and “one-container” systems. Vigorously develop rail-water intermodal transport, and accelerate the shift of bulk cargo and medium-to-long-distance freight “from road to rail” and “from road to water.” Accelerate the transition of rail freight toward rail logistics, and refine industry rules on railway dispatching, clearing, and line connection. Improve the operations and dispatching mechanisms for oil and gas pipeline networks, and accelerate nationwide interconnection. Vigorously develop international shipping and air-freight services. Accelerate the cultivation of integrated logistics integrators, and strengthen resource dispatching and supply-demand matching.

Warehousing. Advance the renewal, renovation, and upgrading of aging logistics and warehousing facilities; explore the reactivation of idle facilities and rail-freight yards; and promote the construction of distributed warehousing facilities. Strengthen services such as origin-based cold storage and preservation, post-harvest pre-cooling, and cleaning and packaging for agricultural products. Coordinate the layout of public, circulation-oriented, and multifunctional cold storage, and upgrade aging cold-storage facilities.

Wholesaling. Guide the rational layout of spot markets for bulk commodities, and promote linked development between futures and spot markets. Enrich the business formats of industrial consumer-goods markets, and explore integrated services such as centralized procurement and warehousing-distribution. Strengthen the systematic layout and policy support for agricultural wholesale markets, and promote the renovation and upgrading of farmers’ markets.

(3) Accelerating the Innovative Development of Software and Information Services

Software. Deeply implement the “AI Plus” initiative, accelerate R&D and adoption of intelligent programming tools, and support procurement of large-model and intelligent-agent services. Accelerate breakthroughs in industrial software, and build compatibility-adaptation and application-demonstration centers for industrial software in key industries. Strengthen the ecosystem of foundational software and open-source communities. Optimize the ecosystem for intelligent audio-visual systems.

Information transmission. Deeply advance the large-scale application of 5G. Promote the development of 5G-A networks, and strengthen R&D on 6G technology. Build mobile IoT infrastructure with appropriate forward-looking deployment. Develop satellite-internet application services.

Data and information technology. Deeply implement the Industrial Internet Innovation and Development Program. Advance the initiative to lay the foundation for industrial data, cultivate data cooperation consortia, and build a number of high-quality industry datasets. Develop specialized services such as data labeling and certification, and explore the establishment of a tiered and classified mechanism for data rights confirmation, valuation, and pricing. Advance, in an orderly manner, the layout of computing power and the construction of edge computing, and improve the intelligent-computing cloud-service system. Accelerate the adoption of City Information Modeling (CIM) platforms and Building Information Modeling (BIM) technology.

(4) Strengthening the Specialized Service Capacity of Supply-Chain Finance

Banking, securities, and insurance. Guide financial institutions — on the premise of lawful compliance and controllable risks — to provide financing secured by movable assets and rights such as inventory, orders, and warehouse receipts. Establish a full-lifecycle financing system oriented toward investing early, investing small, investing long-term, and investing in hard tech. Give full play to the role of the National Venture Capital Guidance Fund, and refine and extend the “Innovation Points System” and the evaluation system for “Little Giant” (SRDI) development of SMEs. Promote new financial-service instruments such as supply-chain bills. Expand the coverage of product-R&D liability insurance, promote insurance for pilot-testing services, and implement the insurance-compensation policy for “first-unit-set” products. Launch the Digital RMB Empowerment Initiative. Explore mutual recognition of cross-border supply-chain-finance standards.

Financial leasing. Encourage financial-leasing enterprises to make coordinated use of service models such as direct leasing, sale-and-leaseback, and joint leasing, to provide customized solutions and reduce lessees’ operating costs. Strengthen monitoring and assessment of lessees’ credit status and repayment capacity, and build a sound valuation system for leased assets. Give full play to the role of government-backed financing guarantee institutions, and establish a risk-sharing mechanism for supply-chain finance.

(5) Actively Developing Energy-Conservation and Environmental Services

Energy conservation and carbon reduction. Advance energy-efficiency diagnostics in key industries, promote the energy-cost-hosting service model for public institutions, and carry out energy-saving and carbon-reduction retrofits for public institutions and large public buildings. Lawfully and prudently conduct financing secured by carbon-emission rights, pollution-discharge rights, water-use rights, and the like. Encourage financial institutions to participate in carbon-market trading, explore carbon-insurance business, and promote innovative products such as carbon-neutrality bonds.

Environmental governance. Develop technical services for green, high-yield, and efficient agriculture, and for the treatment and utilization of agricultural waste. Accelerate the development of environmental services such as marine ecological restoration and pollution control. Expand services such as water-conservation assessment, environmental monitoring, and pollution insurance.

Recycling and reuse. Advocate the concept of green economy and thrift, encourage the adoption of products with higher energy-efficiency grades, and phase out — in accordance with laws and regulations — products that meet the mandatory scrapping standards or fail to comply with safety technical specifications. Improve the layout of recyclable-resource collection networks, strengthen the “trade-in + recycling” logistics system, and coordinate the construction of recyclable-resource sorting centers. Support remanufacturing services in key industries. Establish a certification system for recycled materials, and promote international cooperation and mutual recognition. Deepen research on carbon-footprint accounting standards and methodologies for key recycled materials.

(6) Making Business Services Stronger and Better

Legal and consulting services. Actively develop foreign-related legal services, and cultivate a group of world-class arbitration institutions and law firms. Vigorously develop professional services such as business consulting, asset appraisal, accounting and auditing, taxation, and advertising, and enhance capacity in quality consulting and supply-chain management services. Strengthen industry think tanks, and build world-class consulting brands.

Human-resources management. Release catalogs of demand for “high-end, cutting-edge, and scarce” talent, and continue to implement the Knowledge-Updating Program for Professional and Technical Personnel. Improve the vocational skills competition system with Chinese characteristics. Develop service products such as job-search-and-recruitment large models and VR-based training. Deeply advance the “Belt and Road” Human-Resources Services Initiative.

III. Raising the Development Level of Key Areas of Consumer Services

(7) Increasing High-Quality Supply of Household Services

Community and domestic services. Innovate integrated community-service models, and advance the expansion, upgrading, and efficiency enhancement of “complete communities.” Carry out an initiative to raise the quality of property-management services. Pursue institutional and model innovation in domestic services, expand new types of at-home services, improve the caliber and professional standards of practitioners, and enhance the public’s micro-level experience. Focus on meeting the special-care needs of disadvantaged groups.

Retail. Promote rational urban-rural planning and layout of the retail sector, implement the Retail Innovation and Upgrading Program, and support eligible cities to craft new consumption settings on a “tailored, store-by-store” basis. Encourage the development of instant-delivery formats such as community micro-cold-storage and forward-positioned warehouses. Implement the High-Quality Rural E-commerce Development Program, and advance the “Thousand-Market, Ten-Thousand-Store” upgrading initiative.

(8) Improving the Fit of Elderly-Care and Childcare Services

Elderly care. Strengthen the three-tier county-township-village elderly-care service network, expand the coverage of community-based elderly-care services, and encourage home-based aging-friendly renovations. Expand the supply of services such as rehabilitation and nursing care, integrated medical and elderly care, and long-term care, and develop new service formats such as travel-based retirement living.

Infant and childcare. Develop inclusive childcare and integrated childcare-and-preschool services, deeply carry out demonstration pilots for childcare-service subsidies, and support child-welfare institutions in providing care, rehabilitation, and special education services for children with disabilities in need.

(9) Enhancing the Professional Capacity of Health Services

Medical and health services. Support medical and health institutions in carrying out personalized family-doctor contracting services, providing health assessments, chronic-disease management, home visits, and medication guidance. Prudently advance pilots for international medical services.

Prevention and health care. Develop women’s preventive health care and integrated medical-care services, and improve the health-service network for children and the elderly. Strengthen the construction of a socialized service system for mental health and psychiatric wellness. Accelerate the development of services such as sports-data analytics and nutritional consulting.

(10) Innovating Service Models for Culture, Tourism, and Sports

Culture and tourism. Guide the healthy and orderly development of performing arts and entertainment, gaming and animation, online literature, and similar formats, and promote positive values. Encourage popular scenic spots and cultural and museum venues to extend opening hours. Improve public facilities at scenic areas, revitalize existing tourism projects, strengthen refined management, and optimize service supply.

Sports and fitness. Widely carry out nationwide fitness activities to strengthen the people’s physical health. Advance the high-quality development of the sports-events economy and the ice-and-snow economy, cultivate new formats such as RV camping, and build high-quality outdoor-sports destinations. Nurture new sports-consumption models that are intelligent, customized, and experience-based.

Accommodation and catering. In response to the upgrading of public needs — from “having a place to stay” to “staying well and staying worthwhile” — raise safety and hygiene standards, expand new service models, and develop new accommodation formats incorporating historical-cultural, technological, and family-oriented elements. Cultivate catering services that are healthy, safe, nutritionally balanced, and reflective of local character, and release curated gourmet-tourism routes.

IV. Raising the Digital-Intelligent, Standardization, Integration, and Internationalization Levels of the Services Sector

(11) Advancing the Digital-Intelligent Transformation of the Services Sector

Focusing on key segments such as R&D and design, inspection and testing, logistics and distribution, wholesale trade, and consulting services, build vertical industrial-internet platforms and lower the threshold for digital-intelligent transformation through “small, fast, light, and precise” solutions. Implement a special initiative to accelerate the development of digital-intelligent supply chains, and advance the digital-intelligence empowerment program for commercial and trade logistics. With data as the enabler, implement comprehensive major-scenario and high-value application-scenario projects, cultivate digital-intelligent transformation service providers, and build benchmark applications integrating data, algorithms, and scenarios.

(12) Accelerating Standardization in the Services Sector

Strengthen top-level design and improve the standards system for key areas. Refine standards and norms for domestic services, caregiving, catering, and related fields. Accelerate the formulation of service standards for emerging and integrated formats such as low-altitude services and socialized agricultural services. Build a standards system and interconnection technical specifications for industrial-internet platforms, establish a standards system for computing-power services, and formulate or revise green-service standards. Improve service standards for the platform economy. Promote the establishment of international industry and standards organizations, and advance the “going global” of Chinese standards.

(13) Raising the Level of Integrated Development Between Modern Services, Advanced Manufacturing, and Modern Agriculture

Deepen pilots on the integration of advanced manufacturing and modern services in key areas. Innovate the development of service-oriented manufacturing, and push manufacturing enterprises to transform into providers of “product + service” solutions. Improve the convenient and efficient socialized-services system for agriculture, and optimize the functions of agricultural-product market-information service platforms. Actively promote the deep integration of agriculture with health care, cultural tourism, and the like.

(14) Steadily Advancing Opening-Up and Cooperation in the Services Sector

Further expand opening-up pilots in fields such as value-added telecommunications, biotechnology, and wholly foreign-owned hospitals. Refine the negative-list management system for cross-border trade in services. Enhance service capabilities for cross-border data-transfer compliance assessment and security certification. Strengthen services-trade cooperation with key countries and regions, and coordinate the layout and construction of major opening-up and cooperation platforms such as Pilot Zones for Innovative Development of Trade in Services. Promote the export of cultural and tourism services, and expand inbound consumption.

V. Improving the Supporting Policy System

(15) Deepening Reform and Innovation

Adhere to both “letting it flow freely” and “governing it well.” Clear out unreasonable standards and restrictive measures in the services sector, and promptly eliminate barriers in areas such as factor access, qualification recognition, tendering and bidding, and government procurement. Deepen the reform of public-service institutions in service-related fields, and enhance their development vitality. Optimize the market-access environment in areas such as medical care and technological innovation. Enrich the supply of service scenarios, and roll out lists of application-scenario projects in batches. Improve the statistical system, build a multi-dimensional comprehensive evaluation-indicator system for services-sector development, and accelerate big-data-based oversight.

(16) Enriching Fiscal and Financial Policy Instruments

Enhance the targeting and effectiveness of policy support, and improve a financing credit-enhancement system covering elements such as quality, standards, brands, trademarks, patents, and copyrights. Make good use of the relending facilities for service consumption and elderly care. Enrich the development of pension-finance products, and roll out long-term care insurance. Optimize the implementation of loan-interest-subsidy policies for services-sector business entities; provide phased interest subsidies for qualifying loans to small, medium, and micro private producer-services enterprises; and step up financial support for new consumption scenarios. Use existing national-level government investment funds to support integrated development of advanced manufacturing and modern services. Support eligible projects in the services sector in issuing infrastructure Real Estate Investment Trusts (REITs).

(17) Strengthening the Supporting Role of Infrastructure

Revitalize and make good use of various types of existing stock resources. Accelerate the construction of urban parking and charging/battery-swapping facilities, and advance the upgrading of aging equipment. Strengthen the construction of modern integrated agricultural-service centers. Lay out and build integrated, efficient quality infrastructure, and step up support for investment in intangible assets such as software, R&D, and data. Systematically advance the construction and functional upgrading of national logistics hubs, and optimize the layout of overseas warehouses. Push forward the expansion and upgrading of “15-minute community convenience living circles.” Promote the renewal of commodity-trading markets, urban retail outlets, and rural commercial outlets. Renovate aging neighborhoods and industrial areas, and support the upgrading of commercial districts, cultural-industry parks, and similar formats.

(18) Expanding High-Quality Business Entities in the Services Sector

Accelerate the cultivation of backbone services enterprises, and support eligible ones in IPO financing and in M&A and restructuring. Promote the specialized and “Little Giant” (SRDI) development of SMEs in the services sector, and step up the cultivation of “famous, special, high-quality, and new” self-employed businesses. Cultivate and strengthen socialized-service providers in agriculture. Strengthen the consolidation of industry credit information, encourage business entities to make service-quality commitments, and advocate for “higher quality at higher value.” Support enterprises in strengthening brand-building and communications, and cultivate new brand-experience scenarios.

(19) Strengthening Talent Development

Optimize the disciplinary and specialty layout related to the services sector, and support qualified localities in building city-level industry-education consortia and industry-wide industry-education integration communities. Deeply implement the “Skills Illuminate the Future” training initiative, focusing on industries in urgent need and key employment groups, to carry out large-scale vocational-skills training. Broaden the scope of specialized-talent recruitment, and advance the construction of one-stop service platforms for overseas talent.

(20) Strengthening Safety Regulation

Improve cross-departmental and cross-industry approval and regulatory models suited to the integration of business formats, so as to avoid gaps in management and services. Improve the safety-management system for crowded venues such as performance sites, sports-event venues, exhibition halls, and tourist attractions, and implement responsibility for workplace safety. Regulate catering-service operations, and strictly uphold the bottom line on food safety. Resolutely address misconduct such as “overlord clauses” (unfair contract terms) and false advertising, and effectively safeguard consumer rights. Strengthen the protection of the rights and interests of workers in new forms of employment.

All regions and departments shall, under the centralized and unified leadership of the Party Central Committee, implement this Opinion in light of actual conditions, and strive to open up a new chapter in the high-quality development of the services sector. The government performance-evaluation system shall be further improved to fully mobilize the enthusiasm and initiative of all parties. All regions, grounded in their development stage and comparative advantages, shall implement the tasks and measures in a detailed, locally tailored manner. The National Development and Reform Commission shall strengthen overall coordination, monitoring, and evaluation. All departments shall advance work by sector according to their respective responsibilities, strengthen work coordination, enhance publicity and guidance, broadly build social consensus, and foster a favorable atmosphere of whole-of-society participation. Major matters shall be reported in a timely manner to the Party Central Committee and the State Council in accordance with due procedures.

The State Council
April 14, 2026

But what I find most interesting about the piece is something else entirely: it offers details of how the Government Relations (GR) team of a major platform, according to Xinhua, Pinduoduo (PDD), the parent company of Temu, use force to resist a regulatory inspection.

Below are the key passages:

Around 11 p.m. on December 4 last year, while the task force was conducting its investigation, the platform’s head of security suddenly lost his composure. In full view of the police and the investigators, he led a group of people in directly charging the investigation site, shoving and grappling with the enforcement officers — an outright act of violent obstruction of law enforcement. Guo Hui, who had fractured his hand the day before and was still on duty, immediately moved to intervene. A former military officer, he instinctively placed himself at the front of the confrontation — only to be shoved to the ground, his head striking the floor hard. He was rushed to the hospital by ambulance.

One might have expected that after such an egregious incident the platform would promptly hand over the requested data. Instead, after a private conversation between the company’s Chief Technology Officer and the company’s head, the CTO suddenly collapsed and was also taken away by ambulance, forcing the day’s investigation to end. Task force members followed him to the hospital, where doctors confirmed that the CTO’s heart and overall health were perfectly fine.

When local police and regulators later summoned the platform for formal questioning over the violent-obstruction incident, the GR team’s response reached the level of performance art:

In the middle of the interview, one of the platform’s staff members wrote the words “Silence” and “Don’t talk” on a sheet of A4 paper, holding it up to coach the colleague being questioned. He was caught red-handed by the task force — and then came a moment so shocking and so cinematic it felt scripted: the staff member crumpled the A4 paper into a ball and, in front of everyone in the room, ate it.

The absurdity of this script goes beyond anything any compliance law firm or PR agency could ever advise. As a former GR at a Chinese internet platform, I have to admit that my peers’ performance here is eye-opening.

It also lays a structural contradiction that the Chinese internet industry has long ignored, that the staggering sophistication of these companies’ business models coexists with a shockingly primitive understanding of risk management and regulatory compliance. For some practitioners inside these firms, “cooperating with regulators” has become “putting on a show for the boss to prove that you’re defending the company’s interests.” Ironically, it is precisely this kind of theater that tends to push regulators toward harsher penalties. PDD tops the list with a penalty of RMB 1.522 billion. Its legal representative, Zhao Jiazhen, was also personally fined RMB 6.9373 million.

In terms of outcome, this RMB 3.597 billion “epic fine” marks the beginning of a new era in China’s oversight of e-commerce platforms. The regulator’s “one shop, one penalty” approach directly magnifies the consequences of hosting large numbers of problem merchants, increasing the deterrent effect on platforms.

The full article in English follows below:

Sword Strikes “Ghosts,” Iron Fist Protects People’s Livelihoods

A Documentary Record of SAMR’s Investigation into the “Ghost Takeout” Cases Involving 7 E-Commerce Platforms

By Xu Jianhua

A maximum fine of RMB 1.5 billion on a single platform; combined fines and confiscations of RMB 3.597 billion across seven platforms; nearly RMB 20 million in combined fines on legal representatives and food safety directors of these enterprises; suspension of new cake shop registrations for periods ranging from 3 to 9 months… On April 17, the State Administration for Market Regulation (SAMR) announced the administrative penalties imposed in accordance with the law on seven e-commerce platforms — Pinduoduo, Meituan, JD.com, Ele.me (Taobao Shangou), Douyin, Taobao, and Tmall — in the “Ghost Takeout” series of cases.

The total penalty of RMB 3.597 billion is the largest ever issued by regulators since the Food Safety Law came into force. Spanning nearly 10 months, covering all 31 provinces, autonomous regions, and municipalities nationwide, and involving every major e-commerce platform currently operating, what kind of battle of wits and will — a painstaking process of breakthrough and transformation — lies behind this “largest penalty in history”? It all began with a cake order and a forged certificate.

“Ghosts” Appear: Case Elevated for Handling

“This case gravely concerns the safety of what the people put on their tongues — it must be investigated and handled strictly and swiftly.” On September 8, 2025, after SAMR conducted a surprise inspection of an order-transfer platform, SAMR leadership issued these resounding instructions on the handling of the “Ghost Takeout” case. The directive not only reflected SAMR’s confidence in getting to the bottom of the matter, but also demonstrated the firm resolve of market regulators to hold the line on food safety and safeguard the authority of law enforcement.

Let us turn the clock back two months before this directive.

On July 12, 2025, the Beitaipingzhuang Market Regulation Office of the Haidian District Market Regulation Bureau in Beijing received a complaint from a consumer surnamed Liu, who reported that a birthday cake he had purchased from a shop called “Tianyan Qingshu” (Sweet-Face Love Letter) on a certain platform was suspected to pose food safety problems.

Upon receiving the complaint, Haidian District market regulators sprang into action. During the investigation, they unexpectedly discovered that none of the 20-plus “Tianyan Qingshu” shops in the Beijing area had brick-and-mortar premises. Even more shocking to the enforcement officers: all 378 food business licenses held under the “Tianyan Qingshu” chain name turned out to be forgeries.

Following the trail, enforcement officers uncovered a black-market “Ghost Takeout” industry chain with a clear division of labor among e-commerce platforms, order-transfer platforms, and cake shops. On August 6, the Beijing Municipal Market Regulation Bureau reported the “Ghost Takeout” case up to SAMR.

How could a small cake takeout operation forge 378 food business licenses in bulk? The lead immediately drew high-level attention at SAMR. The Bureau of Law Enforcement and Inspection at SAMR concluded after review that this lowest-bidder-wins auction mechanism fully exposed the platforms’ vicious-competition nature — platforms and “ghost shops” reaped the profits, while genuine food operators were trapped in “involutionary” cutthroat competition. Brick-and-mortar shops had no margin to speak of, and food quality and safety could not possibly be guaranteed. Given the broad scope of the case and its pernicious impact, the investigation was to be elevated.

SAMR immediately decided: extend the investigation, get to the bottom of it, follow the “Ghost Takeout” chain to conduct on-site verification, electronic evidence collection, and evidence gathering.

Tracking the “Chain”: Resolutely Drawing the Sword

On August 11, 2025, under SAMR’s deployment, enforcement officers Lou Chao and Wang Fang of the Zhejiang Provincial Market Regulation System led a Zhejiang team to the mountain city of Chongqing to conduct an on-site inspection of Chongqing Zhuandanbao Network Technology Co., Ltd. (hereinafter “Chongqing Zhuandanbao”).

While obtaining key data from Chongqing Zhuandanbao, Lou Chao and his team also uncovered a crucial lead in Chongqing: besides Chongqing Zhuandanbao, Anhui Xunmeng was another — and larger — order-transfer platform. The two order-transfer platforms were interlinked, forming a complete illegal industry chain that provided technical support and a trading venue for “ghost shops” to come online in bulk and for orders to be illicitly transferred.

After grasping the operating model, SAMR immediately directed enforcement officers from Zhejiang and from market regulators in Wuhu, Anhui, to jointly conduct a surprise inspection of Anhui Xunmeng, obtaining a substantial body of evidence.

After the data from both order-transfer platforms were in hand, Wang Fang — SAMR data-analysis expert and director of the Electronic Data Forensics and Analysis Section of the Administrative Enforcement Team of the Longwan District Market Regulation Bureau in Wenzhou, Zhejiang — led a technical team into a rapid offensive, analyzing the data. Wang Fang is an electronic-data expert with rich case-handling experience and formidable technical skill.

Once the Chongqing Zhuandanbao database was actually extracted, tens of millions of records were laid out before Wang Fang — many tables, complex fields, plenty of noise. How to filter out the case-relevant content from this ocean of data was the first obstacle. Rather than spreading out the work all at once, they first seized on the characteristics of order-transfer behavior itself, starting with order flow, account aggregation, and dispatcher-receiver relationships, gradually untangling the logic of order transfers. Their analysis revealed that within Chongqing Zhuandanbao, a single dispatcher account often corresponded to hundreds or even thousands of order-transfer shops on the platform, with platform orders being consolidated and run under a small number of accounts. Zeroing in on this feature, they dug deeper into key orders, cross-correlating IP addresses, login logs, and recipient phone numbers. One by one, they locked in the specifics of more than ten “ghost shops.” Later, when the Longwan District Market Regulation Bureau investigated one of those “ghost” merchants, they further uncovered the collusion among intermediaries, fake-certificate gangs, and internal platform auditors — confirming the earlier data-analysis findings.

Hard work pays off. When the data from the Chongqing Zhuandanbao and Anhui Xunmeng platforms were combined, the total reached hundreds of millions of records. Building on the success with Chongqing Zhuandanbao, Wang Fang and his team quickly achieved a breakthrough, successfully cracking the database and obtaining key evidence.

About half a month later, when SAMR’s Bureau of Law Enforcement and Inspection saw the data analysis results, the numbers far exceeded expectations: the two platforms had illicitly transferred as many as 3.6 million cake orders, involving seven platforms — JD.com, Meituan, Douyin, Pinduoduo, Ele.me (Taobao Shangou), Taobao, and Tmall.

Faced with such a major case, SAMR leadership issued their directive. Subsequently, under the leadership of SAMR and with the nationwide market-regulation system jointly participating, a formal investigation — “drawing the sword” — was launched against the seven leading e-commerce platforms involved.

A blockbuster case, set in motion by a single cake, had truly begun.

National Coordination, Iron-Fist Action

“When I received the SAMR task force’s ‘muster order,’ I felt really excited. In everyday enforcement work I had seen complaints and reports about ‘ghost takeouts,’ but those were all about individual shops. My family and I, too, had harbored similar suspicions when ordering takeout in our daily life.” Recalling his arrival in Beijing in October 2025 to join the task force, Zhang Jie, brigade leader of the Comprehensive Enforcement Bureau of the Nanjing Municipal Market Regulation Bureau in Jiangsu Province, remains deeply impressed to this day.

Like Zhang Jie, over a hundred elite enforcement officers from market regulators in other parts of the country received the “muster order” to come to Beijing — among them Hu Chao, Level-1 Chief Staff Member of the Nanjing Market Regulation Bureau in Jiangsu, who, like Wang Fang, had won the national Electronic Data Forensics Competition; Yu Yan, Deputy Director of the Law Enforcement and Inspection Division of the Zhejiang Provincial Market Regulation Bureau; Li Xin, Director of the Market Regulation Comprehensive Administrative Enforcement Supervision Bureau in Yangzhou, Jiangsu; Zhou Qunbiao, Deputy Director of the Comprehensive Enforcement Bureau of the Xingtai Market Regulation Bureau in Hebei; Zhang Jun, Level-3 Research Fellow at the Law Enforcement and Inspection Bureau of the Hebei Market Regulation Bureau; Zhang Li, Deputy Chief of the Jiangwan Market Regulation Office of the Hongkou District Market Regulation Bureau in Shanghai; Yuan Xiaolong, Captain of Enforcement Team No. 5 of the Haidian District Comprehensive Enforcement Brigade in Beijing; and others.

The 2025 National Day holiday was spent entirely on overtime for this team. They worked intensively to sort through case details and prepare materials. Two or three days before the National Day break, Li Xin had already led the Jiangsu case-handling team on investigations in Yangzhou, Nanjing, and elsewhere.

On October 10, more than a hundred enforcement specialists from the nationwide market-regulation system gathered at No. 9 Madian East Road, Beijing, for a full day of specialized training. SAMR also drew up enforcement manuals, case-handling key points, and investigation checklists, so that this enforcement team drawn from all corners of the country could achieve “uniform actions and uniform objectives” in the shortest possible time — laying a solid foundation for efficiently completing the special mission.

Confronted with what might be the largest case in the history of online catering in China, SAMR attached the highest importance to it. SAMR leadership personally took command and personally drove the effort forward. The entire national market-regulation system operated as a single chessboard, with top-down coordination and joint action:

Based on preliminary investigation, SAMR organized this elite enforcement team into seven task forces, with one technical task force providing technical support. Yu Yan, Zhang Li, Yuan Xiaolong, Li Xin, Zhang Jie, Zhou Qunbiao, Zhang Jun, and Wang Fang each served as team leader, with clear division of labor and close cooperation.

SAMR leadership personally directed the operation and established a unified coordination and command mechanism, dispatching resources in real time as the cases progressed. SAMR’s Bureau of Law Enforcement and Inspection was specifically responsible for handling the cases, while the bureau’s Inspection Division No. 4 coordinated the enforcement process. A dedicated task team was set up to serve the case-handling effort.

In line with the “Ghost Takeout” case’s different “chain” divisions, different handling mechanisms were established: SAMR directly handled the e-commerce platforms; the order-transfer platforms were placed under designated supervision; and “ghost takeouts” were jointly investigated nationwide.

This was an enforcement “elite squad” of the market-regulation system — answering the call at a moment’s notice, ready to fight upon arrival. Every member was a seasoned professional who had handled numerous major cases.

This was an enforcement “army group” of the market-regulation system — skilled in coordination, each with their own strengths — who, under SAMR’s unified deployment, had repeatedly worked together to crack national-level major cases.

Thus, an “iron fist” aimed at “Ghost Takeouts” was tightly clenched.

As the saying goes, true heroes reveal themselves when the torrent sweeps across the sea. October 11, 2025 — a day worth remembering. On that day, the seven task forces set out from Madian in Beijing for the frontlines at the seven e-commerce platforms, to conduct on-site investigation and evidence collection. A full-scale battle — commanded by SAMR and drawing on the combined strength of the entire system — was launched: a breakthrough campaign against e-commerce platform “Ghost Takeouts,” a food-safety defense battle, and a sustained regulatory-for-the-people campaign.

Battles of Wit and Will: Pressing on Despite Difficulties

The hands of the clock had quietly moved past 10 p.m. This “standoff,” which had already gone on for nearly three hours, still showed no signs of producing any common ground.

On one side of the standoff were task-force leader Zhou Qunbiao, team members Wen Lingyan and Lou Sihan — who was running a high fever — and an expert. On the other side were liaison representatives dispatched by a certain platform enterprise. The main disagreement: defining the scope and authority of the investigation, and a key search term for evidence collection.

At 10 a.m. that day, the task force had entered the platform as scheduled to begin the on-site inspection. However, the platform adopted “tai chi tactics” — letting the officers stew, stalling, then refusing — and even threatened to file complaints against the enforcement officers.

Faced with the company’s non-cooperation, Wen Lingyan was moved to tears of frustration. But her back did not bend and she did not yield on her bottom line. Wiping away her tears, she pressed on. Standing firm on the principle that “without legal authorization, nothing may be done; where legal duties are assigned, they must be carried out,” she and her colleagues used the weapons of law to break through the platform’s runaround “tai chi tactics.” Finally, after the task force’s unrelenting efforts, the other side at last provided the relevant data around midnight. By the time the task force completed its evidence collection, it was 3 a.m. the next morning.

From the moment the task force went on-site at the platforms, it became clear that technical evidence collection from the large e-commerce platforms was both the key to breaking the case and the greatest challenge. “The biggest challenges we faced were that data volumes are huge, evidence is hard to collect, hard to preserve, and hard to verify. E-commerce platforms’ business data are not only enormous in volume but also scattered in storage — generally in the cloud,” said Zhang Yuhao, a Level-1 Administrative Enforcement Officer with the Zhumadian Market Regulation Bureau in Henan Province and a task force member. This meant that investigation and evidence collection could not succeed, as in routine enforcement, simply by examining computers and hard drives — instead, the platform’s technical staff had to cooperate on-site to retrieve data from the cloud and hand it over to the task force.

In the course of actual investigation, however, the task force encountered layer upon layer of difficulties in obtaining data and gathering evidence, because the platform companies generally resorted to “soft resistance” to frustrate evidence collection. They refused to provide data on grounds of “system upgrades,” “no data authorization,” or “data not stored locally”; they used “trade secrets” or “insufficient network speed” as pretexts to stall; they arranged for irrelevant personnel to run officers in circles. Some platforms appeared “actively cooperative” on the surface while in fact providing fragmented, chaotically formatted data, attempting to drown out the critical information. What Zhou Qunbiao’s team went through was typical for the task forces. Many times the task force would arrive at a company at 10 a.m. and still have nothing to show for it by 10 p.m. Even when a platform did provide data, it was often only one-third, one-fourth, or even less of the full dataset.

Where evil grows a foot, righteousness grows ten. Facing the platforms’ various “tricks,” the task force engaged in a comprehensive battle of wits — a contest of data.

“Zhang, my phone number’s used up, you register with yours and keep checking…” Exchanges like this were extremely common and frequent among task force members during that period.

As it turned out, in dealing with data from the major platforms, the task force came up with the “dumbest” of approaches: they logged into all seven platforms and verified information and credentials one cake shop at a time; some they even went to the physical premises to inspect further.

But each phone number had a capped number of login views imposed by the platform — hence the daily conversations among team members. Over the course of about two weeks, “burning through” dozens of phone numbers and verifying three to four thousand shops, they chewed through the “hard bone” using “dumb” methods. Combined with the data from Chongqing Zhuandanbao and Anhui Xunmeng, the task force now had its own big database.

When an enterprise first provided the task force with “discounted” data, the officers could compare it against their own database, establishing a working mechanism of “data commonality, data comparison, cross-verification, and traceability-based reverse checking” to spot the irregularities — and then go back to the platform for another round of “dialogue” or “confrontation.”

Facing a task force so well-armed with data evidence, the platforms began to “squeeze the toothpaste” — 20%, 40%, 60% — until finally 100% of the data was provided. “To break the technical impasse, we repeatedly studied the platforms’ data architecture, transaction flows, and algorithmic logic, and finally penetrated the platforms’ data barriers, achieving precise extraction, classified organization, and effective preservation of key electronic data on order flow, credential filings, and order-transfer transactions,” said Ma Zhenduo, a Level-1 Staff Member with the Tianjin Municipal Comprehensive Administrative Enforcement Corps for Market Regulation and a task force member.

When platforms used “soft resistance,” the task force had to match wits; but when a few platforms escalated to “hard resistance,” the task force had to match courage.

At 10 a.m. on December 3, 2025, when task force members from the Jiangsu-Jiangxi team — Zhang Jie, Chen Cao, Hu Chao, Guo Hui, and others — arrived on-site together to begin their inspection, they could not have imagined they were in for a turbulent three days and two nights.

Under the platform’s “tai chi tactics” — letting them stew, stalling, then refusing — by 11 p.m. no substantive progress whatsoever had been made on the investigation. With no other recourse, Guo Hui and several enforcement officers decided to use the access card the company had given them — good only down to the first floor — to walk around and see what they could spot.

Where the mountains loom and waters wind, and no road seems to lie ahead — suddenly, amid dark willows and bright blossoms, another village appears. At this “rush hour” for the platform’s staff clocking in and out, enforcement officers actually tracked the movements of platform employees and identified where they were really working.

Doing everything possible to get into those offices, Guo Hui spotted a suspicious-looking room. Even though he was in enforcement uniform and had identified himself, the other side still forcibly blocked them from entering. In the struggle over control of the door, Guo Hui’s hand was deliberately crushed in the door by a company employee, causing a fracture. Guo Hui gritted his teeth and held on until the person in charge of the company finally relented and agreed to provide data. But the other side then started playing the “delay game” — the initial promise was to hand over the data at 3 a.m., but officers waited until 5 a.m., and then from 5 a.m. until noon; and the data finally handed over were heavily discounted. Having learned from day one’s “surprises,” the task force specifically coordinated with the local public security authorities to conduct the second round of data extraction and evidence collection together, and insisted the Chief Technology Officer operate the systems in person.

Around 11 p.m. on December 4, just as the task force was conducting its investigation, the platform’s head of security suddenly lost control, and in front of the police and the task force, led a group of people in a direct assault on the enforcement scene — shoving and grappling with the enforcement officers in a violent resistance incident. Guo Hui, who had kept working despite the hand fracture from the day before, immediately stepped forward to intervene. As a demobilized military officer, he instinctively threw himself to the forefront of the conflict, but was shoved and knocked to the ground, his head striking the floor hard. A 120 ambulance rushed him to the hospital.

One might have expected that after such an outrageous incident, the platform would promptly hand over the data. Instead, after the company’s Chief Technology Officer held a private conversation with the person in charge, the CTO suddenly collapsed of his own accord and was also taken by 120 ambulance to the hospital. The day’s investigation was forced to end. Enforcement officers from the task force followed them to the hospital, where doctors confirmed that there was nothing wrong with the CTO’s heart or body.

After the violent-resistance incident, SAMR attached the highest importance. Leadership convened a special meeting to study the response, and instructed the Bureau of Law Enforcement and Inspection to immediately dispatch a senior official to the scene to assess the situation. On the evening of December 5, Peng Zengtian, Deputy Director of SAMR’s Bureau of Law Enforcement and Inspection, rushed to the site under orders to handle matters. Only then did the platform provide the relevant data for a second time.

That same day, the task force, together with local public security and market regulators, held a meeting with the platform regarding the violent-resistance incident. Right in the middle of the exchange, a platform employee wrote “stay silent” and “don’t speak” on a piece of A4 paper, signaling to a colleague being questioned. Caught red-handed by the task force, what unfolded next was shocking and as dramatically theatrical as a movie scene: the employee actually balled up the A4 paper and — right in front of everyone in the room — ate it.

When courage meets courage on a narrow path, the bolder prevails. The “Ghost Takeout” investigation was a contest between arrogance and justice, illegality and law enforcement. Confronted with unprecedented resistance — whether “soft” or “hard” — every member of the task force matched wits with wits and courage with courage. With a fighting spirit of “the more perilous the path, the more resolutely we press on,” they cut through every barrier and forged ahead.

Guo Hui, after simple bandaging and treatment, ignored doctors’ advice and returned resolutely to the investigation site. Zhou Qunbiao, after 72 hours of continuous work, suffered a sudden heart attack and was rushed to the hospital. Lying on the emergency-room bed, all he could think about were case-file details and unfinished verification items. Once his condition stabilized, Zhou Qunbiao rushed back from the emergency room to the investigation site: “The case isn’t done; I can’t rest easy.”

Behind these simple words lies a spirit of “exceptional endurance of hardship, exceptional combat capability, and exceptional devotion.” “Day and night, 5+2” had become the norm — no rest on holidays, no standing down for minor injuries. After three rounds of on-site inspections, the task force tore open gaps in the “iron walls” of the seven platforms and nailed down rock-solid evidence on 67,604 “ghost shops,” laying a firm foundation for the successful resolution of the case.

One Shop, One Penalty: Far-Reaching Impact

As the investigation deepened, the evidence of violations became ever clearer — yet a new challenge now confronted the task force: how to structure the administrative penalties for the platforms.

“On the surface we’re handling one big case, but in reality we’re facing more than 60,000 individual cases. Each shop’s situation is different, and we can’t treat them in bulk,” Zhang Li remarked, pinpointing the difficulty of imposing administrative penalties in this case.

