The cable, dated Friday April 24 and sent to diplomatic and consular posts around the world, instructs diplomatic staff to speak to their foreign counterparts about “concerns over adversaries’ extraction and distillation of U.S. A.I. models,” the news agency reported on the same day.

Xiao Qian, deputy director of the Centre of International Security and Strategy (CISS) and vice-dean of the Institute for AI International Governance at Tsinghua University, wrote about the distillation on April 23 in the South China Morning Post. Xiao has kindly agreed to our dissemination of her commentary, a timely intervention.

I first came across her Chinese version at CISS’s blog within WeChat.

US-China AI race must strike a balance between security and openness

Raising barriers to entry in tech in the name of national security could stifle global AI development

The United States House Select Committee on China recently released a report on artificial intelligence. Titled “Buy What It Can, Steal What It Must: China’s Campaign to Acquire Frontier AI Capabilities”, it captures a hardening view in Washington that Beijing’s artificial intelligence rise is closely tied to both market access and security concerns.

Whether fully substantiated or not, such beliefs are increasingly shaping the policy lens through which technology competition between the two countries is understood in the US – less as a matter of innovation, and more as one of national security.

Against this backdrop, recent controversy over model distillation involving leading US firms – including OpenAI, Anthropic and Alphabet – has drawn a great deal of attention. The coordination among these companies, coming soon after Washington’s push to build a “full-stack AI export” system, suggests that what appears to be a technical dispute is in fact part of a broader shift in how AI is governed – and contested – globally.

At first glance, the debate over model distillation concerns technical pathways and intellectual property boundaries. Distillation is a widely used machine learning technique that enables smaller models to approximate the performance of larger ones, reducing computational costs and accelerating adoption. Its legal status remains ambiguous, and even US firms have used similar methods among themselves.

However, in today’s geopolitical environment, the issue has been reframed. Some US policymakers and companies argue that distilled models could be misused for cyber operations, disinformation campaigns or even military applications. What was once a question of optimisation has been elevated to one of national security.

This shift reflects a deeper transformation in AI governance in the US. Over the past few years, Washington has moved from a primary focus on AI safety – including ethical risks and algorithmic harms – towards a more security-driven paradigm centred on strategic competition and technological control. Rhetoric around safety has not disappeared, but it is increasingly fused with national security considerations.

This transformation is also taking place against a changing technological reality. The latest report by the Stanford Institute for Human-Centred Artificial Intelligence provides concrete evidence that the gap between the US and China in AI development is narrowing. The United States still leads in producing frontier large language models, but China remains highly competitive in scale and diffusion – accounting for the largest share of global AI publications and patents, and rapidly expanding real-world deployment. Meanwhile, benchmark gaps between leading US and Chinese models have further compressed in the latest evaluation cycles, particularly in applied and multilingual tasks.

This narrowing gap may help explain the growing sense of urgency – and, in some quarters, anxiety – in Washington. The framing of AI development as a race to be won has become deeply embedded in US policy discourse. As competition intensifies, maintaining technological leadership is no longer seen as sufficient; slowing competitors is becoming an equally important objective.

Institutionally, this shift has reshaped the relationship between the government and industry. Through advisory bodies, export controls and standards-setting initiatives, leading US technology companies are being drawn into a governance framework that aligns closely with national security priorities. The result is a form of embedded coordination: firms remain market actors, but they also function, in part, as instruments of strategic policy.

In this evolving system, firms such as OpenAI, Anthropic and Google are no longer just innovation leaders. They are becoming gatekeepers of frontier AI capabilities. Security is no longer only about managing risks; it is also about defining who gets access to advanced technologies, and under what conditions. In the name of national security, those big tech companies are capable of shaping competitive dynamics, raising barriers to entry for potential rivals.

This shift sits uneasily with the long-standing ethos of democratising technology, which has underpinned much of the digital economy’s expansion. As access becomes more tightly controlled, the diffusion of cutting-edge capabilities risks slowing, potentially limiting broader participation in innovation while also reinforcing asymmetries between those who control core technologies and those who depend on them.

A direct consequence of this shift is the narrowing of strategic options for developing countries. For many in the Global South, access to advanced AI capabilities depends on integration into existing technological ecosystems, often dominated by a handful of firms. Participation in these ecosystems comes with embedded rules and standards. Building independent capabilities, meanwhile, requires significant resources and time. The result is a structural constraint that risks deepening global technological divides.

As for AI global governance, where international discussions once focused primarily on ethics, transparency and safety, they are now increasingly shaped by geopolitical competition. Governance is no longer only about mitigating risks, but also about managing strategic advantage.

Excessive securitisation risks fragmenting the global technology landscape into competing blocs, raising costs for all and slowing innovation. This transformation complicates international cooperation, even as it makes dialogue in critical areas – such as military AI applications and infrastructure security – more urgent.

For China, these developments present both challenges and opportunities. On one hand, tightening external controls are constraining traditional pathways for acquiring advanced technologies. On the other, they are accelerating efforts to strengthen domestic innovation ecosystems.

In the long run, building a comprehensive AI ecosystem – spanning data, computing power, models and applications – will be essential for enhancing technological resilience. At the same time, China has an interest in preserving an open and inclusive international environment for AI development.

China’s policy approach – emphasising both development and risk management – may offer a useful perspective in this context. The challenge is not simply to respond to external constraints, but to contribute to shaping a governance framework that balances security with openness.

Ultimately, the controversy over model distillation is not an isolated incident. It is a reflection of a broader shift in the logic of technological competition, in which security considerations are increasingly embedded into market and innovation strategies.

