China Market Intelligence

The United States and China have pulled back from a full-blown export control crisis after a presidential summit on the sidelines of the Asia-Pacific Economic Cooperation summit last month. According to both sides’ readouts, they agreed to a one-year, reciprocal truce: the United States will suspend its “50% Rule,” which extended export restrictions to over 20,000 Chinese entities, and in exchange, China will suspend the rare earth element (REE) export control measures announced by the Ministry of Commerce (MOFCOM) on October 9.

Last month, the Chinese Communist Party’s 20th Central Committee concluded its fourth plenary session, during which it adopted the Central Committee’s proposal for formulating the 15th five-year plan covering 2026 to 2030. Beijing has acknowledged a growing pressure to maintain social stability and advance reforms amid more volatile geopolitical conditions. As such, the proposal points to an enhanced role for indigenous innovation, industrial upgrading, and domestic consumption as key drivers of secure and sustainable growth.

China’s factories are busy but not necessarily profitable. In the first eight months of 2025, industrial value-added rose 6.2% year-on-year, yet profits edged up just 0.9%. The wide gap between output and profitability reveals structural inefficiencies across China’s industrial sector, including persistent deflationary pressure, chronic oversupply, and stagnant productivity masked by volume growth. This misalignment threatens the sustainability of industrial recovery and undermines Beijing’s broader growth targets.

China’s State Council has finalized the Notice on Implementing Policies for Domestic Product Standards in Government Procurement after several rounds of public consultation. The document introduces China’s first-ever nationwide definition of “domestic product” for government procurement purposes. This notice will take effect on January 1, 2026.

China’s stock markets have rebounded in 2025, defying expectations that global trade tensions and weak domestic economic conditions might drag on performance. The Shanghai Stock Exchange (SSE) Composite Index has risen 19.54% over the six-month period, with the China Securities Index (CSI) 300 gaining 22.41%.

China’s economy has grown faster than expected this year, but growth in tax receipts has fallen behind. In response, Beijing is turning to tax reform as a cornerstone of fiscal stabilization, combining short-term measures to raise revenue from existing sources with longer-term efforts to standardize its tax regime.

For companies, this marks a shift from episodic policy shocks to institutionalized legal pressure, including conflicting compliance burdens, more discretionary enforcement, and increased uncertainty. Beijing, in turn, can use US firms’ regulatory exposure as a strategic lever to influence trade negotiations, shape corporate behavior, and advance longer-term industrial policy goals.

Although BIS frames the measure as an administrative plug to a loophole in semiconductor export controls, in practice, the rule is a broad decoupling action. As a result of the rule, the number of firms facing Entity List restrictions will climb from around 1,200 to an estimated 11,000, sending a chill through the commercial relationship.

With mandatory centralized traceability and monthly reporting requirements, the new rules grant regulators unprecedented oversight over supply flows and domestic profitability, with repercussions for global price stability.

On August 26, China’s State Council released guiding opinions on the implementation of China’s AI+ Action Plan over the next 10 years. The plan is China’s most comprehensive policy statement yet on embedding artificial intelligence throughout its economy and society, providing ministries, regulators, and local governments with key implementation goals. Target areas for AI integration include R&D, agriculture, industrial processes, and services.