At this critical juncture, SAMR once again drew on the task force’s successful experience — pooling forces from all sides to build case-handling synergy:

In the course of the investigation, the task force sent more than 50,000 case-transfer orders to provinces, autonomous regions, and municipalities nationwide, verifying each platform lead the case had uncovered one by one. On matters of major import, SAMR’s Bureau of Law Enforcement and Inspection worked jointly with the General Office, the Department of Laws and Regulations, the Department of Online Transaction Supervision, the Department of Catering and Food Supervision, the Department of News and Publicity, and other departments to resolve issues together.

This time, SAMR extended its inquiry into legal application beyond the system itself to legislative bodies, judicial authorities, and academia, ensuring that the case handling could withstand both legal and historical scrutiny. SAMR leadership led four delegations to consult with legislative and judicial departments, repeatedly soliciting input on core questions such as the determination of platform liability and the calibration of penalty ranges — ensuring that the case was handled according to law and that discretionary power was exercised with prudence.

SAMR also convened a legal-experts symposium, inviting authoritative scholars from administrative law, civil law, e-commerce law, and other fields to delve into key issues such as the identification of offending entities, the boundaries of platforms’ review obligations, and the calculation of illegal gains — producing written expert opinions.

SAMR leadership presided over 24 specialized meetings, examining the platforms’ violations point by point and repeatedly refining the administrative penalty plan to ensure that every company, every violation, and every penalty amount had a firm legal basis.

After fully absorbing the views of legislative bodies, judicial authorities, and academia, a penalty plan gradually took shape — one that embodied the principle of “penalties commensurate with violations,” reflected the “four strictest” requirements, and aligned with public expectations.

SAMR resolved: in accordance with the principle of “penalties commensurate with violations,” to lawfully impose “one shop, one penalty” on the platforms’ failure to perform their review obligations.

Wang Huowang, Director of SAMR’s Bureau of Law Enforcement and Inspection, said that this case was a landmark case in SAMR’s history for safeguarding food safety and regulating platform development. SAMR’s penalties reflect the regulatory orientation of supporting the standardized and healthy development of the platform economy, and of “grasping both development and regulation firmly with both hands.” The fundamental aim is to urge platform enterprises to fulfill the obligations set out in law — to establish and effectively operate food-safety risk prevention and control mechanisms covering credential review, risk monitoring, problem screening, and rapid response — so as to genuinely safeguard food safety and promote the standardized and healthy development of takeout platforms.

Upon receiving SAMR’s administrative penalty decisions, Pinduoduo, Meituan, JD.com, Taobao Shangou (formerly Ele.me), Douyin, Taobao, and Tmall all pledged resolute implementation of regulatory requirements and meaningful protection of takeout food safety.

People regard food as heaven, and food safety comes first. Though the market regulators’ “sword strike against ghost takeouts” has reached its conclusion — and all platform enterprises have, in line with rectification requirements, taken down unreviewed “ghost shops” and ended catering order-transfer cooperation with the relevant transfer platforms — food-safety regulation is a journey without end. The sword of enforcement remains ever poised overhead, ready to be drawn at any moment.

(This article also benefited from contributions by our newspaper’s reporters Peng Xie, He Ke, and Xu Yachen, and intern reporter Wang Yiming.)

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Some observations:

Beijing’s first point centres on the question of identity. The line “differences in social systems are not a pretext for separatism” is a direct rebuttal of Taipei’s argument, which the authorities in Taipei frame as a binary opposition of “democracy vs authoritarianism” based on political system differences. Beijing’s implicit rejoinder is that institutional arrangements are a secondary matter open to discussion; the more fundamental and non-negotiable question is one of identity: are you Chinese or not?

The second point reiterates the mainland’s standing opposition to “Taiwan independence.” The formulation “Taiwan independence is the chief culprit in undermining peace in the Taiwan Strait — we will absolutely not condone or tolerate it,” with its double negative and emphatic register, serves a dual purpose: it is simultaneously a reaffirmation of Beijing’s long-held position. It’s also an effort to bring the KMT to publicly commit to and formally endorse an anti-”Taiwan independence” stance.

Compared to the first two points, the third is notably softer in tone, with an emphasis on people-to-people exchanges. The line “the mainland motherland is blessed with magnificent landscapes and a vast market — Taiwan compatriots are always welcome to come home” carries a clear policy subtext: it is a direct response to the Taipei authorities’ ban on travel agencies in Taiwan operating group tour packages to the mainland. The implicit message is that the mainland welcomes free cross-strait movement, and that the barriers to such movement originate in Taipei, not Beijing.

Other details worth noting:

The phrase “firmly keeping the future of cross-strait relations in the hands of the Chinese people themselves” functions, I would argue, as a warning directed at certain factions within the KMT. At a moment of sustained instability in US-China relations, Beijing is signaling that Taiwan Strait affairs must not be driven by outside forces. By delivering this message through the KMT, Beijing is effectively transmitting a signal to Taiwan’s broader society that external backers are unreliable, and the only viable path forward is for the two sides to negotiate among themselves.

The resonance between the two parties on the figure of Sun Yat-sen reflects two underlying logics. The first is historical: the First United Front between the KMT and the CPC was forged under Sun Yat-sen’s leadership. Sun is at once the spiritual founding father of the KMT and a revolutionary precursor recognized within the PRC’s own official narrative, making him the single most effective historical common ground between the two parties. The second is that, as Chiang Kai-shek’s historical image in Taiwan has grown increasingly negative over time, the KMT has come to rely more heavily on invoking Sun Yat-sen’s vision of “revitalizing China and achieving national reunification” to construct and maintain its own historical legitimacy.

Below is the transcript I made with the help of AI:

General Secretary Xi Jinping Meets with Chinese Kuomintang Chairperson Cheng Li-wun

Wang Huning, Cai Qi and Others Attend the Meeting

Xinhua News Agency, Beijing, April 10 — General Secretary of the Communist Party of China (CPC) Central Committee Xi Jinping met on the morning of April 10 in Beijing with the Chinese Kuomintang (KMT) delegation led by Chairperson Cheng Li-wun.

Xi Jinping extended a welcome to Cheng Li-wun and her delegation. He noted that the meeting between the leaders of the CPC and the KMT — for the first time in ten years — carries significant importance for the development of relations between the two parties and across the Taiwan Strait. People on both sides of the Taiwan Strait belong to the same Chinese nation. The people of all ethnic groups, including Taiwan compatriots, have together founded a unified multi-ethnic state, jointly written a glorious Chinese history, together created a splendid Chinese civilisation, and collectively cultivated a great national spirit. They have also forged the shared conviction that national territory must not be divided, the country must not be thrown into chaos, the nation must not be fragmented, and civilization must not be severed — a conviction that has guided the Chinese nation in its endless self-improvement and ensured the unbroken continuity of Chinese civilization.

Xi Jinping stressed that no matter how the international situation or the situation across the Taiwan Strait may change, the great trend of the rejuvenation of the Chinese nation will not change, nor will the great tide of compatriots on both sides of the strait drawing closer together and uniting. Compatriots on both sides of the strait all hope for peace and stability in the Taiwan Strait, hope for improvement and development in cross-strait relations, and hope for better lives — this is an inescapable responsibility of both the CPC and the KMT, and also the driving force for their joint cooperation. We are willing, on the common political foundation of upholding the “1992 Consensus” and opposing “Taiwan independence,” to work together with political parties, organizations, and people from all walks of life in Taiwan, including the KMT, to strengthen exchanges and dialogue, strive for peace across the strait, promote the well-being of compatriots, and work toward national rejuvenation — firmly keeping the future of cross-strait relations in the hands of the Chinese people themselves.

Xi Jinping put forward four points on the development of cross-strait relations.

First, uphold correct identity to foster a meeting of hearts and minds. Compatriots on both sides of the strait share the same roots and origins, the same culture and ethnicity, and are bound together by blood — they form a community with a shared destiny, united in times of both joy and hardship. Among family members, as long as there is open communication and a willingness to consult on matters together, no differences or disagreements are beyond resolution. Differences in social systems are not a pretext for separatism. The CPC and the KMT, and compatriots on both sides of the strait, must hold firm to their national standpoint, carry forward and promote Chinese culture, strengthen their identification with the Chinese nation, Chinese civilization, and the great motherland, and build the resolve, integrity, and confidence to stand as proud and dignified Chinese people.

Second, uphold peaceful development to safeguard the shared homeland. The mainland and Taiwan both belong to one China; China is the shared homeland of the Chinese nation. For compatriots on both sides of the strait to protect and build this shared homeland, the fundamental requirement is to uphold the “1992 Consensus” and oppose “Taiwan independence,” with the core being the recognition that both sides of the strait belong to one China. When a family lives in harmony, all things prosper. Any proposal that benefits the peaceful development of cross-strait relations is welcome, and anything that serves the peaceful development of cross-strait relations we will make every effort to pursue. “Taiwan independence” is the chief culprit in undermining peace in the Taiwan Strait — we will absolutely not condone or tolerate it. The CPC and the KMT, and compatriots on both sides of the strait, must uphold the greater good of the nation, oppose separatist “Taiwan independence” and foreign interference, promote the peaceful development of cross-strait relations, and steadfastly protect the shared homeland of the Chinese nation.

Third, uphold exchanges and integration to enhance the people’s well-being. The goal of developing cross-strait relations is to enable compatriots on both sides of the strait to live better lives. We will continue to act in the spirit of the principle that people on both sides of the strait are one family, and actively do practical things, good things, and help resolve difficulties for Taiwan compatriots. The mainland motherland is blessed with magnificent landscapes and a vast market — Taiwan compatriots are always welcome to come home, Taiwan youth are welcome to come to the mainland for exchanges and development, and Taiwan agricultural and fishery products and quality goods are welcome into households across the mainland. The CPC and the KMT, and compatriots on both sides of the strait, should jointly expand cross-strait exchanges, interactions, and integration, and enhance the bonds and well-being of compatriots on both sides.

Fourth, uphold unity and determined effort to achieve the great rejuvenation of the Chinese nation. This year marks the 160th anniversary of the birth of Dr. Sun Yat-sen, whose lifelong pursuits were the revitalization of China and national reunification. Today we have successfully forged the path of Chinese-style modernization, and the great rejuvenation of the Chinese nation is an unstoppable tide. We firmly believe that more and more Taiwan compatriots will come to correctly understand the mainland’s social system and development path, and deeply recognize that Taiwan’s future lies with a strong motherland, and that the interests and well-being of Taiwan compatriots are bound to the great rejuvenation of the Chinese nation. This year marks the opening year of the mainland’s 15th Five-Year Plan; we are willing to share development opportunities and achievements with compatriots in Taiwan and together strengthen the economy of the Chinese nation. The CPC and the KMT should consolidate political mutual trust, maintain positive interactions, unite compatriots on both sides of the strait, and work hand in hand to create a bright future of national reunification and national rejuvenation.

Cheng Li-wun stated that people on both sides of the strait are descendants of Yan and Huang, belong to the same Chinese nation, are nurtured by Chinese culture, are all Chinese — one family — and should rightly join hands to advance the revitalization of China as championed by Dr. Sun Yat-sen. The CPC and the KMT should uphold the common political foundation of the “1992 Consensus” and opposition to “Taiwan independence,” strengthen political mutual trust, play their role as a platform for communication, commit to preserving Chinese history and promoting Chinese culture, advance cross-strait exchanges and cooperation across civil society, grassroots, economic and trade, cultural, and other fields, support youth exchanges and development, enhance the common well-being of the people, promote the peaceful development of cross-strait relations, open up a bright future for cross-strait relations, and realize the great rejuvenation of the Chinese nation.

Wang Huning, Cai Qi, and others attended the meeting.

His core argument is that the war is more like an amplifier than a kingmaker, intensifying trends already running against Republicans, mainly through rising gas prices, compounding the affordability crisis voters already feel. He draws on a deep bench of American electoral history, reaching back past the 2002 post-9/11 midterms all the way to the 1898 Spanish-American War to show that even decisive foreign military victories rarely rescue the president's party when domestic economic pain is the real issue.

Where it gets especially interesting to me is the longer-term analysis. The widening rift between Trump and the MAGA base over the war, with Vance caught in between. The rapid shift in American attitudes toward Israel, particularly among young voters and Democrats. The emerging fault line within the Democratic Party is between AIPAC-backed traditionalists and union-backed progressives sympathetic to the Muslim community. These dynamics could reshape both parties well beyond 2026.

As always, the article provides a window into how China’s strategic community is reading American domestic politics in real time. The original article was published on April 1, 2026, in The Paper (澎湃新闻), and thanks to Professor Diao’s authorization, I can provide the English ver of the article:

How Will the Iran War Affect the Midterms and 2028?

On February 28, 2026, the United States and Israel launched a joint military operation against Iran, killing multiple senior Iranian officials, including Supreme Leader Ali Khamenei. The strike provoked Iranian retaliation, and the Strait of Hormuz was promptly closed. The conflict has now dragged on for over a month, far exceeding what Trump initially claimed would be a matter of days, and the risk of a protracted war cannot be ruled out. Global oil prices have surged and fluctuated in response. The prolonged fighting, rising oil prices, growing likelihood of American military casualties, and the pressure of being sucked into yet another quagmire have all deepened anxiety among the American public. Since 2026 is a midterm election year, the Iran conflict has been repeatedly linked to the midterms in both American and international commentary, with the prevailing view that the war is likely to hurt Republican prospects.

To Capitol Hill, via Tehran?

Iran is no stranger to American electoral politics. Forty-six years ago, Republican Ronald Reagan was able to end Democratic President Jimmy Carter’s bid for reelection. Beyond the stagflation dragging down the American economy and deep disunity within the Democratic Party, the 444-day Iran hostage crisis is widely regarded as having provided the crucial backdrop that constantly reminded voters of the sitting president’s “incompetence.” After the failure of the so-called “Operation Eagle Claw” in late April 1980, Reagan’s polling numbers pulled ahead and stayed there until his victory in November. On January 20, 1981, Reagan was formally sworn in as president, and just minutes before his inauguration, the hostages were released, bringing the crisis to an end.

Could such a dramatic arc replay itself in the 2026 midterms? If the conflict does become protracted, this possibility cannot be entirely ruled out, though its effect would likely not be that of a “kingmaker” that fundamentally alters the electoral landscape, but rather an “amplifier” of trends that are already largely set.

On one hand, unlike the incumbency advantage a sitting president enjoys when seeking reelection, midterm elections carry a so-called “curse” that works against the president’s party. In other words, 2026 was already shaping up poorly for Trump’s Republicans. If we consult the historical record, in the 20 midterm elections from 1946 to 2022, when presidential approval exceeded 50%, the president’s party still lost an average of 14 House seats. When approval fell between 40% and 50%, the average loss rose to 34.5 seats. Below 40%, the average jumped to 38 seats. By these historical numbers, even the mildest average loss of 14 seats would be more than enough for Democrats to reclaim the House majority, and Trump’s current approval sits at just 36%.

On the other hand, inflation, healthcare, housing, employment, and other domestic issues that typically dominate midterm elections are in 2026 being framed and consolidated into a single new pain point for the American public: the “affordability” problem. This structural issue is clearly not something the Trump administration can effectively address in the short term. It is a burden of public resentment that the sitting president and his party simply cannot shirk. In fact, even the Democrats, who stand to retake the House majority on the strength of this discontent, would most likely prove equally helpless against it. The Iran war’s effect is obvious: the constantly climbing numbers on gas station price signs are compounding the public’s anxiety over affordability.

With Republicans almost certain to lose their House majority, various analyses currently predict seat losses ranging from 20 to 70. The Iran factor, particularly the prospect of deploying ground troops, is the variable that pushes the number toward the higher end of that range.

Compared to the rigid trend in the House, the Senate presents a more limited battlefield with only 35 seats up for election. Public dissatisfaction with the Republicans as the president’s party, filtered through a cycle in which only slightly more than a third of seats are contested, is not sufficient to simultaneously strip Republicans of their Senate majority. The only scenario in which that happens is if Democrats sweep the competitive seats in Maine, North Carolina, and Michigan, and also perform exceptionally well in Ohio and Alaska, two seats Republicans are fighting hard to defend, flipping the chamber 51 to 49. The specifics in each state, especially these swing states, probably won’t become clear until after the summer. By then, we’ll know whether the Iran factor is still festering.

Was the War Launched for the Midterms?

While the Iran factor has objectively worsened Republican prospects, could Trump’s subjective motivation in launching the strike, or even his fantasy of a “quick and decisive victory,” have actually been aimed at boosting the party’s midterm chances?

This motive is hard to dismiss entirely. The logic runs as follows: if the war could be quick and decisive, a rapid decapitation strike followed by disengagement might bolster a sense of pride among voters, particularly Republican voters, in the spirit of “Making America Great Again.” This could make certain groups feel that the affordability burdens they bear in daily life are somehow “worth it,” potentially helping to consolidate Republican voters and certain conservative-leaning independents. But now, with the war dragging on and the possibility of prolonged conflict, whatever pride the “greatness” narrative once generated has evaporated, replaced by a growing collective unease that extends well beyond the MAGA wing of the Republican camp.

The 2026 strikes on Iran simply cannot be compared to the War on Terror in 2002. Back then, a spirit of national unity still pervaded the country. In the aftermath of 9/11, “crisis president” George W. Bush and his Republican Party managed to gain seats in both chambers of Congress, delivering the best midterm performance for a president’s party since 1934. Today, a majority of Americans (65%) do not believe military action against Iran serves American interests. Most (75%) think the U.S. is too involved in Iran. Only 35% support the strikes. While a majority of Republicans (73%) and even MAGA supporters have continued to stand with Trump since the war began, these same groups within the party still oppose the risky move of deploying ground troops. This twisted, even self-contradictory state of public opinion means that the Iran war was, from the very start, a partisan affair. In contrast to the old adage that “politics stops at the water’s edge,” this conflict has crossed the water with partisanship fully intact. There will be no rally-around-the-flag effect capable of reaching across party lines, or at least of mobilizing swing voters.

Historical comparisons make the extreme exceptionalism of Bush’s post-war midterm victory even more apparent. In the 1950 midterms, Harry Truman and his Democrats lost 5 Senate seats and 28 House seats, barely clinging to their majorities only because they had entered with such large pre-election margins. They then lost both chambers entirely in 1952. The Democratic losses in 1950 had two main causes: fierce conservative opposition to the Truman administration’s “Fair Deal” agenda on education and social welfare, and public discontent with the administration’s decision to send troops into the Korean War in June and July of that year.

Going even further back, 1898 was also a midterm election year. The Spanish-American War, often called the “Hundred Days’ War,” was not only quick and decisive but vaulted the United States into the ranks of a transpacific and Caribbean power, placing it on the stage of global competition. Yet this victory, which can be seen as the starting point of American hegemony, did not deliver a similarly resounding midterm triumph for William McKinley’s Republicans. The party gained 8 Senate seats but lost 19 in the House, while Democrats gained 37 House seats. The reason was that Democrats picked up seats in agriculture-dependent regions across thirteen states along the Atlantic coast, the South, and the West. This was clearly tied to the electoral strategy of Democratic leader William Jennings Bryan, who attracted populist constituencies and amplified agricultural economic issues. In a sense, the Democrats of 1898 were previewing Bill Clinton’s 1992 playbook of “It’s the economy, stupid,” siphoning away from McKinley and his Republicans the glory they had hoped to monopolize through the Spanish-American War.

Impact Beyond 2026

While the Iran war’s likely impact on the 2026 midterms is more a matter of degree than direction, whether this military action’s effects on America’s political ecosystem extend beyond 2026 is worth watching over the long term.

For instance, many commentators have suggested that MAGA supporters, particularly the most deeply disillusioned among them, may have no recourse against the sitting President Trump himself but could redirect their frustration toward Vance. Vance is seen as having been quite passive on the Iran question, and there is a real possibility that he could lose further support within the Republican Party, forfeiting his shot at 2028 and yielding the opening to figures like Rubio. There is no doubt that the Iran strikes have exposed the growing divergence and fracture between Trump and the MAGA base, leaving Vance, who serves as the bridge between them, in an impossible position. But this does not necessarily provide a reliable guide to what will happen in 2028. Faced with the potential quagmire created by Trump’s personal decision-making, Vance may not be able to shape events, but he can still participate in them. On questions like how to end the war, he still has room and opportunity to respond to the MAGA base.

Meanwhile, polling since the war began shows that the share of Americans holding negative views of Israel has risen from 24% in 2023 to 39% in 2026. Among Democrats, this figure jumped from 36% to 57%, while among Republicans it increased only modestly, from 12% to 18%. More specifically, just 17% of Democrats sympathize with Israel, while roughly two-thirds sympathize with Palestine and the broader Arab world. Among Republicans, these figures are nearly a mirror image: 69% and 14%. Among young Americans aged 18 to 34, roughly two-thirds hold negative views of Israel, with only 13% viewing it positively. These attitudinal patterns reveal that Democratic voters, particularly younger ones, are increasingly critical of Israel and more sympathetic to the Arab world, while Republicans are embracing Israel more firmly.

Following this trend, the Iran war could produce mixed consequences for the Democratic Party as well. First, the drift of Muslim voters away from Democrats, driven by dissatisfaction with the Biden administration’s Middle East policy and visible in the 2024 election, may now face a reversal, or at least a pause. This would help Democratic prospects in Midwestern states, particularly the Rust Belt, where Muslim communities are concentrated.

Second, with pro-Israel forces continuing to place long-term bets on both parties by funneling money and shaping elections, the question of how pro-Israel and anti-Israel factions coexist within the Democratic Party will inevitably reshape its internal ecology to some degree. On March 17, in the Illinois Democratic primaries, AIPAC (the American Israel Public Affairs Committee) poured at least twenty million dollars into four House primary races. In the Illinois Senate Democratic primary, some candidates faced attacks for having visited Israel, others publicly distanced themselves from AIPAC despite long-standing partnerships, and still others, normally active on foreign affairs, refused to take any clear position on Israel-related issues. In the AIPAC-targeted House primaries, some races were won by the traditional establishment-leaning Democrats that AIPAC backed, while in others, progressive Democratic candidates defeated AIPAC-supported opponents.

Does this suggest that the long-standing conflict between traditional establishment Democrats and radical progressives is gaining a new dimension because of the Iran war? Wall Street and pro-Israel forces backing traditional Democrats on one side, unions backing pro-Muslim, identity-politics-focused progressive Democrats on the other, both competing for control of the party’s future direction.

It must be recognized that, facing the accelerating transformation of America’s demographic composition, the Democratic Party, which has traditionally excelled at integrating the interests of diverse groups, will inevitably face even greater challenges. Particularly given the reality that America’s Muslim population is projected to surpass its Jewish population around 2035, the reverberations of Middle Eastern affairs on American domestic politics are becoming increasingly unpredictable. How both parties, and especially the Democrats, adapt to these demographic and constituency shifts, and how this in turn shapes the evolution of their Middle East policies, are fascinating questions indeed.

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The article is by Zhuo Xian卓贤, Director and Senior Research Fellow at the Department of Social and Cultural Development Research, Development Research Center of the State Council. The DRC is one of China's most influential government think tanks, reporting directly to the State Council.

In most countries around the world, social insurance systems are built on the foundation of stable employment, and China is no exception. Whether it's unemployment insurance or maternity insurance, these programs were designed to protect workers against the risk of career interruptions. Three pillars keep the system financially sustainable: stable employer-employee relationships, wages that grow in step with productivity, and a favourable demographic structure. Zhuo warns that as AI is deployed at scale, companies no longer need to maintain large formal workforces and are shifting toward a more fragmented gig economy. At the same time, AI learns faster than any individual can, threatening to break the "learning by doing" ladder of human capital accumulation. As entry-level positions shrink, so do the pathways to becoming senior experts.

On the policy front, Zhuo proposes solutions at several levels. In the near term, he advocates for a differentiated “robot tax,” offering tax incentives for AI technologies that augment human capabilities, while withholding tax breaks or imposing modest levies on technologies that purely replace labour. Operationally, he suggests learning Japan’s approach of earmarking consumption tax revenue specifically for social security, so that social insurance funding is no longer entirely dependent on payroll taxes. The logic is that as labor’s share of national income continues to decline, there must be new mechanisms to channel the wealth generated by AI back into a social safety net that benefits ordinary people.

Over the longer term, Zhuo argues that since AI computing power will become a foundational infrastructure, the state should invest in and retain ownership of core computing assets to capture the economic rents that AI generates. He made an analogy to Norway's sovereign oil fund, which helps inject an "AI dividend" into the social security system, shifting the model from "taxing labor" to "sharing in AI's returns."

On the human development side, he believes education should pivot toward cultivating metacognitive abilities and interdisciplinary thinking, rather than betting on specific technical skills that will quickly become obsolete. In the short term, the government should subsidize wages or cover social insurance contributions for young people entering the workforce, reducing employers' costs of hiring junior staff and preventing AI from blocking young people's career on-ramps.

His article reflect-in some way- how China's policy advisors are thinking about AI. Zhuo directly cites language from the 15th Five-Year Plan proposal on "building an employment-friendly development model," which may signal that AI's impact on the job market and the fabric of society has reached the highest level on China's policy agenda. Beijing's consideration treats AI first and foremost as a governance problem, including whether pensions can be paid on time, whether public health insurance funds can remain solvent, and whether young people can still find an upward path into the middle class.

AI, Employment, and Social Security

Zhuo Xian — Director and Research Fellow, Department of Social and Cultural Development Research, Development Research Center of the State Council

The Relationship Between Economic Growth and Employment Is Changing

In the long agrarian era before the Industrial Revolution, low technological progress brought low-speed growth, corresponding to low population growth and low employment growth. Economic growth was virtually synonymous with the growth of agricultural employment.

The Industrial Revolution broke through the constraints of energy and power and the existing combinations of factors of production, greatly expanding the frontiers of human production. Industrialization and urbanization mutually reinforced each other through economies of scale. Industrial product prices fell as productivity rose, while wage levels rose along with productivity. Large-scale production and large-scale consumption formed a positive feedback loop, and blue-collar industrial jobs grew rapidly.

The modern corporate system expanded the scope of social division of labor and collaboration. Numerous production processes that were originally completed within a single enterprise (such as logistics, marketing, and legal consulting) spun off into specialised firms, forming a vast network of intermediate inputs and services. While improving economic efficiency, this also gave rise to a surge in knowledge-based white-collar positions within hierarchical organisational structures. After the widespread adoption of personal computers in the 1980s, information-processing positions such as accountants, secretaries, and analysts grew relatively quickly.

The marketisation of household labour was another important engine of job creation. As women entered the labour market on a large scale, work that had previously been performed unpaid within households was transformed into market-based services in national economic accounting. Jobs in lifestyle service industries such as housekeeping, food services, education, and entertainment were continuously created.

For most of the 20th century, “economic prosperity equals full employment” was a form of social cognition shaped by industrial civilisation, and it became the narrative logic and psychological foundation of many current business models and social institutions.

The several episodes of “jobless growth” experienced by advanced economies around the turn of the 21st century began to challenge this consensus. Initial research attributed “jobless growth” to post-crisis periods, seeing it primarily as a cyclical anomaly resulting from newly established firms increasing equipment investment, rather than a structural change in the relationship between employment and growth. However, subsequent research showed that the disappearance of routine cognitive and manual jobs did not occur gradually but was concentrated during economic recessions. Firms used crises as a concentrated “cleansing mechanism” to permanently eliminate mid-skill positions that could be replaced by automation. When the economy recovered, those jobs did not return. Although the service sector eventually absorbed the majority of the workforce, it did so at the cost of sacrificing wage growth and job stability.

Synthesising recent domestic and international literature on AI’s impact on employment, artificial intelligence has not caused large-scale unemployment. Many studies have even found that while the unemployment rate among workers in industries with high AI exposure is indeed rising, the unemployment rate among workers with lower exposure is rising even faster. One possible explanation is that workers with high AI exposure tend to have higher levels of education and stronger re-employment capabilities, and are therefore less affected. The few studies that do demonstrate higher unemployment among those with high AI exposure primarily use large language models to assess the risk of various occupations being replaced by AI — in other words, “AI tells us that AI is worsening unemployment” — and the statistical significance is not high.

Although the impact on overall employment levels is not obvious, in the current era of artificial intelligence, the relationship between employment and growth has already shown some new trends, which can be summarised as “decoupling” in three areas.

First, employment is decoupling from investment. In the industrial and service economy eras, both infrastructure investment and machinery investment generated considerable direct and indirect employment. In the AI era, technology companies are deepening their capital at unprecedented speed, yet the employment-creation effect is declining. Unlike the previous wave of internet investment, the expansion model of the AI era has shifted from “asset-light, people-heavy” to “capital-heavy, computing-heavy,” relying on high-density investment in physical infrastructure such as data centers and energy networks. The combined capital expenditures of Microsoft, Amazon, Google, and Meta in 2025 are projected to reach $400 billion — a figure exceeding the annual GDP of many medium-sized countries. Yet at the same time, tech companies are implementing human capital austerity strategies, cutting hundreds of thousands of jobs and freezing entry-level hiring for graduates. What is unusual is that these actions are occurring against a backdrop of record-high stock prices and robust revenue growth, reflecting a decision-making logic of cutting labor costs to free up funds for investment in computing infrastructure.

Second, technological progress is decoupling from human capital development. In the past, improvements in labor productivity came both from capital and the technology embodied in machinery, and from the contribution of human capital accumulated through “learning by doing.” In the AI era, labor productivity gains are more likely to come from a decline in the denominator of that metric — i.e., the size of the labor force — and the pace of human capital development falls far behind the speed of AI technological progress.

On the one hand, the path of “learning by doing” for human capital accumulation is narrowing. Previously, college graduates accumulated experience through foundational work and gradually developed into senior talent. Now, AI is increasingly competent at tasks performed by junior analysts, junior programmers, and junior copywriters, and hiring demand for fresh graduates in some positions is declining. For example, the traditional law firm model relied on large numbers of junior lawyers to perform document review, legal research, and similar work. AI can now complete these tasks in seconds, but demand for cases such as divorce proceedings does not increase because of AI — leading law firms to sharply reduce hiring of junior lawyers. This not only contributes to rising youth unemployment but may also sever the long-standing ladder for many types of human capital development. If companies no longer hire junior employees, where will future senior experts come from?

On the other hand, in the race between technology and education, the linear pace of human capital accumulation cannot keep up with the exponential speed of technological evolution. A major prescription for the employment challenges of the AI era is lifelong education. But the transformation of educational models is not a panacea in the face of AI technological advances. For the majority of workers, the pace of human capital accumulation can no longer keep up with the evolution of machine intelligence. For example, by the time a university has just launched a course on “prompt engineering,” the latest models may no longer require prompt optimization.

Third, workers’ wages are decoupling from productivity gains. Research on the U.S. labor market shows that the decoupling of labor productivity and real wages has been ongoing since the 1970s, and the accelerated adoption of AI may widen this gap. In the AI era, AI is routinizing non-routine cognitive tasks such as basic code writing, legal document drafting, and foundational financial analysis. The surplus profits of high-efficiency sectors are increasingly converted into capital gains and salary growth for a small number of core talents. Workers remaining in auxiliary roles within high-efficiency sectors are not only declining in number — because their human capital contribution is less than that of AI — but their wage growth will also not keep pace with the sector’s productivity gains.

The traditional “Baumol-style” productivity-sharing mechanism is breaking down. The “cost disease” theory proposed by Baumol noted that the surplus value created by high-productivity sectors such as manufacturing would spill over — through labor market competition (bidding for scarce labor) or institutional arrangements (union bargaining, minimum wages, etc.) — into sectors with slow productivity growth such as healthcare, caregiving, and entertainment, thereby achieving a general rise in wages across society. This cross-sectoral wage transmission mechanism maintained relative equilibrium in the labor market and served as the primary channel through which workers in low-efficiency sectors shared in prosperity. In the AI era, since high-efficiency sectors no longer need more workers, they do not need to continuously raise wages to maintain their labor force, and therefore cannot pull up society-wide wage levels through a “wage demonstration effect.” When mid-skill workers displaced by AI (such as clerks, translators, and junior coders) flow into service sectors with slower productivity growth (such as ride-hailing, delivery, and basic caregiving), labor supply exceeds demand, and the mechanism by which wages in low-efficiency sectors rise in tandem with those in high-efficiency sectors is severed.

Declining AI costs press down the “hard ceiling” on human wage increases. For a large number of tasks based on rules, logical analysis, information synthesis, and pattern recognition, AI provides a nearly infinite supply, breaking the scarcity of human capital in these areas and pushing down the market price of the relevant skills. AI technology is inherently energy-intensive. If the marginal cost of intelligence ultimately converges to energy costs, and energy costs continue to decline with technological innovations such as controlled nuclear fusion, high-altitude wind power, and space-based solar, then the wage ceiling for humans performing existing tasks faces sustained downward pressure. For example, in a particular task, when the deployment cost of AI drops to $5 per hour, the wage of a worker who performs only that single task can never exceed $5, regardless of how much their productivity has improved.

The Social Insurance System Based on Stable Employment Faces Challenges

Based on different assumptions about the timing, speed, and scope of AI’s employment displacement and creation effects, the “crystal balls” of various institutions diverge widely in their predictions of AI’s impact on future employment. For instance, since 2020, the World Economic Forum has made three consecutive, contradictory judgments on whether AI will increase employment, with a gap of 92 million between its predictions of net job gains and net job losses over the next five years. Compared to changes in overall employment levels, this article is more concerned with the challenges that structural changes in employment in the AI era pose to social security.

The modern social insurance system is a product of the era of large-scale industrialization. Whether public pension and health insurance, or unemployment insurance, work injury insurance, or maternity insurance, their original purpose is the socialized dispersion of “risks of employment interruption for workers.” The design of social security systems is therefore strongly linked to employment contributions, and their continued operation depends on three cornerstones: the growth of employed persons driven by a demographic dividend, the standardization of labor relations formed by large-scale industrial production, and the growth of wage income driven by productivity improvements. It was the historical convergence of these three conditions in the 20th century that made social insurance systems financially viable and politically operable, establishing them as an important institution for states to manage social risk.

The first cornerstone is a favorable demographic structure, which provides the actuarial foundation for social insurance. Under the social insurance system, population growth itself is transformed into a special asset class. Intergenerational transfer payments produce an implicit “biological rate of return” that can even exceed the accumulation of monetary capital. If the sum of an economy’s population growth rate (n) and real wage growth rate (g) exceeds the real market interest rate (r), then introducing a pay-as-you-go social insurance system increases total social welfare. In the decades-long “golden age” after World War II, the baby boom made this “return without capital” a reality. Participating in social insurance was not merely a mandatory burden but an investment superior to private savings. A favourable demographic structure established a social insurance intergenerational contract with social consensus, shifting retirement risk management from dispersed households to centralised social provision.

The second cornerstone is long-term stable employment relationships. Unlike social assistance based on means testing, the modern social security system emphasises the reciprocity of rights and obligations — that is, benefit levels are strictly linked to contribution histories. The original intent of this design is to maintain a dignified life for workers after retirement. Long-term stable employment relationships give workers clear, continuous income streams, ensuring the feasibility of linking “retirement benefits” to “labour contributions.” Highly organised employment relationships not only created a stable middle class but also made workers’ income transparent, calculable, and easy to deduct. This transformed the modern corporate system into an extension of state capacity, turning enterprises into agents of the state’s payroll tax (contribution) collection, improving the administrative efficiency of social security fund collection and expanding its coverage.

The third cornerstone is the synchronous growth of workers’ wages and productivity. The synchronous growth of wages and productivity ensures the endogenous expansion of the social security contribution base. Given a fixed demographic structure and collection mechanism, the improvement of social security benefit levels and the solvency of the fund fundamentally depend on the growth rate of the contribution base. Even if population aging occurs and n declines or turns negative, as long as the real wage growth rate g maintains relatively high growth, social security benefit levels can naturally rise along with total social wealth. In the 30 years after World War II, Western countries experienced a golden period of productivity growth. High unionisation rates ensured that productivity gains were translated into wage growth, forming a virtuous cycle of broadly shared productivity gains. The compound growth from a demographic dividend overlaid with a productivity dividend meant that each generation needed to contribute only a small share of its income to support the previous generation in a life better than what they had in their youth.

The modern social insurance system is an institutional arrangement through which human society, by rational design, harnesses the risks of industrialisation. It successfully internalised three specific macro-historical conditions into the parameters of institutional operation, enhancing social cohesion and improving economic and social stability. However, since the late 20th century, population aging has shaken the actuarial logic of the first cornerstone, and the second and third cornerstones also face challenges amid the leap in artificial intelligence technology.

The impact of population aging on the first cornerstone has been extensively discussed and will not be elaborated here. However, it should be noted that the impact of aging on the social insurance system is gradual and predictable, whereas the progress of artificial intelligence is nonlinear and exponential, potentially posing faster, broader, and larger-scale challenges to the second and third cornerstones of the existing social security model.

First, artificial intelligence will change the production organisation model and enterprise forms of industrial civilisation, fragmenting existing formal employment relationships and shaking the second cornerstone.

On the one hand, AI reduces market transaction costs and drives the gig-ification of knowledge workers. If the market is an efficient mechanism for resource allocation, why do firms exist? Coase’s answer is that market transactions involve search, bargaining, contracting, and monitoring costs. When the organisational costs within a firm are lower than the transaction costs in the external market, firms emerge and expand. As AI technology is applied to labour market platforms, the transaction costs of “hiring by task” become negligible relative to “hiring by job.” The basic unit of work will gradually shift from a “job” — a bundled, long-term, loosely defined set of tasks — to a “task” — a single, clearly defined, short-term deliverable — potentially reaching what has been called the “Coase Singularity.” Under the Coase Singularity, a large number of tasks that previously belonged to the firm’s core can be outsourced, even giving rise to “one-person companies,” as workers previously employed on a long-term, stable basis become outsourced personnel. Financial reports from global freelancing platforms such as Upwork and Fiverr show that large enterprises are systematically replacing full-time employees with highly skilled freelancers. If the “enterprise” — the core node of social security contribution collection — is replaced by a “transaction network” of knowledge-based tasks, the likelihood of more office white-collar positions shifting from permanent employment to gig work increases.

On the other hand, AI reduces coordination costs within enterprises and may lead to “middle-layer collapse.” In traditional enterprises, middle managers’ core functions are information transmission, task allocation, and process monitoring. AI agents are beginning to execute complex workflows without continuous human intervention, completing these coordination tasks at extremely low cost. This may lead to the flattening of organizational structures, where senior leaders can directly oversee more business units, and middle managers responsible for coordination and information processing become dispensable. Gartner predicts that by 2026, 20% of organizations will use AI to flatten their organizational structures, and more than half of middle management positions will no longer be needed.