Thus, the key question for the international community is not only how to govern AI risks, but how to prevent security narratives from becoming tools of exclusion. If standards, regulations and capability controls continue to be used primarily to raise barriers, global AI development may move towards a trajectory of structural fragmentation: leading systems consolidate their advantages by controlling critical capabilities, while others face growing technological and institutional constraints.

The task ahead is not to choose between security and openness, but to find a sustainable balance between the two. How this balance is struck will determine whether AI becomes a shared engine of global progress or another fault line in an increasingly divided technological world. (Enditem)

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Henry Huiyao Wang on How China’s patient diplomacy can help secure peace in Iran

Henry Huiyao Wang, founder and President of the Center for China and Globalization (CCG), wrote on Wednesday, April 22 in his opinion column in the South China Morning Post…

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4 days ago · 24 likes

Yet Dandan Zhang of Peking University argues that the issue is more complicated. For many workers, long hours are simply the price of earning enough. In that context, the more immediate concern is not leisure but income.

That, Zhang suggests, is the central dilemma. China is still at a stage where many households are building up savings and financial security, while firms face intense pressure to upgrade and remain competitive. If the state mandates shorter working hours without protecting workers’ income or providing broader policy support, companies may respond by cutting jobs, outsourcing more work, or replacing labour with machines. Workers could end up with fewer hours, but also less income and less security.

In Zhang’s view, a better approach would be a combination of raising the minimum wage and improving fiscal and tax policies to steer a greater share of social wealth toward workers.

Dandan Zhang is a Professor in Economics and Deputy Dean at the National School of Development (NSD), and Deputy Dean of the Institute of South-South Cooperation and Development, Peking University.

The transcript of the interview was published by Tencent Finance on 5 March 2026. The interview was conducted by 冯彪 (Feng Biao) of the Chinese tech giant's news outlet.

—Yuxuan Jia

张丹丹：零工劳动者工时明显偏长，缩减工时前提是保障工资水平

Dandan Zhang: Gig Workers Put in Too Long Hours, and Any Cut in Working Time Must Be Matched by Protection for Their Pay

Working Hours Are Long Across the Board, and Gig Workers Stand Out Even More

Q1: What is the overall picture of working hours in China today, and what stands out when compared with other countries?

Dandan Zhang: According to 2023 data, average annual working hours in OECD countries are generally below 2,000 hours. Assuming 50 working weeks a year, that comes to no more than 40 hours a week. In some developing countries, however, annual working hours reach 2,300 hours, or about 46 hours per week.

Compared with developed economies, working hours in China are relatively long. Several major household survey datasets, including the Chinese General Social Survey (CGSS), the China Health and Nutrition Survey (CHNS), the Chinese Household Income Project (CHIP), and the China Labour-force Dynamics Survey (CLDS), show that in 2023, non-agricultural workers in China were working more than 50 hours a week on average. That gives a broad picture of overall working hours. Of course, different surveys use different definitions and samples, so there are some variations.

Generally speaking, this kind of household survey covers a relatively low proportion of migrant workers, mobile populations, and gig workers, as many of them live in dormitories or on the urban periphery. Their working hours are also markedly longer than those of local urban workers.

Overall, differences in working hours are mainly shaped by a country’s stage of development, household wealth accumulation, and industrial structure.

Q2: You have spent years tracking migrant populations and gig workers. What do their working hours look like?

Dandan Zhang: Based on my sample survey data, among gig workers, those working in manufacturing plants generally work 10 to 12 hours a day. Even after taking out meal breaks and short rests, their actual working time is still no less than 10 hours, and they work six or seven days a week.

Take food-delivery riders, another segment of gig workers, as an example. My research shows that around 20 per cent of riders, mainly station-managed riders and crowdsourced riders in high-commitment schemes such as “Lepao” and “Youxuan”, complete nearly 80 per cent of all orders. Some of them worked an average of 12.6 days out of 14 days, with average daily working hours of 10.6 hours. Of that, about 6.5 hours were spent delivering orders, while around four hours were spent waiting for the next one.

These riders work at very high intensity and earn relatively higher incomes. In some cities, their monthly earnings can remain steadily above RMB 12,000 [$1,743]. The other 80 per cent are mostly crowdsourced riders. Their work is more sporadic, their income is limited, and their employment is much less stable and continuous. But many of these crowdsourced riders work part-time, so it is harder to calculate their total working hours.

I have also found that the gig sector likewise exhibits a polarisation, where “involution” and “lying flat” coexist. Some people work continuously for months on end, while others switch jobs frequently or work only two days a week. In fieldwork carried out in 2025 in places including Suzhou and Shenzhen, I found that some young workers preferred daily pay. They would work for two days, earn enough to cover a week’s living expenses, and then stop working. They also gave little thought to long-term issues such as social insurance, household registration, or starting a family.

Q3: China moved from a six-day workweek to a five-day workweek in the 1990s, and later introduced statutory holidays. Compared with historical data, what major changes can be seen in working hours?

Dandan Zhang: Broadly speaking, the year 2000 was a turning point. Before 2000, average weekly working hours were in the 40-plus range, still below 50 hours. After 2000, they gradually rose above 50 hours a week, and from 2006 onwards they remained at that relatively high level. One possible explanation is that after China joined the WTO, export orders grew rapidly, which lengthened working hours.

Any Cut in Working Time Must Be Matched by Protection for Workers’ Pay

Q4: At China’s current stage of economic transition, is it necessary and feasible to reduce working hours and increase leave?

Dandan Zhang: Given the current weakness in domestic demand and a low consumption rate, especially in service consumption, and considering workers’ physical and mental health, reducing working hours is certainly necessary.

That said, in terms of practical conditions, I have not studied other sectors, so I cannot make a blanket judgment. But at least for gig workers and food-delivery riders, I think it is very difficult at present to push for shorter hours and more leave.

