Top reading of the Week China Market newsletter

 top 3 breaking news stories from China this week, with key insights for global observers:

1. China's Economy Shows Mixed Signals Amid Deflation Fears

• Latest Data: July CPI fell -0.3% (first deflation since 2021), while exports plunged -14.5% YoY

• Why It Matters:
  ✓ Confirms weakening domestic demand despite stimulus efforts
  ✓ Heightens pressure for stronger economic interventions
  ✓ Global markets watch for potential yuan devaluation moves

  

2. U.S.-China Tech War Escalates: New Chip Export Controls

• Developments: Biden administration plans new restrictions on AI chip exports (targeting Nvidia's A800/H800)

• China's Response:
  ✓ Accelerating $150B semiconductor self-sufficiency plan
  ✓ Testing local AI chips (e.g., Huawei's Ascend 910B) as replacements

• Impact: Could delay China's AI ambitions by 2-3 years, per analysts

3. Diplomatic Storm Over Taiwan Ahead of 2024 Elections

• Current Crisis: China conducts live-fire drills after Taiwan VP's U.S. transit stop

• Strategic Implications:
  ✓ Tests U.S. "strategic ambiguity" policy
  ✓ Raises risk of accidental conflict (60+ PLA warplanes near ADIZ this week)
  ✓ Taiwan's January elections could trigger bigger crisis

Bonus Trend: Youth unemployment hits record 21.3% - government suspends official data publication, signaling deeper labor market troubles.

For business leaders: Monitor China's August policy response - expected stimulus could create short-term opportunities in infrastructure/tech sectors despite long-term decoupling trends.

China has key advantages:

✅ Stronger economic growth (+5% in 2024)
✅ Economic leverage (rare earths, supply chain control)
✅ Growing Global South influence

But…
❌ U.S. still leads in tech & military power
❌ The West is rallying against China (EU, Japan, Australia)

Final Verdict:
China can’t outright "win" against the U.S., but it can make the conflict so costly that Trump is forced to negotiate. Expect a prolonged economic cold war, with cycles of tension and temporary truces.

• https://frmore.com/2022/02/08/chinese-new-regulation-for-education-is-a-win-win-for-all/
• https://seoagencychina.com/small-businesses-enter-china/
• https://mallinpallin.blogspot.com/2025/04/chinas-pharmaceutical-industry-deep.html
• https://www.linkedin.com/pulse/how-douyin-helps-small-brands-succeed-china-from-discovery-nfdqe/