Both of these trends will cause the gig economy to expand from its current domains of construction, manufacturing, food delivery, and courier services into knowledge-worker-dominated producer services, resulting in a larger scale of non-long-term employment relationships. This will lead to a decline in employers’ social insurance contribution responsibilities and an increase in individual workers’ contribution obligations and risk exposure.

Furthermore, if AI’s ultra-large-scale capital deepening continues in its current manner, the tilt of national income distribution toward capital owners and a small number of highly skilled individuals will shake the third cornerstone.

AI may make it difficult for the wage income of middle-income groups to keep pace with productivity growth. The primary source of funding for the social insurance system is a large middle-income population. Unlike previous industrial revolutions that mainly replaced blue-collar manual labour, generative AI accelerates the routinization of non-routine cognition, turning mid- to high-level cognitive abilities into industrially replicable services. Its primary impact is on the white-collar class — educated workers engaged in cognitive work — a group that has stable employment, relatively high wages, and high compliance rates for contributions.

A declining share of labour compensation leads to a relative decline in the social security tax base. Data from the OECD and the International Labour Organisation both show that in the most digitised industries, the share of labour income in value added is declining at an accelerating pace. This means that the dividends from technological progress are increasingly flowing to capital owners who possess algorithms, data, and computing power. Since high-income earners face caps on contributions to public basic pension insurance, health insurance, and unemployment insurance, further income growth for this group contributes almost nothing to social security funds. If capital deepening in the AI era leads to a reduction in the labor income share — particularly the income share of middle-income groups — the social security tax base as a proportion of overall economic output will decline, and economic growth will fail to translate into commensurate growth of social security funds.

Building an Employment-Friendly Development Model in the Age of Artificial Intelligence

Technology itself is neutral, but technological innovation does not inherently orient toward human well-being. If the purpose of artificial intelligence is to enhance human potential and improve the quality of life rather than “how to replace people with machines,” all the challenges described above could be readily addressed, and the technological dividend could compensate for the disappearance of the demographic dividend. For example, the European medical technology industry association estimates that the widespread application of AI in healthcare could save European healthcare systems between €170 billion and €210 billion annually, with wearable AI devices alone potentially saving approximately €50 billion per year, directly alleviating the pressure on health insurance funds in drug procurement. As another example, an important approach to solving the pension crisis is to extend contribution years. AI technology can eliminate the physiological and cognitive barriers that prevent older people from participating in the labor market, allowing older employees to focus on high-value work requiring judgment, empathy, and complex decision-making, reducing work fatigue, and enabling older workers to opt for a “phased retirement” model — transitioning from full-time to part-time work rather than abruptly cutting off their income source.

However, at least four factors currently steer the direction of AI innovation in ways unfavourable to employment and social security. First is the capital-driven “Turing Trap.” Stanford University’s Erik Brynjolfsson proposed the concept of the “Turing Trap,” pointing out that current AI research and development is excessively focused on “thinking and acting like humans,” developing “human-like intelligence” rather than augmenting human capabilities. This is a result of capital-driven innovation responding to scarcity. Prices, as signals of scarcity, direct the course of technological change, steering innovation toward replacing factors of production that are large in scale and high in price. In advanced economies, this directs innovation toward replacing high-cost labour. Second, geoeconomics promotes a labour-saving innovation pathway. In recent years, under the influence of geoeconomics, advanced economies have pushed for industrial reshoring but face severe shortages of skilled labour. To avoid uncertainties in cross-border investment, immigration policy, and tariff policy, companies are redirecting their technological investment toward “labour-saving” directions. Third, the infinite demand of the digital world exacerbates scarcity in the physical world. AI innovation cannot directly break through the scarcity of atoms. Physical constraints on land, freshwater, lithium, cobalt, and other critical minerals persist, and the scarcity of economic growth shifts to energy, environmental capacity, and key raw materials. From an employment perspective, these are all areas with thin labour demand; accelerating their development may even create a problem of AI competing with human well-being for scarce resources. Fourth, the innovation limitations of AI4Science. A study analysing 67 million papers across six major fields — biology, chemistry, geology, materials science, medicine, and physics — found that while AI tools have improved individual scientists’ output, they have led to a convergence in research topics. Scientists tend to study data-rich areas that AI can easily process, while data-scarce or marginal fields that are difficult for AI to model are neglected. This tendency may narrow the breadth of scientific discovery and reduce the potential for breakthrough innovations that open up new areas of human demand and employment.

Technological progress is path-dependent. Once a certain technological paradigm achieves dominance, society’s engineering capabilities, infrastructure, and cognitive habits are all built around it and become self-reinforcing, “locking in” the development model onto a specific trajectory. The proposal for the 15th Five-Year Plan calls for “building an employment-friendly development model” and explicitly states the need to “improve employment impact assessment and monitoring and early warning” to address “the impact of new technological developments on employment.” This represents the unity of high-quality development and high-quality full employment, and carries great significance for guiding the development direction of AI technology.

Unlike the United States, which bets the bulk of its incremental innovation resources on the training and inference layers of AI, China’s “AI+” action plan emphasises large-scale technological application, distributing innovation resources more evenly across the training, inference, and application layers of AI. This not only shortens the investment return cycle of technological innovation but also facilitates job creation through the development of AI application scenarios across production, consumption, and distribution. Moreover, China’s labour costs are far lower than those of the United States, making the gains from AI replacing labour less substantial and leaving more room for public policy to steer AI development “toward the good.” Beyond the conventional policies already in place, this article proposes several policy directions for discussion.

On the “robot tax.” Because some countries provide tax credits or accelerated depreciation for automation equipment while levying high payroll taxes (including social security contributions) on labour, this effectively subsidises the replacement of human workers with AI technology. Although many studies have proposed a robot tax, no country has yet implemented one. The Korean government, often mistakenly cited as having introduced the “world’s first robot tax,” did not directly tax robots but rather reduced tax credits for corporate investment in automation equipment. In theory, a robot tax could internalise the social costs of AI development (such as unemployment) and slow excessive employment displacement. In practice, however, it faces definitional challenges — for instance, what constitutes a “robot,” and should an Excel spreadsheet improved by AI technology be taxed? A more feasible approach would be to implement differentiated tax rates based on the type of AI technology: granting tax credits for “labour-augmenting” technologies such as exoskeletons and augmented reality glasses that assist workers, while withholding tax incentives or imposing moderate taxes on technologies that purely substitute for labour.

On a “tax-contribution coordinated” approach to social security financing. Unlike the model in continental European countries such as Germany and France, which relies primarily on employer and employee contributions, countries like Denmark have chosen to fund social security mainly through general taxation, with a smaller share of contributions. Japan, one of the world’s most aged societies, raised its consumption tax rate from 8% to 10% in 2019, with the increased revenue explicitly earmarked for social security expenditures, including pensions, healthcare, and long-term care. Although the social security financing structures of Denmark and Japan’s reforms were not originally designed to address AI disruption, a “tax-contribution coordinated” approach to social security financing can channel the wealth dividends created by AI back into the social safety net, mitigating the shocks to the three cornerstones of social security. As for specific tax instruments, based on policy practices in several countries, value-added tax (or consumption tax), environmental taxes, and capital gains taxes are options, and some research institutions have also proposed levying an AI “excess profits tax.”

On sovereign AI infrastructure. If AI computing power, as some researchers suggest, will become the currency of the future, then controlling AI infrastructure means controlling future seigniorage. Building “sovereign AI infrastructure” is not only a national security issue but could also become a new channel for social security financing. Countries such as the United Kingdom, France, Canada, and Singapore are investing in building state-owned “national research clouds” or sovereign AI computing clusters. Through national investment in core computing infrastructure, governments can directly capture the economic rents generated by AI in the future. After the large-scale commercialisation of AI, this “AI dividend” could play a role similar to Norway’s current petroleum fund, directly injecting into the social security system, achieving a shift from “taxing labour” to “sharing in AI dividends,” and allowing the social security system to share in the capital appreciation brought by AI.

On human capital accumulation in the AI era. A study by the European think tank Bruegel found that in AI-related job postings, mentions of university degrees declined by 23%, while mentions of specific skills increased significantly. At the basic and higher education stages, as the half-life of specific professional backgrounds and skills shortens, education must pivot toward cultivating “metacognitive” abilities, critical thinking, and cross-disciplinary systems integration capabilities. On the youth employment front, as AI takes over entry-level work and the “learning by doing” pathway for human capital narrows, new incentive mechanisms for graduate internships and apprenticeships must be designed. One option is for fiscal funds to subsidise the wages or social security contributions of young people entering the workforce, encouraging enterprises to hire young workers and develop human-AI collaboration and co-growth on the job.

The New York Times described him, aptly in my view, as someone "known for dispensing ruthlessly blunt advice about how to maximize a student's chances at success." But how did an education consultant amass such enormous influence in just a few years, even upon his death, that ordinary citizens mourned him as though they had lost someone they personally knew?

To understand his appeal, you first have to understand the gaokao. The gaokao is, for the vast majority of Chinese students, the sole gateway to university. Held every June, it is a nationally standardised exam that ranks students by score and matches them to universities accordingly. Since its reinstatement in 1977, the gaokao has been the single most important mechanism for social mobility in China. For most ordinary families, it is the most reliable chance their child will ever have to change the trajectory of their life.

If the gaokao remains China's most critical channel for upward mobility, then the application process that follows it — choosing which universities and majors to list on your preference form — is the most opaque stretch of that channel. Zhang Xuefeng's rise from education consultant to nationally recognised public figure was not because he said anything particularly brilliant. It was because he spoke directly to the anxiety that had existed for years, but had never found a voice.

Put simply, within the gaokao system, the amount of information available to a family varies enormously depending on where they live and what class they belong to. A student in Beijing or Shanghai might have older peers sharing frank assessments of different universities and career prospects from as early as tenth grade. Their parents might be graduates of elite universities themselves, casually remarking over dinner that a certain department at a certain school isn't as strong as its reputation suggests. A student in a small county town, by contrast, is likely to hear only one piece of advice from their teachers: get a high score.

What Zhang did during his livestream was make that knowledge visible. He spoke bluntly about things like what jobs a given major actually leads to, how a given university is actually regarded within an industry, and whether a particular path makes sense for a kid without family connections. This kind of talk was easy for elites to look down on as “vulgar pragmatism.” But for most ordinary families, education leaves little room for dreams. Every point on that gaokao score is a bargaining chip, and it must be spent wisely, because after graduation, these kids still need to find a job and gain a foothold in an unfamiliar city, entirely on their own.

At the individual level, the average Chinese gaokao taker is around nineteen years old, having spent the previous twelve years in school. Given the academic intensity in most parts of China, the overwhelming majority of these students have poured nearly all of their energy into preparing for exams. Many have barely had the chance to figure out what they are good at, let alone what they want to do for a living. To expect them to deploy their gaokao scores strategically — making rational decisions about careers and cities — is simply unrealistic.
Zoom out further, four decades of rapid industrial upgrading have produced wave after wave of structural upheaval in Chinese society, rendering experience-based wisdom almost useless. Roughly every ten years, the groups that benefit most from China's economy shift markedly, making it impossible for parents to guide their children based on their own career trajectories. In the 1980s and early 1990s, graduates of vocational secondary schools — zhongzhuan — were guaranteed job placements by the state, while university admission rates remained low. Many of the best middle school students chose vocational school over the high-school-to-university track. Then, around 1999, a massive expansion of university enrollment and the abolition of guaranteed job placement dramatically reduced the returns on vocational education. Overnight, the university track became the obvious first choice.

In hindsight, these turning points seem unmistakable. But for those living through them, they were anything but. And so, for most families, the only option was to rely on someone like Zhang Xuefeng, who understood the rules of the game well enough to point others in the right direction.

Of course, decades of breakneck growth also served to cushion the consequences of poor information and poor choices. As long as someone's university wasn't too bad, even a misjudged major could be overcome: the tailwinds of industrial expansion and urbanisation were strong enough that switching careers mid-stream remained a viable path to a decent life. In other words, society as a whole still had a high tolerance for error.

But as China has moved away from that era of high-speed growth, and the rising tide no longer lifts all boats, the calculus has changed.

A dozen years ago, an ordinary student who got into a middling university’s computer science program had a realistic shot at landing a job at a top internet company, earning several times the national average salary. Today, even a degree from an elite “985” university, China's equivalent of the Ivy League, is no guarantee of entry into a leading firm. Some employers have even taken to scrutinising applicants’ undergraduate origins — the so-called “first degree”(第一学历)- as if having tested into a top graduate program from a lesser-known college were not a sign of perseverance, but a stain on one’s resume.

In this environment, Zhang Xuefeng told ordinary families the things they needed to hear: Where do you actually stand? What cards do you actually hold? Which majors give you a real chance of survival? Which choices are traps? Renwu人物 magazine called him “the opposite of an idealist.” But I would argue that for the many families with no connections, no safety net, and no capital for trial and error, his brutal honesty came closer to kindness than any amount of gentle platitudes ever could.

What Zhang represented was a challenge to a deeply rooted traditional Chinese shidafu ideal, which holds that education derives its nobility from rising above material concerns. Zhang told ordinary people to survive first. And yet, isn't the belief that every ordinary person deserves the right to make an informed choice a higher form of idealism? This questioning of the conventional narrative around education was already widespread while Zhang was alive. Now, with his passing, it’s been sanctified and placed beyond challenge.

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The Man Ordinary Chinese Chose to Trust

Thousands lined up on Saturday in Suzhou, in China’s eastern Jiangsu province, to bid a final farewell to Zhang Xuefeng, the education influencer who died suddenly after suffering cardiac arrest during exercise. Faced with the spontaneous, surging crowds outside the Suzhou Funeral Home, any criticism or controversy that once clung to his name looked sud…

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a month ago · 43 likes · 4 comments · Jiayao Liu, Lixing XIE, Zichen Wang, and Yuzhe HE

Jiang served as Deputy Secretary-General of the Chinese State Council between 2011 and 2018, one of the highest positions in China's policy-drafting. In this role, she was directly involved in formulating and implementing major economic policies. Prior to her government service, she established herself as a leading academic voice on industrial economics and development policy at the Chinese Academy of Social Sciences. After leaving the State Council in 2018, she returned to academia as Dean of the School of Public Policy and Management at Tsinghua University, a position she held until 2022. Now, she’s a Professor at the University of Chinese Academy of Social Sciences.

At this week’s Boao Forum, she publicly called for caution toward AI applications designed purely to replace human labor. As she pointed out: “In the past, technological progress typically created far more new jobs than it eliminated. But since the 1980s, that trend has been clearly slowing down.”

She also stressed that what is technically “rational”(合理) should not be equated with what is socially “desirable.”（合意） Using human emotion as an example, she asked: “We experience a full range of emotions — joy, anger, sorrow, happiness. Technology could make you feel only happiness. But is that really what we want? Science used to be about discovering the laws of nature. Now we are creating technologies that do not exist in nature, technologies that can alter how we live, how we perceive and reproduce, and even the very structure of our society — do we truly consent to this?” She argued that genuine social consent can only be established through thorough public debate. When technology begins to threaten public safety and personal privacy, the government must intervene decisively rather than leaving the outcome to market forces alone.

She urged the government to pay greater attention to “the people being replaced.” She cited the example of a city that had attempted to develop a device to replace workers performing the most basic manual labor. The initiative not only required significant R&D investment but also subsidies for institutions to purchase the machines, making the overall cost of using the machines higher than employing human workers. Moreover, the quality of work performed by the machines was far inferior, yielding no real practical benefit. The government had supported the project simply because it fell under the banner of “new technology” and “new industry.” Yet those being displaced were precisely the lowest-income workers in the city — people whose basic livelihoods would be severely threatened if they lost their jobs. She therefore emphasized that AI deployment cannot be left entirely to the market. While promoting technological development, the government must give full consideration to its impact on vulnerable groups.

Recently, she delivered a speech at Southwest University of Political Science and Law, arguing that the answer cannot be left to tech companies alone. In a recent address, she presented her view on AI for good, calling on the social sciences to define the benchmarks for AI's benefits and harms. Thanks to her kind authorization, I can present the English transcript.

Jiang Xiaojuan on AI for Good: What Is “Good,” How to Achieve It, and Who Should Act

I am very glad to be here at Southwest University of Political Science and Law to exchange ideas with all of you. I believe everyone can appreciate that there is already a high level of attention and consensus on digital development issues, and that governance challenges have become increasingly prominent. Today, I would like to share some preliminary thoughts on the theme: AI for Good: What Is “Good,” How to Achieve It, and Who Should Act.

What Is “Good”: A Social Science Perspective

For a long time, there have been extensive discussions about AI for good, and there is a fairly high degree of consensus at the conceptual level. For instance, from UNESCO’s Preliminary Draft Report of COMEST on Robotics Ethics in 2016 to the Paris AI Action Summit in 2025, there has been strong consensus on AI governance principles. Concepts such as safety, transparency, non-discrimination, explainability, traceability, fairness and justice, inclusiveness and openness, respect for privacy, benefit-sharing, human-centeredness, and human control have been repeatedly discussed. However, discussions on how to realize these ideals and who should implement them to put “good” into practice have been relatively insufficient. These discussions have mainly been carried out by the companies involved and related technical communities within the framework of “alignment”—a perspective that is one-sided, frequently shifting, and lacking in generality and stability. I feel it is necessary to situate this issue within the knowledge system of the social sciences for discussion and analysis, as “good” in its broadest sense is precisely the purpose and theme of much social science research. Whether technology serves the good fundamentally depends on whether it promotes economic development, social progress, and people’s well-being—that is, whether it advances human welfare. The social sciences are capable not only of proposing conceptual pathways toward good, but also of establishing evaluation criteria, implementation pathways, and identifying responsible actors within a universal knowledge framework, drawing on deep academic foundations and theoretical capacity.

1. Rationality Is Good: Efficient Resource Allocation, Increased Social Welfare, and Fair Distribution

“Rationality” is a core concept in economics. Economics defines “rationality” as improved resource allocation efficiency, increased social welfare, and relatively fair distribution. Under this objective, economics provides clear evaluation criteria and indicators: improving total factor productivity (TFP), enhancing input-output ratios, income growth, and promoting innovation investment are all measures of resource allocation efficiency; improvements in education and healthcare, as well as the strengthening of social security systems, are measures of increased social welfare. Measured by these indicators, AI has made notable contributions to improving TFP and social welfare growth—the goodness of technology is indeed significant.

As for how to achieve “rational good,” economics offers both implementation pathways and identifies responsible actors. For example, allowing the market to play a decisive role in resource allocation in AI-related fields is an implementation pathway, which necessarily requires enterprises to be the primary actors. Of course, the market involves not only enterprises but also a sound “market environment,” including fair competition and equitable market access, which in turn requires well-developed market regulation. Measured by fair distribution, however, AI cannot yet be called “good.” The Gini coefficient, income gaps, and similar metrics are all indicators used in economics to assess whether the fruits of development are distributed relatively fairly. By these measures, AI’s impact is currently predominantly negative—that is, there exists an influence of “not-good.” On one hand, wealth is increasingly concentrated in the hands of the very few who succeed in innovation; on the other hand, AI’s displacement effects primarily affect middle- and low-income groups, and there is as yet no sign that continued AI development will improve or reverse this trend. Drawing on the experience of past technological progress, addressing this problem requires effort from AI companies themselves, as well as a greater role for government—maintaining a necessary balance between AI applications whose primary effect is labor substitution and new employment opportunities created by AI, and better fulfilling government responsibilities in improving long-term social security systems.

2. Consumer Benefit Is Good: Gains Beyond the GDP Boundary

Some gains from technological progress cannot be measured by standard GDP growth, yet they generate substantial consumer surplus—or what we might call “use-value benefit” (yongyi). In plain terms, this means bringing convenience, happiness, well-being, and a sense of fulfillment to the people. AI’s impact in this regard is particularly remarkable.

AI brings the good of convenience. The convenience brought by AI is extremely significant, yet a considerable portion of it is not reflected in GDP. For example, consumers’ extensive use of self-service tools based on networks, AI models, and intelligent agents brings great convenience, yet does not generate economic activity that counts toward GDP. On the contrary, it replaces services that were previously counted in GDP—such as self-service ticket booking replacing ticketing services, free online information replacing newspaper subscriptions, email replacing postal mail, and a host of other free services. The cultural industry is the most representative case: entertainment platforms and generative models allow everyone to enjoy more music, books, videos, and richer cultural products, vastly increasing cultural consumption. Yet at the same time, the market size of cultural products measured by GDP has not grown correspondingly. For example, data from the Recording Industry Association of America shows that U.S. music industry revenue fell from $14.6 billion in 1999 to $7.5 billion in 2016—the many benefits that digital music brought to consumers cannot be measured by GDP. While platforms offering various free services generate GDP through advertising pushed to consumers, many studies have found that this is far less than the GDP scale of the replaced services and newly created welfare. Clearly, AI has brought the good of consumer benefit.

AI brings the good of equal access. AI has brought massive numbers of ordinary consumers into domains of consumption and creativity that were previously accessible mainly to high-income and highly educated groups. For example, in the field of cultural consumption, consumers with poor reading ability can choose to have AI provide or generate culturally rich products in formats such as images and video; lower-income consumers can use free platform services to enjoy expensive cultural products and services that would be inaccessible to them offline (such as performances at high-end theaters). Furthermore, in the field of cultural creativity, ordinary people who lack “professional” creative skills can now transform highly creative ideas into cultural products of their own making and share them with others. Influencers on social networks not only sell their products and services but also share lifestyles, emotions, fashion, sentiments, and dreams with their followers, providing consumers with greater satisfaction of spiritual and psychological needs.

The good of consumer benefit manifests through free services, self-entertainment, mutual assistance, and similar means, and cannot be measured by GDP growth or income increases. However, it can be measured using the contingent valuation method (CVM) or willingness-to-pay assessment. Consumers can be asked how much they would be willing to pay if these benefits required purchase, or how much compensation they would need to give up certain benefits that are currently free. For example, how much compensation would make them willing to stop using “Xiaohongshu”-type apps or free large language models? From such data, the total social use-value benefit can be calculated. Research has shown that the ratio of use-value benefit to monetary income is significantly higher for low-income earners than for high-income earners, indicating that AI does indeed have the good of promoting equality and improving the welfare of the low-income population.

Use-value benefit also has its “not-good.” Some consumption that brings momentary psychological pleasure can cause deep, long-term harm to body and mind. For example, addiction to online games, or the narrowing of perception caused by thick information cocoons—the harmfulness of these problems enjoys high social consensus, and those affected suffer greatly yet cannot extricate themselves. Technology holders and users have a responsibility to exercise restraint and self-discipline. If there are no countermeasures, they should refrain from such harmful acts; if there are adverse consequences, they should use technological means to constrain and limit them—just as product manufacturers bear responsibility for product quality and must not sell products that endanger health or life. At the same time, government and society must collaborate in responding. For those “evils” on which there is society-wide consensus—such as challenging the baseline of human values, violating personal privacy, promoting terrorism, and similar speech and conduct—public authorities must take forceful action.

3. Consensus Is Good: Social Agreement on the Long-Term Consequences of Technology

Multiple social science disciplines study “consensus” (heyi). For example, social consensus as studied in sociology represents a relatively high degree of social agreement. This article defines “consensus” as the social agreement that commands the broadest common ground and the social solidarity it determines, and uses the concept of consensus to discuss the ethical issues of science and technology in the AI era.

Ethical issues in science and technology are nothing new, but they have become particularly prominent in the AI era, and their nature has fundamentally changed. In the past, we spoke of science as “discovering the laws of nature”—these were laws inherent in the natural order, formed through the interplay and evolution of various forces over billions of years. Now, AI strives to construct conditions that do not exist in the evolution of either nature or human society, creating new orders, with many explorations aimed at altering the human condition or the state of human society. For instance, in the life sciences—where “AI for Science” applications are most concentrated—much scientific research attempts to alter our physiology, reproduction, cognitive structures, and even intervene in the formation of consciousness, thereby changing humanity’s agency and control in consciousness formation and related behavior. Some efforts aim to construct new life forms whose long-term consequences are unknown. What consequences will arise from the creation of these new entities? Perhaps even the scientists who invent them cannot say for certain. On closer reflection, this is quite different from past scientific discoveries.

Under such circumstances, whether humanity agrees with a certain direction of scientific development becomes very important—this is what this article calls “consensus.” I once told a scientist I greatly admire that, regarding a certain research project of his, I—as an ignorant technology enthusiast—was very curious and eager; as an economist, I could not immediately judge; but returning to the natural identity of being “human,” I wanted to say that his research was entirely “lacking in consensus.” When scientists attempt to alter human characteristics and natural laws that have evolved over tens of millions of years, this has already become a matter of great significance to every person. The public must be informed, must participate, and must express whether they agree. This kind of heavily scientific discussion may be difficult to advance using methods like contingent valuation; instead, it requires public, transparent, and open “collective deliberation.” Scientists have a responsibility to explain to the public all possible consequences—not merely the benefits—while allowing society-wide, thorough discussion to form social consensus commanding the broadest common ground. Only through full expression and sustained negotiation among all parties can an approximation of “consensus” and a realistic position be found. The logic of technology must not be allowed to become the dominant factor; even more importantly, we must guard against irreversible and inappropriate “innovations” hastily carried out by a few technology experts who lack a strong sense of responsibility or sufficient foresight. In short, for these kinds of AI-for-good questions, the requirement of consensus must be present.

Exploring Mechanisms: Multi-Party Collaboration to Promote AI for Good

Let us now consider the mechanisms for achieving good. Apart from the “good of consumer benefit,” which is a natural result of technology itself, “rational good” and especially “consensus good” do not occur naturally. Where, then, do the incentives for good come from? How should corresponding mechanisms be designed? Practice has shown that incentive mechanisms compatible with “good” and factors leading to “not-good” coexist at multiple levels. In the AI era, the forces behind both “not-good” and “good” differ from before, and “good” requires both self-restraint and social restraint.

First, AI innovators and producers have significant and effective incentives toward “good.” An important reason is that AI requires very large-scale adoption; if its “good” does not gain social consensus, it cannot be well and sustainably applied. Society’s high level of attention to AI safety and ethical issues exerts pervasive, powerful, and sustained pressure and value orientation on enterprises and entrepreneurs. Maintaining reputation requires producers to “do good,” and when society perceives them as “not good,” they must respond and adjust quickly. In 2023, OpenAI faced widespread criticism for using sensitive user data in its training, and promptly pledged not to do so again. Several leading domestic AI companies have also had commendable responsive cases. From this perspective, the incentive mechanism for “good” is more pervasive and powerful in this era.

Second, distributed governance is a distinctive feature of AI-for-good governance. The most important difference between AI and data-driven industries and past industries is the scenario-based nature of their applications. In the past, market resource allocation was one-to-one, but in the AI era, resource allocation is cluster-based and scenario-specific. For digital government, smart cities, intelligent transportation, smart healthcare, and the low-altitude economy to be effective, groups upon groups of transacting parties must allocate resources—what we define as distributed resource allocation. In distributed resource allocation, stakeholders with related interests and values form communities of various sizes around specific scenarios, with market and social actors autonomously choosing specific transaction and cooperation partners. Each scenario has its own rules—for example, platforms have their own transaction rules, return policies, and penalties for violations—which define what is “good and not-good” in that scenario, that is, what participants may or may not do. Participants follow these rules, and thus these communities also take on governance functions, which can be called distributed governance.

Third, the governance role of public authority is indispensable. Some seriously consequential “not-good” cannot be left to market and social negotiation; rather, there must be a clear negative list of things that “must not be done”—that is, acts of “evil.” For example, invading users’ privacy without their consent, publishing false information, terrorism, hate speech, and so on. Furthermore, for market and social governance to be effective, the government’s most important function is to mandate openness and transparency. Enterprises must enable consumers to quickly and clearly see their user agreements; transparency in the details of these agreements is extremely important. And as discussed earlier, for innovations related to humanity itself and human society, providers must clearly explain to society and the public what they are doing and what the consequences may be.

Finally, government signaling is also particularly important. Laws need to be relatively stable and cannot easily keep pace with events, nor is it necessary to rush legislation before the situation has relatively stabilized. But there is much that government can do: issuing guidelines and best-practice cases, criticizing improper practices, summoning relevant enterprises for supervisory talk（约谈）—all of these have significant guiding effects on AI for good.

To return to the central thesis of this article: the social sciences must play an important role in promoting AI for good. The social sciences have deep disciplinary foundations that give us greater capacity to judge the good and evil of AI. In terms of resource allocation efficiency, social welfare gains and losses, fair distribution of wealth, assessment of public sentiment and willingness, and the maintenance of social harmony, the social sciences have made outstanding contributions. In the AI era, we must redouble our efforts, shoulder our responsibilities, and stand at the center and the frontier in the discussion, practice, and theoretical construction of AI for good.

More to read:

The East is Read

Jiang Xiaojuan: domestic reform underpins China's opening up

Jiang Xiaojuan is a professor at the University of Chinese Academy of Social Sciences. She is a former president of the China Public Administration Society and now serves as director of its Academic Advisory Committee…

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5 months ago · 9 likes · Yuxuan JIA and Yifan YAN

A week earlier, at the same station, the number had been just over 2,100 yuan (about $304). Lao Zhou has been in the road freight business for twelve years. He currently runs 12 round trips a month on the Shanghai to Guangzhou trunk route, connecting China's two most powerful regions, the Yangtze River Delta (around Shanghai) and the Pearl River Delta (around Guangzhou). Together, these two regions generate over 35% of China's GDP and account for nearly 60% of its total exports.

Each one-way leg is 1,400 kilometers; his truck burns 38 liters per hundred kilometers. At the current diesel price of 7.8 yuan (about $1.13) per liter, the fuel-cost increase alone is costing him an extra 3,200 yuan (about $464) a month. Freight rates haven't budged. He told the reporter that his net profit per trip has shrunk from 1,200 to 1,500 yuan (about $174 to $217) at the start of the year to just five or six hundred yuan (roughly $72 to $87) now.

When asked whether he knew about the Iran situation. Lao Zhou said he had scrolled past the words "Iran" and "Strait of Hormuz" on his phone. "I don't really understand what's going on over there. All I know is that when there's trouble on that side, diesel goes up on ours."

The trouble that Lao Zhou doesn’t really understand is pushing up global oil prices with brutal efficiency. On February 28, the United States and Israel launched a joint military strike against Iran. Iran responded by effectively blocking the Strait of Hormuz. Within ten days of the blockade, Kuwait, Iraq, and Qatar successively announced production cuts; Middle Eastern oil-storage capacity hit critical levels. On March 9, Brent crude crossed $100 a barrel for the first time in three years.

For China, which depends on imports for over 70 percent of its crude oil, the shockwave transmits almost instantaneously, from oilfield to refinery, from port to gas station, and from Lao Zhou’s ledger to his high-school-age child’s tuition back in Anhui, his aging parents’ medical bills, and the mortgage payment that comes due every month without fail.

But for China’s macroeconomy, what matters the most is the timing of this oil price increase.

China's economy is in a very critical position. The PPI — the index that measures factory-gate prices — has been negative for an extended stretch. The GDP deflator has been negative for eleven consecutive quarters. Firms dare not raise prices, consumers defer spending, investors wait and watch, and the waiting itself pushes prices down further, creating a negative feedback loop that keeps policymakers up at night. Just weeks ago, the 2026 Government Work Report wrote "bring the overall price level from negative to positive"推动价格总水平由负转正" into its annual policy objectives, its degree of bluntness rarely seen in recent years.

Chinese economists have begun to debate whether the high oil prices, born of Middle Eastern conflict, could finally break the low-price feedback loop.

Guan Tao, global chief economist at BOCI Securities — who recently attended the People's Bank of China's economic symposium and who briefed then-Premier Li Keqiang on the Chinese economy in 2022 — does not think the question is absurd. In a lengthy essay published on March 23, he cited the case of Japan, which was mired in deflation for three decades. The Bank of Japan exhausted every tool in its arsenal, from quantitative easing, qualitative easing, and negative interest rates, and deflation did not budge. What ultimately freed Japan were two external shocks it had not chosen: the 2020 global pandemic disrupted supply chains, and the 2022 Russia-Ukraine war ignited commodity prices. Imported inflation broke the old price expectations. Japan's CPI exceeded its 2% target for 45 consecutive months beginning in April 2022; the Nikkei index rose 75% over four years; the economy-wide leverage ratio fell by nearly 40 percentage points. A thirty-year deadlock, shattered by an inflation that was not of Japan's own making.

Guan Tao also mentioned that in 2021, China’s reflation fundamentals were actually stronger than Japan’s. China’s PPI inflation that year hit 8.1%, versus Japan’s 4.6%. Yet Japan achieved reflation the following year, while China narrowly missed the window twice. Part of the reason was that China’s supply-stabilization and price-control measures effectively dampened the transmission of imported inflation; when international coal prices surged as much as 7.6 times, domestic coal prices rose only 40%. Another part was that pandemic-era policies preserved the supply side but, against a backdrop of weak demand, exacerbated the imbalance between supply and demand.

His implication is not hard to read: this time around, facing another wave of imported inflation, China should perhaps not extinguish the fire as quickly as it did last time.

But such an idea is unlikely to win much sympathy on the factory floors that produce everyday goods seemingly unconnected to oil.

According to Blue Whale News (蓝鲸新闻) on March 20, the sustained surge in international crude prices has driven sharp increases in the price of adhesives, a product closely tied to petroleum. Henkel China, the world-renowned adhesive manufacturer, has sent letters to its customers announcing a 20% price increase on all products effective March 17, citing raw-material procurement costs that have "far exceeded manageable levels."

Adhesives are the invisible backbone of many consumer goods manufacturing processes, especially in the personal care sector. The production of sanitary pads and diapers depends on hot-melt adhesive for structural bonding, elastic-band fixing, and backing adhesion, all of which directly affect product comfort and safety. Blue Whale News reporters learned from multiple sanitary-pad contract manufacturers that the impact extends well beyond adhesives, with nonwoven fabrics, polymer materials, and other key inputs all affected. Overall production costs have risen approximately 20%, and prices are changing day by day, with all quotes valid only at the moment of final order placement. A personal-care brand executive told reporters that many private-label operations have already raised prices, but proprietary brands are still watching and waiting. "A month or two is manageable, but after that, the pressure will be severe."

The transmission logic behind these numbers is not complicated. Rising international oil prices push up polyethylene and polypropylene, which in turn raise the cost of everything from adhesives to nonwoven fabrics. Because many companies stocked up on materials in advance, they still have inventory to draw on, creating a lag before costs are passed on to consumers. But if the conflict persists, price increases for sanitary pads, diapers, and other daily necessities that touch every household are likely only a matter of time.

Luo Zhiheng, chief economist at Yuekai Securities, is also a long-term economic advisor, attended the economic symposium hosted by Premier Li Qiang in July 2023 and October 2024. In his report titled “Different Paths, Hard to Converge殊途难同归——油价上涨能否助推物价合理回升？” published on March 13, he pointed out that when prices rise due to demand-pull inflation, household incomes typically rise in tandem, and the pain can be offset. But when prices rise due to cost-push inflation, the burden lands directly on top of an existing income squeeze, and the pain is far more real. Energy and food account for a larger share of spending among low-income households, meaning oil-price increases erode these families' purchasing power the most.

Luo's view is more cautious than Guan Tao's. He does not deny that imported inflation may produce some serendipitous positives, such as breaking the self-fulfilling prophecy of low-inflation expectations, boosting nominal GDP and thus fiscal revenue, and reducing real interest rates and lightening corporate debt burdens. But he is more concerned about a fourfold cost, namely a direct increase in the cost of living for low- and middle-income groups; a profit squeeze on midstream and downstream firms caught between rising costs and flat selling prices; pressure on the exchange rate from deteriorating terms of trade; and, the most concealed yet most intractable risk, the possibility that if CPI is pushed above 2% by oil prices, public opinion could pressure the central bank into tightening at precisely the wrong moment, disrupting the normal rhythm of macroeconomic management.

What China needs, Luo argues, is not inflation per se, but the logic of a normally functioning economy that inflation is supposed to reflect, like firms that can turn a profit, households with employment and income, and a society with confidence in the future. Numbers pushed up by oil prices do not automatically equate to any of these things.

The trending topic "oil prices rise, hardshell jackets get pricier" recently surged onto Weibo's hot-search lists, corroborating Luo's analysis from another angle.

Polyester, nylon, spandex, and other synthetic fibers are the primary raw materials for hardshell jackets and athletic apparel, and all of them are, at root, petroleum derivatives. According to the Qilu Evening News on March 20, as crude prices climbed, chemical-fiber feedstocks spiked in response, and polyester quotes jumped more than 20% overnight. The main input for hardshell jackets, polyester POY (partially oriented yarn), soared from 7,000 yuan (about $1,015) per ton in late January to 9,600 yuan (about $1,391) per ton by mid-March, an increase of over 35%.

Fabric costs account for 60 to 70% of a hardshell jacket’s total production cost. For a mass-market jacket priced around 500 yuan (about $72), raw-material costs have risen by nearly 40 yuan (about $6); for mid- to high-end models above 1,000 yuan (about $145), the increase ranges from 60 to 100 yuan (roughly $9 to $14). Even though leading brands like Arc’teryx have not yet officially announced price adjustments, the industrywide cost pressure is unmistakable.

From the gas pump to the wardrobe, oil's transmission chain is longer and more hidden than most people imagine. The same Qilu report noted that fertilizer and pesticide production are heavily dependent on oil and gas. Rising agricultural input costs, compounded by higher diesel prices, are driving up both farming and logistics costs. And higher logistics costs eventually pass through to food delivery, fresh produce, and other end-consumer channels. From transportation and clothing to food and daily necessities, petroleum-driven cost pressures are silently seeping into every corner of daily life.

Xiong Yuan, chief economist at Guosheng Securities, pointed out in an analysis on March 10 that rising oil prices will widen the divergence in corporate profitability. Upstream and midstream profits stand to improve significantly, while downstream profits may be squeezed. He reviewed the experience of the previous PPI recovery cycle, also driven by imported factors, in which upstream sectors such as oil extraction, coal, and nonferrous metals saw revenues and profit margins surge in lockstep, while downstream sectors such as electrical machinery, telecommunications electronics, and general equipment had limited pricing power, faced rising costs, and saw profit improvement that was modest at best, and deteriorating at worst.