I have quietly “lurked” in many WeChat groups for delivery riders, and I often see team leaders post messages saying, “There are a few rest slots available tomorrow; anyone willing to take leave can sign up.” Very few riders volunteer. In my fieldwork, the most common demand riders raise is not for more time off. What they want is more orders. The policy they dislike most is compulsory rest.

Some platforms also design their incentives so that riders only get a higher per-order rate once they have worked a certain number of hours. In other words, if they want to earn more, they have to work longer. Otherwise, their income does not go up. So if their earnings are not protected, talk of shorter hours and more leave is simply not very realistic.

Q5: In that case, which do you think is more urgent: raising hourly pay or cutting working hours? What policies would you suggest?

Dandan Zhang: There really is a dilemma here. If we want shorter working hours and more rest time, then workers’ existing income levels must not be allowed to fall.

But if higher wages are borne entirely by businesses or platforms, that raises costs, which could directly reduce employment. And with AI advancing so quickly, it could also accelerate the replacement of people by machines or shrink formal employment and encourage more outsourcing and gig work. If that happens, workers’ social security coverage and leave entitlements may become even harder to guarantee.

At the moment, one measure I can think of is raising the minimum wage, because that is something the government can directly influence. In my field research, I have found that when firms set wage levels, the benchmark they most often refer to is the local minimum wage. This is especially true in manufacturing, where pay for gig workers is highly sensitive to the minimum wage. Around 2010, minimum wages in many places were rising quite quickly, but in recent years the pace of increase has slowed.

At the same time, wage increases cannot fall entirely on firms. They also need fiscal support. At the policy level, there is now greater emphasis on “investing in people”. The recommendations for the 15th Five-Year Plan also state that “Personal incomes should increase in step with economic growth, and remuneration should rise in tandem with labour productivity increases”.

I think that direction is very important. Workers need money before they can have leisure. That also means the distribution of income and the broader flow of wealth in society need to tilt more towards labourers.

Q6: From the perspective of labour laws and regulations, where do you think further refinement is needed?

Dandan Zhang: Compared with the old standard working-time system, today’s gig work is fragmented. This makes overtime harder to define. Existing laws and regulations still lack more detailed standards, which leaves grey areas in enforcement.

I believe one point policy needs to pay particular attention to is this: many measures are introduced with good intentions and are meant to protect workers, but there is always a risk that, in practice, they may end up harming them instead. For example, a policy may be designed to protect workers’ wages and right to rest, but if the end result is unemployment or a further expansion of gig work, that would in fact be detrimental to workers.

Q7: Some firms are now voluntarily reducing working hours or giving workers more flexible schedules. There is also the phenomenon of younger entrants to the workforce—“the post-2000 generation is rectifying the workplace” by refusing to work overtime. How do you see these developments?

Dandan Zhang: I think it still depends on the underlying conditions. Shorter working hours require a certain level of wealth accumulation, whether in the form of a company’s financial strength or a family’s intergenerational wealth. Firms and individuals with those conditions can move first and experiment.

What worries me most is a one-size-fits-all approach. If it were imposed across the board, the negative impact on employment could be significant. Overall, I think China is still at a stage of household wealth accumulation, while also facing intense competition in frontier industries. Under those conditions, cutting working hours will be very challenging in the short term.

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Pekingnology

Life as a Migrant Food Delivery Rider in Shanghai

Pekingnology often delved into grand and overarching themes, often navigating the complex terrains of policy and abstract concepts. Today, let’s detour to zoom in on something distinctly more microscopic…

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3 years ago · 22 likes · 3 comments · Xinyi Qu and Zichen Wang

He also argues that resolving overcapacity is not a macroeconomic policy target, that China must preserve the breadth of its industrial system and full-chain independent control, and that stronger expansionary fiscal and monetary policies are needed to reduce external imbalances and stabilise growth.

For readers interested in Yu’s thinking on one of these points in greater depth, we recently published another article explaining his argument that “there is no consumption-driven growth model”.

—Yuxuan Jia

The following article was published on the official WeChat blog of Shanghai Development Research Foundation (SDRF) on 11 April 2026.

余永定：“十五五”期间的中国经济

Yu Yongding: China’s Economy During the “15th Five-Year Plan” Period

On 2 April, 2026, the Shanghai Development Research Foundation held its 200th academic salon. The featured speaker was Yu Yongding, Academician (学部委员) of the Chinese Academy of Social Sciences and the guest at the foundation’s very first salon. In this talk, Yu shared his reflections on the 15th Five-Year Plan and China’s economic trajectory, offering a systematic reading of the plan’s core priorities, clarifying key economic misunderstandings, and advancing a set of pragmatic policy proposals. Drawing on more than two decades of research, he examined the international environment, growth targets, consumption and investment, industrial-chain security, local government debt, and other major issues, providing a clear framework for understanding both the plan and the direction of the Chinese economy.

I. The “15th Five-Year Plan”: Assessments on the International Situation and the Positioning of Growth Targets

(1) Major assessments on the international situation

One of the most notable changes in the 15th Five-Year Plan is that the familiar language of “peace” and “development,” repeated for decades, is absent. That omission reflects the leadership’s grimmer assessment of today’s geopolitical environment. Global conflicts are frequent, geopolitical rivalry is intensifying, and the external environment facing China is more severe than in the first decades of reform and opening up. The drafting of the plan must therefore be highly aligned with the security environment, and the dual focus on development and security has become a core principle.

(2) The reasonable range of economic growth

As for the growth target, the 15th Five-Year Plan does not specify a particular growth rate, but instead proposes doubling per capita GDP by 2035 relative to 2020 and reaching the level of moderately developed countries. Yu Yongding noted that the prevailing academic consensus is that China’s economy needs to maintain an annual growth rate of 4.7% to 5% over the next five years to meet this long-term goal. In his view, the plan should be based on specific “point targets”, arguing that “range targets” complicate the coordination of plans across departments and regions.

