Research & Analysis

Presidents Donald Trump and Xi Jinping on Thursday met in South Korea for their first in-person engagement of Trump’s second term. Trump called it a “truly great” meeting and emphasized the “enormous respect” between the United States and China. He fashioned the commitments made during the meeting as a one-year deal that the countries will re-negotiate annually.

Dr. Dan Wang is China director for Eurasia Group, specializing in China’s economy, industrial policy, and geopolitics. She previously served as the chief economist at Hang Seng Bank China based in Shanghai, responsible for macroeconomic forecasting and capital market analysis.

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%.

Bilateral tensions flared over the weekend after China announced new export controls on rare earth elements. The move was a response to the Commerce Department’s “50% rule,” which was released late last month and dramatically expanded the number of Chinese firms on the Entity List.

The Senate on Thursday passed its version of the National Defense Authorization Act (NDAA) for 2026. The new version includes several China provisions that were excluded from the package offered in mid-September. The bill now moves forward to conference with the House, which passed its version earlier in September.

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.