The Chinese government decided not to stay idle. At 3 p.m. on March 23, nine hours before the current refined-fuel price-adjustment window was due to open, the National Development and Reform Commission (NDRC) issued a brief announcement.

Under the existing pricing mechanism, which adjusts domestic fuel prices every 10 working days, the current round should have resulted in increases of 2,205 yuan (about $320) per ton for gasoline and 2,120 yuan (about $307) per ton for diesel. But the NDRC decided to raise prices by only 1,160 yuan (about $168) and 1,115 yuan (about $162) per ton, respectively. The roughly 1,000 yuan (about $145) per ton that was not passed through translates to approximately 0.85 yuan (about $0.12) per liter. The announcement's language was explicit, the measure was taken to "mitigate the impact of the abnormal surge in international oil prices, ease the burden on downstream users, and safeguard stable economic operation and people's livelihoods."

China's refined-fuel pricing mechanism has a ceiling mechenism, when international oil prices exceed $130 per barrel, domestic fuel prices are in principle no longer raised, or raised only minimally. This ceiling had not yet been triggered, but the NDRC intervened preemptively anyway. Sending signal that the government did not intend to wait for the mechanism to activate, but to chose to cushion the blow early, to smooth the curve.

For Lao Zhou, this means his 400- to 600-liter tank will cost 300 to 500 yuan (about $43 to $72) less each time he fills up. It’s not a lot, but when his net profit per trip is down to five or six hundred yuan ($72 to $87), that sum is the difference between the pump counter clicking forward and not, the difference between making the mortgage payment on time at the end of the month and falling behind.

But a single ad hoc intervention is obviously not enough. In his report, Luo Zhiheng laid out a more systematic set of policy recommendations. On the supply side, he proposed flexible use of strategic petroleum reserves, absorbing when prices are low, releasing when prices are high, as a peak-shaving, valley-filling stabilizer. At the micro level, he called for targeted tax cuts or subsidized loans for sectors directly impacted by the shock, including transportation, logistics, and downstream chemicals, as well as price subsidies or consumption vouchers for low- and middle-income households. At the macro level, he argued that monetary policy should anchor on core CPI and the output gap rather than headline price indices distorted by oil, and should clearly signal to the market that the moderately accommodative policy stance remains unchanged, to prevent unnecessary speculation about a policy pivot.

Guan Tao’s recommendations look further ahead. He called for using the stability of domestic circulation to hedge against the uncertainty of international circulation, by implementing household-income growth plans, cracking down on involutionary competition to reduce ineffective supply, and advancing public-utility price reform to unclog the transmission from PPI to CPI. He also made a point of revisiting a piece of history as a cautionary note. In 2021 and 2022, PPI inflation averaged 8.1% and 4.2%, respectively, yet the central bank not only refrained from tightening but actually continued to cut reserve requirements and interest rates, because CPI remained well below the 3% target. In hindsight, that judgment was correct. From 2023 through 2025, PPI was persistently negative and CPI sank to near zero. Had the central bank misjudged and tightened prematurely, the consequences would have been severe. That historical experience, Guan clearly believes, remains relevant today.

So, is the high oil price caused by the Middle Eastern conflict ultimately good news or bad news for China's reflation?

The three chief economists offer three different answers. Guan Tao is the most optimistic, arguing that China should learn from Japan’s experience and maintain a degree of tolerance for this bout of imported inflation, rather than repeating the mistake of twice letting reflation slip through its fingers. Xiong Yuan leans toward neutral, emphasizing that the direction of price recovery remains intact but stressing that divergent corporate profitability and the risk of U.S. stagflation are side effects that cannot be ignored. Luo Zhiheng is the most cautious, returning again and again to a fundamental question, can an improvement in the price numbers translate into a genuine improvement in conditions for real people and real firms?

High oil prices may indeed break the vicious cycle of low-inflation expectations, improve upstream business performance, and boost nominal GDP. But at the same time, they place the heaviest burden on the most vulnerable. The core problem of the Chinese economy remains insufficient effective demand. If rising oil prices do not correspond to more orders for businesses, a recovery in household incomes, and a restoration of confidence across society, then they amount to nothing more than an illusion of economic growth.

In his article The ‘Donroe Doctrine’ and the Reshaping of U.S. Hegemony in the Western Hemisphere (《”唐罗主义”与美国西半球霸权地位的重塑》), Professor Zhao argues that Trump’s second-term foreign policy in the Western Hemisphere should not be mistaken for retrenchment. While the U.S. may be pulling back from maintaining the liberal international order elsewhere, in its own “backyard,” it is expanding aggressively. The New York Post coined the portmanteau “Donroe Doctrine”—a blend of Donald Trump and Monroe—and Trump himself embraced the label enthusiastically.

Professor Zhao connects the dots between the Venezuela raid and the Trump administration’s wider ambitions, including courting right-wing forces across the hemisphere, securing control over critical minerals and energy resources, building U.S.-dominated supply chains, and squeezing out Chinese influence from Latin America. For Zhao, the “Donroe Doctrine” is about the United States attempting to lock down an entire hemisphere as the foundation for sustaining its global hegemony in an era of intensifying U.S.-China competition.

Below is the full article. I want to thank Professor Zhao for his kind authorization.

In early December 2025, the United States released its National Security Strategy report, promoting the so-called “Trump Corollary to the Monroe Doctrine.” The report declared that the U.S. would restore its dominant position in the Western Hemisphere, ensure American control over the region’s strategic resources, expand military relations with relevant countries, and weaken the influence of rival powers in the hemisphere. In early January 2026, the United States launched a military strike against Venezuela, “capturing” President Maduro and his wife from the capital Caracas and subsequently transporting them to New York to stand “trial.” Coincidentally, in January 1990, U.S. forces that had invaded Panama similarly seized the country’s top leader, Noriega, under the pretext of “drug trafficking.” These two operations exemplify America’s hardline intervention in Latin American and Caribbean nations and underscore the profound influence of the “Monroe Doctrine” on U.S. foreign policy. At a press conference held after the raid on Venezuela, Trump declared that he would far surpass the traditional “Monroe Doctrine.” Clearly, the United States is attempting to reshape its hegemonic position in the Western Hemisphere—a move that not only disrupts the region’s geopolitical power dynamics but also poses new challenges for the U.S.-China strategic competition.

I. The “Donroe Doctrine”: Trump’s Version of the Monroe Doctrine

The governing slogan of Trump’s second term is “Make America Great Again,” and his understanding of “greatness” is closely tied to the territorial expansion and imperialist conduct that have characterized the United States since the 19th century. As early as 1823, James Monroe, the fifth President of the United States, articulated the declaration that “America shall not interfere in European politics, and Europe shall not intervene in the affairs of the New World”—a principle that later became known as the “Monroe Doctrine.” This concept both delineated a sphere of influence dominated by the United States and reflected a deep-seated bias rooted in a “hierarchy of civilizations.” In 1902, European powers, including Britain and Germany, dispatched warships to threaten Venezuela, demanding debt repayment. President Theodore Roosevelt intervened to mediate, with the aim of preventing European powers from expanding their involvement in the region—forming the “Roosevelt Corollary to the Monroe Doctrine.” From that point onward, as American national power grew, the Monroe Doctrine evolved from a defensive posture to one that was increasingly expansionist and aggressive. The United States combined its economic, financial, and military power to continually strengthen its influence over nations in the Western Hemisphere, particularly in Latin America. For example, in 1954, the U.S. engineered the overthrow of the Guatemalan government; in 1961, it launched the Bay of Pigs invasion aimed at toppling the Cuban regime; and in 1989, it sent troops to invade Panama. These events demonstrate that the United States has long carried out interventions with distinctly imperialist overtones in Central and South America, frequently engaging in regime change operations.

On December 2, 2025, the White House issued a “Presidential Statement Commemorating the Anniversary of the Monroe Declaration” in Trump’s name. On December 4, the Trump administration released its new National Security Strategy report. In articulating America’s core interests, the report stated: “We want to ensure the Western Hemisphere remains sufficiently stable and well-governed to prevent and deter mass migration to the United States; we want governments in this hemisphere to cooperate with us in combating narco-terrorists, drug cartels, and other transnational criminal organizations; we want this hemisphere to be free from the encroachment of hostile foreign powers, preventing them from owning critical assets and controlling key supply chains; and we want to ensure our continued access to critical strategic locations. In other words, we will enforce the Monroe Doctrine and implement the ‘Trump Corollary.’” Regarding how to implement the “Trump Corollary to the Monroe Doctrine,” the report emphasized two major pathways: first, coalition—pushing Western Hemisphere nations to more vigorously align with U.S. policies on economic, immigration, and military security matters; and second, expansion—incorporating more regional countries into the U.S.-led orbit while weakening rival nations’ influence over the hemisphere’s strategic resources, critical infrastructure, and supply chains.

Clearly, Trump seeks to craft a Monroe Doctrine bearing his personal stamp and to establish it as the legacy of his second term. In January 2025, the New York Post coined the term “Donroe Doctrine” by combining the names Donald Trump and Monroe to encapsulate the Trump administration’s Western Hemisphere policy. Trump himself was highly enthusiastic about this label. As a Cuban-American political figure, Secretary of State Rubio explicitly stated that Trump’s second-term foreign policy features an “Americas First” orientation. Rubio’s first overseas trip after assuming office was to Latin American and Caribbean nations. He made no effort to conceal the Trump administration’s expectation that these countries submit to American directives, demanding compliance on issues such as immigration deportation, supply chains, and military security. In summary, Trump’s “Donroe Doctrine” exhibits the following characteristics:

First, it leverages the fight against drug trafficking and illegal immigration to strengthen substantive control over Western Hemisphere nations, packaging acts of aggression as law enforcement operations. The Trump administration has labeled leaders of countries such as Colombia as supporters of “narco-terrorism,” seeking to legitimize interventionist actions under the pretext of combating transnational crime. Under the immense pressure of America’s tariff war, Mexico, Guatemala, and other countries have agreed to accept migrants deported by the United States.

Second, it advances U.S. military relationships with relevant countries and does not hesitate to use maximum pressure or even military means to achieve territorial annexation goals. The Trump administration is seeking to restore and renovate military bases in Puerto Rico, Panama, and other locations, while strengthening joint military exercises with Ecuador, El Salvador, Argentina, and others. Trump has also repeatedly claimed that the United States “absolutely needs” Greenland, stated that the use of military force is one of the options, and appointed Louisiana Governor Jeff Landry as special envoy to Greenland.

Third, it prioritizes dominance over the strategic resources of Western Hemisphere nations and aims to build U.S.-controlled supply chains in areas such as semiconductors. South American nations, rich in critical minerals, have become focal points of great power competition. The Trump administration has intensified its courtship of Argentina, Chile, and other countries regarding important resources such as lithium, uranium, and natural gas. The U.S. is also accelerating its efforts to transform Costa Rica into the Silicon Valley of Latin America, achieving nearshore outsourcing in semiconductor packaging, testing, and other industrial sectors.

Fourth, it cultivates right-wing political forces in the Western Hemisphere and influences the domestic politics of relevant countries, such as Ecuador and Bolivia. Brazil and Colombia are scheduled to hold presidential elections this year, and pushing these countries’ domestic politics toward a “rightward turn” is a U.S. policy objective. This is effectively a new model of regime change: the Trump administration and the right-wing forces behind it are attempting to establish indirect rule in relevant countries through low-cost methods.

Undoubtedly, Trump’s second-term foreign policy should not be simply characterized as “retrenchment.” While the United States does wish to reduce the burden of maintaining the international order, the Trump administration’s posture in Western Hemisphere affairs is one of expansion. The aggressive and bullying nature of the “Donroe Doctrine” should not be underestimated; at its core, it represents America’s desire to maintain its global hegemonic position by controlling the Western Hemisphere.

II. The U.S. Raid on Venezuela and Its Implications

As early as Trump’s first term, he sought to remove Maduro from power and imposed severe sanctions on Venezuela. Since Chávez came to power in 1999, Venezuela has been regarded by the United States as a thorn in its side. During the Obama administration, the U.S. government declared that Venezuela posed “an unusual and extraordinary threat to U.S. national security”; during the Biden administration, America’s diplomatic engagement with Venezuela failed, and Washington shifted to intensifying pressure on the country. As the Western Hemisphere regained a central position in Trump’s second-term national security strategy, the United States had long since resolved to eliminate Maduro. By striking at Maduro, Trump demonstrated to American voters his determination to implement the “Make America Great Again” strategy and address problems such as narcotics, thereby helping to cultivate his “strongman president” image. When discussing Maduro’s links to transnational criminal organizations and illegal immigration, Trump harshly criticized the disorder in cities and regions governed by Democrats, reflecting the domestic political calculations underlying the “Donroe Doctrine.” The raid on Venezuela also helped Trump court Latino voters within the United States—Florida alone has 300,000 Venezuelan-American voters, and securing these votes holds significant value for Trump and the Republican Party ahead of the 2026 midterm elections.

The Trump administration’s raid on Venezuela is an important manifestation of the military dimension of the “Donroe Doctrine” and carries strong overtones of “gunboat diplomacy.” The operation was built on months of meticulous preparation. As early as August 2025, the Trump administration began implementing its plan. A covert CIA team infiltrated Venezuela in advance, and the U.S. military constructed a full-scale replica of Maduro’s residence at the Joint Special Operations Command base in Kentucky, where operational training was conducted. Beginning in October 2025, the Trump administration steadily escalated military pressure on Venezuela. The U.S. military increased its deployments in the Caribbean, attacking Venezuelan vessels on multiple occasions and causing casualties. U.S. Southern Command also spearheaded the formation of a “Joint Task Force”—a strong signal that the U.S. military was preparing for a strike operation. On the eve of the raid, the U.S. military deployed large numbers of special operations aircraft, electronic warfare aircraft, armed drones, and fighter jets to the Caribbean region, and struck Venezuelan radar stations and air defense systems to provide cover for the infiltration of special forces. The Trump administration sought to frame this operation as a “symbol” of America’s formidable military power, using it to intimidate nations across the Western Hemisphere.

After completing the raid, stabilizing the situation in Venezuela became the Trump administration’s priority. Unwilling to repeat America’s quagmire in Afghanistan and Iraq, it sought to gradually install pro-American forces in power through limited engagement. Trump explicitly stated that the United States would “govern this country” until a “smooth transition of power” could be achieved in Venezuela. Maduro’s deputy, former Vice President and Oil Minister Rodríguez, received Washington’s endorsement and became acting president. According to U.S. sources, this lawyer-turned-politician with close ties to the oil industry had agreed to cooperate with the Trump administration. Secretary of State Rubio, Chairman of the Joint Chiefs of Staff Kaine, and Special Envoy for Latin American Affairs Grenell are the core figures in the Trump administration handling the Venezuelan situation. Rubio stated that Rodríguez, the acting president, “is willing to do what we deem necessary.” Venezuela’s domestic political landscape is extremely complex, featuring paramilitary organizations such as the “colectivos,” the Colombian National Liberation Army (ELN), and various transnational criminal organizations. Trump does not have full confidence in opposition figures such as Machado, believing they lack governing experience and would struggle to gain the support of Venezuela’s military and political elite. In the short term, the Trump administration is more inclined to support figures capable of stabilizing Venezuela’s domestic political situation in the “post-Maduro era,” rather than completely dismantling the existing regime. The United States will strengthen its influence over Venezuela’s political elite through sustained military pressure and economic inducements. At the same time, Washington will also identify agents who can gradually replace Rodríguez and execute the American policy agenda, developing and implementing a long-term plan for controlling Venezuela.

Rubio has explicitly stated within the State Department that competing for dominance over energy and resources is a priority of U.S. foreign policy. The driving force behind America’s invasion of Venezuela is closely linked to controlling oil resources—not only because the U.S. consumes 20 million barrels of crude oil daily, but also to ensure the dominance of the U.S. dollar. Oil trade has been settled in dollars for decades, forming the so-called “petrodollar” system. If the dollar were no longer the dominant currency for oil transactions, America’s financial hegemony would be weakened. Venezuela possesses the world’s largest proven oil reserves and is a major exporter of heavy crude. Trump has claimed that the Venezuelan government’s seizure of assets belonging to American companies amounted to “stealing America’s oil.” If the U.S. controls Venezuela, it could influence global oil pricing and weaken the bargaining power of Saudi Arabia and other OPEC members in the energy arena vis-à-vis the United States. Additionally, Venezuela ranks eighth globally in natural gas reserves, and its nickel, manganese, and rare earth deposits are strategic resources the U.S. needs. It is worth noting with alarm that the Trump administration’s goal extends beyond merely acquiring Venezuela’s resources—it also seeks to decouple Venezuela from its economic and trade cooperation with China, Russia, Cuba, and other countries, transforming it into a resource provider under American control. Following Rodríguez’s assumption of the acting presidency, the Trump administration is expected to gradually lift sanctions on Venezuela’s oil exports. Trump hopes that major American oil companies such as ExxonMobil and Chevron will take the lead in reshaping Venezuela’s oil industry. However, due to enormous political and commercial risks, American companies are unlikely to return to Venezuela on a large scale in the near term. The Trump administration may instead facilitate U.S. corporate participation in repairing energy infrastructure and increasing oil production capacity in select areas of Venezuela. In the long run, the Trump administration seeks to build a U.S.-led Western Hemisphere economic fortress, incorporating Venezuela into it. Under the logic of the Monroe Doctrine, the United States views the Western Hemisphere as a more secure “economic backyard” and aims to create a closed loop of “energy–minerals–food” in the hemisphere to consolidate the dollar’s position.

The Trump administration’s abduction of Maduro signals that the United States will pursue a neo-imperialist policy in its Western Hemisphere “backyard.” Trump has already issued direct threats to Colombia, Cuba, and other countries, and has expressed displeasure with Mexican President Sheinbaum and Brazilian President Lula. Chilean President Boric has warned that “today it is Venezuela, tomorrow it could be any country.” Trump administration decision-makers believe that the Maduro regime was sustained with the support of Russia, China, and Iran, and that the U.S. needs to strike at the “anti-American axis” composed of Venezuela, Cuba, and similar nations. Trump has stated that the action against Venezuela will weaken Cuba, which is heavily dependent on Venezuelan oil and energy, and that Cuba already appears to be teetering on the brink.

Notably, the aggressive nature of Trump’s “Donroe Doctrine” also manifests on the geopolitical level, aimed at diminishing the influence of China and other major powers in Western Hemisphere nations. Close attention must be paid to the risk of the United States undermining China’s legitimate interests in Venezuela. China has provided tens of billions of dollars in loans and investments to Venezuela and is a major purchaser of the country’s crude oil and other products. Chinese companies such as Huawei have participated in Venezuela’s telecommunications and infrastructure construction. In May 2025, Colombia announced its accession to the Belt and Road Initiative. To date, 22 Latin American countries have signed Belt and Road cooperation memoranda with China. Previously, Rubio has repeatedly hyped the so-called “threat” of China in the Americas, falsely claiming that “the Panama Canal has fallen into Chinese hands.” The United States has not only pressured the Panamanian government into withdrawing from the Belt and Road Initiative but also regards Chinese-built infrastructure projects such as Peru’s Chancay Port as thorns in its side. The Trump administration is attempting to leverage military-security instruments to address its competition with China, using security issues as bargaining chips to pressure Western Hemisphere nations. The U.S. has pressured Argentina to cancel its plans to purchase Chinese-made JF-17 fighter jets and other weapons, and has demanded that Argentina terminate its currency swap agreement with China. The Trump administration has amplified the threat narrative around China in cybersecurity and space security, seeking to counterbalance Chinese influence through measures such as strengthening cooperation with Embraer (Brazil’s aerospace company), while obstructing China-Chile collaboration on the Digital Silk Road and space monitoring projects.

Conclusion

Against the backdrop of the Trump administration’s accelerated reshaping of its hegemonic position in the Western Hemisphere and increasingly aggressive interventionist actions grounded in the “Donroe Doctrine,” close attention must be paid to the numerous policy objectives set forth in the newly released National Security Strategy report. The U.S. raid on Venezuela has provoked widespread international dissatisfaction and condemnation, and the Trump administration’s blatantly self-interested policies are bound to bring greater instability to the Western Hemisphere and the world at large. In July 2025, a poll released by the Pew Research Center showed that respondents in Argentina, Brazil, Mexico, and other countries all identified the United States as the “greatest threat.” The sustainability of Trump’s “Donroe Doctrine,” its potential blowback on America’s long-term interests, and the prospects for U.S.-China strategic competition in the context of a National Security Strategy focused on the Western Hemisphere—all merit deeper exploration.

中美双方团队进行了深入、坦诚、建设性的磋商。通过这次的磋商，双方已经就一些议题取得了初步共识，下一步我们将继续保持磋商进程。

The Chinese and U.S. teams engaged in in-depth, candid, and constructive consultations. Through these consultations, the two sides have already reached preliminary consensus on certain issues. Going forward, we will continue to maintain the consultation process.

When these three words — “in-depth,” “candid,” and “constructive” — appear together, they usually indicate that the negotiations have indeed made progress and that communication between the two sides was relatively substantial, rather than merely diplomatic courtesy. U.S. officials, for their part, described the atmosphere of the talks as “stable,” which also indirectly suggests an improvement in the dialogue environment.

The core issues in this round of talks were still the extension of the China-U.S. trade truce and tariff arrangements. In Li’s remarks, the idea of establishing a working mechanism to promote bilateral trade and investment cooperation is also a relatively positive signal.

From a negotiation strategy perspective, the U.S. tactic of temporarily increasing leverage just before talks appears to have lost its effectiveness. My observation is that in several rounds of China-U.S. negotiations in 2025, the U.S. frequently adopted unilateral measures on the eve of negotiations (My favourite word in Chinese is 虚空印牌“playing cards out of nowhere”) in an attempt to seize the initiative. Before the core tariff issues from each round had even been resolved, Washington kept inserting new issues into the agenda in order to maintain the upper hand.

For example, before the China-U.S. talks in Kuala Lumpur, the U.S. Commerce Department’s Bureau of Industry and Security (BIS) introduced the 50% rule: any non-U.S. company more than 50% owned by an entity on the restricted list would automatically become subject to the corresponding export control restrictions. In addition, the U.S. imposed port fees on Chinese vessels. China responded with reciprocal countermeasures, comprehensively upgrading its rare earth export controls and beginning to impose port fees on the U.S. as well.

By contrast, on the eve of the Paris talks, although the U.S. announced the launch of Section 301 investigations into multiple countries, including China, the timing and background suggest that this move was more of a procedural repair following the Supreme Court’s earlier rejection of the Trump administration’s broad tariff measures, rather than a new round of offensives specifically targeting China. Li Chenggang’s response was also relatively restrained: he emphasised opposition to “such unilateral investigations” and expressed concern that they might “disrupt and damage the hard-won stable China-U.S. economic and trade relationship.”

Overall, these negotiations suggest that after the truce reached last year, both sides have begun to seek more pragmatically the possibility of stabilising relations. The U.S. shows signs of a retreat from its earlier strategy of continually expanding its agenda to avoid further escalation caused by the proliferation of issues. China also shows great strategic patience. This indicates that both sides intend to pull their economic and trade relationship back from a state of confrontation, or at the very least prevent it from deteriorating further.

After Trump announced that he was seeking to postpone his visit, Bessent took the initiative to clarify that this was because Trump needed to remain in Washington to direct operations involving Iran:

It would have nothing to do with the Chinese making a commitment to the Straits of Hormuz. It would obviously be in their interest to do so, but a postponement would not be as a result of any ask from the president not being met

I think this, in a sense, also confirms that the U.S. likewise wants to preserve the broader stability of the China-U.S. trade truce and is trying to avoid strategic disruption caused by misinterpretation of signals. Both sides have already learned how to look for balance amid confrontation. “Seeking communication amid rivalry, and probing each other while applying pressure” may well become the normal pattern of China-U.S. relations in the short term.

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Below is the Chinese readout in English:

China, U.S. hold candid, in-depth, constructive talks on economic, trade issues

PARIS, March 16 -- The Chinese and U.S. delegations held candid, in-depth and constructive exchanges and consultations here from Sunday to Monday on economic and trade issues of mutual concern, including tariff arrangements, promoting bilateral trade and investment, and maintaining existing consultation consensus.

During the talks, which are guided by the important consensus reached by the two heads of state, the two sides reached some new consensus and agreed to continue consultations.

Under the strategic guidance of the important common understandings between the two heads of state, and following five rounds of economic and trade consultations last year, China and the United States have reached a series of outcomes in the economic and trade area, said Chinese Vice Premier He Lifeng during the new round of China-U.S. economic and trade talks with U.S. lead person Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer.

These outcomes have injected greater certainty and stability into bilateral economic and trade relations as well as the global economy, He said.

Recently, the U.S. Supreme Court ruled that the tariffs imposed by the U.S. government under the International Emergency Economic Powers Act were unlawful, said He, noting that subsequently, the U.S. side levied an additional 10 percent import surcharge on all trading partners under Section 122 of the Trade Act of 1974, and successively introduced a series of negative measures concerning China, including the Section 301 investigations, corporate sanctions and market access restrictions.

China has consistently opposed the unilateral tariffs imposed by the United States, He said, urging Washington to completely remove such tariffs and other restrictive measures.

China will take necessary steps to firmly safeguard its legitimate rights and interests, He added.

China expects the United States to move in the same direction, follow through on the important consensus reached by the two heads of state, expand areas of cooperation and reduce problems, so as to promote the healthy, stable and sustainable development of China-U.S. economic and trade relations, He said.

The U.S. side said that a stable China-U.S. economic and trade relationship is of great importance to both countries and the world, and helps promote global economic growth, supply chain security and financial stability. Both sides should reduce frictions, avoid escalation of the situation, and resolve differences through consultation.

The two sides agreed to study the establishment of a cooperation mechanism to promote bilateral trade and investment, continue to make good use of the China-U.S. economic and trade consultation mechanism, strengthen dialogue and communication, properly manage differences, expand practical cooperation, and promote the sustained, stable and sound development of bilateral economic and trade relations.

But reality runs on an entirely different logic. It is precisely the fantasy of a “master designer behind the curtain” that makes grand strategy so dangerously misleading. As argued in his essay

Grand strategy is not a coherent phenomenon states possess or execute, but a retrospective genre and institutional language that imposes order on political behavior that is, in practice, fragmented, contested, and improvised.

The Trump administration’s military campaign against Iran has proven the point once again. Two weeks after the United States and Israel launched their war on Iran, the White House still cannot offer a consistent explanation for why the war was started. And not surprisingly, within this strategic no-man' s-land, one narrative has already surfaced: It’s all about China.

The argument originates from a report by Zineb Riboua of the Hudson Institute. She contends that by striking Iran, Trump is dismantling a pillar of China’s regional architecture. She claims that “Trump’s strikes are the first move by an American president who appears to understand that the road to the Pacific runs through Tehran,” and declares Operation Epic Fury “the opening act of the Indo-Pacific century.”

It’s a really telling story—exactly the kind of move I would make in Hearts of Iron: clear the minor threat first, then concentrate forces against the main rival. Textbook grand strategy. But the problem is that the real world offers no omniscient perspective, and the White House can’t click a button to switch its national focus.

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A War Without a Plan

Before we debate whether this war serves some grand China strategy, a more basic question needs answering: do the people who launched it even know what they are doing? I don’t think they do.

Two weeks in, the U.S. government still hasn’t produced a coherent narrative on war objectives. When the joint strikes first began, Trump claimed the purpose was to “eliminate the imminent threat posed by the Iranian regime.” The Pentagon, however, indicated there was no intelligence suggesting Iran was planning to attack U.S. forces. Secretary of State Rubio tried to patch the hole by offering a second version of “imminent threat” that Iran would retaliate against American troops once Israel struck. But Trump himself contradicted Rubio’s framing outright: “No, I might’ve forced their hand.” In short, the U.S. government cannot agree internally on the objective of its own war, and Trump himself has been self-contradictory.

The administration’s posture on negotiations has been equally bewildering. Oman’s foreign minister revealed that “before the war began, A peace deal is within our reach … if we just allow diplomacy the space it needs to get there.” But Trump said he was “not satisfied” with the talks and launched strikes. On March 1—the day after the war started, he announced he agreed to continue negotiations with Iran. Just two days later, on March 3, he wrote on Truth Social: “They want to negotiate. I said, ‘Too late!’” By March 7, “too late” had escalated to “unconditional surrender.”

So when someone tries to fit this war into a carefully designed anti-China chessboard, the first fact we must confront is this: the person supposedly playing chess can’t even agree on the objective of the game within two weeks. A government that cannot articulate why it went to war lacks the capacity to execute a grand-power strategy that demands the highest degree of coordination.

A Narrative That Doesn’t Survive Scrutiny

Setting aside the U.S. government’s internal contradictions, let’s examine the argument on its own terms. It rests on three assumptions. I don’t think any of them hold up.

Assumption 1: Beijing and Tehran Are Allies

For many analysts, China's failure to provide military assistance to Tehran during the Iran crisis proves that Beijing is an unreliable ally—that it failed to do what a great power "should do" when a partner is under pressure. But the premise is wrong. Beijing is not Washington. It is not in an alliance with Tehran.
My friend Zichen Wang’s piece in Foreign Policy already laid this out well. As he wrote: "Modern China’s political identity was forged through invasion, coercion, and national humiliation. A country with that experience is less likely to romanticize the idea that strong states should travel abroad to reorder weaker ones by force."

What I’d also want to add is that the concept of 以我为主 yi wo wei zhu" with ourselves as the principal—has long been, and remains, the most fundamental principle of Beijing’s foreign policy. It means that domestic affairs occupy a higher priority, and that foreign policy is driven by internal needs. This is also a natural condition for any great power.

Assumption 2: Iran Is a Pillar of China’s Regional Strategy

China’s approach to the Middle East has never been about betting on a single country. Beijing simultaneously maintains active economic and diplomatic relations with Saudi Arabia, the UAE, Egypt, Turkey, Qatar, and others. China is Saudi Arabia’s largest oil export destination, the UAE’s largest non-oil trading partner, a major infrastructure investor in Egypt’s Suez Canal Economic Zone, and a growing trade partner for Turkey.

China’s brokering of the Saudi-Iranian diplomatic reconciliation in 2023 illustrates the point. A country that viewed Iran as a strategic pillar would not actively facilitate its normalization with a regional rival—doing so would diminish Iran’s value as an exclusive partner. But Beijing did exactly that, because its interest lies not in Iran’s dominance or isolation, but in being a participant that maintains connections with all regional stakeholders. I think a portfolio logic captures Beijing’s Middle Eastern approach far better than a traditional alliance logic. Beijing prefers to diversify risk through a range of partnerships rather than staking everything, like a gambler, on a single country.

Assumption 3: Striking Iran Weakens China

This is the weakest link in the argument. Compared to the damage inflicted on China, this war is far more costly to the United States itself.

From a military resource perspective, the sustained campaign against Iran is draining American combat capacity at a serious rate. As Iranian retaliation escalates, U.S. stocks of interceptor missiles and other critical munitions are under enormous pressure. Ironically, the United States has begun redeploying the THAAD anti-missile system from South Korea to the Middle East, which caused a huge diplomatic stand-off 10 years ago between China and South Korea. If the purpose of this war is truly to clear the deck for competition with China, then pulling military assets stationed on China’s doorstep and shipping them to the Middle Eastern theater is self-defeating.

From a political standpoint, the United States launched a massive military strike without a clear imminent threat, without bothering to ask its allies, and even after the other side had signaled willingness to negotiate. The message this sends to the world is certainly not one of stability. It reminds me of a conversation I had last year with a professor at a top university in US. His assessment is that the current U.S. government is worse than the law of the jungle, because in the jungle, a lion stops hunting once it’s full. The current US administration expands even when there is no need.

Back to the report itself. The author claims that striking Iran is “the opening act of the Indo-Pacific century.” But the reality is: a government that still can’t produce a consistent war objective two weeks into hostilities; a China-Iran relationship mislabeled as an “alliance”; and a war whose costs to America far outweigh any damage to China. This is not grand strategy. This is action first, meaning later, as we say in Chinese, 大棋党思维: “it’s all part of the master plan.”

This kind of retroactive sense-making has a long tradition, not just in the United States, though Washington has arguably perfected it. The Iraq War was cast as the beginning of the Middle East's democratization. The withdrawal from Afghanistan was framed as a prelude to the strategic pivot to Asia. None of these narratives, in hindsight, survived the test of time. Their function was just to package messy decisions into a coherent strategy and to make disorder look logical. This meets human cognitive needs, but it's also just wrong.

What's more dangerous is that such narratives reshape future decisions. My favorite metaphor is a drug dealer who starts using his own supply and ends up dealing just to feed the habit. Once “striking Iran is step one of the grand China strategy” become a widely accepted story, it generated path-dependence. Since the first step has already been taken, it becomes a sunk cost. Escalation becomes easier to argue for, and harder to walk back — because no one wants to admit the master plan never existed.

And those who declare after the fact that everything went according to plan are doing something not different from what I used to do sitting in front of my screen—except they’re not using a mouse. They’re using think tank reports and op-ed pages.

For a long time, there’s been a objection to raising rural pensions, saying that farmers never paid their share of insurance. I don’t think it stands at all. Chinese farmers gave up what was originally private ownership of their land, and that became the very foundation of the land finance model powering China's urbanisation. For decades before that, farmers also paid through the industrial-agricultural price scissors, subsidising industrialisation by artificially suppressing crop prices. China's development was built on the cumulative sacrifice of its rural population, and the value of that sacrifice cannot be overstated.

Increasing the rural pension has also been advocated by multiple deputies to the National People's Congress and members of the Chinese People's Political Consultative Conference during the ongoing Two Sessions.

Economist Lu Ming, who wrote the famous book Mega-Nations, Dynamic Metropolises 大国大城  briefed Xi on the 14th FYP in 2020 and Premier Li in 2023, is also a member of the national CPPCC. In his latest post, he said that many children of rural families, after starting their careers, give their parents a monthly allowance that is far lower than the social insurance contributions they make each month. These contributions, in turn, are used to pay pensions to those eligible for retirement benefits. As a result, the monthly financial support these young people provide to their own parents is much lower than the pensions they effectively pay to other, unrelated elderly individuals.

By his count, nine other delegates also raised the issue.
Bi Lixia, the chairperson of the Jinghua Rice Planting Professional Cooperative in Jianli City, Hubei Province, stated,

I earnestly request that the Ministry of Finance, the Ministry of Human Resources and Social Security, and the Ministry of Civil Affairs increase the monthly pension for rural residents aged 70 and above to 400 yuan.

Lei Maoduan, Party branch secretary and village committee director of Goudong Village in Sanluzhen Town, Yanhu District, Yuncheng City, Shanxi Province, stated

It is recommended to raise the basic pension for farmers from the current 100-plus yuan to over 500 yuan. Although farmers have not paid into the social insurance system with cash, they have contributed through grain, labor, and essential resources... There are 54 million farmers aged over 70 in China. Increasing their pension to 500 yuan per month would cost the state an additional 230 billion yuan annually, accounting for 0.83% of the national general public budget expenditure. With less than 1% of state expenditure, we can achieve the satisfaction and tangible benefit of 100% of the people.

Guo Fengjian, Party branch secretary of Dazhai Village in Xiyang County, Shanxi Province, remarked

“The rural pension is very low, only 200 yuan a month, and farmers even have to contribute a portion themselves first, which is quite unfair to them.” “Could it be raised to 500 yuan?” “We need to turn online attention and public discourse into tangible care and warmth.”

Zhang Xuewu, chairman of Hunan Yanjin Shop Food Co., Ltd., and Zhu Xiaokun, chairman of the board of Jiangsu Danyang Tiangong International Co., Ltd., both suggested increasing the monthly pension for farmers to 1,000 yuan within five years.

Yin Yong, head of the Guiren Branch of Sihong County Post Office in Jiangsu Province, voiced his opinion: “The adjustment of the basic pension should be linked to the consumer price index and the growth rate of rural residents’ per capita disposable income.”

Furthermore, three other deputies to the National People’s Congress—Lu Qingguo from Hebei, Shen Changjian from Hunan, and Zhang Yi from the Chinese Academy of Social Sciences—have also spoken out on behalf of the welfare of elderly farmers.

Wang Mingyuan, a researcher at the Beijing Reform and Development Research Association who previously worked at the China Society for Economic System Reform. Wang has long made a similar case. A senior scholar of Reform and Opening Up history, he has documented in detail the mechanics of how rural China subsidised the nation's industrialisation, from the price scissors to the land transfers. And I believe his latest op-ed, published on Phoenix New Media, is worth reading, in which he explains why rural residents should receive higher pensions.

Below is Wang's full text. I want to thank him for kindly authorizing me to put his piece into English:

Working Beyond Retirement in Rural China: Are Farmers Entitled to Higher Pensions?

“Retired but Still Working” — The Reality for China’s Rural Population

I made two trips back to my hometown in southern Shandong around the Spring Festival this year, and spent time with many of my fellow villagers. What struck me was how universally people continue to work well past retirement age. With the rare exception of retired public school teachers or those lucky enough to have children who are very well off, virtually every person over 60 engages in physical labour for as long as their body holds up, simply to make ends meet. They farm, pick up odd jobs at small village factories, or work at local trade markets. The oldest worker I came across was a grandmother surnamed Ren, born in 1939, who spends summer and autumn doing packaging work at the village vegetable market. She never misses a chance to tell visitors, with evident pride, that she makes over 10,000 yuan a year.

Those unfamiliar with rural China might be tempted to write this off as a peculiarity of impoverished backwaters. In fact, the counties surrounding my hometown rank somewhere between 150th and 300th nationally in county-level economic output — placing them squarely in the upper tier of rural China by income. This is not an outlier. Having conducted fieldwork in rural communities across the country, I can say with confidence that what I see among the elderly in southern Shandong is simply a snapshot of what is happening everywhere in the Chinese countryside.

The Seventh National Population Census of 2020, which broke down employment by industry and age cohort, offers a fuller statistical picture. That year, 177.15 million people were employed in agriculture, forestry, animal husbandry, and fishery. Of these, 60.5% were over 50, 29.1% were over 60, and 9.2% were over 70. Put differently, 51.55 million people past the conventional retirement age of 60 were still working the land, including 16.29 million aged 70 or older.