(3) The concept of total factor productivity (TFP)

There is a general misunderstanding regarding the concept of total factor productivity (TFP). TFP is the part of output growth that cannot be explained by increases in capital or labour inputs, or the residual left over after the measurable contributions of factor inputs are stripped out. In the early 1980s, reforms such as the household responsibility system in agriculture and enterprise contracting sharply increased output despite limited increases in capital and labour. That unexplained increase was TFP growth.

But the gains from any particular reform are one-off and cannot continue indefinitely. Once these initial gains are exhausted, future output growth will depend primarily on input increases. At that point, the unexplained residual may fall to zero, and TFP growth will also fall to zero. However, that does not necessarily mean a decline in resource allocation or production efficiency. Therefore, TFP should not be treated as a rigid policy target. More practical indicators, such as labour productivity and capital-output efficiency, should be used instead.

II. Consumption and Investment: Breaking the Misconception of a “Consumption-Driven Economy”

Classical growth models and empirical research clearly show that long-term economic growth is driven by capital, labour, and technological progress. Consumption is not an independent variable in the production function, and consumption in the traditional sense is not a driver of growth. From Marx to the Harrod-Domar framework and neoclassical growth theory, the engines of growth have always been investment, labour, and technological advance, not consumption.

Cross-country empirical research also shows that consumption grows only after the economy grows, and consumption grows only after investment grows; the higher the consumption-to-GDP rate, the slower the consumption growth rate tends to be. Major global economies show a weak negative correlation between consumption rates and consumption growth.

Yu emphasised that some Western analysts advocate for China to shift from “investment-driven” to “consumption-driven” growth. However, such a proposition is a strategic trap that China must absolutely not adopt. Consumption (e.g., going to the gym) can serve as a driver of growth only insofar as it improves the supply of effective labour. But in this case, such “consumption” is an investment in human capital and is different from consumption in the usual sense.

III. Correct Understanding of “Vigorously Boosting Consumption”

It is necessary to distinguish between the consumption rate and the level of consumption: the consumption rate is a passive result, while raising the level of consumption is a development objective. In Sub-Saharan African countries, the consumption rate is close to 100%, yet they remain the poorest region in the world. A decline in the consumption rate may result from an increase in investment growth (as seen during China’s 2009 RMB 4 trillion stimulus package) and vice versa.

What China should pursue is a rise in the level of consumption, not an increase in the consumption rate, regardless of actual conditions. The rise or fall of the consumption rate should not be treated as a macroeconomic policy target. Doing so may conflict with the objective of achieving the desired economic growth rate.

At present, China faces insufficient effective demand. Actual GDP growth is lower than potential GDP growth, while consumption growth is lower than actual GDP growth. Under the present circumstances, stimulating consumption is indeed necessary. But the real challenge is not whether to expand consumption, but how to do so. Household consumption is a function of households’ permanent income. If current income and income expectations do not improve, it will be difficult for consumption to rise sustainably.

The key lies in improving household income expectations. Stabilising real estate prices, improving the social security system, refining the tax system, and equalising income distribution are all very important and must be actively advanced. But these tasks basically do not fall within the category of macroeconomic policy, and in the short term, they are unlikely to produce an immediately tangible effect on raising the economic growth rate. Issuing consumption vouchers and subsidising consumers may boost households’ temporary income and certainly can help promote consumption. However, their effect is likely limited and insufficient to reverse the current weakness in consumption.

To break the cycle where “raising growth requires boosting consumption” and “boosting consumption requires increasing growth,” the optimal choice is to increase infrastructure investment and raise its growth rate. In China’s current system, infrastructure investment is a macroeconomic adjustment tool in the government’s toolbox that does not depend on prior increases in household income or household consumption. Increasing infrastructure investment will increase long-term growth potential and address short-term effective demand gaps. Infrastructure investment not only has a significant multiplier effect, but can also generate a “crowding-in” effect that stimulates private investment.

The fundamental problem with distributing money directly or subsidising consumer goods to stimulate consumption is that: if the amount of money distributed is not large enough, the effect will be weak; if a large amount of spending is used to stimulate consumption, it may lead to a rapid rise in inflation. The U.S. experience from 2020 to 2022 offers lessons that should be learned.

The 15th Five-Year Plan mentions infrastructure 19 times, clearly laying out a comprehensive plan for national transportation networks, energy infrastructure, modern water networks, integrated computing power networks, and underground pipeline renovation. Underground pipeline renovation alone amounts to 700,000 kilometres, implying a massive investment opportunity. The 15th Five-Year Plan itself refutes the notion of “overcapacity in China’s infrastructure”.

Yu also pointed out that due to the public, long-term, and foundational nature of infrastructure, short-term profitability should not be overly emphasised with regard to infrastructure. Waste in some local infrastructure projects is indeed serious and must be corrected, but one should not overreact and abandon infrastructure investment altogether.

IV. The Problem of “Overcapacity”

China does indeed face overcapacity at both the industry and firm levels. In the main, overcapacity should be addressed through market mechanisms. If a particular industry or firm has excessive capacity and produces beyond demand, product prices will fall, and corporate profits will shrink. Firms in the affected sector will then close, merge, or restructure, reducing capacity. This adjustment process will continue until supply and demand return to equilibrium and prices stop falling. Industrial policy, such as environmental policy, can also play a role in resolving overcapacity. The persistence of overcapacity is related to deeper causes in the institutional arrangement and also to insufficient effective demand.

