geopol: thaw with Delhi, Wang Yi tours South Asia
Modi’s meeting with Xi in Tianjin on 31 August puts Sino–Indian relations in the spotlight, as both nations navigate a delicate balance of economic cooperation and geopolitical tension. It is Modi’s first visit to the PRC since 2018.
The easing of tensions comes amid fresh Trump tariffs on India, prompting Beijing’s support for India in response.
Ahead of the leaders’ meeting, Foreign Minister Wang Yi 王毅 visited India. The sides agreed to boost trade and restart direct flights. Wang also co-chaired boundary talks, agreeing to work towards resolving the Himalayan border disputes.
Wang also visited Pakistan, agreeing to launch new China–Pakistan Economic Corridor projects. He then travelled to Afghanistan for trilateral trade, security and counterterrorism talks.
Xi and Putin discussed the Ukraine crisis, with Xi advocating Beijing’s role in peace negotiations, showing its ambition as a player in global security.
macro: fiscal turn, legal push
Beijing reinstated VAT on interest from new central, local and financial bonds on 8 August, ending a nearly decade-long exemption. It will broaden revenue and tilt portfolios away from safe asset earnings. Holdings issued before 8 August are exempt until they mature. Expected to raise some C¥32 billion in 2025, income from the tax will rise to C¥99 billion by 2027, while foreign investors remain exempt through 2025.
July prices were weak. Consumer prices y-o-y were flat (core up 0.8 percent), while producer prices fell 3.6 percent. Retail sales grew 3.7 percent; new-home prices across major cities fell. With property dragging and consumption subdued, policies focus on rules rather than stimulus.
The Supreme People’s Court issued 25 rules to enforce the Private Economy Promotion Law, prioritising payment of arrears to private firms, speeding up enforcement, tightening disposal of assets and boosting IP rights. These steps reduce risks and ease strain on cash flows without extra spending, supporting Xi’s recent commentary.
New antitrust guidance focuses on utilities, aiming to check the power of local state-owned enterprises. Meanwhile, tighter rules limit platform fees and pricing abuses to protect merchants. The aim is to curb ‘big-data-enabled’ discrimination seen in recent price wars, restoring merchant certainty at the cost of added compliance on fee and algorithmic-pricing governance.
trade: growth vs tariffs
July exports rose 7.2 percent y-o-y, imports 4.1 percent. Shipments to the US fell 21.7 percent y-o-y, but double-digit growth to ASEAN, Africa and the EU made up the shortfall.
Trade friction was handled via talks and targeted countermeasures. Meeting in Stockholm, the PRC and US extended their tariff truce, both sides keeping ten percent tariffs and suspending 24 percent tariffs for 90 days. Beijing pledged to lift some sanctions on US firms. Upcoming talks will be tough, with US’ economic security’ concerns limiting the impact of any concessions, warns Gao Cheng 高程.
Two Lithuanian banks were sanctioned as Beijing hits back over EU probes into Russia-linked PRC firms. An EU dairy investigation was extended for talks. Beijing retaliated against Canadian tariffs by imposing duties on rapeseed and launching an inquiry into pea starch (see ag below).
A yuan-backed stablecoin, led by Hong Kong and Shanghai, may soon launch, reports Reuters. Hong Kong’s role in linking the PRC with global markets was highlighted by Zhang Monan 张茉楠 China Centre for International Economic Exchanges. Other moves include anti-dumping duties on Canadian and Japanese rubber products and Indian optical fibres.
scitech: central AI+ push
Tech should not stay in labs, insists Beijing, or fuel asset bubbles. A State Council plan aims for 70 percent uptake of new AI agents and smart terminals by 2027 across seven sectors, not least science, industry, consumption and governance. Cities like Shanghai are tailoring local AI plans for factories. At the World Robot Conference, humanoid robots were tipped for a ‘ChatGPT moment’ in two to five years.
Despite involution from overinvestment, Beijing still backs new sectors, tweaking risk‑averse finance to push ‘new industrialisation’. Yet local government financing vehicles, once tied to real estate, now chase scitech bonds, often lacking skills to back real projects.
energy: setting the stage
Energy regulators have now formulated 1+6 basic rules for the national power market. This comprises one overarching rule plus six core and supporting rules covering
- mid and long-term trading
- spot markets
- auxiliary services
- info disclosure
- registration
- metering and settlement
The national power market is set to launch by end-2025, with most provinces starting trial spot market operations.
New Guiding Opinions from NDRC and NEA are meanwhile reforming pricing for natural gas pipelines. A single rate will be set for each province or region, with local commissions setting prices for transport within provinces. Provincial energy authorities will oversee planning and regulation.
agriculture: stress tests and standards
A preliminary anti-dumping ruling imposed a 75.8 percent deposit on Canadian canola seed, cutting off 90 percent of PRC imports and creating a 400,000-tonne monthly gap. Crushers halted sales, and Zhengzhou Commodity Exchange futures jumped C¥830 a tonne, the highest since January 2023.
COFCO booked its first Australian canola cargo in five years, while Argentine soymeal trials reflect a broader push to diversify supply. Beijing is stress-testing feed resilience amid wider trade disputes. Meanwhile, the EU dairy anti-subsidy probe was extended by six months, keeping exporters uncertain amid tightening import standards and stricter 2026 equivalence checks.
environment/climate: carbon market master plan
‘The first-ever central-level opinions on the carbon market were issued by State Council and the Central Committee, outlining a timeline for development. The market aims to cover all major industrial sectors by 2027, moving from intensity-based limits to a hard emission cap in a ‘sector-by-sector’ approach. Carbon emissions and coal use will also be included in fixed asset project reviews.
Work on the 15th 5-year plan is underway, focusing on growing the marine economy. Other moves include programs to pilot green external debt and a draft green consumption guide.
governance: guardrails for private firms
Beijing is cracking down on rent-seeking conduct that stifles private enterprise. New’ Guiding Opinions’ call for standardising penalties, including limiting excessive fines and cracking down on breaches of state contracts and dishonesty.
The Supreme People’s Court has released model cases highlighting unlawful or disproportionate penalties and coercive action used against firms without legal basis. It urges proactive judicial review of administrative enforcement orders rather than waiting for appeals. These steps attempt to protect private enterprise rights, boost market confidence and improve the business environment.
social policy: higher quality procured drugs
The 11th round of national drug procurement focuses on quality and real-world data (RWD), expecting to boost brand recognition.
A new ‘K visa’ targets young, international, skilled STEM workers.
Commercial health insurance was left out of the Health Insurance Law. NHSA plans to conduct further studies and set up a commercial health insurance expert database at Capital Medical University. Meanwhile, a biomedical industry chain is forming in the Jiangsu Free Trade Pilot Zone to promote biopharma development and build a globally recognised innovation hub.