The rural population continues to age, and although employment in these primary industries has shrunk somewhat in recent years — by around 8% — I have no doubt that the number of over-age workers still comfortably exceeds 50 million today.

It is also a mistake, as many do, to treat the rural pension problem as concerning only those elderly who actually live in the countryside. China’s permanent rural population stands at 491 million, but 792 million people hold rural hukou (household registration). The gap means that roughly 300 million rural hukou holders live permanently in cities. The large contingent of ageing migrant workers is itself a critical dimension of the rural pension crisis.

According to the National Bureau of Statistics’ 2024 Migrant Worker Monitoring Survey, China had 297.53 million migrant workers with an average age of 43.2; 31.6% of them were over 50. The survey does not give a precise figure for those over 60, but cross-referencing with census data — which shows that 50-to-59-year-olds accounted for 20.8% of all urban employment — suggests that approximately 10.8% of migrant workers, or around 32.14 million people, had passed 60.

To get a ground-level sense of this, I visited day-labour markets at Majuqiao马驹桥 and Liangxiang良乡 in Beijing, Xiaozhan in Tianjin天津小站, and Xiasha in Hangzhou杭州下沙. At every site, elderly workers were out in force. As private-sector employers have tightened their hiring standards, it has become increasingly hard for anyone over 60 to land a regular job, pushing them into the casual-labour market. Walk around any major Chinese city and you will notice it yourself: ageing security guards in residential compounds, elderly restaurant servers, older domestic workers. A national figure of 20 to 30 million elderly migrant workers at the lower end of old age is entirely plausible.

Tallying everything up and drawing on the most recent data available (2024 employment figures), I estimate that roughly 82 million rural hukou holders aged 60 and above remain in the workforce. With the total elderly rural hukou population at approximately 130 million, that implies a labour participation rate of 63% among the rural elderly.

Factor in census undercounting and elderly people engaged in occupations that slip through the statistical net — street vending, taxi driving, and the like — and I believe the true rate is closer to 70–75%. Go one step further and exclude the roughly 17 million rural residents over 80 who have lost the ability to work, and among the remaining 113 million people aged 60 to 80 who retain some capacity for labour, a staggering 80–90% still have to keep working.

The Third National Time Use Survey, released by the National Bureau of Statistics in 2024, supports this estimate. At the time of the survey, China’s elderly population stood at around 300 million, of whom 36.3% — roughly 109 million — were engaged in paid work. Subtract the estimated 15 to 20 million urban hukou holders working past retirement (discussed in detail below), and the figure for rural hukou elderly in paid employment comes to approximately 90 million.

What makes these numbers so striking is the gulf between rural and urban areas. The Fourth China Urban Labour Force Household Survey (CULS4), conducted by the Chinese Academy of Social Sciences in 2016, found a labour participation rate of just 4.2% among urban retirees. A household survey by the Wuhan Municipal Bureau of Statistics at the end of 2014 put the rate for those 65 and older at a mere 2.5%. Census data on employment age structures across industries show that secondary and tertiary sectors together employed 14.84 million people past retirement age. Even if every one of them were an urban hukou holder with no migrant workers in the mix, that would represent only 10.3% of the urban elderly population of 143 million.

International comparisons are also illuminating. Although overseas studies on post-retirement labour participation generally use 65 as the threshold — making direct comparison imperfect — the contrast is telling. Japan leads the developed world at 25.2% (2023), followed by the United States at 18%. Germany, Italy, and France are all below 10%.

By any measure, the labour participation rate among China’s rural elderly is grotesquely high — an anomaly. Among countries at a comparable or higher stage of development, China’s rural elderly are almost certainly the most overworked retirees on the planet.

Abysmally Low Rural Social Security Benefits Are the Main Driver

Why are elderly farmers still doing backbreaking physical work? The most direct and fundamental reason is that pension benefits for rural hukou holders are woefully inadequate. In 2024, the national minimum standard for the Urban-Rural Resident Basic Pension Insurance paid to farmers was 123 yuan per month — subsequently raised to 143 yuan in 2025 and 163 yuan in 2026.

According to the 2024 national social insurance fund settlement, the average per capita payout under this pension scheme was about 203 yuan per month. But this figure is inflated by the inclusion of nearly 40 million non-employed urban residents whose benefit levels are far higher than those of farmers. A realistic estimate of the actual monthly pension received by farmers would be closer to 180 yuan. On top of this, the average rural resident holds about one mu (roughly one-sixth of an acre) of land, yielding around 500 yuan per year in rental income — a form of property-based income that can be treated as a modest, stable guarantee from the state. All told, the two sources amount to approximately 2,660 yuan per year.

Now consider the other side of the ledger. The Fifth National Sample Survey on the Living Conditions of Urban and Rural Elderly, published jointly in October 2024 by the Ministry of Civil Affairs, the National Committee on Ageing, the National Health Commission, and the Ministry of Finance, found that the average annual routine expenditure of rural elderly was 6,734 yuan. This means that social security and property income together replace only about 40% of basic spending needs — a far cry from the 88% replacement rate enjoyed by their urban counterparts from the same two sources of income. Farmers who reach retirement age simply cannot afford to stop working. Doing so would put their survival at risk.

The same survey also found that 73% of rural elderly receive financial support from their children or grandchildren, averaging 3,280 yuan per year. This in itself tells us that the vast majority of rural elderly cannot sustain themselves on social security alone. For context, the Survey of Income and Program Participation released by the U.S. Census Bureau in May 2025 reported that only 4.3% of elderly Americans — 2.4 million out of 55.8 million — relied on intra-family transfers. Cultural norms around filial piety certainly account for part of the difference, but the adequacy of the pension system is the decisive factor.

Healthcare is another major drain on elderly finances. In 2024, urban residents nationwide received an average of 5,497 yuan per person in medical expense reimbursements, compared to just 1,125 yuan for rural residents. Rural elderly shouldered out-of-pocket drug costs averaging 1,906 yuan per year — a crushing burden that exceeds 33% of their median income (5,640 yuan). For urban elderly, out-of-pocket costs of 2,326 yuan represented just 8% of their median income (28,800 yuan).

The extent of the disparity becomes even starker when you examine the three social insurance fund ledgers side by side. According to the 2024 national social insurance expenditure settlement, pension payouts for 112 million retired urban enterprise workers totalled 4.99 trillion yuan, or an average of 3,712 yuan per month per person. For the more than 21 million retired civil servants and public institution employees, the total was 1.76 trillion yuan — an average of 6,984 yuan per month. Meanwhile, the Urban-Rural Resident Basic Pension fund, which covers 180 million recipients (both rural elderly and non-employed urban elderly), disbursed a mere 439.1 billion yuan in total, excluding individual accounts. These 180 million recipients outnumber the combined total of retired enterprise workers and civil servants by a factor of 1.35, yet the money spent on them amounts to just 6.5% of what the other two groups receive. The average monthly benefit trails enterprise retirees by a factor of 18 and government retirees by a factor of 34.

In short, although China has been operating essentially as a market economy since the late 1990s, its pension and healthcare systems remain rooted in the dual-track urban-rural framework inherited from the planned-economy era — or more precisely, a three-track hierarchy of cadres, enterprise workers, and farmers. The result is a deeply lopsided allocation of social security resources, skewed toward urban residents and those inside the state apparatus. This structural imbalance is the root cause of the abnormally high labour participation rate among the rural elderly.

III. Have Rural Elderly Earned the Right to a Decent Pension?

Whenever economists call for higher pension benefits for farmers, a predictable chorus of objections follows: farmers never paid into the pension system, so what entitles them to draw from it? Some go so far as to accuse such advocates of deliberately maligning China’s welfare system and fomenting social discord.

My answer is this: while it is true that farmers did not, for a very long time, pay into the social insurance pool in the formalised way that urban workers did, they made extraordinary — indeed, superhuman — contributions to China’s modernisation that functioned as a form of implicit social security payment. They have more than earned their right to pension compensation.

The first and most obvious of these contributions lies in the price scissors between industrial and agricultural goods during the planned economy era. For decades, farmers were compelled to sell their produce at artificially suppressed prices, subsidising the state’s industrial build-up at enormous personal cost. According to Professor Yan Ruizhen of Renmin University of China, a recipient of the prestigious Sun Yefang Prize in Economics, from 1953 to 1985 the state extracted roughly 24 billion yuan per year from farmers through this price gap — a figure roughly equivalent to total capital construction investment during the same period.

The joint research group on “Agricultural Investment,” organised under the CPC Central Committee Policy Research Office and the State Council Development Research Centre, estimated that during 1950–1978, the government reaped approximately 510 billion yuan through the industrial-agricultural price scissors. After the Reform and Opening Up began, the absolute magnitude of the scissors actually widened: a further 1.5 trillion yuan was extracted from 1979 to 1994. This pricing distortion did not substantially disappear until the early 2000s. As a rough guide, the scissors averaged around 25% of total agricultural output value before reform and about 10% afterward.

The second contribution was the crushing burden of agricultural taxes, fees, and unpaid labour. Between 1949 and 2005, Chinese farmers paid a cumulative total of over 420 billion yuan in formal agricultural taxes. But the various village- and township-level surcharges — the “three deductions and five charges,” administrative fees, compulsory fundraising, and fines — amounted to at least twice that sum. The imputed wages for conscripted farm labour used to build water conservancy and transportation infrastructure (which totalled 30 billion work-days from 1950 to 1978 alone) were of a similar order of magnitude. Together, these three categories add up to at least 1.68 trillion yuan. Moreover, based on the official statement that “following the complete abolition of the agricultural tax in 2006, the annual burden on farmers was reduced by approximately 125 billion yuan,” we can calculate that over the 28 years of the reform era alone, farmers’ cumulative excess taxes, fees, and compulsory labour amounted to well over 3 trillion yuan — roughly 15% of their total income.

The third contribution comes through rural land expropriation. From 1999 to 2025, local governments across China collected a cumulative total of approximately 83 trillion yuan in land transfer revenues, of which roughly 90% derived from the conversion of expropriated farmland into urban construction land. About 50% of these revenues went toward demolition and resettlement compensation, and roughly 10% was channelled into rural construction and affordable housing projects.

That leaves approximately 40% — some 33 trillion yuan — absorbed into urban construction and general government spending. Over the past two decades, land transfer revenues have consistently accounted for 20–30% of local government income. This represents another massive contribution from rural China, one that continued long after the formal obligations of agricultural taxes and corvée labour had been abolished.

In sum, for nearly eight decades since the founding of the People’s Republic, farmers have continuously sustained the country’s modernisation through contributions that far exceeded what could reasonably be asked of them. The share of their labour and property income surrendered without compensation is no smaller than the social security contribution rates paid by urban workers. Farmers have every right to receive pension benefits with broad coverage.

IV. Non-Contributory Pensions as a Growing Global Norm, and What China Should Do

Even leaving historical debts aside, there is a straightforward principle of modern governance at stake: all citizens of a country, regardless of whether they live in a city or the countryside, regardless of gender or ethnicity, and regardless of whether they have paid into a pension scheme, should be entitled to a fair share of a universal public pension — sometimes called a national pension or citizens’ pension. This is a basic obligation of the modern state.

As far as I can determine, Sweden was the first country to establish such a system. As early as 1913, the Swedish parliament legislated that anyone who had lived in Sweden for at least 40 years or worked for more than 30 was entitled to a pension from the age of 66, set at roughly 20% of the prevailing average wage. By 1959, this had been raised to 66%.

Britain followed in 1946 with its universal State Pension. France (1956), the Netherlands (1957), West Germany (1957), and Japan (1959) subsequently established national pension frameworks that included farmers. Among developing nations, Mauritius (1950), Brazil (1963), Suriname (1973), Chile (1974), Turkey (1976), and Malaysia (1982) all built universal public pension systems of varying generosity.

A 2018 report by the International Labour Organization found that of 186 countries and territories surveyed, 114 had established non-contributory pension schemes, with average benefits equivalent to roughly 16% of per capita GDP. In most developed OECD nations, the figure reaches about 30% — for instance, approximately 1,095 USD per month in Australia and 1,201 USD per month in the Netherlands.

For China, I believe the most instructive comparisons come from Latin American countries at similar stages of development. Brazil has 26 million people living in rural areas — a significant number — and its national pension coverage reaches 90%, with benefits of 330 USD per month as of 2015. Suriname (coverage above 80%) and Uruguay (coverage 92%) have similarly built universal pension systems in their rural areas, paying 152 USD and 262 USD per month respectively (Qi Chuanjun, 2020).

Taiwan region offers another valuable reference point. Like the mainland, Taiwan once restricted retirement pensions to urban workers with formal employment. Starting in 1995, it began extending pension payments to farmers, and in 2008 it folded them into a comprehensive National Pension system through the Old Farmer Allowance, currently set at 8,110 New Taiwan Dollars per month (roughly 1,930 RMB).

Building a public pension system for rural China that matches the country’s level of development is no longer optional — it is overdue. The government should draw up a clear, publicly announced roadmap with specific targets, much as it does for industrial policy, to give people confidence that change is coming.

Members of the National People’s Congress and economists periodically float proposals to raise rural pensions to 1,000 yuan in one stroke. I believe that a foundational welfare programme of this kind cannot be built overnight. A more prudent path would be to raise rural pensions to 400 yuan per month over the next five years and to 800 yuan per month within ten years, achieving a replacement rate of about 60% of routine daily expenditure for the rural elderly. Combined with land rental income, support from children, and some light work, this would be enough to meet basic needs.

This is hardly an ambitious target. Even at 800 yuan per month by 2035 — roughly 120 USD per month, or 1,440 USD per year — and with China’s per capita GDP expected to surpass 20,000 USD by then, that would represent just 7.2% of per capita GDP, an extraordinarily low figure by international standards.

Nor is it beyond China’s fiscal means. Assuming a rural elderly population of 180 million by 2035, national GDP of 200 trillion yuan, and fiscal revenues of 40 trillion yuan, even an 800-yuan monthly pension would cost a total of 1.73 trillion yuan — less than 0.9% of GDP, or 4.5% of fiscal revenue. That is roughly equivalent to the 2025 pension expenditure for retired government and public institution employees, and about 35% of what is spent on enterprise worker pensions.

Raising farmers’ pensions is, among the many unavoidable challenges China faces, quite possibly the easiest to accomplish. And it would not merely be a fiscal obligation — it would be a powerful stimulus to consumption and economic vitality, delivering two benefits for the price of one. Many of these farmers are already very old. The compensation they are owed should not be deferred any longer. Every year of delay is a year too many.

References:

Office of the Leading Group for the Seventh National Population Census of the State Council, 2020 China Population Census Yearbook (Beijing: China Statistics Press, 2022).

Nie Aixia, Non-Contributory Pensions: Policy Trends and Reflections for China (Beijing: China Social Sciences Press, 2020).

Taiwan Research Institute, Study on Sweden’s Implementation of the NDC Pension System (2010).

Fang Lianquan, “Implications of Latin American Non-Contributory Pension Systems for China’s Rural Pension Reform,” http://ilas.cssn.cn/xschengguo/xslunwen/201902/t20190219_4831024.shtml

Yan Ruizhen et al., “The Current State, Development Trends, and Countermeasures for the Industrial-Agricultural Price Scissors in China,” Economic Research Journal, No. 2 (1990).

Joint Research Group on “Agricultural Investment,” “Agricultural Protection: Current Conditions, Rationale, and Policy Recommendations,” Social Sciences in China, No. 1 (1996).

Qi Chuanjun, “The Development of Brazil’s Non-Contributory Pension and Its Implications for China,” Working Paper, World Social Security Research Centre, Chinese Academy of Social Sciences (2020).

The policy covers three core areas:

Free Deployment Support: Encouraging platforms to establish “Lobster Service Zones” that provide developers with free OpenClaw deployment services, with subsidies of up to 2 million yuan for enterprises that contribute code or develop skill packages.

Data and Compute Subsidies: Opening up high-quality public datasets and offering 30%–50% subsidies on data services, AI NAS hardware, and large model API usage. Enterprises newly settled in OPC communities also receive three months of free compute resources.

Full-Chain Entrepreneurship Support: From 2 months of free housing and 18 months of discounted office space, to up to 100,000 yuan in talent settlement grants and up to 10 million yuan in equity investment, covering every stage of an OPC entrepreneur’s journey from arrival to growth.

My first reaction is that the speed at which this policy was rolled out is yet another proof that Shenzhen’s local government is, without question, one of the most capable local governments. I only heard about the OPC concept earlier this year. OpenClaw has been in the spotlight for barely two months. In China’s non-tech circles, most people didn’t even know what this was until early February. Subtract the Spring Festival holiday when civil servants were off, and the window from research, drafting, to publishing the draft for public comment was three weeks at most. Three weeks to produce a complete policy document with specific subsidy ratios and dollar amounts, in itself demonstrates institutional competence.

What's more impressive is how precise the policy is. You can tell it wasn't copy-pasted from some template designed for traditional manufacturing.

The core logic of AI Agents is that one person plus a well-tuned AI Agent can do the work of an entire small team from the pre-AI era. That's a direct leap in productive forces. The problem is that the relations of production have to keep up. Sure, one person can now do the work of ten, but only if they can afford the tools first. OpenClaw is still unstable at this stage, and you need a separate machine for safe deployment.

Running tasks burns tokens, and computing costs real money. The average monthly salary for non-private sector workers in Shenzhen in 2024 was 14,540 yuan. A Mac Mini now lands at just over 4,000 yuan, roughly a quarter of that monthly paycheck. Given that the people who actually mess with this stuff are mostly young and early in their careers, that's not a trivial expense. Stack ongoing API costs on top, and the startup cost for personal deployment is genuinely not low. Then there's the data problem. Without clean data, you can't fine-tune your agent.

I think the value of Longgang’s policy is that it starts with the non-technical barriers an OPC entrepreneur might face first. No matter 50% subsidy on AI NAS purchases, three months of free government-provided compute, access to high-quality de-identified datasets, an 18-month discount on office space, and even two months of housing when you first arrive. It's simple, but it cuts the real cost.

One more thing: nearly every item in this document corresponds to actual fiscal expenditure. Whether a government is willing to put real money on the table is the only reliable standard for judging how serious a policy is.

Below is the document I translated with the help of AI

Several Measures of Shenzhen Longgang District to Support OpenClaw & OPC Development

(Draft for Public Comment)

In order to implement the “Action Plan for Building Shenzhen into a Leading Hub for AI-Powered OPC Entrepreneurship Ecosystem (2026–2027),” deepen the “AI+” initiative, cultivate new business models and formats for industrial development, and build an innovation-driven, industry-clustered AI OPC entrepreneurship ecosystem, these measures are hereby formulated.

I. Free OpenClaw Deployment and Development Support. Market-oriented, professional platform operators are encouraged to launch “OpenClaw Service Zones” providing free OpenClaw deployment services, with eligible operators receiving corresponding subsidies. Support shall also be provided for the development and promotion of OpenClaw-based AI agent tools. For entities that contribute key code to major international open-source communities, develop and publish skill packages related to Longgang’s advantageous industries on skill trading platforms, or develop application projects integrating OpenClaw with embodied intelligent devices, subsidies of up to 2 million yuan shall be granted upon verification.

II. Dedicated OpenClaw Data Service Support. High-quality de-identified public datasets in areas such as low-altitude economy, transportation, healthcare, and urban governance shall be made openly available, with public data usage fees reduced or waived. For purchases of data governance, annotation, data asset capitalization, and related services used for OpenClaw framework-related development, application, or research, a 50% discount on actual costs shall be provided. For purchases of enterprise-developed, ready-to-use AI NAS units (”Lobster Boxes”), a subsidy of 30% of the market price shall be granted.

III. OpenClaw-Based AI Agent Tool Procurement Support. An “OpenClaw Digital Employee Voucher” program shall be implemented to support enterprises in purchasing or self-building OpenClaw-based AI agent solutions. Subsidies of up to 40% of total project investment shall be provided, with an annual cap of 2 million yuan per enterprise.

IV. OpenClaw-Based AI Agent Tool Application Demonstration Support. Focusing on areas such as smart manufacturing, smart government services, smart parks, and smart healthcare, a selection of OpenClaw deep-application projects demonstrating strong innovation and proven effectiveness shall be made each year. Selected projects shall be awarded the title of “Longgang District OpenClaw Application Demonstration Project” and receive a one-time reward of up to 30% of actual investment, capped at 1 million yuan.

V. AIGC Model Usage Support. For eligible AIGC enterprises within the district that use leading domestic multimodal large models for AIGC content creation and production, a subsidy of 30% of actual model API usage fees shall be provided, with an annual cumulative cap of 1 million yuan per enterprise.

VI. Compute Resources and Scenario Application Support. Intelligent computing resources shall be coordinated to provide verified enterprises newly settled in OPC communities with three months of free compute resources (including but not limited to general-purpose and intelligent computing) and related foundational technical support services. Based on criteria including technological innovation, market promotion, application effectiveness, and growth potential, demonstration scenario projects with industry-leading impact shall be selected annually and granted support of up to 50% of actual project investment (for non-government-funded projects), capped at 4 million yuan.

VII. Talent and Entrepreneurship Space Support. To attract young talent, newly recruited doctoral, master’s, and bachelor’s degree holders who settle in Longgang shall receive tiered settlement subsidies of up to 100,000 yuan. Newly registered or newly relocated OPC enterprises in Longgang shall be provided with up to 2 months of free housing to reduce talent onboarding costs. Outstanding OPC founders or core talents awarded the title of “Longgang District OPC Person of the Year” shall receive corresponding benefits including medical coverage, children’s school enrollment, and talent housing in accordance with relevant regulations. The “One Desk, One Office, One Floor” policy shall be implemented to provide OPC enterprises with up to 18 months of discounted office space, lowering the barrier for early-stage teams. Social organizations participating in OPC community development shall be supported, with verified OPC communities receiving annual operational subsidies of up to 4 million yuan.

VIII. Fund and Financing Support. The district’s Science and Technology Innovation “Seed Fund,” the Longgang Yuntu Industrial Fund, and the AI Industry Fund of Funds shall be leveraged to provide investment and financing channels for seed-stage OPC projects with high technological content and strong innovation capacity, with priority given to youth entrepreneurship projects. Eligible projects may receive equity investment support of up to 10 million yuan.

IX. Overseas Expansion Support. Leveraging the district’s Enterprise Internationalization Service Base, an OPC “Overseas Service Station” shall be established, integrating one-stop services including market development, cross-border logistics, and compliance consulting to build an agile closed loop from demand identification to product delivery. Eligible export-oriented OPC enterprises purchasing export credit insurance shall receive proportional premium subsidies.

X. Competition and Awards Support. OPC teams that win prizes in events such as “OPC Hackathons” and innovation and entrepreneurship competitions hosted in Longgang District shall receive awards of up to 500,000 yuan. Individuals who win prizes in the “Longgang District OPC Person of the Year” selection shall receive awards of up to 100,000 yuan. The same entity shall receive support on a highest-applicable, non-duplicative basis.

These measures shall take effect on [date] 2026 and remain valid for a period of three years.

深圳市龙岗区支持OpenClaw&OPC发展的若干措施

（征求意见稿）

为贯彻落实《深圳市打造人工智能OPC创业生态引领地行动计划（2026-2027年）》，深入实施“人工智能+”行动，大力培育产业发展新业态新模式，构建产业集聚、创新活跃的人工智能OPC创业生态，制定本措施。

一、OpenClaw免费部署与开发支持。鼓励市场化、专业化平台载体推出“龙虾服务区”，免费提供OpenClaw部署服务，符合条件的给予一定补贴；提供OpenClaw类智能体工具开发推广支持。对向国际主流社区贡献关键代码、在技能交易平台开发上架龙岗优势产业相关技能包、开发与具身智能设备结合的应用项目的，经认定后给予最高200万元补贴。

二、OpenClaw专属数据服务支持。OpenClaw专属数据服务支持。开放低空、交通、医疗、城市治理等高质量脱敏公共数据，减免公共数据使用费用；对购买数据治理、标注、数据资产入表等服务用于OpenClaw框架相关的开发、应用、研究的，按实际支付的费用给予50%优惠。对购买企业自主研发，开箱即用的AI NAS（龙虾盒子）的，按市场价的30%给予补贴。

三、OpenClaw类智能体工具采购支持。实施“OpenClaw数字员工应用券”计划，支持企业采购或自建OpenClaw智能体解决方案，按不超过项目总投入的40%给予补贴，单家企业年度最高200万元。

四、OpenClaw类智能体工具应用示范支持。聚焦智能制造、智慧政务、智慧园区、智慧医疗等领域，每年遴选一批创新性强、应用效果好的OpenClaw深度应用项目，授予“龙岗区OpenClaw应用示范项目”称号，并按实际投入30%给予一次性奖励，最高100万元。

五、AIGC模型调用支持。对符合一定条件的区内AIGC企业使用国内头部多模态大模型进行AIGC创作生产的，按实际支付的模型调用费用30%给予补贴，每家企业每年累计补贴总额最高不超过人民币100万元。

六、算力与场景应用支持。协调智能算力资源，为经认定的OPC社区新入驻企业提供为期三个月的免费算力资源（包括但不限于通用算力、智能算力等）及相关基础技术支持服务。按照技术创新、市场推广、应用成效、发展潜力等维度，每年遴选具有行业引领的示范场景项目，最高按照项目（非政府投资项目）实际投入的50%，给予最高不超过400万元支持。

七、人才与创业空间支持。吸引青年人才落户，对新引进落户龙岗的博士、硕士、本科人才，分档给予最高10万元入户补贴。为新注册或新迁入龙岗的OPC企业提供最长2个月免费住宿，降低人才落地成本。对获得“龙岗区OPC年度人物”评定的优秀OPC创办人或核心人才，按规定给予医疗保障、子女入学、人才住房等相应待遇。落实“一张办公桌、一间办公室、一层办公楼”的乐业办公体系，为OPC企业提供最长18个月办公空间优惠期，降低初创团队落地门槛。支持社会力量参与OPC社区建设，对经认定的OPC社区，按年度给予运营机构最高400万元支持。

八、基金融资支持。用好区科技创新“种子基金”、龙岗云图产业基金及人工智能产业母基金，为科技含量高、创新能力强的种子期OPC项目（重点倾斜青年人才创业项目）提供投融资渠道，符合条件的给予最高1000万元股权投资支持。

九、产品出海支持。依托区企业国际化服务基地，设立OPC“出海服务站”，集成市场拓展、跨境物流、合规咨询等一站式服务，构建从需求感知到产品交付的敏捷闭环。对出海型OPC投保出口信用保险符合条件的，给予一定比例保费支持。

十、赛事奖励支持。对在龙岗区主办的“OPC黑客松”、创新创业大赛等活动中获奖的OPC团队，给予最高50万元奖励支持；对在“龙岗区OPC年度人物评选”活动中获奖的个人，给予最高10万元奖励支持。同一主体按就高不重复原则享受支持。

本措施自2026年X月X日起施行，有效期3年。

At the same time, the deficit rate remains at 4%. In my view, this reflects a policy orientation in which structural adjustment takes priority over GDP growth, with no appetite for a strong stimulus push.

Below are the points I consider most worth watching:

1. GDP target set as a range for the first time

The most eye-catching change is the GDP target set as a range of 4.5% to 5%, the first time since 2019, with the added note to “strive for better outcomes in actual implementation.” This is the first downward revision after three consecutive years (2023–2025) of anchoring at “around 5%,” and the numerical target now sits below the average of provincial growth objectives.

Three layers of consideration: sustaining employment requires a certain growth floor; the target should guide all parties to focus on high-quality development; and it must dovetail with the 2035 long-term vision. The GWR also makes explicit the goal of “doubling per-capita GDP by 2035 relative to 2020”—i.e., from RMB 73,300 in 2020 to roughly RMB 146,000, or approximately USD 20,000–24,000 at prevailing exchange rates, corresponding to the threshold of a moderately developed economy. This implies that macro policy will not demand excessively high growth rates going forward.

In my reading, the range-based target reflects greater caution toward external uncertainty: the leadership wants to defend a growth floor that keeps employment stable while freeing up policy bandwidth to channel resources toward higher-end industries.

2. Markedly stronger language on difficulties

In 2025, the NDRC report described challenges in relatively measured termslike insufficient effective demand, “involution in some sectors,” and “growing business difficulties.” The 2026 report is notably more blunt:

“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.”

The GWR echoes this in its domestic assessment, noting that “employment and income growth have become harder for the public, fiscal revenue-expenditure tensions in some localities are pronounced, and the real-estate market is still adjusting.” It goes so far as to state—unusually—that “some officials lack the ability and the means to pursue high-quality development… and some hold distorted views of political achievement.” Personally, I like this more forthright acknowledgment of problems.

The NDRC’s observation that “infrastructure investment growth has turned from positive to negative” signals that the traditional model of using infrastructure spending as a counter-cyclical backstop is approaching its limits. The GWR’s direct criticism of cadre competence and performance incentives, in my view, indicates that the central leadership is placing higher demands on the quality of policy execution.

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3. Fiscal stance broadly flat

Against a backdrop of strained local finances and rising debt risks, fiscal policy is the area markets are watching most closely this year. According to the GWR, the deficit-to-GDP ratio stays at 4%, with a deficit of RMB 5.89 trillion (up only RMB 0.23 trillion from 2025—far less than last year’s RMB 1.6 trillion increase). The local government special-bond quota remains at RMB 4.4 trillion. Ultra-long special central government bonds remain at RMB 1.3 trillion, allocated across equipment upgrades (RMB 200 billion), consumer trade-in subsidies (RMB 250 billion, down RMB 50 billion from last year), and major infrastructure and security projects (RMB 800 billion).

4. Monetary policy

According to the GWR, monetary policy maintains its “appropriately accommodative” stance and continues to “give important consideration to promoting economic growth and a reasonable recovery in the price level.” There’s an expression saying 灵活高效运用降准降息等多种政策工具，保持流动性充裕 “Employ a range of policy tools, including RRR cuts and interest rate cuts, in a flexible and efficient manner to maintain ample liquidity.” That’s an important tool.

At the same time, the GWR explicitly calls for “optimizing and innovating structural monetary-policy tools, appropriately expanding their scale, and improving implementation.” This points to a growing role for targeted monetary instruments. Some interpret this as the PBOC favoring precision liquidity injections through directed tools over broad-based rate cuts.

5. Industrial policy intensifies the fight against “involution,” but leans on market-based tools

The NDRC draft plan calls for “strengthening capacity governance in key industries,” naming steel, oil refining, copper smelting, alumina, and coal-to-chemicals as sectors requiring capacity reduction or tighter oversight. The specific wording, however, is worth noting:

“Strengthen anti-monopoly and anti-unfair-competition enforcement, regulate market pricing, and adopt a comprehensive approach to curb ‘involutionary’ competition… Encourage emerging industries to maintain moderate capacity redundancy to foster competition and innovation.”

This suggests the government does not intend to force capacity cuts through administrative fiat, but rather to rely on quality standards, pricing regulation, and market competition mechanisms to address involution. The explicit endorsement of “moderate capacity redundancy” in emerging industries is a corrective to earlier concerns that aggressive capacity curtailment could stifle innovation.

The GWR complements this from the angle of building a unified national market and disciplining local governments. It proposes “regulating local governments’ economic-promotion activities, issuing positive and negative lists for investment attraction, and standardizing tax incentives and fiscal subsidies.” This directly targets the practice of local governments creating “tax havens” to lure investment—an attempt by the center to curb, at the source, the duplicative capacity races driven by subsidy-based competition among localities.

6. CPI target lowered to 2% for the second consecutive year—subdued inflation expectations

The 2026 CPI target remains at “around 2%,” whereas from 2021 to 2024 it had consistently been set at “around 3%.” Setting the target at 2% for two years running is partly a nod to reality, but it also signals that policymakers do not expect a meaningful rebound in prices in the near term. This is consistent with the overall cautious policy tone.

7. New specifics on opening up

The NDRC draft plan introduces several notable opening-up measures: expanding market access with a focus on the services sector; steadily advancing pilot programs in value-added telecommunications, biotechnology, and wholly foreign-owned hospitals; actively pushing forward accession to the DEPA and CPTPP; and working to bring the China–ASEAN FTA 3.0 upgrade protocol into effect at an early date.

The GWR, for its part, calls for “expanding cross-border use of the renminbi” and “actively expanding imports and promoting balanced trade development.” Against the backdrop of mounting external pressure, the phrase “promoting balanced trade development” is particularly noteworthy—it signals China’s willingness to proactively adjust its posture on trade imbalances, giving room for potential negotiations.

Growth Target

For three years, Beijing set its GDP target at around 5%. But , a fellow at the Asia Society Policy Institute and a longtime China watcher, has made a compelling case for a lower target, citing the provincial-level Two Sessions held in recent weeks. Of the 31 provincial-level governments, 21 lowered their growth targets. Guangdong, the largest provincial economy, came down to 4.5 to 5%, while Zhejiang, which had exceeded 5.5% in 2025, trimmed its target to 5 to 5.5%. When the big provinces start managing expectations downward, the national target tends to follow.

Most analysts expect the headline number to land somewhere between 4.5% and 5%. The IMF projects 4.5%, revised up by 0.3 percentage points from its October forecast.

But I also want to introduce another way to look at this. The central government and local governments don't always see GDP targets the same way. For local officials, these targets are tied directly to performance reviews and competition for resources, so they tend to be more conservative in adjusting targets. For the central government, it also needs to consider shaping expectations across the economy. The number itself can become a kind of self-fulfilling prophecy. During last year’s Central Economic Work Conference, it reiterated the importance of improving expectation management mechanisms and boosting public confidence. (健全预期管理机制，提振社会信心) So, I would say the central government actually has a stronger incentive to hold the line at around 5, without imposing a rigid target that would pressure local governments into rushing to meet it.

The 15th Five-Year Plan

This is the real substance of the session. The 15th FYP covers 2026 to 2030 and is meant to serve as a bridge between the goals set at the 20th Party Congress and the target of basically realizing socialist modernization by 2035. The core priorities are by now familiar: technological self-reliance, industrial upgrading, expanded domestic demand, and reaching moderately developed country per capita GDP by the end of the next decade. None of this is new, but the framing is getting more explicit with each policy cycle, and the resource allocation behind it is getting more concrete.

On the industrial side, the focus will be on what Beijing calls new quality productive forces（新质生产力）. Expect the plan to lay out accelerated support for sectors like commercial aerospace, the low-altitude economy, biomedicine, quantum technology, embodied intelligence, and 6G, alongside digital and green transformation of traditional industries. This is where the bulk of industrial policy resources will flow over the next five years, and the FYP will likely formalize much of what has already been signaled through sector-specific plans and local pilot programs.

But formalising support is only half the story. The other half is disciplining how that support gets deployed locally. Over the past two years, the rush to develop new quality productive forces has led to widespread duplication at the provincial and municipal level, with dozens of cities simultaneously launching low-altitude economy zones or AI industrial parks, often with little regard for local comparative advantage. The Politburo's pre-session meeting on February 27 used the phrase "因地制宜发展新质生产力, " emphasising accordance with local conditions, which signals that Beijing is aware of this problem and may use the FYP to impose more structured differentiation. If the plan includes clearer guidance on regional industrial specialisation, it would mark a shift from simply directing more resources toward strategic sectors to also correcting how those resources are allocated across geographies. That would be progress.

The more interesting question is whether the FYP can move beyond the supply side. Boosting consumption has been on the agenda for years, but in practice most policy energy still flows toward production and investment. The State Council’s Work Plan for Accelerating the Cultivation of New Growth Points in Service Consumption, released at the end of January, is a good example. Most of the measures focus on supply-side relaxation, opening up market access and removing regulatory barriers. This is not surprising. The government simply has more levers to pull on the supply side, and fewer direct tools on the demand side. But without genuine progress on household income and consumption, the political goal of sustaining growth becomes harder to deliver on with industrial policy alone. How the FYP balances these two sides will be one of the most important things to read for when the text comes out.

The Trade War Backdrop

The external environment heading into this year’s Two Sessions is very different from even a few months ago, and that gives China more room for maneuvering.

On February 20, the Supreme Court ruled that IEEPA does not authorize the President to impose tariffs. This has immediately reshuffled the trade situation. China's trade-weighted tariff burden will decline.

Trump responded quickly. He imposed a global 15% duty under Section 122 of the 1974 Trade Act, a different legal authority with its own set of constraints and expiration timelines. And the timing of what comes next is significant: According to Reuters, Trump is scheduled to travel to China from March 31 to April 2 to meet with Xi and discuss trade. The Two Sessions will wrap up around March 11, so Beijing will be crafting policy language with this diplomatic window firmly in mind.

After all the worst-case tariff scenarios have been taken off the table, at least for now. That decreased the likelihood that the central gov would announce a massive stimulus package. Instead, expect measured, targeted language that signals openness to negotiation while preparing for potential future escalation.

Other Things Worth Watching

The top priority coming out of the December CEWC is reviving domestic demand, and the specifics of how Beijing plans to do that will be closely scrutinized. I would watch for measures aimed at investing in people（投资于人）, including healthcare, elderly care, childcare, and education system reform.

The introduction of birth subsidies at the national level is a good start. It shows the central government is willing to put real money behind demographic concerns rather than just issuing guidance documents. And the broader logic is straightforward. When households feel insecure about medical bills, retirement, or the cost of raising a child, they save more and spend less.

But China simply does not have the fiscal capacity to build out a comprehensive welfare state in any short timeframe. Local governments are already stretched after years of land revenue decline and debt issue. The central government has more balance sheet room, but that room is being pulled in every direction at once. Infrastructure, industrial upgrade, and debt resolution.

There is another obstacle. The deeply rooted perception that generous welfare breeds laziness（福利养懒汉）is not just a talking point among fiscal conservatives in the government. It reflects a wider cultural attitude shaped by decades of compressed modernity, where China went from widespread poverty to middle-income status within a single generation. In societies that experienced this kind of rapid transition, the instinct to tie social provision tightly to labor participation runs deep. Shifting that mindset takes time, probably more than one Five-Year Plan cycle.

So from a practical standpoint, I am watching two things more closely than the welfare expansion headlines.