“Resolving overcapacity” is not a macroeconomic policy target. At the macroeconomic level, there are only two possible forms of imbalance:

• Aggregate demand exceeds aggregate supply (inflation, economic overheating)

• Aggregate demand falls short of aggregate supply (deflation, economic underheating)

Macroeconomic targets are growth, employment, price stability (2%), etc. There is no separate macroeconomic target of “eliminating overcapacity”, nor does the macro policy toolkit contain instruments specifically designed for that purpose. The fact that the “15th Five-Year Plan” does not mention “overcapacity” is worth reflection.

V. “Building a Modern Industrial System”

Given China’s special geopolitical position, its industrial system must have two features.

(1) Complete sectoral coverage, particularly in key sectors such as food, energy, steel, and information.

China has the world’s most complete industrial system. It is the only country that covers all industrial divisions, groups, and classes under the United Nations’ International Standard Industrial Classification, spanning 41 industrial divisions, 207 groups, and 666 classes. This does not, of course, mean that China must retain every section, division, group, and class.

(2) Complete industrial chains, especially for key products such as the production of central processing units (CPUs).

What households ultimately consume are final goods, but those goods are produced through long and multi-stage processes. Globalisation has fragmented the production of final goods, with different stages distributed across countries according to comparative advantage. Global industrial chains improve efficiency, but they also increase risk.

China should continue to participate actively in the international division of labour, leverage its comparative advantages, and improve resource allocation through trade and two-way investment. However, given China’s special geopolitical position, dependence on foreign sources in key sectors must be reduced as much as possible. For example, China’s external dependence on oil stands at 72%–78%, while that for natural gas exceeds 40%, underscoring the need to accelerate energy security building. In many critical products, including CPUs, operating systems, and industrial software, China must achieve full-chain independent control.

VI. Internal-External Balance and Risk Resolution

China has recorded trade surpluses of more than US$1 trillion for two consecutive years. At present, its current account surplus has risen to 3.7% of GDP (this figure still requires further verification). Dependence on external demand is relatively high, which could easily trigger trade frictions.

China should expand domestic demand, increase the fiscal deficit, and stimulate domestic investment and consumption; optimise export rebate policy to avoid excessive subsidy to overseas markets; and promote industrial relocation to central and western China rather than relying on one-way overseas relocation of capacity. In short, China should implement the central leadership’s strategy of “dual circulation, with domestic circulation as the mainstay.”

Current account surplus = (private savings – private investment) – fiscal deficit + investment income

This identity shows that China’s current account surplus exists because the gap between savings and investment is too large. The ways to balance the current account are:

1. increase consumption,

2. increase investment,

3. increase the fiscal deficit.

Put simply, a stronger expansionary macroeconomic policy would help rebalance China’s external trade. At the same time, export incentive mechanisms such as export tax rebates should also be reformed.

VII. Core Conclusions and Outlook

The 15th Five-Year Plan is firmly centred on both development and security. Its design is sound, and its direction is correct. China should continue to treat investment as the foundation and infrastructure as the stabiliser, reject the misconception of consumption-led growth, uphold manufacturing as the basis of national strength, and maintain full-chain independent control to safeguard national economic security. It should also straighten out the division of fiscal powers and administrative responsibilities between the central and local governments, defuse local government debt risks, seize the current policy window, and boldly implement expansionary fiscal and monetary policies. Provided policies are implemented effectively, and reform and opening up are upheld, China’s long-term growth potential will remain ample, short-term growth stabilisation targets can be successfully achieved, and China can steadily move toward the level of moderately developed countries.

At present, expansionary policy should be used boldly to finance infrastructure investment. Since the RMB 4 trillion stimulus, the contribution of the central government’s general public budget to infrastructure financing has been too low. China remains under deflationary pressure, while its fiscal position is relatively sound, its savings rate is high, and its stock of state-owned assets and net foreign assets is substantial. This means there is ample room for expansionary fiscal and monetary policy. There is no need to place excessive emphasis on “reserving policy space”. Instead, China should seize the current window to step up policy support, rather than risk losing room for manoeuvre once external shocks, such as rising oil prices or stagflation, begin to materialise. Under the leadership of the Party Central Committee and the State Council, China will certainly be able to maintain stable economic growth and successfully realise the second centenary goal of national rejuvenation.

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Hosted by the Center for China and Globalization (CCG), the Forum has, over the past eleven editions, become an important platform for international dialogue on global governance, major-power relations, regional developments, and cross-border cooperation. The 2026 Forum, under the theme “Innovating Globalization: New Drivers and Emerging Challenges”, will continue this tradition by providing a space for substantive exchange on some of the most pressing issues in international affairs today.

Event at a Glance

12th China and Globalization Forum

Host:​ Center for China and Globalization (CCG)

Co-organizers:​ China Association of International Trade

China Society for World Trade Organization Studies

China-US Exchange Foundation

Tsinghua University Schwarzman College

Date:​ April 26, 2026, 9:00 – 21:00

Venue:​ Beijing (Detailed venue information will be provided upon confirmation of registration.)

Participants

The Forum will bring together dozens of Chinese and international participants from government, diplomacy, academia, business, and international organisations.

Confirmed and invited guests include former senior officials from the United Nations and national governments, ambassadors and diplomats based in China, leading scholars from major universities and think tanks, and senior representatives from multinational institutions and enterprises.

Discussions throughout the day will draw on perspectives from public policy, international economics, diplomacy, business, and regional studies, with the aim of fostering informed and forward-looking dialogue across sectors and borders.

Core Themes and Agenda

The Forum is structured around a series of roundtable discussions addressing key issues in global governance and international cooperation.

Opening Roundtable:​

The Global Governance Order: Challenges and the Path Forward

Special Session on China-U.S. Relations:​

Navigating Dialogue and Cooperation in Technology, Trade, and Climate

China-U.S. Youth Dialogue:​

Fostering Exchange and Building the Foundation for Future Relations

China-Europe Relations Forum:​

European Strategic Trajectories and Prospects for China-Europe Engagement

Global South Dialogue:​

Development Cooperation, Regional Connectivity, and Emerging Opportunities

Closed-door Session:

The Prospect for Peace in the Russia-Ukraine War and Implications for China-Europe Relations（Invitation Only）

Gala Dinner Dialogue:​

In-Depth Perspectives on the Middle East Situation and Regional Security

All sessions are designed to prioritize interaction, featuring substantial Q&A segments and opportunities for direct, face-to-face dialogue.

Why Attend

The Forum offers participants a full day of access to high-level discussion on international affairs, global governance, major-power relations, and regional developments.

Participants can expect:

• Access to the opening session, keynote speeches, thematic roundtables, and gala dinner

• Direct engagement with policymakers, diplomats, scholars, and senior practitioners

• Opportunities for discussion during dedicated Q&A sessions and throughout the day’s programme

• A professional platform for exchange with participants working across diplomacy, academia, business, and public policy

• Forum materials, including keynote summaries, selected CCG research outputs, and related publications

• Chinese-English simultaneous interpretation throughout the event

• On-site support, refreshments, lunch, and gala dinner arrangements for confirmed participants

• Participants in this year’s Forum will also receive advance information on selected future CCG dialogues, seminars, and policy events.

Who Should Attend

• Diplomats from foreign embassies in China and representatives of international organisations

• Senior executives at multinational companies and Chinese enterprises with an international outlook

• Scholars, researchers, and think-tank professionals working on international affairs and public policy

• Professionals engaged in international cooperation, global investment, and cross-border exchange

Registration Notes

As seats are limited, registration is subject to review by the organising committee and places will be confirmed on a rolling basis.

Applicants will be asked to provide relevant personal and/or institutional information as part of the registration process. A conference fee will apply to confirmed participants. Detailed participation information, including the final agenda, venue address, and logistical guidance, will be shared upon confirmation.

Registration and Contact

For registration, please click the link below or scan the QR code.

For further enquiries, please contact:

Email: event@ccg.org.cn

Tel: 010-65611038

Appendix: List of Guests(in alphabetic order)

Thomas Biersteker: Emeritus Professor, Graduate Institute of International and Development Studies Geneva; Senior Fellow, United Nations University Centre for Policy Research (confirmed)

Chen Jian: Former Vice Minister of Commerce (to be confirmed)

George Chen: Partner and Co-Head of Digital Business, Asia Group (confirmed)

James Chau: President of the China-United States Exchange Foundation (confirmed)

Renata Dwan: Director of Technology Diplomacy, Simon Institute for Longterm Governance (confirmed)

Vebjørn Dysvik: Ambassador of Norway to China (confirmed)

Jens Eskelund: President of the European Union Chamber of Commerce in China (confirmed)

Victor Gao: Vice President of the Center for China and Globalization (CCG) (confirmed)

Gou Haodong: Former Deputy Representative of China to the African Union (to be confirmed)

Guo Shize: Founder and President of Yingzhong Overseas Consulting (to be confirmed)

Han Bing: Former Deputy Director General of the Department of European Affairs, Ministry of Commerce (confirmed)

Huang Dizhong: Vice President of the China-United States Exchange Foundation (confirmed)

Huang Xuifu: Founder of X Art Museum (to be confirmed)

Hou Shoushan: Chairman of Shenzhen Hanqingda Technology Co., Ltd. (to be confirmed)

Jiang Shan: Former Director General of the Department of American and Oceanian Affairs, Ministry of Commerce (to be confirmed)

Jiang Xipei: Founder and Chairman of Far East Holding Group Co., Ltd. (to be confirmed)

Jiang Yaoping: Former Vice Minister of Commerce (confirmed)

Jin Xu: President of the China Association of International Trade; Former Minister-Counselor for Commercial Affairs, Embassy of the People’s Republic of China in the United Kingdom (confirmed)

Jiang Zhongyuan: Founder of Kangfubao Group (to be confirmed)

William C. Kirby: Harvard University Distinguished Service Professor China Studies (confirmed)

Li Hua: Chief Legal Counsel of Contemporary Amperex Technology Co., Ltd. (to be confirmed)

Lan Lijun: Former Ambassador of China to Canada, Indonesia, and Sweden (to be confirmed)

Li Zhongzi: Chairman of Lisi Holdings and Founder of Lisi G9 International Manor (to be confirmed)

Gordon G. Liu, BOYA Distinguished Professor of Economics, Dean of the Institute for Global Health and Development, Peking University (to be confirmed)

Daniel Levy: President of the U.S./Middle East Project (confirmed)

Roberta Lipson: Honorary Chair of the American Chamber of Commerce in China; Founder of United Family Healthcare (confirmed)

Ma Enduo: Chairman and General Manager of Jinduoduo Food Group (to be confirmed)

Paolo Magri: President of the Italian Institute for International Political Studies (ISPI) (confirmed)

Kishore Mahbubani: Distinguished Fellow, Asia Research Institute, National University of Singapore; Former President of the United Nations Security Council (confirmed)

Ma Jianchun: President of China Society for World Trade Organization Studies; Former Ambassador of China to the Gambia (confirmed)

Ma She: Former Deputy Director General of the Department of European Affairs, Ministry of Commerce; Former Minister Counselor of the Embassy of China in France (confirmed)

David Meale: Head of China Practice, Eurasia Group; Former Deputy Chief of Mission, U.S. Embassy in China (confirmed)

Dario Mihelin: Ambassador of Croatia to China (confirmed)