First is the implementation of paid leave. China’s labor law already guarantees paid annual leave, but enforcement is weak, especially in the private sector. If Beijing gets serious about making this a reality, the downstream effects on service consumption could be considerable. Tourism, hospitality, and cultural spending. It is one of those rare policy levers that costs the government little in direct fiscal terms but can meaningfully change household behavior.

Second, and more fundamental, is the Urban-Rural Resident Income Growth Plan（城乡居民增收计划）. Consumption is ultimately a function of income. I’d be watching whether the plan includes concrete mechanisms for raising labor’s share of national income, through minimum wage adjustments, transfer payment reform, or more direct and fundamental- increasing pensions for rural residents. But I would not expect a large increase like policy advisor Liu Shijin suggested last year, given the budget's affordability.

The welfare and social spending narrative will get a lot of attention during the Two Sessions, and rightly so. But the binding constraints are fiscal and cultural, and neither fact will change quickly. The more actionable space lies in income growth and institutional reforms like paid leave that unlock existing but suppressed demand. That is where I would focus.

1. Bilateral Relations

Xi Jinping put forward three proposals for China-Germany relations. Notably, the very first one was a call for Germany to

View China’s development in an objective and rational manner.

希望德方客观理性看待中国发展

In Chinese diplomatic parlance, this is a veiled criticism — suggesting that Germany and Europe’s perceptions of China in recent years have been tainted by bias and emotion, particularly as reflected in framing China as a systemic rival and in the broader “de-risking” discourse.

A similar signal is embedded in the phrase

pursue an active and pragmatic China policy,

奉行积极、务实的对华政策

which implies that Beijing views some of Germany’s recent policy moves as having been driven more by ideology than by national interest.

2. The “Innovation Partner” Framing

One formulation I find particularly noteworthy is Beijing’s assertion that

The German government has proposed new development strategies in areas such as technology, innovation, and digitalization, which are highly aligned with China’s development direction of intelligentization, green transformation, and integrated development during the 15th Five-Year Plan period.

德国政府在技术、创新、数字等领域提出新发展战略，同中国“十五五”时期智能化、绿色化、融合化发展方向高度契合。

Beijing wants to convey the message that, since the two countries’ macro-level directions in technology and innovation are convergent, there is no reason not to cooperate. Building on this premise, Beijing immediately laid out its own demands. The call for “two-way flow of talent, knowledge, and technology”支持两国人才、知识、技术双向流动 is a direct pushback against restrictions on technology transfers to China in recent years.

The phrase “correctly manage the relationship between competition and cooperation”双方要正确把握竞争和合作的关系 reflects Beijing’s longstanding dissatisfaction with the EU’s tripartite characterization of China as “partner, economic competitor, and systemic rival” — the word “correctly” here is saying: your current approach to managing this balance is incorrect.

And the emphasis on “stability and smooth functioning of industrial and supply chains”共同维护产业链供应链稳定畅通 is a rejection of the “de-risking” agenda.

The “four roles”四个“者” formulation is also interesting. Xi stressed that China and Germany should take the lead in being “defenders of multilateralism, practitioners of the international rule of law, champions of free trade, and advocates of solidarity and cooperation.” 多边主义的维护者、国际法治的践行者、自由贸易的捍卫者、团结协作的倡导者 None of these four roles names any country explicitly, yet every single one implicitly targets the policy trajectory of the second Trump administration.

3. Merz’s Remarks

Merz’s statements in the Chinese readout are an edited one, but Beijing’s choice of wording still conveys useful signals. What I find most worth noting is the emphasis on Merz calling for “a reliable and lasting economic and trade cooperative relationship” between the EU and China. This is consistent with the tone Merz struck in his pre-visit statement and suggests that Germany does not intend to aggressively pursue “de-risking” with China.

4. Ukraine

On Ukraine, Beijing’s readout uses the phrase “exchanged views,” which in Chinese diplomatic grammar signals that a significant gap remains between the two sides’ positions. However, while Ukraine is an important issue, it is not the most central agenda item of Merz’s visit. As such, this divergence is unlikely to damage the bilateral relationship.

5. Joint Press Statement

Both sides placed their core concerns under a “noted” (注意到) structure. Germany’s concerns (dependency, trade imbalance, export controls) and China’s concerns (securitization of trade issues, restrictions on high-tech exports) remain apart. But putting disagreements on the table and agreeing to disagree is still better than both sides talking past each other inside their own echo chambers.

“Germany reaffirmed its adherence to the one-China policy” stands as its own paragraph in the document. This can be read as highlighting its importance, but it can also be interpreted as Germany’s reluctance to elaborate further on this position. How one reads it depends on where one stands, which is perhaps, in itself, part of the art of diplomacy.

Below are the English versions of the Chinese official readout and the joint statement I issued.

Xi Jinping Meets with German Chancellor Merz

On the afternoon of February 25, President Xi Jinping met with German Chancellor Merz, who was on an official visit to China, at the Diaoyutai State Guesthouse in Beijing.

Xi Jinping pointed out that China and Germany are the world’s second and third largest economies respectively, and that China-Germany relations concern not only the interests of both countries but also have significant ripple effects on Europe and the world. The current international situation is undergoing the most profound transformation since the end of World War II. The more the world is beset by change and turbulence, the more China and Germany need to strengthen strategic communication, enhance strategic mutual trust, and promote continuous new development in the China-Germany all-round strategic partnership.

Xi Jinping put forward three proposals for the next phase of China-Germany relations. First, the two countries should be reliable partners who support each other. Both China and Germany have achieved rapid development on their own footing, adhering to mutual respect, mutual trust, openness, and cooperation, writing a success story of mutual benefit and win-win outcomes. China is committed to the path of peaceful development, and has the capability and confidence to achieve Chinese-style modernization. China will continue to share development opportunities with countries around the world, including Germany. It is hoped that Germany will view China’s development in an objective and rational manner, pursue an active and pragmatic China policy, and work with China to ensure the steady and sustained development of China-Germany relations.

Second, the two countries should be innovative partners committed to openness and mutual benefit. The German government has proposed new development strategies in areas such as technology, innovation, and digitalization, which are highly aligned with China’s development direction of intelligentization, green transformation, and integrated development during the 15th Five-Year Plan period. Both sides should strengthen the alignment of their development strategies, support the two-way flow of talent, knowledge, and technology between the two countries, and promote dialogue and cooperation in cutting-edge fields such as artificial intelligence. Both sides should correctly manage the relationship between competition and cooperation, seek mutually beneficial and win-win cooperation pathways, and jointly safeguard the stability and smooth functioning of industrial and supply chains.

Third, the two countries should be people-to-people partners who know and feel close to each other. Both China and Germany are major countries with profound cultural heritage. The two sides should strengthen mutual learning between civilizations, deepen people-to-people exchanges, and consolidate the popular support foundation for China-Germany friendship.

Xi Jinping emphasized that in the face of the accelerating transformation of the world unseen in a century, all countries should stand together through thick and thin and share a common destiny. China and Germany should uphold the central role of the United Nations, reinvigorate the UN’s leading role, and take the lead in being defenders of multilateralism, practitioners of the international rule of law, champions of free trade, and advocates of solidarity and cooperation. China supports Europe in becoming more independent and stronger, and hopes that the European side will work in the same direction as China, maintain the strategic partnership positioning, adhere to openness, inclusiveness, cooperation, and win-win outcomes, achieve greater development in China-EU relations, and make greater contributions to world peace and development.

Merz said he was delighted to visit China as the Chinese people celebrate the Spring Festival, and wished the Chinese people good fortune in the Year of the Horse. Since the establishment of diplomatic relations between Germany and China, the two countries have maintained friendly exchanges and close cooperation, bringing benefits to the peoples of both countries. Germany values its relationship with China, firmly adheres to the one-China policy, and is willing to work with China to continue the tradition of friendship, uphold mutual respect, openness, and cooperation, and continuously deepen the all-round strategic partnership between the two countries. The German business community attaches great importance to the Chinese market and hopes to further deepen cooperation with China to achieve mutual benefit and common development. The international situation is undergoing profound changes, and Germany and China bear an important shared responsibility in addressing global challenges. Germany looks forward to strengthening coordination with China, upholding free trade, and opposing protectionism. It is in the interest of both sides for the EU and China to develop a reliable and lasting economic and trade cooperative relationship, and it also contributes to world stability and prosperity. Germany supports strengthened dialogue and cooperation between the EU and China.

The two leaders exchanged views on the Ukraine crisis. Xi Jinping elaborated on China’s principled position, pointing out that the key is to persist in seeking solutions through dialogue and negotiation. It is essential to ensure equal participation of all parties and build a solid foundation for peace; to ensure that the legitimate concerns of all parties are addressed and the willingness for peace is strengthened; and to ensure the realization of common security and the building of a lasting peace architecture.

The two sides issued the Joint Press Statement of the People’s Republic of China and the Federal Republic of Germany.

Wang Yi attended the meeting.

Joint Press Statement of the People's Republic of China and the Federal Republic of Germany

Xinhua News Agency, Beijing, February 25

At the invitation of Premier Li Qiang of the State Council of the People’s Republic of China, Federal Chancellor Friedrich Merz of the Federal Republic of Germany paid his first official visit to the People’s Republic of China from February 25 to 26, 2026. He was accompanied by a high-level delegation that included 30 representatives from the German business community.

During his stay in Beijing, President Xi Jinping of the People’s Republic of China met with Chancellor Merz, and Premier Li Qiang held talks with Chancellor Merz. The leaders of the two countries exchanged views on China-Germany relations, international and regional issues, and economic policy matters.

Both sides spoke positively of the good cooperation under the framework of the China-Germany all-round strategic partnership, and agreed that mutual respect, mutual benefit and win-win outcomes, continued open dialogue, and cooperation in addressing common challenges are the fundamental principles for developing China-Germany relations. This visit has injected new momentum into the development of the bilateral partnership. Both sides emphasized the overarching significance of the China-Germany intergovernmental consultation mechanism in comprehensively advancing bilateral cooperation.

Germany reaffirmed its adherence to the one-China policy.

Both sides emphasized that economic and trade cooperation is an important component of the bilateral relationship and expressed willingness to deepen mutually beneficial and win-win cooperation. Both sides stressed the vital importance of open dialogue, fair competition, and mutual market access. The Chinese side noted Germany’s emphasis on issues such as “reducing dependency,” trade imbalances, and export controls; the German side noted China’s concerns regarding the securitization of economic and trade issues and export controls on high-technology products. Both sides are willing to properly address each other’s concerns through candid and open dialogue, so as to ensure a long-term, balanced, reliable, and sustainable economic and trade relationship. The two Premiers jointly attended a symposium of the China-Germany Economic Advisory Committee and engaged in exchanges with business representatives from both countries. Both sides agreed to continue the China-Germany Dialogue on Climate Change and Green Transition.

Both sides believe that the principles of the United Nations Charter and international law form the basis for international cooperation. China and Germany will continue to make efforts to this end and, on this basis, maintain dialogue on international issues, firmly uphold the status of the United Nations, and adhere to multilateralism and free trade.

Both sides encourage and support the strengthening of people-to-people exchanges between the two countries, and agreed to further enhance cooperation in the fields of culture and sports, and to promote mutual understanding through exchange programs and mutual visits between cultural figures, sports organizations, and young people. Both sides welcomed the restart of the China-Germany Dialogue Forum.

Both sides also discussed the Ukraine issue, and support efforts to achieve a ceasefire and lasting peace on the basis of the United Nations Charter and its principles.

Chancellor Merz expressed his gratitude to the Chinese government for the warm reception accorded to him as the first foreign leader to visit China after the Chinese Lunar New Year.

This official visit fully demonstrates that both China and Germany are committed to maintaining a stable and constructive bilateral relationship, are willing to deepen cooperation in areas of mutual interest, and are prepared to properly handle differences through candid, open, and mutually respectful dialogue.

In his trip to Munich, Wang Yi held back-to-back meetings with leaders and foreign ministers from the US, UK, France, Germany, Ukraine, Austria, Serbia, and Argentina on the sidelines of the Munich Security Conference. In this issue, I’ve compiled the Chinese official readouts of those meetings.

As in previous years, it was a packed schedule. But looking closely at the readouts, what stands out most to me is the revival of the China-France-Germany trilateral foreign ministers’ meeting. According to SCMP, “It revived a configuration not seen since the days of French President Emmanuel Macron’s first term.”

The timing is no coincidence. The second Trump administration has been relentlessly pressuring Europe, from tariffs to threatening to take Greenland, to sidelining Europe entirely by engaging Russia directly on Ukraine. The unease in Paris and Berlin is plain. Merz recently announced plans to visit China, signaling German government’s willingness to recalibrate its approach to Beijing.

The readouts show fairly positive language from both the French and German foreign ministers. Wadephul: “In the face of a turbulent world, Germany and France need dialogue with China more than ever.” Barrot spoke of France’s commitment to “revitalizing a stable and positive EU-China relationship.” Both also expressed support for free trade and opposition to decoupling.

These are, of course, standard diplomatic formulations, and I don’t want to over-read every word. But the overall trend is clear: with Trump injecting uncertainty into the transatlantic relationship, France and Germany are both looking to widen their diplomatic room for maneuver, and maintaining high-level dialogue with China is an important part of that. For Beijing, this is a window worth seizing.

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China-Ukraine: Pulling in a Better Direction

As for Wang Yi’s meeting with Ukrainian Foreign Minister Sybiha, the readout has quite a few well-crafted phrases. But to put it cautiously, problems remain — it’s just that this time, the rope is being pulled in a better direction.

China pledged humanitarian assistance for Ukraine’s power infrastructure. Ukraine’s energy grid has been devastated by the war, so this is a practical gesture aimed at something Kyiv genuinely needs. For its part, Ukraine still maintains that China-Russia trade has enabled Russia’s war. This complaint isn’t new — Kyiv and much of Europe have held this position for some time.

But from a realist standpoint, expecting China to cut economic ties with its largest northern neighbor is simply not realistic. China-Russia trade has its own economic logic and geographic reality. No major power would abandon relations with its largest neighboring country because of external pressure.

So the current dynamic looks more like both sides giving a little and gaining a little: China is willing to provide energy aid for Ukraine in need, and Ukraine is willing to keep talking. Notably, in January, Budanov — former head of Ukraine’s Defense Intelligence and now chief of the Presidential Office — publicly stated at Davos that “China has not transferred a single finished unit of weapon.” This suggests that Zelensky’s claim last April of having evidence of Chinese arms supplies to Russia was more of a diplomatic pressure tactic.

The underlying disagreements between China and Ukraine haven’t disappeared, but both sides are looking for a space where they can coexist.

Notes on the Other Meetings

The readout from the meeting with Rubio was short, just confirming that both sides agreed to implement the consensus reached by their heads of state and to keep communication channels open. No specific issues mentioned here.

In his meeting with UK Foreign Secretary Cooper, the British side reaffirmed its longstanding policy position on Taiwan, consistent with the Starmer government’s broader “reset” approach to China since taking office.

The meeting with Serbian President Vučić continued the familiar rhythm of the close China-Serbia relationship, with concrete projects like the Hungary-Serbia railway and the bilateral free trade agreement.

In the meeting with the Argentine Foreign Minister, Wang Yi emphasized that “China-Argentina cooperation is not directed at any third party, nor should it be disturbed by third-party factors.” Who that message was aimed at doesn’t need much explanation.

On the Russia-Ukraine issue, Wang expressed support for Europe’s participation in the Russia-Ukraine negotiation process. Since the Trump administration initiated U.S.-Russia dialogue, Europe’s greatest anxiety has been marginalization. China’s statement of support for Europe is, in a sense, also a response to the U.S.-Russia negotiation, which tries bypass the EU and Ukraine.

Below are official readouts:

1. China-Germany-France Trilateral Foreign Ministers’ Meeting

Wang Yi held a trilateral foreign ministers’ meeting with German FM Wadephul and French FM Barrot in Munich.

Wang Yi said this first-ever China-France-Germany trilateral FM meeting is both an innovative response to changing times and an important opportunity for strategic communication. He described the current international landscape as undergoing the most profound and complex changes since WWII — with unilateralism, protectionism, and power politics rampant, the UN-centered international system under severe strain, open economic globalization facing strong headwinds, and global governance suffering serious deficits. As responsible major countries and major world economies, the three nations bear important responsibilities for world peace and development. He called for upholding mutual respect, seeking common ground while shelving differences, advocating open cooperation, and pursuing win-win approaches — to give China-EU relations clear direction and provide more stability and certainty amid global turmoil.

Wang Yi stressed that 50 years of China-EU engagement prove the two sides are partners, not rivals; that mutual dependence is not a risk; integration of interests is not a threat; and open cooperation does not undermine security. China’s development is an opportunity for Europe, and Europe’s challenges do not come from China. He urged Germany and France, as heavyweight EU members, to push the EU toward an objective, comprehensive perception of China and a rational, pragmatic China policy, while keeping the China-EU partnership positioning firm. Both sides should respect each other’s core interests, properly handle frictions, deepen practical cooperation, and jointly tackle global challenges.

Wadephul said that facing an unstable world, Germany and France need dialogue with China more than ever — to build trust, dispel misunderstandings, and speak with a common voice as major powers. Germany values China’s positive role in global affairs. Germany and France reaffirm their firm adherence to the One China policy and commitment to long-term stable relations with China. They support free trade, oppose decoupling, and are willing to resolve trade frictions through consultation to promote balanced EU-China economic and trade development.

Barrot said global instability is rising, multilateralism and the international order are under threat, and conflicts persist worldwide. France, China, and Germany should jointly promote world peace and improve global governance. The more unstable the situation, the more partnerships are needed. France is committed to revitalizing stable, positive EU-China relations. France welcomes President Xi’s global governance initiatives and looks forward to coordinating across multilateral platforms. He expressed confidence that France-China, Germany-China, and EU-China relations can advance in parallel.

The three sides exchanged views on China-EU relations, the Ukraine crisis, and other issues of common concern, positively assessed the meeting’s significance, and agreed to maintain strategic communication.

2. Wang Yi Meets German FM Wadephul

Wang Yi said the world is increasingly turbulent, the existing international order faces severe shocks, and multilateralism confronts serious challenges. At this critical juncture, strengthened China-Germany strategic communication and joint opposition to unilateralism and bloc confrontation carry significance beyond the bilateral relationship. Both sides should firmly uphold the UN Charter’s purposes and principles, replace the “law of the jungle” with global governance, and together serve as stabilizing forces.

Wang Yi expressed China’s readiness to prepare for the next phase of high-level interactions, enrich the China-Germany all-round strategic partnership, and contribute to healthy China-EU relations. He called economic and trade cooperation the “ballast stone” of China-Germany ties and pledged that China would provide a market-oriented, law-based, and internationalized first-class business environment for German and other foreign enterprises to share in China’s development opportunities.

Wadephul said that stable Germany-China relations provide much-needed stability in a turbulent world. Germany attaches great importance to China, welcomes a more open China, and has high expectations for the Chinese market. Germany-China cooperation holds enormous potential. Germany opposes economic decoupling and trade protectionism, welcomes fair competition, and pursues the One China policy. He looks forward to close high-level exchanges and a comprehensive upgrade of Germany-China relations.

Both sides exchanged views on the Ukraine crisis and other international and regional issues.

3. Wang Yi Meets French FM Barrot

Wang Yi noted they had just successfully held the inaugural China-France-Germany trilateral FM meeting, sending positive signals. Facing a world of growing turmoil and assaults on multilateralism, the three major countries should stand up to uphold the UN Charter’s purposes, defend true multilateralism, maintain the free trade system, and provide more positive energy for the world.

Wang Yi said that since President Macron’s visit to China, China-France relations have shown positive momentum, with departments following up on visit outcomes and exchanges accelerating across fields. Both sides should plan the next phase of engagement, continuously build understanding and trust, and expand mutually beneficial cooperation. As responsible, independent major countries, multilateral collaboration is a hallmark of China-France relations. Both sides should squarely face global governance deficits, support each other’s multilateral initiatives, jointly uphold the UN’s role, and prevent the world from sliding back into the “law of the jungle.”

Barrot said President Macron’s successful visit to China last year saw in-depth strategic communication and broad consensus between the two leaders. France values China’s major-country role, firmly pursues the One China policy, and is ready to implement the leaders’ consensus, strengthen institutional dialogue, deepen mutually beneficial trade cooperation, and resolve frictions through dialogue. This year France holds the G7 rotating presidency while China hosts APEC; France looks forward to close multilateral cooperation with China on important issues such as global governance.

Both sides also exchanged views on the Ukraine crisis, the Iran nuclear issue, and other topics.

4. Hungarian Prime Minister Orbán Meets with Wang Yi

(It’s before the MSC, but it’s part of Wang’s trip to EU)

On February 11, 2026 local time, Hungarian Prime Minister Viktor Orbán met with Wang Yi, Member of the Political Bureau of the CPC Central Committee and Minister of Foreign Affairs, in Budapest.

Wang Yi conveyed warm greetings from China’s leader to Orbán. Wang Yi stated that despite the complex and volatile international situation, what remains unchanged is the friendship and cooperation between China and Hungary. The leaders of the two countries have established strong mutual trust and friendship, providing a strategic guarantee for the healthy development of China-Hungary relations. China commends the government led by Prime Minister Orbán for its longstanding policy of friendship toward China and its active promotion of comprehensive China-Hungary cooperation. Facts have proven that developing mutually beneficial cooperation with China fully serves the fundamental interests of the Hungarian state and people and is the right choice. China will continue to be a trustworthy long-term strategic partner for Hungary. China-Hungary relations are built on the foundations of mutual respect, equal treatment, and win-win cooperation, and possess strong inherent momentum and broad development potential. Hungary is welcome to continue riding the express train of Chinese-style modernization, sharing opportunities and jointly promoting development. China is confident that Hungary will continue to provide strong support on issues concerning China’s core interests. China will, as always, support Hungary in safeguarding its sovereignty, security, and development interests, in pursuing a successful path suited to its own national conditions, and opposes external interference in Hungary’s internal affairs. The success story of China-Hungary cooperation will have a demonstrative effect on Europe and the world, and China looks forward to Hungary playing an active role in promoting the healthy development of China-EU relations.

Orbán asked Wang Yi to convey sincere greetings to China’s leader, noting that President Xi Jinping’s historic visit to Hungary in 2024 consolidated the traditional friendship between Hungary and China and deepened cooperation across all fields. The Chinese nation is a great nation, and China’s leader possesses strategic vision, excels at long-term planning, and has led China’s rapid development, making it increasingly strong and confident. Hungary admires China’s development achievements. Chinese corporate investment in Hungary has ranked first for consecutive years, and the Hungary-Serbia Railway is about to commence operations — all of which have vigorously promoted Hungary’s economic development and improved the livelihood of its people. More Chinese enterprises are welcome to invest and establish operations in Hungary. Hungary firmly upholds the one-China policy and looks forward to further deepening comprehensive cooperation with China. Hungary will continue to actively promote EU-China dialogue and cooperation.

During the visit, Wang Yi held talks with Hungarian Foreign Minister Péter Szijjártó, and the two jointly met with the press.

5. Wang Yi Meets UK Foreign Secretary Cooper

Wang Yi said China and the UK are both world-class powers and permanent UNSC members, each bearing responsibility for international peace and security. They should maintain regular exchanges, strengthen strategic coordination, expand common interests, and safeguard world peace and development. Prime Minister Starmer’s recent historic visit to China successfully restarted China-UK relations. President Xi and PM Starmer agreed to develop a long-term, stable, comprehensive strategic partnership, reaching a broad consensus on bilateral and multilateral cooperation and responding to widespread expectations for stable China-UK ties.

Wang Yi called for implementing the leaders’ consensus, releasing positive signals in the bilateral relationship, and exploring more cooperation potential. Both sides should properly hold the next rounds of the economic and financial dialogue, the joint economic and trade committee, and the China-UK strategic dialogue; resume normal legislative exchanges; and strengthen people-to-people contacts. China supports free trade, opposes all forms of protectionism, and welcomes UK and other foreign enterprises to invest in China and use platforms like the China International Import Expo to expand exports to China. He hoped the UK would provide a fair, just, and non-discriminatory business environment for Chinese enterprises.

Cooper said PM Starmer’s China visit achieved complete success and fruitful results, playing an important role in advancing UK-China relations. A long-term, stable comprehensive strategic partnership serves both sides’ strategic interests. The UK has long pursued its policy on the Taiwan issue since the establishment of diplomatic relations, which has not and will not change. The UK is willing to implement the leaders’ consensus, advance institutional dialogues, expand cooperation in trade, investment, finance, climate, security, and green technology, and properly manage differences. The UK upholds multilateralism and the international rule of law; both sides can strengthen multilateral cooperation to contribute to world peace and security.

Both sides also exchanged views on the Ukraine crisis, Sudan, Iran, and other international and regional issues.

6. Wang Yi Meets Austrian FM Meinl-Reisinger

Wang Yi said the world is changing rapidly and should change for the better, not for the worse. Now is the time for countries to strengthen solidarity and cooperation, jointly uphold the UN’s authority, and practice true multilateralism. Countries should work together to build a community with a shared future for mankind. China supports Europe in pursuing strategic autonomy and contributing to a more secure, harmonious, and fair world. Austria, a European country with unique strengths, will surely make new contributions. As a responsible major country, China will remain committed to being an anchor of world peace and a main engine of global development.

Wang Yi noted this year marks the 55th anniversary of China-Austria diplomatic relations. Both sides should draw on historical experience, maintain their friendly strategic partnership positioning, and deepen relations on the basis of equality and mutual respect. China is ready for close exchanges at all levels, strengthened cooperation, and welcomes Austrian enterprises to seize opportunities in the digital economy and future industries. He hoped Austria would provide a fair, just, and non-discriminatory business environment for Chinese enterprises. China supports expanded cultural and artistic exchanges and welcomes Austrian citizens to take advantage of visa-free policies to visit and experience China.

Meinl-Reisinger said Austria highly values relations with China and firmly pursues the One China policy. Austria-China cooperation has achieved positive results across all fields on the basis of equality and mutual benefit. Austria is willing to use the 55th anniversary as an opportunity to strengthen exchanges, expand trade cooperation, enhance people-to-people contacts, and elevate the friendly strategic partnership. The world indeed needs more cooperation and peace, not turmoil and war. Austria is willing to strengthen cooperation with China in multilateral institutions such as the UN under the framework of multilateralism.

Both sides exchanged views on the Ukraine crisis and other issues of common concern.

7. Wang Yi Meets US Secretary of State Rubio

Wang Yi said President Xi Jinping and President Trump have provided strategic guidance for China-US relations. Both sides should jointly implement the important consensus reached by the two leaders, making 2026 a year in which China and the US move toward mutual respect, peaceful coexistence, and win-win cooperation. For China and the US, dialogue is better than confrontation, cooperation is better than conflict, and win-win is better than zero-sum. As long as both sides maintain attitudes of equality, respect, and reciprocity, they can find ways to address each other’s concerns and properly manage differences. Both sides should work together to continuously extend the cooperation list and shorten the problem list, putting China-US relations on a track of stable, healthy, and sustainable development, and sending more positive signals to the world.

Both sides agreed the meeting was positive and constructive. They agreed to jointly implement the two leaders’ important consensus, leverage the coordinating role of political and diplomatic channels, serve high-level interactions between the two countries, strengthen dialogue and cooperation across all fields, and promote stable development of China-US relations.

8. Serbian President Vučić Meets Wang Yi

Wang Yi conveyed warm greetings from President Xi Jinping. He said President Vučić has led the Serbian people in upholding independence, opposing foreign interference, and safeguarding national stability, dignity, and development — which China appreciates. Under the leadership of Presidents Xi and Vučić, the building of the China-Serbia community with a shared future in the new era has gotten off to a good start. The two leaders met twice last year for strategic communication and broad consensus. China is willing to maintain close high-level exchanges with Serbia, consolidate political trust, clearly support each other on core interests, strengthen practical cooperation, operate the Hungary-Serbia railway well, unleash the positive effects of the China-Serbia FTA, and carry forward the ironclad friendship.

Vučić asked Wang Yi to convey greetings to President Xi, noting Xi’s successful visit to Serbia the year before last powerfully advanced bilateral ties. He thanked China for supporting Serbia’s sovereignty, independence, and territorial integrity. In an increasingly turbulent world, China remains Serbia’s true friend and partner. He looks forward to elevating cooperation in politics, trade, technology, and culture. Serbia firmly adheres to the One China principle, firmly supports China’s legitimate position on national reunification, and will continue to give firm support on all issues involving China’s core interests.

9. Wang Yi Meets Ukrainian FM Sybiha

Wang Yi noted this year marks the 15th anniversary of the China-Ukraine strategic partnership, with the 35th anniversary of diplomatic relations coming next year. Despite major changes in the international landscape, China upholds the founding spirit of mutual respect, equality, mutual benefit, and win-win cooperation, cherishes China-Ukraine traditional friendship, and continues to advance cooperation across fields. Last year, China-Ukraine trade developed steadily, with China maintaining its position as Ukraine’s largest trading partner and largest source of imports. The intergovernmental cooperation committee’s sub-committee meetings continued. China-Ukraine relations should stay anchored in the right direction. China is willing to provide new humanitarian assistance to Ukraine and hopes Ukraine will continue to ensure the safety of Chinese personnel and institutions in Ukraine.

Wang Yi said recent intensive dialogues around the Ukraine crisis are encouraging. China’s position has been consistent, always following the “Four Shoulds” proposed by President Xi as the fundamental guideline — adhering to objectivity and fairness while actively promoting peace talks. China is willing to maintain communication with Ukraine and, together with the international community, play a constructive role in achieving an early political settlement.

Sybiha said Ukraine and China have traditional friendship and are important strategic partners. China is a major country with significant international influence. Ukraine highly values developing relations with China. As Ukraine’s largest trading partner, cooperation potential is enormous. Ukraine adheres to the One China principle and will take concrete measures to ensure the safety and legitimate rights of Chinese citizens and enterprises in Ukraine. Ukraine appreciates China’s consistent respect for the sovereignty and territorial integrity of all countries and its positive efforts to promote peace. The war in Ukraine should end, and Ukraine looks forward to China playing an important role in achieving an early ceasefire and comprehensive peace.

10. Wang Yi Meets Argentine FM Quilno

Wang Yi said that in the 54 years since establishing diplomatic ties, China and Argentina have always upheld mutual respect and equal treatment, with relations proving resilient through international vicissitudes. In 2024, President Xi and President Milei met and reached important consensus on consolidating the China-Argentina comprehensive strategic partnership. China is ready to implement the leaders’ consensus for the benefit of both peoples.

Wang Yi called for maintaining the right direction in bilateral ties, strengthening mutual support on core interests, and deepening cooperation in trade, technology, finance, and minerals. Argentina is welcome to use platforms like CIIE and the Canton Fair to bring more quality products to China. He hoped Argentina would provide a fair, transparent, and non-discriminatory business environment for Chinese enterprises, and welcomed Argentine citizens to use visa-free policies to visit China. He stressed that China’s growth represents an increase in world peace and stability, that China never engages in geopolitical competition or asks countries to choose sides, and that China-Argentina cooperation neither targets any third party nor should be disturbed by third-party factors.

Quilno said Argentina-China friendship has deep roots. The 2024 leaders’ meeting injected new momentum into the relationship. The two countries are important trading partners and comprehensive strategic partners; cooperation with China has greatly benefited Argentina. He thanked China for its support on the Malvinas Islands sovereignty issue and for assistance during Argentina’s economic difficulties. Argentina firmly adheres to the One China principle and looks forward to deepening cooperation in trade, energy, minerals, and finance, welcoming Chinese enterprises to invest in Argentina.

11. Keynote Speech: “Jointly Calibrating the Course of the Ship of History”

Full text, MSC “China Session,” Feb 14, 2026

Esteemed Chairman Ischinger,

Dear friends and colleagues,

It is a pleasure to be back at the Munich Security Conference and to exchange views with all of you once again.

Over the past year, the international landscape has grown ever more turbulent and chaotic. The law of the jungle and unilateralism are running rampant, and humanity’s cause of peace and development has arrived at a new crossroads. President Xi Jinping has put forward the Global Governance Initiative, calling on all nations to uphold five principles — sovereign equality, the international rule of law, multilateralism, a people-centered approach, and action orientation — and to jointly build a more just and equitable global governance system. This initiative follows the tide of our times, builds the greatest common ground among nations, and has quickly won broad international support. It has injected fresh momentum into the effort to build a community with a shared future for mankind, and has provided a Chinese compass to guide the great ship of history through the storm toward a brighter shore. Humanity has traveled a long road through wind and rain to reach where we are today; sailing together in the same boat remains the only right choice. We should calibrate the course of this great ship of history by reforming and improving global governance.

To reform and improve global governance, we must first reinvigorate the United Nations system.

The United Nations is a vital achievement of the victory in the World Anti-Fascist War, a hard-learned choice made by our forebears after profound reflection, and the peace project into which nations have poured more effort than any other. This edifice, built jointly by the peoples of the world — we bear only the responsibility to reinforce and maintain it, never the right to damage or tear it down.

The United Nations may not be perfect, but it remains the most universal and authoritative intergovernmental international organization in the world. On the UN platform, every country — regardless of size, wealth, or poverty — can make its voice heard, cast a sacred vote, and bears equal obligations and enjoys equal rights. Without the United Nations, the world would slide back into a jungle era of the survival of the fittest, and the vast majority of small and medium-sized countries would lose the multilateral anchor on which their security and livelihoods depend.

What we need most today, therefore, is to return to the original mission: reinvigorate the United Nations’ leading role, uphold the purposes of its Charter, enhance the efficiency of the UN system, and enable it to better meet the demands of the twenty-first century — so that it may once again radiate powerful vitality.

To reform and improve global governance, the key is for countries to coordinate and cooperate.

The reason the current international system is underperforming lies mainly not in the United Nations itself, but in the fact that some countries magnify differences and divisions, pursue “my country first,” zealously promote bloc confrontation, and even revive Cold War thinking. All of this has eroded the foundations of trust, poisoned the atmosphere for cooperation, and made the functioning of international mechanisms an uphill struggle.

To safeguard international coordination and cooperation, we should seek common ground while shelving differences, and pursue mutually beneficial cooperation. The world is inherently diverse; that countries differ in social systems, histories, cultures, and interests is only natural. It is precisely because differences exist that dialogue and cooperation are needed. We can respect one another and elevate one another — like the friendship between gentlemen: harmonious, yet distinct.

Looking back at history — whether it was winning the World Anti-Fascist War, weathering the impact of the global financial crisis, tackling climate change, or combating terrorism — every step of progress in human endeavor has been the result of nations bridging their differences and working together in good faith. Let us always remember: unity is strength, and unity is hope.

To reform and improve global governance, we must steadfastly practice multilateralism.

The monopolization of international power by a handful of countries is losing credibility. We are entering a multipolar world, and we should practice true multilateralism, advance the democratization of international relations, ensure that global affairs are decided by all countries through consultation, and that the destiny of the world is shaped by all countries together.

We must ensure that everyone adheres to the same set of rules — the basic norms of international relations grounded in the purposes and principles of the United Nations Charter. We must uphold equality of rights, equality of opportunity, and equality of rules, so that all countries — especially the vast number of small and medium-sized states — can find their place and play their part in the international system.

In practicing multilateralism, major powers must especially lead by example: lead in advancing cooperation, not in provoking conflict and confrontation; lead in abiding by rules, not in applying double standards; lead in practicing equality, not in imposing one’s will on others; lead in promoting openness, not in pursuing unilateral self-interest.

The Global South is rising as a collective force, and the global governance system must keep pace with the times, giving fuller voice to their concerns and greater weight to their representation. Time will prove that the more democratic international relations become, the more secure world peace will be; and the stronger multilateralism grows, the more effective global governance will become.

To reform and improve global governance, the most urgent task is to stop wars and promote peace.

As we look to the future, we must not forget the present. Without peace, how can we speak of global governance? Even today, more than sixty conflicts continue to rage around the world; war is still inflicting wounds, and people are still suffering. The vision of common, comprehensive, cooperative, and sustainable security put forward by President Xi Jinping points us toward the way to resolve these problems. All parties should persist in urging peace and promoting talks, oppose fanning the flames, use mediation to resolve disputes, and use dialogue to end conflicts.

Achieving a ceasefire and reconstruction in Gaza still requires unrelenting effort. Implementing the two-state solution and delivering justice to the Palestinian people is an inescapable responsibility of the international community. The situation in Iran bears on the broader landscape of Middle East peace; all parties should act with prudence and avoid triggering new conflicts. The Ukraine crisis has at last opened the door to dialogue; all parties concerned should seize this opportunity, strive to reach a comprehensive, lasting, and binding peace agreement, address the root causes of the conflict, and achieve enduring peace and security in Europe. On Venezuela, the bottom line of the international rule of law must not be breached, and the principle of national sovereignty must be upheld.

Dear friends,

This year marks the launch of China’s Fifteenth Five-Year Plan. The starting point of all our work is to give our people a better life. We look forward to a stable external environment for development, and we hope that through our own development we can make the world a better place. China will be a firm force for peace — committed to our own path of peaceful development and calling on all other nations to do the same. China will be a reliable force for stability — upholding international fairness and justice and exploring solutions to hotspot issues with Chinese characteristics. China will be a progressive force in history — resolutely safeguarding the fruits of human civilization’s progress, advancing the implementation of the four major global initiatives, and promoting the building of a community with a shared future for mankind.

China and Europe both possess ancient civilizations and are both indispensable poles in a multipolar world. The choices we make are of vital importance to the future and destiny of the world. In the process of world multipolarity and economic globalization, China and Europe are partners, not rivals. As long as we hold firmly to this conviction, we will be able to make the right choices in the face of challenges, prevent the international community from sliding toward division, and continue to drive the progress of human civilization. Let us together calibrate the direction of history’s advance, and together create a better world!

12. Q&A on Ukraine and Regional Conflicts

“Support political resolution of all regional hotspots through dialogue”

When asked what role China plays in resolving regional conflicts, especially the Ukraine issue, Wang Yi said: China’s position is clear — all regional hotspots should seek political resolution through dialogue and consultation, and the same applies to Ukraine. But China is not a party to the conflict; the decision-making power is not in China’s hands. What we can do is urge peace and promote talks. We have sent a special envoy to mediate, and through various channels we have urged all parties to cease fire as soon as possible and return to the negotiating table.