Miao Lü: Co-Founder and Secretary-General of the Center for China and Globalization (CCG) (confirmed)

Min Hao: President, Dongwu Shian (confirmed)

Mohamed Amersi: Founder and Chairman of the Amersi Foundation (confirmed)

Chandran Nair: Founder and Chief Executive Officer of the Global Institute for Tomorrow (confirmed)

Steve Orlins: President of the National Committee on U.S.-China Relations (confirmed)

Sun Jie: Former Director of the Fund Department of the China Securities Regulatory Commission, former President of the China Securities Investment Fund Industry Association (to be confirmed)

Sun Yongfu: Former Director of the European Department of the Ministry of Commerce (to be confirmed)

Pan Qingzhong: Executive Dean and Professor, Schwarzman College, Tsinghua University (confirmed)

Peng Gang: Minister of the Mission of the People’s Republic of China to the European Union (confirmed)

Philip Pilkington: Senior Research Fellow, Institute of Foreign Affairs and Trade, Hungary (confirmed)

Vesselin Popovski: Professor and Dean, Jindal Global University, India (confirmed)

Qian Jing: Vice President, Asia Society (confirmed)

Susan Shirk: Professor, University of California, San Diego; Former Assistant Secretary of State for East Asian and Pacific Affairs, U.S. Department of State (confirmed)

Tang Haoxuan: Chairman of Feida International (to be confirmed)

Tang Min, Executive Vice Chairman of the YouChange China Social Entrepreneur Foundation, Vice Chairman of CCG, and former Counsellor of the China State Council (to be confirmed)

Tian Deyou: Former Economic and Commercial Counselor, Embassy of the People’s Republic of China in the United States (to be confirmed)

Achilles Tsaltas: President of the Athens Democracy & Culture Foundation (confirmed)

Selçuk Ünal: Ambassador of Turkey to China (confirmed)

Wang Huiyao: Founder and President of the Center for China and Globalization (CCG); Former Counselor of the State Council (confirmed)

Wang Mengyan: President, China, PMI (Philip Morris International) (confirmed)

Wang Qingyuan: Former Minister-Counselor for Economic and Commercial Affairs at the Chinese Embassies in Brazil, Argentina and Mexico (confirmed)

Wang Yiwei: Professor, School of International Studies; Director of the Institute of International Affairs, Renmin University of China (confirmed)

Wu Yanyan: Vice President, BMW Group (confirmed)

Xue Lan: Counselor of the State Council; Dean of Schwarzman College, Tsinghua University (confirmed)

Tan Sri Michael Yeoh: Chairman of KSI Strategic Institute for Asia Pacific (confirmed)

Tian Deyou: Former Economic and Commercial Counselor, Embassy of the People’s Republic of China in the United States (to be confirmed)

Zhang Jingan: Former President of the Science and Technology Daily, President of the China Association for Science and Technology Reform (to be confirmed)

Zhou Yanli: Former Vice Chairman of the China Insurance Regulatory Commission (to be confirmed)

Zhu Hailuan: Vice President of Sanofi China (to be confirmed)

Zhu Hong: Former Commercial Minister, Embassy of the People’s Republic of China in the United States (confirmed)

Accordingly, Shen highlights three key lessons for China in the global AI race. The first is to be wary of capital bubbles and ensure AI investments are grounded in the real economy. Second, China should invest in training programmes that promote human-machine collaboration and plan early for social policies that support flexible employment. Lastly, China needs to balance AI growth with energy infrastructure development, ensuring that technological progress does not outstrip the country’s energy infrastructure capacity.

Shen published this article in the “Peking University NSD Think Tank Series” column on Economic View of the China News Service on 22 January, 2026. It is also available on the NSD’s official WeChat blog.

Shen has kindly authorised its translation.

—Yuxuan Jia

沈艳：美国AI困局的三重警示

Shen Yan: Three Warnings of the U.S.’s AI Predicament

Recent in-depth reviews and analyses of The Wall Street Journal’s Tech News Briefing suggest that AI development in the United States is moving out of its capital-fuelled frenzy and into a phase of fiercer competition and structural adjustment. Technological iteration and capital spending are still rising at an exponential pace, and the competitive landscape is becoming more diverse. But the economic gains from AI have yet to be widely realised. Even so, its effects on productivity, the labour market, and energy infrastructure are already emerging, with the potential to drive bigger social and economic change.

Capital spending remains strong, but the market is growing more wary of whether returns will materialise, and whether a bubble is forming

A recent Teneo survey of more than 350 CEOs at listed companies found that more than two-thirds plan to increase AI spending over the next year. Yet this willingness to double down has not eased rising investor scepticism. In the summer of 2025, for example, an MIT report found that as many as 95 per cent of corporate AI pilot projects had failed. Then, in the autumn, a web of circular capital transactions among tech giants, including OpenAI, Nvidia, AMD, Oracle, and Microsoft, deepened concern that capital was becoming too concentrated and increasingly detached from real output.

The market is, in fact, moving beyond simple faith in technology and towards a harsher assessment of return on investment and the prospects for scalable profitability.

The competitive landscape is shifting sharply, with control of core infrastructure emerging as the key strategic high ground

The landscape of technological leadership is undergoing a dramatic shake-up. OpenAI’s lead once looked unassailable, but it has recently come under pressure from rivals such as Google’s Gemini. At the same time, in underlying infrastructure such as GPUs, giants including Google are trying to loosen Nvidia’s grip. Enterprise customers are moving away from dependence on a single provider and towards combinations of models from different vendors. The frontier-model market is entering a more contested, “warring nations” phase.