We are encouraged that dialogue among various parties has recently been launched, particularly with a focus on substantive issues of the Ukraine crisis. We welcome this. Of course, the positions of all sides still diverge significantly, and peace talks cannot be achieved overnight. But without dialogue, where will peace come from? If dialogue does not continue, a peace agreement will not materialize on its own. We encourage and support all efforts dedicated to peace, and will continue to play a constructive role for peace in our own way.

Europe should not be a bystander. After the US and Russia launched their dialogue early last year, Europe seemed to be sidelined. I raised here that the war is taking place on European soil — Europe has the right and should join the negotiation process at the appropriate time. Europe should not be on the menu, but at the table. China supports Europe engaging in dialogue with Russia and putting forward its own proposals and solutions. In this process, by addressing root causes, a more balanced, effective, and sustainable European security architecture should be formed to prevent similar events from recurring and achieve lasting peace in Europe.

13. Q&A on Japan

“Wang Yi reiterates stern position on China-Japan relations”

When asked what responsibility China bears for the re-escalation of tensions in the Asia-Pacific, Wang Yi said: I do not agree that the Asia-Pacific situation is growing tenser. Looking around the world, only Asia still maintains overall peace. Even the recent localized conflict on the Cambodia-Thailand border was quickly brought under control through the efforts of all parties, and China played a role in that. China has become the mainstay of peace in Asia. As an important force for peace in today’s world, China will continue to play a constructive role in regional peace and stability.

Wang Yi then said: The Asia-Pacific is not entirely smooth sailing either. What needs to be watched now is the dangerous trend recently emerging from Japan. Japan’s sitting prime minister has publicly declared that a Taiwan contingency would constitute an “existential crisis” justifying Japan’s exercise of collective self-defense — this is the first time in 80 years since the end of WWII that a Japanese prime minister has publicly made such reckless remarks. It directly challenges China’s national sovereignty, directly challenges the postwar international order under which Taiwan was returned to China, and directly betrays the political commitments Japan made to China. China absolutely cannot accept this, and 1.4 billion Chinese people will not accept it!

Wang Yi continued: Today we are in Germany, so it’s worth comparing how postwar reckoning was handled in Japan versus Europe. Germany conducted a thorough reckoning with fascism after the war and enacted laws prohibiting the promotion of Nazism. But Japan still enshrines Class-A war criminals in its shrine, and Japanese leaders continue to make pilgrimages there in an endless stream, worshipping them as “heroic spirits.” This phenomenon is unimaginable in Europe — and this is the root cause of all the problems.

Wang Yi emphasized: The Japanese leader’s wrong remarks on Taiwan expose that Japan’s ambition to invade and colonize Taiwan has not died, and the specter of revived militarism lingers. It was precisely under the pretext of a so-called “existential crisis” that Japan launched its invasion of China and attacked Pearl Harbor. The lessons of history are not far away and must not be forgotten. If Japan refuses to repent, it is bound to repeat its mistakes, and peace-loving people should be on alert. First and foremost, the Japanese people should be reminded not to be deceived and coerced by far-right forces and extremist ideologies again. All peace-loving nations should also warn Japan: if it tries to turn back the clock, it will be courting self-destruction. If it gambles again, it will only lose faster and more devastatingly!

14. Q&A on China-US Relations

“The future of China-US relations is bright”

On China-US relations, Wang Yi said: How the two major powers get along concerns the fundamental direction of the international landscape. China has always approached US relations from the height of responsibility to history, to the people, and to the world. President Xi Jinping, drawing on decades of experience and lessons in China-US interactions, solemnly proposed that China and the US should pursue mutual respect, peaceful coexistence, and win-win cooperation, and through dialogue and consultation, jointly find the right way for two major powers to coexist on this planet. We will continue to adhere to this general direction, because it serves the interests of both peoples and the common interests of the international community. Whether it can be realized, however, depends on America’s attitude.

What encourages us is that President Trump greatly respects President Xi and respects the Chinese people. He has explicitly stated that China and the US can join hands to solve the world’s major problems, and that the two heads of state can develop China-US relations even better. But there are still some people in America who do not think this way — they are still doing everything possible to contain and suppress China, and resorting to all means to attack and smear China.

Wang Yi said China-US relations face two scenarios. In the first, the US takes an objective and rational view of China, pursues a positive and pragmatic China policy, works with China in the same direction, and continuously expands common interests — leading to cooperation, which would be a great blessing for both countries and the world. In the second, the US decouples and severs supply chains, opposes China at every turn, forms anti-China cliques and blocs, and even instigates and plots “Taiwan independence” to split China, trampling on China’s red lines — which would plunge China-US relations into confrontation. We of course hope for the first scenario, but we are also prepared to deal with all risks. History advances through twists and turns, and the future of China-US relations is bright. The vision and principles of mutual respect, peaceful coexistence, and win-win cooperation will ultimately prevail, because this is the only correct choice.

15. Q&A on China-EU Relations

“China and Europe should act as gentlemen”

On China-EU relations, Wang Yi said: China and Europe are of course partners, not rivals, and certainly not “systemic rivals.” We have been dealing with each other for over half a century — isn’t that track record of achievement proof enough? China-EU daily trade exceeds $2 billion, surpassing the entire annual total before diplomatic relations were established, and hundreds of cooperation mechanisms are running nonstop. How did we suddenly become “systemic rivals”? This is negative thinking and a mistaken perception. If this continues to be hyped up, it will produce harmful interference and impact on the future of China-EU relations.

Are there differences and disagreements between China and Europe? Of course — the two sides have different social systems, values, and development models. But these all stem from our respective histories and cultural heritage, and are the choices of our respective peoples. Differences are not a reason to become rivals, and disagreements are even less a basis for confrontation. The right approach is mutual respect, mutual appreciation, and mutual learning, achieving common development and jointly illuminating the world.

Wang Yi emphasized: There is an ancient Chinese saying: “All things grow together without harming each other; all paths run parallel without conflicting with each other.” If the ancients had such breadth and tolerance two thousand years ago, can modern people really not match them? Confucius had a famous saying: “The gentleman seeks harmony but not uniformity.” This means seeking harmonious coexistence on the basis of acknowledging differences — this is the way of the gentleman. China and Europe should both act as gentlemen and walk the path of the gentleman. Especially in the face of the current turbulent international situation, China and Europe should join hands to practice multilateralism together, uphold UN authority together, oppose unilateral bullying together, and resist bloc confrontation together. We hope to work together to implement the four major global initiatives proposed by President Xi Jinping and build a more just and equitable global governance system — this should be the shared direction of China-EU efforts.

16. Meeting with German Chancellor Merz

Wang Yi conveyed Chinese leaders’ warm greetings to Merz. Wang Yi said: Chancellor, your speech at the opening of the Munich Security Conference yesterday reflected Germany’s and Europe’s aspiration for strategic autonomy and self-reliance. China supports Germany playing a greater role in this regard. All initiatives and actions China has proposed and taken on the international stage are aimed at maintaining the international system with the UN at its core. Although the UN’s authority and status have been weakened, its importance remains irreplaceable. President Xi’s Global Governance Initiative aims to reinvigorate the UN and build a more just and equitable global governance system. Against this backdrop, China and Germany should demonstrate the responsibility of major powers and make new contributions to world peace and development. We look forward to Germany becoming a driver of practical China-EU cooperation and a stabilizing anchor of the China-EU strategic relationship.

Wang Yi said China and Germany share extensive common interests and strong complementary advantages, and strengthening cooperation is a strategic choice based on the practical needs of both countries. China is committed to high-level opening up, which will provide enormous opportunities for German businesses. We hope Germany will also provide a fairer and more equitable business environment for Chinese enterprises. China is ready to work with Germany to prepare for the next phase of high-level exchanges, strengthen practical cooperation in all areas, explore trilateral cooperation, and elevate the comprehensive strategic partnership to a new level.

Merz asked Wang Yi to convey his sincere greetings to Chinese leaders. Merz said: China has achieved remarkable development that has attracted worldwide attention and has become a world power, playing a pivotal role internationally. Germany is committed to maintaining a rules-based international order and upholding the status and role of the WTO, which is consistent with China’s vision for global governance. It benefits both countries and the world for Germany and China to jointly uphold and practice these principles. Germany-China economic and trade relations are close — both sides are beneficiaries and supporters of economic globalization, and we should seize opportunities, tap potential, and deepen cooperation. Germany has consistently opposed protectionism, advocates free trade, and encourages German companies to increase investment cooperation with China. Germany adheres to the one-China policy and looks forward to close high-level exchanges with China, advancing cooperation in all fields, and achieving greater development in Germany-China relations.

17. Meeting with Czech Vice PM/FM Marčinka

Wang Yi said China and Czechia have a friendly tradition — Czechia was among the first countries to establish diplomatic relations with New China. However, in recent years, China-Czech relations have experienced setbacks, which did not serve either side’s interests. This year marks the 10th anniversary of the China-Czech strategic partnership. China appreciates the new Czech government’s active commitment to improving relations with China. We are willing to work with the Czech side in the same direction to bring China-Czech relations back to a healthy development track as soon as possible. We hope the Czech side will establish a correct perception of China, earnestly abide by the one-China principle, and respect China’s core interests. Both sides should encourage exchanges at all levels and in all fields, enhance mutual understanding and trust, and on this basis carry out pragmatic cooperation — making up for lost time.

Marčinka said China is a world power. The Czech side treasures the traditional friendship and looks forward to using the 10th anniversary of the strategic partnership as an opportunity to open a new chapter in bilateral relations. The Czech side firmly adheres to the one-China policy, recognizes the People’s Republic of China as the sole legitimate government representing all of China, and respects and supports China’s efforts to safeguard its sovereignty and territorial integrity. The Czech side looks forward to improving relations with China, resuming high-level exchanges, and advancing cooperation in economy and trade, tourism, culture, and other fields.

18. Wang Yi Meets Norwegian Foreign Minister Eide

On February 14, 2026 local time, Wang Yi, Member of the Political Bureau of the CPC Central Committee and Foreign Minister, met with Norwegian Foreign Minister Espen Barth Eide on the sidelines of the Munich Security Conference.

Wang Yi stated that China always views China-Norway relations from a strategic and long-term perspective, and is willing to maintain close exchanges at all levels with Norway, deepen cooperation across various fields, and sustain the healthy and stable momentum of bilateral relations. Multilateralism was a consensus in discussions at this year’s Munich Security Conference. However, multilateralism does not mean acting as one pleases, and multipolarity does not mean domination by a few major powers. All parties should abide by the purposes of the UN Charter and uphold the international rule of law. To this end, President Xi Jinping has proposed an equal and orderly multipolar world — “equal” meaning that all countries, large and small, have the right to participate, and “orderly” meaning that all collectively abide by international law. Both China and Norway support multilateralism and free trade, and should further strengthen communication and coordination. He expressed hope that Norway would play a constructive role in the stable development of China-EU relations.

Eide stated that Foreign Minister Wang Yi’s remarks just delivered at the Munich Security Conference clearly articulated China’s vision for reforming and improving global governance, which is highly aligned with Norway’s position. Norway attaches great importance to its relations with China and hopes to continue strengthening bilateral dialogue and cooperation, coordinate closely within multilateral mechanisms such as the World Trade Organization, and jointly uphold multilateralism and free trade.

19. Wang Yi Meets Canadian Foreign Minister Anand

On February 14, 2026 local time, Wang Yi, Member of the Political Bureau of the CPC Central Committee and Foreign Minister, met with Canadian Foreign Minister Anita Anand on the sidelines of the Munich Security Conference.

Wang Yi stated that Prime Minister Carney’s visit to China yielded fruitful results, fully demonstrating that Canada’s new government is pursuing a new China policy — one that serves the common interests of both countries and is entirely the right choice. President Xi Jinping and Prime Minister Carney reached a consensus on building a new type of China-Canada strategic partnership, providing strategic guidance for the positive development of bilateral relations. China is willing to work with Canada to implement the important consensus reached by the two leaders, remove disruptions, restart exchanges and cooperation across all fields, and promote the healthy, stable, and sustainable development of China-Canada relations.

Anand stated that Prime Minister Carney’s visit to China was very successful and has opened a new era in Canada-China relations. She expressed gratitude for China granting visa-free treatment to Canadian citizens, and expressed hope that both sides would strengthen dialogue, cooperation, and people-to-people exchanges to drive Canada-China relations forward in a positive and stable direction.

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He’s also an influential figure in policy circles; last year, he joined Premier Li Qiang's April 9 symposium on economic conditions alongside other leading experts and business leaders.

His research found that while the program successfully stimulated consumption in the short term, diminishing marginal returns are also evident. Consumers who have already traded in their durable goods are unlikely to do so again anytime soon. Moreover, automobiles alone accounted for over 60% of the total sales driven by the subsidies, suggesting that the primary beneficiaries have been middle- to high-income groups, whose marginal propensity to consume is low. A significant portion of the fiscal spending did not generate incremental consumption, but rather amounted to a windfall for people who would have made these purchases anyway.

He calls for expanding the program's overall funding while fundamentally redesigning its direction — extending coverage to service consumption, lowering the average price threshold of subsidized goods to reach more low- and middle-income consumers, and shifting the policy objective from simply 'boosting sales figures' toward the more fundamental goal of 'promoting employment and raising incomes.

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Below is his full text published on his WeChat account:

How to Expand Beneficiary Coverage of the “Trade-In” Program

During 2024–2025, the central government allocated a combined RMB 450 billion in ultra-long special government bond funds to support the consumer goods “trade-in” policy, delivering subsidies directly to consumers totaling over 480 million person-times—of which over 120 million person-times occurred in 2024, over 280 million in the first half of 2025, and over 80 million in the second half of 2025. The program drove related merchandise sales exceeding RMB 2.6 trillion and directly contributed 0.6 percentage points to the growth of total retail sales of consumer goods.

These figures reveal two salient features of the policy. On one hand, the trade-in program has been indispensable in boosting consumption—without it, achieving the 5% growth target in 2025 would have been difficult. On the other hand, the policy’s multiplier effect appears to have fallen short of expectations, and its beneficiary pool remains relatively narrow. Since May 2025, the year-over-year monthly growth rate of total retail sales of consumer goods has decelerated steadily, reaching only 0.9% in December. Moreover, the number of beneficiary person-times in the second half of 2025 declined to just 80 million. This paper explores how to enhance the marginal effectiveness of the trade-in program, expand its beneficiary coverage, and promote employment.

The “Trade-In” Policy: From Launch to Enhancement to Expansion

In July 2024, the State Council issued the Notice on Several Measures to Strengthen Support for Large-Scale Equipment Renewal and Consumer Goods Trade-In, earmarking approximately RMB 150 billion in ultra-long special government bond funds for local governments to support consumer goods trade-ins. In 2025, an additional RMB 300 billion was allocated to support the scaling-up and broadening of the trade-in program, expanding eligible home appliance categories from 8 to 12 and introducing purchase subsidies for smartphones and other digital products.

[Chart 1: Estimated Sales Driven by the Trade-In Program]

How Effective Has the Trade-In Program Been in Driving Consumption?

Looking at retail sales across the five major product categories associated with the trade-in program, year-over-year growth rates generally followed a pattern of initial acceleration followed by deceleration. In 2025, among above-designated-size retail units, retail sales of telecommunications equipment and cultural & office supplies grew by 20.9% and 17.3% year-over-year respectively, maintaining double-digit growth across all four quarters. In contrast, while full-year retail sales of household appliances & audio-visual equipment and furniture grew 11% and 14.6% respectively, monthly growth rates had already turned negative. Growth in automobile consumption lagged behind overall merchandise consumption.

[Chart 2: Monthly YoY Growth of Trade-In Related Retail Sales (%)]

Given that funding support began in August 2024 (the national-level policy was issued on July 24, 2024; we temporarily set aside the time lag between local implementation guidelines and actual policy rollout), and to eliminate base effects and seasonal distortions, we divide the observation period into four segments:

• Before2 (B2): Aug 2022 – Jul 2023, the second complete year before policy implementation

• Before1 (B1): Aug 2023 – Jul 2024, the first complete year before policy implementation

• After1 (A1): Aug 2024 – Jul 2025, the first complete year after policy implementation

• After2 (A2): Aug 2025 – end of 2025, the second (incomplete) year after policy implementation

The data shows that in the first complete year after implementation (A1), retail sales of related product categories grew by 10%, significantly outpacing the pre-policy period (approximately 3% annual growth, B1). However, in the second incomplete year (A2), growth was only about 2% over the same period of the first post-policy year—well below the roughly 9% growth recorded when comparing the first post-policy year to the pre-policy baseline.

[Chart 3: Cumulative Retail Sales of Trade-In Related Products (RMB 100 million)]

Examining cumulative year-over-year growth rates, the first full year after implementation showed a marked acceleration compared to the pre-policy period, while the second year saw a notable decline.

[Chart 4: Cumulative YoY Growth of Trade-In Related Retail Sales (%)]

Are subsidies merely producing a pulse effect on retail sales? We applied the above methodology to each of the five major product categories and found the following:

(1) The “enhancement” effect is evident in the first year, but sustaining rapid retail sales growth may prove difficult. The allocation of ultra-long special government bond funds starting in August 2024 had a significant positive impact on related retail sales—B1 and B2 largely overlap in the charts, while A1 shows a clear upward shift from B1. However, in the second year, the stimulative effect weakened markedly (A2). A likely explanation is that consumers who have already upgraded durable goods such as home appliances are unlikely to do so again in the near term.

[Chart 5: Cumulative Retail Sales of Household Appliances & Audio-Visual Equipment (RMB 100 million)]

[Chart 6: Cumulative Retail Sales of Furniture (RMB 100 million)]

(2) “Broadening” the scope can sustain retail sales growth even against a high base, since newly covered products are effectively in their “first year” of subsidies. In 2025, purchase subsidies were introduced for the first time for individual consumers buying smartphones, tablets, and smartwatches/bands. Accordingly, retail sales of telecommunications equipment and cultural & office supplies continued to grow meaningfully on top of already elevated growth rates—even though A1 already stood well above B1, A2 still showed notable growth over the same period in A1.

[Chart 7: Cumulative Retail Sales of Telecommunications Equipment (RMB 100 million)]

[Chart 8: Cumulative Retail Sales of Cultural & Office Supplies (RMB 100 million)]

(3) The automobile trade-in subsidy has had limited impact on retail sales. Although in 2025 one out of every two new passenger cars sold benefited from a trade-in subsidy, the stimulative effect on automobile retail sales was noticeably weaker than for the other four product categories. Possible explanations include: the high unit price of automobiles makes purchases more sensitive to macroeconomic factors such as income and expectations; consumers who already intended to buy or replace a vehicle likely simply applied for the subsidy rather than being induced to purchase by it; and the industry’s “trading price for volume” dynamic, in which widespread price cuts offset the growth in unit sales.

[Chart 9: Cumulative Retail Sales of Automobiles (RMB 100 million)]

Of course, the trade-in program should not be assessed solely through the lens of consumer subsidies. The policy also promotes green production and consumption patterns, accelerates the development of recycling systems, and improves product safety.

(1) Energy conservation and carbon reduction. Green, low-carbon products have been adopted at an accelerating pace: nearly 60% of vehicles purchased by consumers were new energy vehicles, and over 90% of home appliances purchased were rated at the highest tier of energy or water efficiency. The “Two Renewals” policies (including trade-ins) have cumulatively generated annual energy savings exceeding 69 million tonnes of standard coal equivalent and reduced carbon emissions by over 170 million tonnes.

(2) Recycling. The recycling and reuse infrastructure has been significantly strengthened. During 2024–2025, over 29,000 smart community recycling facilities were added nationwide; 17.673 million end-of-life vehicles were recycled, with an average annual growth rate of 45.8%; 39.686 million used vehicles were traded; and approximately 53 million units of waste home appliances and mobile phones were formally dismantled, with an average annual growth rate of roughly 12%.

(3) Safety improvements. In 2025, the number of outdated electric bicycles retired and replaced was more than nine times the 2024 figure. All replacement electric bicycles carry product certificates and CCC certifications compliant with current national standards, and approximately 90% use lead-acid batteries, which offer superior safety performance.

The 2026 Consumer Goods Trade-In Policy: Can Beneficiary Coverage Be Expanded?

On December 30, 2025, the Ministry of Commerce and six other government departments issued the Notice on Enhancing Quality and Efficiency in Implementing the 2026 Consumer Goods Trade-In Policy. Compared with 2025, the policy includes the following adjustments: (1) Adjusted subsidy scope. Smart glasses have been added as a new category under digital and smart products. (2) Unified subsidy standards. In line with the goal of building a unified national market, uniform subsidy standards are now applied nationwide for automobile scrappage renewal, automobile replacement renewal, six categories of home appliance trade-ins, and four categories of digital and smart product purchases. (3) Optimized subsidy mechanisms. The fixed-amount subsidy for automobile scrappage/replacement renewal has been converted to a proportional subsidy, with the maximum cap unchanged. (4) Strengthened energy-efficiency orientation. Home appliance subsidies are now restricted to Tier-1 energy/water-efficiency products, and the subsidy rate has been reduced from 20% to 15%.

These adjustments are intended to address several considerations. First, amplifying policy impact—leveraging fewer fiscal resources to drive greater consumption growth. Second, enhancing fairness and inclusiveness—for instance, switching from fixed-amount to proportional subsidies for automobiles (which carry larger per-unit subsidies) implements a “spend more, get more” approach within the cap. Third, “embracing innovation”—including smart glasses in the subsidy scope aligns with the trend of AI wearable devices going mainstream, lowers the barrier to experiencing cutting-edge technology, and fosters a virtuous cycle where new demand guides new supply and new supply creates new demand.

These policy rationales are all well-founded. However, a notable concern is that the number of beneficiaries over the past two years has been relatively modest—only a cumulative 480 million person-times. Measured by unique individuals, the figure is likely even smaller, with trade-in participants potentially accounting for less than one-third of the total population. This is particularly evident in the second half of 2025, when beneficiary person-times dropped sharply to 80 million, signaling a declining marginal impact.

China’s primary consumer demographic should be the low- and middle-income population, comprising approximately 60% of the total population, or 840 million people. However, the main beneficiaries of the trade-in program have been high-income and upper-middle-income groups (per the National Bureau of Statistics’ classification), primarily because the average unit price of subsidized products skews high—automobiles, for example, accounted for 61.5% of total trade-in-driven consumption in 2025. Given the high unit price of automobiles, beneficiaries are predominantly high-income individuals whose marginal propensity to consume is low; they would likely have purchased new vehicles even without subsidies. Meanwhile, the ongoing price war in China’s automobile industry has already eroded profit margins significantly and intensified overcapacity pressures—further encouraging industry expansion would be ill-advised.

To expand beneficiary coverage of the trade-in program, the following measures merit consideration:

(1) Increase funding and broaden product categories. Could the 2026 allocation be expanded from the 2025 level of RMB 300 billion to RMB 400 billion? Could eligible categories be extended beyond durable consumer goods to encompass daily necessities, general merchandise, and even services under a “national subsidy” framework?

(2) Lower the average unit price of subsidized products to better stimulate purchasing willingness among low- and middle-income groups. For example, the multiplier effect of electric bicycle trade-ins significantly exceeds that of automobiles.

(3) Shift the program’s objective from “treating the symptoms” to more fundamentally “addressing root causes”—namely, promoting employment, raising incomes, and stabilizing expectations. Policymakers may be primarily evaluating the program based on the volume of consumption it generates, but such sales increases may be one-off in nature. Even a massive automobile trade-in program contributes little to employment, as manufacturing employment has been declining since 2013. Given that China’s service sector still accounts for a relatively low share of total employment, increasing trade-in support for service consumption could play a meaningful role in boosting service-sector employment.

Professor Yao is a renowned Chinese economist and policy advisor, specializing in economic development and institutional economics. He currently serves as the Dean of the Dishui Lake Advanced Institute of Finance at Shanghai University of Finance and Economics (SUFE). He was the dean of the National School of Development (NSD) at Peking University.

Professor Nie is a distinguished Professor at the School of Economics at Renmin University of China, specializing in organizational economics. What I think is particularly valuable about Professor Nie’s observation is that he focuses on grassroots research in China, having amassed a wealth of firsthand insights into China’s grassroots politics and economic operations. I always think that whatever big data tells us, the pure numbers cannot replace first-hand observation; the impact of abstract numbers is incomparable to the actual case.

At the beginning, they touched on the paradox of technological progress. Both professors observed that automation and AI adoption in Chinese factories have accelerated far beyond expectations—not primarily because of rising labor costs, as economists typically assume, but because machines simply perform better. Professor Nie described visiting a county factory where CNC machines had replaced most workers, and even a 12,000 RMB monthly salary couldn’t attract young people—the youth find the dreary jobs in central China’s county towns unbearable. Professor Yao noted that “dark factories”—fully automated facilities with no human workers—are becoming increasingly common. The problem is that China’s high-tech sector is thriving, but high-tech itself doesn’t create jobs.

Professor Yao argues that people are not just leaving first-tier cities—they’re leaving almost all cities, sinking down to county-level towns where they pick up gig work at drastically reduced incomes. He calls on the local government to put more focus on the service sector, which creates more jobs.

About the central-local government relations, Professor Nie offered a fascinating observation: before 2012, about 80% of China’s policies originated from local governments, with the central government accounting for only 20%. After 2012, this ratio completely reversed. Digital technology has accelerated this centralization—“information is power.” Digital technology has played an interesting role in this process—as information flows more easily upward, the central government naturally assumes more decision-making authority. At the grassroots level, this has created new challenges: some officials are more cautious, preferring to avoid potential mistakes rather than experiment with new approaches. The approval processes embedded in these systems, while promoting accountability, can also be cumbersome to change once set in motion.

They also talked about a tendency to overconcern about the long-term effect that sometimes may block short-term actions. He attributed this to the lower discount rate characteristic of agricultural societies, where decision-makers tend to prioritize long-term outcomes, but “In the long run, we are all dead”—he quoted Keynes and called for swift actions to boost inflation. He warned if we cannot solve the immediate issue, the bright future would be irrelevant. (It’s worth noticing that in the latest episode of Qiushi, there’s an article named “Actively promote a reasonable recovery in prices” 积极推动物价合理回升. We shall see more policies this year to boost inflation.)

Perhaps the most unexpected turn in the conversation came when both economists—empirical researchers by training—began discussing Wang Yangming’s Neo-Confucian philosophy. Professor Nie suggested that in an era where AI threatens to replace most jobs, perhaps 90% of people will eventually be freed from work entirely, leaving time for creative and philosophical pursuits. He believes the concept of Universal Basic Income (UBI) is worth learning. Professor Yao argued that we need to “write ourselves a story”—construct a narrative that helps us make peace with our circumstances.

Neither professor offered easy reassurances. They acknowledged that the path ahead is genuinely uncertain—that technological progress and human displacement are happening simultaneously, and that the policy toolkit to address this tension remains incomplete. But they also had a lot of confidence in China's capacity for adaptation, rooted in their years of observing how this country actually works at the ground level.

Below is the transcript I made with the help of AI.

China’s Economic Transformation and Grassroots Vitality

Speakers

· Yao Yang: Professor Shanghai University of Finance and Economics

· Nie Huihua: Professor, Renmin University of China

· Li Yubai: Host

I. Ground-Level Observations from the Field

Host: It’s a pleasure to gather with everyone here at the Capital Library this Sunday afternoon. We’re fortunate to have Professor Yao Yang and Professor Nie Huihua with us to discuss China’s economic transformation and grassroots vitality. While the topic sounds rather official, since we’ve all made the effort to be here, we hope to spend the next hour and a half discussing the issues that matter to you—how each of us, with our own jobs and lives, can develop a fuller picture of China’s economy, understand what’s actually happening, and identify the opportunities and changes within it.

During our backstage chat, I learned that Professor Nie and Professor Yao hadn’t seen each other for at least five or six years. Yet when sharing his new book, Professor Nie immediately thought of Professor Yao—and they’re even from the same hometown. I’m sure you’re both curious about each other’s recent research and thinking. So let’s start there: Over the past year, what stories or observations from your firsthand experiences or fieldwork have given you a real sense of how China’s economy is changing?

Nie Huihua: I’ll kick things off. Professor Yao is my senior, someone I’ve learned from, and a fellow Jiangxi native.

Let me share one story. About a year ago, I visited a county in China—fairly large but quite poor. We saw many factories, and two things surprised me. I’d always assumed rural factories would be packed with workers, and that most would be young. I was wrong on both counts.

First, many of these factory floors had barely anyone—just five or six people operating CNC machines. That caught me off guard. Second, nearly all the workers were in their fifties or sixties. No young people. I asked the owner why. He told me a young guy had come by, and he’d promised him: learn to operate and maintain this CNC machine, and I’ll pay you 12,000 yuan a month. Even that—12,000 yuan in a central Chinese county town, mind you—couldn’t keep him. The kid thought it was too boring, too isolated, no social life. He’d rather work as a security guard than in a factory.

So two things exceeded my expectations: how far digitalization has advanced, and how thin the labor force in these rural factories has become. But I think it’s precisely because these enterprises keep fighting to survive, full of resilience and grit, that they form the bedrock of China’s economy. There are countless businesses like this, hidden away in workshops and villages where you’d never notice them.

Host: And you won’t hear from them online either.

Nie Huihua: Exactly. And many of them, despite their small scale, are hidden champions in their industries—dominant players in narrow niches that most people have never heard of. I even asked a relative in Jiangsu and Zhejiang to investigate—just pick a street and count how many of these small factories there are. He told me straight up: you can’t even get through the door. They won’t let you in. It’s getting harder and harder to see what’s really going on. I find this story quite striking—this is the real China. That’s my one story.

Host: So after a year of fieldwork like this, would you say you’re relatively optimistic about the current economic situation and what’s ahead? More confident?

Nie Huihua: Here’s how I’d put it: there are two ways to look at China’s economy. One is top-down—looking at macro data. Professor Yao studies macroeconomics; I don’t understand it at all, so don’t ask me macro questions, ask him. The other perspective is bottom-up, looking at the micro level. I tend to see more from the ground up.

If you look at the macro picture, you might conclude the economy is slowing down, growth is decelerating, unemployment is rising. But if you look at the micro level, you see people still full of energy and resilience, still fairly confident—especially factory owners. I’m sure they’ve wrestled with doubt internally, but from what I can see, they still embody the toughness of China’s economy.

Host: Let’s hear from Professor Yao.

Yao Yang: Let me respond to Huihua’s observations first. I’ve also noticed that automation and AI adoption in China is happening faster than we imagined. And the way it’s being applied differs from what we economists typically assume. We tend to think rising labor costs drive factory owners to adopt automation and AI.

The reality on the ground is different. They’re adopting these technologies because the technical requirements are high, and machines are more precise than humans—which boosts productivity. That’s the main reason.

Take warehouses, for example. They’re all vertical now. If you have humans do it, you need someone driving a big forklift, following instructions to go up, slot something in, bring something down. Mistakes happen easily—and when they do, people can get killed, crushed by falling goods. Machines don’t make those kinds of errors.

So this challenges our economic assumptions. We always thought conditions had to change first—wages rising too fast, for instance—before people would adopt machines. But the machines and AI are already there; it’s just a question of whether factories choose to use them. What’s actually happening is that the availability of technology is driving organizational change. That’s my takeaway from visiting factories.

From a macro perspective, I’d say China’s economy right now is a tale of fire and ice. If you see what Huihua and I have seen in those factories, you’d think China’s economy is doing great. And indeed, progress in high-tech sectors has been remarkably fast. But high-tech is only one part of the economy, not the whole thing. And as we’ve both observed, the more high-tech something is, the fewer jobs it creates.

So we’re facing a major contradiction: rapid growth in high-tech, but employment isn’t keeping pace. How do we resolve this? Economists figured it out long ago—you need to boost domestic demand. And that brings us back to the macro picture.

II. Where Have All the Workers Gone?

Host: Based on what you’ve both shared, at the macro level we can see certain sectors—especially high-tech—performing impressively. At the micro level, many enterprises are achieving real productivity gains through digitalization and intelligent manufacturing. But this doesn’t quite match what ordinary people feel.

Take what Professor Nie described: when you actually go down to the grassroots and visit these factories, you discover something counterintuitive—local young people don’t want these jobs. Yet our general sense is that young people are gradually returning from big cities to their hometowns. So where exactly is everyone going? And as certain jobs disappear, where does that leave employment? Have you been thinking about this? Is there any solution?

Nie Huihua: Actually, these two things aren’t contradictory. Machines replacing workers and young people returning home can happen simultaneously. Young people may be going back because opportunities in cities are shrinking, while the trend of machine substitution is unstoppable. So we end up with exactly the problem Professor Yao described.

I see two approaches. First, we try to create new jobs—and the most important thing there is to reduce regulation. If you just ease up on controls, Chinese people are incredibly hardworking, incredibly clever, incredibly eager to make money. We’ll do whatever it takes to earn a living. So loosening regulations could definitely expand employment.

Second, what if job creation still can’t keep pace with machines and AI? There will still be an employment gap. And here’s something that might sound outlandish: What if only 10% of the world’s population needs to work, and the other 90% can just enjoy life? It’s entirely possible. Some European and American countries have been experimenting with UBI—Universal Basic Income. They’ve realized they can afford to support everyone because not that many people actually need to work.

But that doesn’t mean everyone would be unemployed in a bad way. People could pursue literary creation, for instance. Literature might become genuinely important then, because everyone might end up studying humanities. No more cramming for STEM exams. Some science fiction writers have imagined exactly this scenario, and it might not be as far-fetched as it sounds.

At first I found this idea hard to believe—isn’t this too ahead of its time? But one thing made me think we shouldn’t be too pessimistic. I’m from Jiangxi, as is Professor Yao. For thousands of years, farming in our region meant rising at dawn, working till dusk, manually planting seedlings, manually harvesting. I did that kind of work myself—even while I was in college, I was still doing farm labor.

Back then, I thought there was no way large-scale mechanization could work in southern China’s terrain—half basin, half hills. But look at the past few years. Starting about a decade ago, nobody in my village farms by hand anymore. Everyone uses machines. All sorts of small-scale equipment has been invented to handle various tasks. People figured out the math: if you farm yourself, you might make 1,000 yuan after a year of backbreaking work. But if you go work in someone else’s factory, you can earn 2,000 yuan in a single month.

Host: So they just lease out their land.

Nie Huihua: Right—or they don’t even bother anymore. I asked someone from my village: can you set aside a plot for me, grow rice without any pesticides or fertilizers, and ship me whatever you harvest—even if it’s just 200 jin per mu? He said impossible. Modern farming is all large-scale now. The water flows through interconnected channels; you can’t stop your neighbor’s water from crossing your field without blocking your own irrigation. We’re all in this together now—there’s no going it alone.

See, thousands of years of agricultural tradition transformed in barely a decade. We should embrace technological change, not fear it. So when I say that someday 90% of people might not need to work and can just enjoy life—those of us here might actually live to see it.

Host: When I did a podcast with Professor Nie recently, he made this same point, and some listeners commented: “Can this really happen? How can such a down-to-earth economist be talking about something so sci-fi?” But I think the rapid pace of technological development and its disruptive force are posing enormous challenges to all of us, economists included. Do you feel this challenge? As China transitions from high-speed growth to high-quality development, which past assumptions might no longer hold? What needs to be reconsidered? I’m curious how economists are thinking about this.

III. Short-Term Problems and Long-Term Thinking

Yao Yang: I’ve been thinking about how Chinese people always take the long view. That’s one of our strengths. Research shows that agricultural societies have low discount factors—meaning future value doesn’t depreciate much when converted to present value. For Chinese people, one yuan in the future might be worth 98 cents today. In some other countries, it might only be worth 90 or even 80 cents. So we place great importance on the future. In farming, you plant in spring and don’t harvest until autumn—a long cycle. You have to be patient. That’s a Chinese strength.

But taken to an extreme, this creates problems—we think so much about the long term that we neglect the present. We always assume we can muddle through the short term. Lately I’ve been thinking that I’m becoming more and more of a Keynesian. Not in the sense of constantly stimulating the economy, but in appreciating Keynes’s famous line: “In the long run, we are all dead.”

The long run is just countless short runs stacked together. What does this mean? Right now we have a demand problem—that’s a short-term issue. Earlier we asked: where did all those people go?

We conducted a study on household registrations, looking at urban population changes. We were shocked to find that outside of first-tier cities, populations in other cities have been declining over the past few years. Even in first-tier cities, population growth has slowed, and Beijing and Shanghai are actually shrinking. Where did everyone go?

Since we’re talking about over 330 officially designated cities, a large chunk of people must have settled at the county level. If they went back without formal employment, they’re probably doing gig work. Settling into service jobs at the county level means their incomes have dropped significantly. Some may have no work at all. This is one of our biggest immediate challenges.

We said earlier that China’s economic future is bright—I believe that, because our pace of technological progress is still strong. But the problem is, if we can’t solve the short-term employment problem, we might end up exactly where Keynes warned: unable to cross this hurdle, making the long term moot.

Some people, especially economists, keep saying: if you do that, the next step might create new problems. I say the next step isn’t what we should be worrying about right now. While you’re fretting about the next step, you haven’t solved this step. For instance, prices are falling right now. What we urgently need to do is push prices back up.

I’ll tell you, when I say this, there’s a 90% chance someone—including well-known economists—will object: what about inflation? I say you can’t even use the word “inflation” right now. Prices are still falling—why are you worried about inflation? Shouldn’t we first get prices back up? That’s what we need to do now. Inflation isn’t our current problem.

Host: I think not just 90% of economists—99.9% of ordinary people would disagree with you. They’d say: my income is already precarious enough, and you economists want to raise prices?

Yao Yang: Yes, but this is exactly the issue. Understanding the complete logic is what’s needed.

This is where Keynes’s brilliance shines. You appreciate more and more that a hundred years ago, his insights were truly great. He identified what he called the “paradox of thrift”: when the economy is declining, the more you save, the worse the economy gets. But dig one level deeper, and it’s really about the conflict between individual rationality and collective rationality.

When the economy is bad, it makes perfect sense for each household to tighten their belts and not spend. We see housing prices falling, so of course we shouldn’t buy—you’d be catching a falling knife. From an individual perspective, this is completely correct. But aggregate these individual decisions to the whole economy, and it becomes terribly wrong—because when nobody’s buying houses, when nobody’s consuming, the economy keeps spiraling down.

Second, why are prices falling? Behind the numbers are poor expectations. Everyone’s pulling back. If you can’t stabilize expectations, everyone keeps pulling back. Understanding this isn’t easy because it runs against our individual intuition.

Host: But there’s one thing I think people can grasp: your spending is someone else’s income. When you spend less, it likely means others are earning less too, and this reflexivity eventually comes back to affect your own income.

Yao Yang: True, but very few people can think beyond themselves to consider others. They think: my spending less doesn’t necessarily affect someone else’s income.

Host: When people watch the news saying we need to stimulate domestic demand, they all hope others will spend more so everyone’s better off.

Yao Yang: Right—everyone wants everyone else’s family to hurry up and spend more.

Host: Do economists have any solutions to this predicament?

Nie Huihua: That’s the question Professor Yao has raised. It’s not entirely unsolvable—our country does have an advantage: when the government commits to doing something, it can get it done.

I strongly agree with Professor Yao about the paradox of thrift. This is a real issue. Local governments—as Professor Yao has noted—are among the biggest consumers in our domestic economy. If local governments publicly announce “we need to tighten our belts,” it signals to everyone that the economy isn’t doing well, so I’d better cut back too. That creates a self-fulfilling prophecy of thrift.

To break this “fallacy of composition” created by the paradox of thrift, you also need a top-down approach. If the central government leads the way—spending, and spending in the right directions—people see that and gain confidence, businesses see it and are willing to invest, enterprises come alive, the economy comes alive. So I don’t think this is unsolvable. We don’t need to convince everyone.

Yao Yang: You’ve studied local government very deeply; I’ve also read your book. I’ve always been puzzled: within our entire bureaucratic system, why is the amplification effect so severe at each level? What comes down from above—many policies that are correct by economic standards—ends up getting distorted more and more at each lower level, eventually going to extremes, even becoming counterproductive.

And I have another question: if the top doesn’t move, can you rely on lower levels to, say, increase spending? Is that even possible?

IV. The Predicament of Grassroots Governance

Nie Huihua: Professor Yao has raised a profound question—really getting at the logic of grassroots governance in China over the past few decades.

There’s research showing that before 2012, many policies in China were made by local governments—80% originated locally, with only 20% from the central government. After 2012, this completely flipped: 80% of policies now come from the center, and local policies mainly repost, supplement, or refine them. Local autonomy has clearly diminished, and there are deep reasons behind this.

One reason is the development of digital technology. As digital technology has allowed central or higher-level authorities to learn more about lower levels, they’ve gained more power to control—because information is power.

For example, many localities are no longer allowed to create their own apps. It’s called “one form from top to bottom”—the city level creates the form, and everyone below just copies it. The internet connects everything, so local governments lose that discretionary space. This is a fundamental incentive problem.

Local governments now face intense accountability pressure. When doing anything, the first thing everyone thinks is: will this get me in trouble? That’s the priority—not how to achieve results, but how to avoid problems. There are reasons for intensified accountability, but when it goes beyond a certain point, local officials become paralyzed with fear. Why won’t they act?

Let me give you an example from grassroots public service. Say a locality needs to distribute social security benefits—specialized subsidies typically go to “five-guarantee households” [the elderly, disabled, and orphaned with no family support]. In the past, township officials or village cadres could determine who qualified. Now nobody dares make that call. Even if someone’s off by one yuan, they won’t approve it.

Previously, how would a minor case like this be handled? Say the social security threshold is 1,000 yuan annual income. Someone earns 950 yuan—I’d just give it to them because I have a slot and there’s nobody else. That was fine in the past. Now it’s impossible. If you enter 950 into the system, it doesn’t pass the data check. It’s not a person signing off anymore—it’s “one form from top to bottom.” Enter 950 yuan income, the system rejects it automatically. Who do you appeal to?

So digitalization has brought convenience on one hand, but on the other hand it’s left grassroots officials with even less autonomy. Higher-level accountability has become easier too—now every step, every modification has to leave a trail.

Here’s another case. One of my students quit his civil service job to pursue a PhD with me. After graduation, he should have had fresh graduate status, but it didn’t work out. Why? His former employer, out of kindness, paid three extra months of social security after he resigned, so he wouldn’t be without income. That backfired—having social security contributions after enrollment meant he lost fresh graduate status.

Could he return the money and fix it? No. Every modification requires sign-off going up level by level. The system essentially can’t be changed.

Think about it: in this kind of environment, grassroots officials have almost no autonomy. Without autonomy, the safest approach is to do everything by the book, or even over-correct. The further down you go, the simpler and more uniform the standards need to be. If you say “you can do it this way or that way,” everyone below is lost—they don’t know which instruction to follow. So it has to be simple, clear, even blunt. Only then does execution go smoothly.

But the outcomes are inevitably poor. There are more reasons beyond what I’ve mentioned, but Professor Yao has raised an excellent question: why has the grassroots level lost its innovative spirit and vitality in recent years, its former drive? This deserves serious reflection from everyone.

Host: But people’s sense is that grassroots civil servants are obviously much busier now, with more things to do—just like people outside the system. Is that related to this mechanism?

Nie Huihua: Being busier and having less autonomy aren’t contradictory.

Here’s an example: I learned during fieldwork that one important task for “village official” college graduates is filling out forms. A lot of stuff used to be on paper. Now that you finally have someone educated, who went to college, who knows computers—great, put them on form duty. They digitize all the forms from the past five years.

After a few years, I figured surely they’d be done by now with all those forms. They weren’t. Why? New forms kept coming. And now uploading a form is more convenient than ever. Before, there was still some discretionary space. Now grassroots autonomy keeps shrinking.

So what I argue in this book is “co-governance from above and below”: China’s economic growth has always combined top-down grand design with bottom-up “crossing the river by feeling the stones.” The problem is we have plenty of top-down design now, but much less stone-feeling, much less grassroots innovation. As a result, the advantages, vitality, and potential of the grassroots haven’t been fully unleashed.

Host: Over these years of fieldwork, Professor Nie, have you sensed the atmosphere and mindset of the people you interview? Do they express frustration? Maybe they tell you that research doesn’t seem to matter much anyway, since they have so little autonomy. Is that what it’s like?

Nie Huihua: It is. Grassroots civil servants are under a lot of pressure—they’re busy, and their incomes have dropped. So they may not be eager to host visitors.

But I try to reassure them. I tell them I’ll do my best to relay their situation upward and advocate publicly. Because this isn’t something that can change overnight, and it’s not something I alone can change—even someone as influential as Professor Yao can’t change it immediately.

But I believe if enough people speak up—for instance, form-filling at the grassroots has actually decreased recently. There’s now an effort to reduce “fingertip formalism”—apps can’t be created arbitrarily anymore. During one visit, I saw a locality that had created an innovation: do everything through an app. Later I asked what happened to it. They said the higher-ups ordered burden reduction, so the county can’t create apps on its own anymore.

So things can change. If enough people talk about it, I believe higher levels can hear it and make improvements where they can.

Host: But overall, things are still moving in a positive direction.

V. Opportunities and Challenges in County Economies

Host: Earlier, Professor Yao mentioned something important: population is flowing into top-tier cities like Beijing, Shanghai, and Shenzhen—or at least outflow has slowed—while at the township level, people are leaving. Many people, especially young ones, seem to be settling at the county level. County-level economies have become a hot topic in recent years.

I’m curious what discoveries from your research over the past two years you can share about county economies. People are wondering: if big companies have done something successfully in first-tier cities, can the same model be replicated in counties? Maybe that’s a trillion-yuan market?

Yao Yang: I haven’t specifically studied industrial development at the county level—Huihua can speak to that. Let me just share my hometown’s situation. Our county is probably even poorer than Huihua’s—it’s in central Jiangxi, Ji’an Prefecture, which isn’t as developed as his Fuzhou Prefecture.

But over the past fifteen years or so, economic development has been decent, mainly due to industrial growth. A luggage industry emerged in our county—purely because people who used to work in coastal factories as small bosses came back and opened factories in the county seat. That drove pretty good economic growth over the past 15 years.

Now there’s a big problem, which Huihua mentioned: many young people don’t want to work in these factories. Factories can pay good wages, but young people still won’t do it. The luggage industry is still largely manual labor. Now when you look at factory workers, they’re all over 40. I rarely see anyone under 40 willing to work in a factory.

What I want to point out is that this shift in the younger generation’s values isn’t just happening in cities—it’s the same in rural areas of central and western China. Nobody wants factory work anymore. Freedom has become more important than income.

Take my nephew, for example. He could find work in our county—I’m sure he could easily get a job paying six or seven thousand yuan since he has a vocational diploma. But he just won’t do it. He went to drive a taxi. First in the city, but with so many people doing ride-hailing now, what could he do? He went to Southeast Asia to drive there. Really—he’s driving a taxi in Southeast Asia now.

Host: Leaving home for distant lands—but in an optimistic light, he’s got entrepreneurial spirit.

Yao Yang: It does show initiative. But he represents a whole cohort. What I’m saying is that this wave of industrialization in central and western China may be over soon—it’s already been 15 to 20 years, right? Things are already very different from what we imagined.

Nie Huihua: County-level economies do deserve more attention these years. When we talk about county economies, we mean county-level administrative units. China has over 2,800 county-level units, but the actual counties, autonomous counties, banners, autonomous banners, plus county-level cities add up to around 1,800—about two-thirds. The other third are districts, which don’t count as county economies.

Looking at macro data, counties account for about 60-70% of the population but only 40% of GDP. In other words, counties still lag behind districts.

My view here might differ from others’—I’m not that optimistic. I think the biggest problem now is unfair competition between counties and districts. What do I mean by unfair competition? If you’re a county, your competitor might be a district. And a district belongs to the municipality.

The difference between a municipality’s districts and its counties is huge. Counties have relatively complete institutions and considerable discretionary authority—your fiscal affairs and personnel are independent. Districts aren’t like that. A district’s land planning and many other agencies answer to the municipal level—they have no autonomy. So when we talk about county economies, we’re definitely not including districts.

What does that data tell us? Counties mostly can’t compete with districts. Why? The good resources get grabbed by districts first.

Here’s an example: suppose a major company like BYD comes to a municipality. BYD is a big deal—the city will mobilize all its resources to support this project. Where will they put it? Definitely in a district, not a county—unless the county happens to have a provincial or national-level development zone, but even then it usually isn’t under county control.

The bottom line is that districts have the home-court advantage. Here’s another angle: a district party secretary might well be a standing committee member of the municipal party committee or a deputy mayor. A county party secretary almost never is. How can you compete with that?

Zoom out further: look at China’s urban hierarchy. We have direct-controlled municipalities at ministerial level, 15 sub-provincial cities, regular provincial capitals, regular sub-provincial cities, prefecture-level cities, county-level cities. They’re all arranged in a ranked structure, each level different from the others.

So here’s how I see it: In China, people follow resources, resources follow power, and power is embedded in hierarchy. Think about it—how can a county compete with a district? If you want county economies to grow, a prerequisite is leveling the playing field between districts and counties. For starters, could we eliminate sub-provincial city designations? Could we upgrade all counties to deputy-department level? Only then could county economies truly compete with municipal economies. Otherwise, it’s just not possible.

One more example: when I did fieldwork in a township, people told me: a township has nothing—what advantage do you have for attracting investment? They said: we have no advantages. But here’s how the policy works now: the county knows the township can’t compete with county-level areas. So if you bring in a business, you can put it in the county’s industrial park, but the credit goes to you. That solves the incentive problem.

See? Even they understand there’s no way to compete. The same logic applies between districts and counties—good resources always go first to core areas and higher-ranked cities. After higher-ranked cities, it’s districts first, then counties.

So if county economies are going to expand, they face this fundamental problem of unfair competition with districts. We’ve done research showing that higher-ranked cities do have higher total factor productivity for enterprises. But that’s mainly because they have more favorable conditions from the start—greater tax discretion, more preferential policies. Just take land approval authority alone—municipalities have far more power than counties. Fair competition is nearly impossible.

Host: But I think people asking about county economies might have a different angle. They’re not necessarily thinking about setting up factories or companies, weighing administrative divisions and corresponding resources and rankings. They might be thinking: counties have strong consumer potential too. Maybe I’m just an ordinary person who can’t do anything big, but I could open a restaurant, a shop, a small store. Can you take what worked in first-tier cities and replicate it in counties? Have you seen examples of this in your research?

Nie Huihua: It’s basically not going to work. Let me put it this way: except for a few large-population counties—say, over 500,000 people, which we call “big counties”—you might be able to replicate part of the model. Otherwise, it’s basically impossible.

Here’s a question for you: Pangdonglai is hugely successful in Henan—but can it expand to other places? No, because other counties simply don’t have enough population. The supply chain can’t sustain it.

To put it bluntly, in many underdeveloped areas of central and western China, the economy is basically what I’d call a “doctors-teachers-officials economy”—completely dependent on the public sector. Doctors, teachers, civil servants—they’re the main consumers. Take them away and there’s essentially no market. Look at some places in the Northeast—I don’t mean any offense—why has the economy been declining? Because there’s no other consumer base. If you transplant a Beijing-Shanghai-Guangzhou model there, you’ll definitely fail.

That’s not to say the Northeast has no future. I’m just saying it reflects problems common to many underdeveloped regions.

Host: It’s fine, I’m from the Northeast—I’m used to it.

Nie Huihua: You’re from the Northeast? Sorry, I didn’t mean to offend.

Host: No worries—I already voted with my feet.

Nie Huihua: Right. But think about it: the Pangdonglai model is hard to replicate. That should be obvious. It might work in a large-population county; in a small-population county, it’s nearly impossible.

Host: Let alone expanding beyond Henan—they can barely even make it into Zhengzhou. That involves more than administrative divisions; there are various other factors at play.

VI. Reflections on Development Models

Host: From both your perspectives, as people pay more attention to cities beyond Beijing, Shanghai, and Shenzhen, including counties—what other insights from your research and conversations are worth sharing? What surprising changes or trends have you uncovered?

Those of us here live in Beijing day-to-day; we understand Beijing and the first-tier cities best. But there’s so much happening across the rest of China that people would like to learn about through you.

Yao Yang: Overall, I think population is still concentrating in a few major regions. I mentioned earlier that urban populations are declining in most cities. Many people are probably settling in county-level cities—many in county-level cities of developed regions.

The clusters seem to be: the Yangtze River Delta, the Pearl River Delta, the Sichuan Basin, and the Beijing-Guangzhou railway corridor—from Zhengzhou to Wuhan to Changsha. And Chengdu.

Take Chengdu: its population keeps growing because it doesn’t really restrict city size the way Beijing and Shanghai do, with their caps of 25 million. Chengdu just keeps drawing bigger circles. I think this is a crucial reason why Chengdu’s economy has been able to develop.

Many companies have skipped over countless cities and relocated directly from the coast to Chengdu.

Nie Huihua: Why is that? Because Sichuan has a lot of local workers?

Host: So it’s not just geography?

Yao Yang: As Huihua suggested, Chengdu’s leadership has been relatively hands-off with regulations. Chengdu’s pace of life suits young workers today. Many young people work jobs where they’re basically glued to a computer—remote work. They don’t need a frenetic pace, and housing and living costs are relatively low. Add these advantages together, and people are willing to move their companies straight to Chengdu.

I think many cities have failed in this round of industrial relocation because of rigid thinking, excessive regulation, and especially bias against private enterprise. They’re always chasing big projects. I think many cities in central and western China are like this.

Take my hometown—I was born in Xi’an. Xi’an is a classic example. How many big projects are there to go around? And even with this approach, big projects still leave. Look at our Xi’an Dian Company—that’s a central state-owned enterprise, right? Been in Xi’an for sixty or seventy years. It moved to Shanghai. They couldn’t even keep a big project.

Host: You also moved to Shanghai.

Yao Yang: Right. I think mindset determines everything. And people’s mindsets are extremely hard to change—very stubborn and ossified. Add what Huihua mentioned: within our government system, certain ways of thinking keep getting reinforced, layer upon layer like an invisible net. Eventually nothing can get done. To revitalize the economy, to revitalize employment, the government still needs to step back.

Host: I think it’s not about any individual’s intention—it’s often the unconscious combined force of a group of people that leads to either greater openness or greater rigidity.

But listening to Professor Yao just now, several lightbulbs went off in my head. You’ve highlighted a few regions—the Yangtze River Delta, the Greater Bay Area, the Sichuan Basin, the Beijing-Guangzhou corridor. If these places still have population inflows and growing vitality, then maybe instead of trying to outcompete where you are, you could just go there? For individuals, especially those in service industries, these places might offer better prospects—at least for the next three to five years?

Yao Yang: That’s probably right. But because domestic demand as a whole is weak, whichever city you visit, it looks sluggish. Even Shanghai—walk down any street and you’ll see plenty of shops closed, sitting empty. The same in inland cities. We’re only talking about relative differences—which cities are slightly better.

And personally, I feel—this is also what Huihua’s book discusses—it’s not that there’s anything wrong with the central government emphasizing manufacturing, new technologies, new industries. But the problem is our bureaucratic system amplifies the signal infinitely. By the time it reaches the grassroots, that’s all they do. The service sector gets ignored.

Either they don’t prioritize it, or nobody thinks about how to revitalize idle assets. Shanghai’s municipal government is a bit better—they said you can convert commercial properties to residential. But even that reform hasn’t succeeded because of all the legal issues involved. I haven’t seen other cities even trying.

Everyone acknowledges it’s a problem, but they’re all busy with hard tech and high-tech industries—that’s what generates visible achievements, because that’s what the higher-ups evaluate. Service industries aren’t evaluated. Retail isn’t evaluated. Even though everyone talks about boosting domestic demand, it’s not a performance metric.

You see what Huihua’s book describes: the multi-task principal-agent theory. Economists all know this theorem: when you have many tasks but only certain ones get evaluated, people focus on those. So the end result is a two-track system: on one hand, you see government pouring massive resources into high tech, going all-in, and indeed high tech develops well. On the other hand, no one addresses the stagnation we see.

We’ve forgotten something: ordinary people’s employment still depends on the service sector. A small shop might seem insignificant, but a city has hundreds of thousands of these small shops. Each one hires a couple of people—that solves a lot of employment. Services remain the biggest job creator.

Our industrial sector doesn’t generate employment anymore, right? We’ve all seen those lights-out factories, and they’re getting darker still—workers are being replaced. Manufacturing is valuable for international competition—competing with America and so on—but it doesn’t do much to raise incomes for ordinary people.

This is America’s problem too. Look at American high tech—it’s doing great, never mind the naysayers. The American economy performs well on paper. But who’s driving that performance? Silicon Valley, Wall Street, the pharmaceutical triangle around Washington, D.C.—all high-tech sectors.

If you have a high level of education and studied the right field, and you get a job in Silicon Valley, a master’s degree probably starts around $150,000 now. And when you join, you get a $100,000 signing bonus just like that. Your income immediately shoots up. With a PhD, you’re starting at $300,000.

But for ordinary Americans—median household income, if I recall correctly, is somewhere between $70,000 and $80,000. Life is actually quite hard, because prices have risen. Many Americans work two or even three jobs just to support their families.

So you see, high tech doesn’t put food on the table. We shouldn’t set these up as opposites, but the current problem—and I want to discuss this with Huihua—in studying government, is there any way to untie this knot? What I see is that local governments execute central policies to the letter, to an extreme—”look, I’m doing everything right”—and ignore everything else. They invest and invest. Is there any solution?

Nie Huihua: Professor Yao has raised a profound question. According to our framework of “co-governance from above and below,” we definitely need hard tech. We need high technology. But ordinary people can’t eat by high tech alone.

The service sector also needs local governments to develop new thinking. But that’s not how people see it right now—they think services don’t matter.

There are actually approaches. For instance, starting about a decade ago, the central government introduced a concept called “functional zoning”—different regions have different priorities.

I’ve asked friends in western and northwestern regions about this. They told me that in their areas, ethnic unity is the top priority; economic development must serve that goal. If we adopt this functional zoning mindset, couldn’t we designate certain places to focus specifically on the economy, while giving other places certain autonomy?

Let me share some research I’ve been doing with students—not yet published. We found that starting over a decade ago and continuing to now, out of roughly 2,800 districts and counties nationwide, nearly 1,000 no longer have GDP as a direct assessment metric. Many people can’t believe this.

Does not evaluating GDP lead to better development? We dug deeper and found something interesting: there are two types. In one type, they don’t evaluate GDP but substitute other indicators—say, this is an ecological protection zone, so they evaluate environmental metrics. In the other type, no indicators are specified at all; localities are simply allowed to pursue balanced development on their own.

We found that the latter—completely autonomous development—actually achieves more balanced outcomes. The former—what we might call “controlled KPI” where there’s no GDP target but other mandated metrics—doesn’t develop as evenly.

So the reverse logic is: China is vast, with enormous regional variation. We should leverage this large-country advantage to run policy experiments and implement functional zoning. But we may have become too fixated on a “unified national market,” too focused on scale effects. When all you see is economies of scale, the playbook becomes: maximize scale, drive down prices, use low prices to crush competitors. That’s not a healthy competitive mindset—it’s zero-sum. And when this approach gets exported overseas, it’s even worse. Talking about “bringing the competition abroad” is absolutely wrong.

So I think we should allow different regions to adapt to local conditions in their assessment criteria. Different places should have different responsibilities, different functional zones. Only then can China’s economy have both face and substance. We can’t sacrifice substance for face—substance is what puts food on the table.

Of course, face matters too—in the long run, it can become your foundation, your confidence. But for most people, especially in the short term, there is some tension between employment and high tech.

VII. Specialty Towns and Development Paths

Nie Huihua: There’s a fascinating phenomenon I think about: China’s various specialty regions. There’s a book called Shoe Capital. Do you know where China produces the most athletic shoes? Jinjiang. Jinjiang accounts for 20% of global output, 40% of national output. It’s just a county-level city. Within Jinjiang there’s a town called Chendai that alone accounts for 8.5% of world production.

Many famous brands—361°, Xtep, Anta—all started there. The development process perfectly fits the pattern of many Chinese specialty towns. It starts with overseas Chinese with some money, not sure what to do with it, who stumble onto something profitable—making leather shoes, say. One family makes money, others follow suit. Small workshops become private enterprises. As they grow, quality varies wildly; some counterfeits and knockoffs emerge. The government cracks down. Those who survive that phase, get quality under control, and build brand awareness—they become big players. Then they can do international OEM manufacturing. That’s how Anta was born.

I think the story of “China’s Shoe Capital” is quintessentially Chinese—you rarely see this abroad. Why is Chinese manufacturing so formidable? Why did China become the world’s factory? Because of hundreds and thousands of these specialty towns.

Host: But does this playbook still work today? Stories like the shoe capital started 20 years ago. What about now?

Nie Huihua: Good question. But I think the underlying logic is similar. It always starts with loose regulations, then one person gets rich, which inspires others, the government is supportive, and people develop brand awareness.

Here’s an example: we may not have as many “Shoe Capitals” or “Women’s Fashion Capitals” or “Ceramics Capitals” or “Fruit Hometowns” anymore—those were the old specialty towns. But Taobao villages represent a new model. Do Taobao villages need any advanced resources? Not really. Leveraging the internet and digital economy, they can explode into prominence.

If you look at Taobao villages—like Shaji Town—the development process is similar. There’s always some element of “co-governance from above and below”: grassroots willingness to innovate, entrepreneurial spirit, willingness to take risks; local officials with the courage to provide support; and higher-ups who at least turn a blind eye.

Industries develop gradually. Once they’re up and running, you develop first, regulate later—regulate as you develop, develop as you regulate. Many Chinese industries have grown this way. So we keep emphasizing: first, ease up on regulations; second, govern from both above and below.

Host: Give people more space, more gray area. With the Chinese character—hardworking, willing to hustle—people can carve out opportunities. In the past it was shoes and fashion; in the future it might be something else entirely. Whatever it is, people can make it work. Whether it’s Taobao as you mentioned, or livestream e-commerce we see on platforms, or short dramas—we used to have Hengdian [horizontal screen film studio], now there’s “Shudian” [vertical screen studio]—these are all examples of people spotting trends and applying their ingenuity.

VIII. AI Applications and Grassroots Governance

Host: We’ve touched on social media and digital technology. In this era of AI transformation, people want to understand how AI’s widespread adoption has changed how grassroots governance and public services operate. Where has it improved efficiency, and where has it amplified existing governance challenges?

There was big news recently about Shenzhen’s Nanshan District using AI technology—AI completing in one day what dozens of civil servants would do. It sparked a lot of discussion.

Nie Huihua: Sure, I can share some cases. AI definitely has huge potential for grassroots applications. For example, in Beijing, when children need to enroll in elementary or middle school, it’s now handled by big data verification—directly networked, no human review needed. Otherwise, imagine manually verifying everyone’s information—impossible. Now in one second it determines whether you have local household registration, whether you qualify for enrollment. That definitely reduces workload.

But there are problems too.

One is what I’d call “digital authoritarianism.” As I mentioned earlier, once higher-ups say “the big data told me so,” you have no way to argue back. And the data isn’t necessarily accurate. There was that whole satellite imagery controversy—satellites photograph an area that’s supposed to be green, but it shows up as not green. Then you have to explain yourself. Maybe the planning changed. This creates a kind of data dictatorship.

The other problem is that AI’s adoption faces a hurdle grassroots officials have told me about: it can’t solve the pain point of grassroots governance—accountability. The grassroots logic is that everything must leave a paper trail. Why? For accountability. Every matter must be implemented and traceable.

AI ties that knot: if you do something and say “AI told me to do it this way,” nobody can hold AI accountable. So at certain critical junctures, you can’t use AI.

Here’s a simple example: I have a student who works in bank lending. Credit evaluation is actually ideal for AI—it can assess whether a customer is a risk. But he told me the most critical steps still require human review, probably because of the accountability issue.

Host: That’s why people say the job least likely to be eliminated at a company is finance. Headcount might shrink, but the function will always exist—because someone needs to be accountable.

Nie Huihua: True, but some companies undergoing digital transformation have cut 70% of their finance staff. The pressure is intense. So really, no position is safe.

IX. Youth Anxiety and Career Choices

Host: Both of you primarily do research, but you must interact with students frequently. Do you observe them feeling anxious about employment or their future academic and career prospects?

Yao Yang: Anxious. Even Peking University students are anxious—not because they can’t find jobs, but because they’re comparing themselves to others. What kind of job can you get might differ from what your classmate gets.

I talk to them and sense this anxiety. There’s a doctoral student graduating this year—a young woman who’s quite talented. But before she secured a job, her anxiety was beyond words. She couldn’t sleep well. Her applications weren’t getting responses. Of course, eventually she got several offers, and now she has a different worry—which one to accept? Tomorrow I’ll ask her what she decided.

So the anxiety isn’t about not getting something; it’s about comparing yourself to others before you get it—the classmate in the next dorm room or your own roommate who landed a good job easily.

Now that I’m at a Shanghai university, where students don’t have quite the same job prospects as Peking University, the anxiety is even greater. Fortunately, Shanghai has many financial institutions, so they can find jobs. Ultimately they do find jobs, usually more than one, and then have to choose. But throughout the job search, everyone is anxious.

I think this reflects our entire social atmosphere. My generation was the first not to have jobs assigned by the state. Back then, anxiety was rare—you’d always find something. But now everyone’s comparing—you got this job, I got that job—which creates anxiety.

Back then, incomes were low across the board. It didn’t matter much where you worked; the pay gap wasn’t huge. When I graduated from college, I almost went to work in Xinjiang. The difference wasn’t that big. Today it’s completely different. The gap between a good job and a not-so-good job might be two or three times, maybe more. That’s why everyone’s so anxious.

Host: Are people trending toward more stable, secure jobs?

Yao Yang: I’m working on a study with collaborators because I’ve observed that graduates from Tsinghua, Peking, and 985 universities generally end up in stable jobs. Our parents push kids to get into 985 schools, 211 schools, Tsinghua and Peking—and then what? They end up working for, say, a Shandong University of Science and Technology graduate. That actually happens quite often.

Look at the new generation of entrepreneurs—people like Wang Xing [founder of Meituan]—they’re not from elite schools. But who works for them? Tsinghua and Peking graduates.

So I keep thinking: parents pushing their kids into 985 schools, fighting to get into Tsinghua or Peking—they may actually be harming their children. Because these kids all end up the same, no differentiation, and they find stable jobs. Once you’re middle class, you might have killed a kid’s adventurous spirit. A kid who could have become the next Wang Xingxing [founder of Unitree Robotics] ends up as a civil servant. The probability of that is quite high.

Host: Being a civil servant isn’t bad either.

Yao Yang: But if you could become Wang Xingxing, why wouldn’t you? Wang Xingxing’s contribution is obviously far greater than an ordinary civil servant’s.

Host: I think this shows Professor Yao has a high risk tolerance. But you wouldn’t really raise your own child this way, would you?

Yao Yang: My son is already married and established. I think at this stage in China’s development, we should let children make their own choices. There’s no need to force them to get into 985 or 211 schools.

Just like different regions are now finding their own niches, we all face the risk of being replaced by AI. A Tsinghua or Peking degree doesn’t guarantee safety. You graduate, become an accountant, and 70% of accountants get replaced. But if you become Wang Xingxing, you’ll never be replaced—you’ll be the one driving AI, right?

Host: Your child might not have an adventurous spirit though.

Yao Yang: True.

X. On Education and Building Inner Strength

Host: Professor Nie, as a parent whose child is still in school—you’ll be heading back to help with homework later—as a father, how are you approaching your child’s education?

I’m genuinely curious about this because people feel that AI can now provide so much knowledge, yet kids still have to be at school by 7 a.m., stay late, then go to tutoring. The system keeps rolling along by inertia, and parents have to go along with it. I’d love to know how an intellectual parent like you handles this.

Nie Huihua: Thanks. That question hits close to home—you’re asking a Haidian parent [Haidian District in Beijing is known for extreme academic competition]. Chinese parents are the most exhausted in the world, and Haidian’s Chinese parents are the most exhausted of all.

I don’t have any secret formula. I give myself a few reminders, though I’m not sure I can always follow them. Of course I hope he gets into a good university, but there are prerequisites.

First, physical health. That’s number one. Second, I hope his mood can be reasonably happy. Those are the two bottom lines. Third, I hope he develops resilience—the ability to handle setbacks. He doesn’t have to be top of the class, but he can’t fall apart when things go wrong. Because there will be plenty of confusion and failure ahead.

Fourth, when I talk to him—and this is different from how I was raised. When I was a kid, education was simple. Our slogan was “stand out from the crowd”—that’s it. Why study? To stand out. That phrase meant something beyond just becoming an official; you needed to make something of yourself.

We probably won’t raise our children that way anymore. It’s more like: find work you enjoy, earn a decent living. And our generation has already solved that problem.

Let me add something: many middle-class parents’ children aren’t as anxious anymore. Take one of my master’s students, now in his second year. He can either graduate in three years or try to move into a PhD program early. If he doesn’t get into the PhD program, he’ll have to graduate and find a job immediately. I asked him: what if you don’t get into the PhD and don’t find a job? He said casually, “I’ll just take a gap year.”

That confidence comes from the foundation laid by our generation or even the generation before us. It shows the pressure on them is relatively lighter. So when I say someday 10% of people might work while everyone else can enjoy life—we’re actually already at a point where we don’t worry about basic survival anymore. In rural areas, you don’t have to pay agricultural taxes. Grow your own food on a plot of land, harvest a thousand jin of grain a year, and you can definitely feed a family. Basic survival isn’t the issue anymore.

This generation doesn’t need to be so anxious. Values have genuinely shifted.

So from my perspective, the things I care about—good health, good spirits, resilience, handling setbacks—I believe these are shared hopes among many parents. Whether we can actually achieve them is another matter. In the process of comparison, you might become even more anxious and forget your original intentions.

You think: the neighbor’s kid got first place again, why can’t mine? He finally got into a key middle school but still isn’t performing—what’s wrong? Under that kind of pressure... it’s a prisoner’s dilemma. You need tremendous inner strength.

That’s why I tell my students: study some humanities, read some philosophy of life. I really recommend Wang Yangming’s philosophy of the mind. I can’t tell you that China’s economy will grow rapidly in the future or that job opportunities will multiply—that’s not realistic.

In this environment—during an economic downturn—how do you find happiness and fulfillment? That’s too specific to prescribe. All I can say is: you have to be the master of your own mind. You need inner strength.

Here are a few principles we’ve suggested: lower your expectations, improve your skills, exercise, cherish your time, learn English well, read more history. I’d add one more: cultivate yourself. Wang Yangming’s philosophy says: “Outside the mind, there is no principle; outside the mind, there are no affairs; outside the mind, there are no things.” That might sound extreme, but think about it—the big trends can’t be changed. So what do you do? You can’t fight yourself. You have to make peace with yourself.

I’ll stop here because I haven’t figured it all out myself. I’m still a typical Haidian parent. But more and more I feel we really need to think about this—don’t we need better psychological fortification, including within our families?

Host: So in conversations with students, you’re basically the one telling them not to be so anxious?

Nie Huihua: I definitely have to play that role. If a paper gets rejected, the first thing I tell them is: rejection is normal. Wait a couple of days and you won’t feel as bad. Don’t fall apart after one rejection. What I fear most is seeing students crushed by setbacks. They need to internalize that failure is just part of the game.

Lately I’ve been reading Wang Yangming too. I think Neo-Confucianism and the philosophy of mind are getting at the same thing. This era may need this kind of life philosophy. Professor Yao has written about how Chinese Neo-Confucian political thought evolved. Any philosophical perspective is a response to its times—you need to address contemporary concerns.

I now think philosophy, psychology, sociology—as complements to economics—may be more important for ordinary people. We may have reached that point.

Host: It’s kind of unusual for an economist to be discussing philosophy on stage...

Nie Huihua: We’re not worried about others taking our jobs.

XI. Making Peace with Yourself, Making Peace with Society

Host: Professor Yao, as someone more deeply versed in philosophy, what advice or reflections would you like to share?

Yao Yang: Professor Nie mentioned my book The Study of Living Wisely. I wrote it based on a course I had on Himalaya [a podcast platform]. The editor said we needed a catchy title. In my Peking University class, it was called “Economic and Political Philosophy.” The editor said that wouldn’t sell. After much discussion, we settled on The Study of Living Wisely.

I strongly agree with Huihua: as individuals, we can’t change this era. In fact, we can’t even change our immediate environment. Huihua has escaped certain pressures, but he still faces the issue of his child. From what I heard, he still wants to compete—he can’t help it. If he doesn’t push, but his wife wants to, right? If he doesn’t go along, they’ll argue. Plenty of couples fight or even divorce over this, right? Because moms feel they have to compete—the mom group chat puts so much pressure on you if you don’t. Everyone gets swept up. As a dad, all you can do is support. What else can you do?

We can’t change our surroundings. So what can we do? We can only try to understand them.

First, understanding means understanding how the economy works, how society works. Then we need to figure out by what standards we judge whether the economy and society operate justly. Then we need to think about how society’s concept of justice forms, whether the government considers justice when making policy. So you go up one level. Then another: what kind of political system can ensure that the policies that emerge are reasonably just? Layer upon layer.

What I want to say is: we need to learn to craft a story for ourselves within this environment—to make our lives make sense. You could call it a fiction. Indeed—we all live within fictions. Isn’t human civilization one grand fiction? Everything we call culture is something we made up. In that sense, we’re all being “deceived.” But if you refuse to be “deceived,” what kind of person do you become? You might not jump off a building, but you’d be in profound inner turmoil, unable to make sense of the world.

So we need to create our own story. And of course, this story needs constant revision as circumstances change. Keep rewriting your story to make your life coherent. Only then can we be at peace with society and at peace with ourselves.

XII. How to Find Reliable Information

Host: Finally, I’d like to ask both professors one very practical question on behalf of everyone. We live in an age of algorithms. Whatever we’re interested in, social media platforms keep feeding us more of it. Our information channels are either algorithmic recommendations or people around us. How can we build a relatively stable framework to distinguish signal from noise? How can we ensure the information we consume is more objective and comprehensive?

Any suggestions?

Yao Yang: I think Chinese scholarship, including our education, has a big problem: it doesn’t teach logic. Chinese people aren’t naturally inclined toward logic because our language isn’t structured that way. Classical Confucian argumentation—I’ve noticed—is basically parallel sentences. No logic in there. Chinese itself had no grammar for a long time. It wasn’t until the early twentieth century that Mr. Wang Li established formal grammar.

The upside of having no grammar is great poetry. I think Chinese is probably the best language for that.

Nie Huihua: Very loose.

Yao Yang: But for thinking, it’s deadly. No logic. And because there’s no logic, we tend to jump straight to conclusions, making gut judgments based on emotion. Discussion becomes extremely difficult. You can’t make sense of events around you.

So my suggestion for those who are still students: learn some logic. And if nothing else, I’d like to think my book can help establish a framework.

Nie Huihua: My suggestions: First, know what kind of person you want to become. That’s a hard question in itself. But who you want to be determines what knowledge you seek and what information you need.

Second, maintain some distance from social media. You still have to use it daily—I do too—but I make sure to have periods where I use it less or not at all. I don’t constantly check WeChat. I tell my students: we’re all looking at the same stuff—what’s there to discuss? If you can actually have a conversation, it’s because you have other information sources.

What I mean is: spending ten days reading one book will get you more than spending a whole day scrolling through WeChat, because you’ll see something different.

Don’t try to outsmart the algorithms—you can’t beat them. They’re incredibly powerful; they exploit human weaknesses. What you can do is close these things off for certain periods. This is why I mentioned Wang Yangming’s philosophy—you need time for regular self-reflection. That’s crucial. Beyond that, I don’t have much else to offer.

Honestly, in this age, completely disconnecting from social media is impossible. If you must choose, I’d rather scroll through my friends’ posts than algorithm-fed recommendations. Because in my feed, if Professor Yao shares an article, I trust his judgment—he’s effectively curated it for me. I’m not going to randomly consume whatever the system pushes.

Host: So find reliable information sources—whether that’s a person, an institution, or a platform.

Nie Huihua: Exactly. A friend of mine often says there are two keys to success: first, your cognition—do you have the knowledge? Second, your network—who do you know? Think about it—that’s pretty comprehensive, right?

So to succeed: first, elevate your understanding; second, expand your circle with quality connections.