Energy, meanwhile, has overtaken capital and talent as the tightest constraint on the expansion of AI computing power. Analyses by the International Energy Agency and the Electric Power Research Institute point to a sharp rise in electricity demand from AI in the United States, turning energy supply into a major challenge for the national energy system. In 2024, data centres accounted for 4 per cent of total U.S. electricity consumption. A typical AI-focused hyperscale data centre consumes as much power each year as 100,000 American households. Some large AI data centre projects now under construction are expected to consume 20 times as much electricity as a typical existing facility.

The IEA projects that by 2030, total U.S. data centre electricity demand will reach 133 per cent of its 2024 level, placing severe strain on an ageing grid. China’s relative advantage in power capacity stands in sharp contrast to current U.S. grid conditions, adding to American anxiety over competition in AI. The future of the U.S. AI industry will therefore revolve around investment in new energy, including nuclear (such as Microsoft’s plan to restart the Three Mile Island nuclear plant) and geothermal power, and policy support effectiveness.

AI’s impact on the labour market is also harder to ignore, and the risk of structural unemployment is rising

The impact of AI on employment has entered a more concrete phase of job displacement. Amazon CEO Andy Jassy has publicly said that AI will reduce its corporate workforce, a sign that companies are shifting from “stockpiling” talent to optimising it. This carries two dangerous structural risks.

Entry-level white-collar positions are the first to face the threat of unemployment. A sharp decline in openings for recent graduates and young people entering the workforce could cut off the traditional starting point for a generation’s career progression, creating lasting mismatches in human capital.

Second, ongoing layoffs may become the new normal. At the micro level, AI-driven productivity gains could turn workforce reduction from a periodic adjustment into a steady, drip-feed process of optimisation.

From a macroeconomic perspective, while AI can create new jobs, these positions require highly specialised skills and will not fully offset the loss of large numbers of traditional roles. The result could be a labour market stuck in prolonged instability. If ordinary workers face declining incomes and weaker job security, then the goods and services produced through AI-enabled productivity gains may run into a demand shortfall, which would in turn drag on growth.

Insights into U.S. AI development trends and their economic impact

This leaves the United States at a critical crossroads in 2026. The technological race and the build-out of infrastructure (energy and semiconductors) will continue at speed. But the ability of the U.S. economy and society to absorb and adapt to these changes will face a severe test. The main pressures will fall in three areas.

The first is energy and digital infrastructure. If AI is to deliver expected profits, the United States must elevate the upgrading of the national power grid, the promotion of energy innovation, and the optimisation of data centre planning as matters of national strategic competitiveness.

The second is labour transition and the social safety net. The U.S. needs a large-scale and efficient reskilling system, as well as new forms of social protection and income distribution suited to an era of persistent employment volatility.

The third is systemic risk. Vigilance is required against sharp market swings caused by the gap between investment expectations and real returns, while in-depth research is needed into the potential dampening effects of automation on aggregate demand.

Even if Washington raises these issues to the level of national strategy, implementation will remain difficult. Take energy and digital infrastructure as examples.

The first difficulty is whether a distant solution can solve an immediate problem. Expansion of the ageing U.S. grid is nowhere near keeping pace with demand. In some regions, new projects must wait up to seven years for grid connection, and operators have already warned that “There is simply no new capacity to meet new loads”. However much the government tries to speed up approvals, the physical construction cycle of power systems remains badly out of step with the exponential growth of AI computing demand.

Another difficulty lies in resources and social equity. The vast electricity and water consumption of this build-out poses a twin challenge to local ecosystems and carbon-reduction goals. At the same time, the costs of the required infrastructure are being passed disproportionately to households and small businesses through higher electricity bills, potentially exacerbating regional inequality.

The United States also faces institutional friction stemming from intense political and social division. The federal government’s use of funding restrictions to pressure states into loosening regulation could trigger constitutional litigation and sharpen tensions between Washington and the states. Meanwhile, efforts to weaken AI ethics, safety governance, and environmental standards in pursuit of development have already drawn broad criticism and may leave the U.S. in a weaker position when global governance rules are set.

In sum, the United States has shown strong strategic intent and considerable capacity to mobilise resources, but deep-seated contradictions such as ageing infrastructure, political and social polarisation, and structural economic imbalance remain fundamental obstacles in this long contest.

The above analysis of trends in U.S. artificial intelligence development indicates that the pace of technological change may far exceed the capacity of social systems to adapt. That offers China three warnings as it develops its own AI sector.

The first is to guard against capital bubbles and technological myths. That means strengthening scrutiny of the commercial viability and integration of AI investments into the real economy, and emphasising that AI should be used to raise productivity across all sectors.

The second is to confront employment disruption and skills transition head-on. China needs to plan early for vocational training built around human-machine collaboration, and for social policies that support flexible forms of employment. AI development must remain people-centred, rather than being pursued at the cost of large-scale joblessness.

The third is to move beyond a narrow view of energy. Computing power, green energy, especially nuclear power, and grid upgrading need to be planned together as an integrated system of national strategic infrastructure to ensure the sustainable momentum of the technological revolution and keep social costs under control. That, in turn, requires a systematic approach to AI development, one that balances incentives for innovation, protection of people’s livelihoods, and national security.

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Justin Yifu Lin warns U.S. AI bubble will burst in 5 years, causing another international crisis

Justin Yifu LIN is Dean of the Institute of New Structural Economics, Dean of the Institute of South-South Cooperation and Development and Professor and Honorary Dean of the National School of Development (NSD) at Peking University. He was the Senior Vice President and Chief Economist of the World Bank, 2008-2012…

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China has made major gains at lower levels of education. Primary and junior secondary schooling are now nearly universal for younger cohorts. But upper-secondary completion and tertiary attainment remain relatively low, especially among the generations that make up most of today’s workforce. Compared with the United States, the G7, and even Russia, China still has a relatively large share of adults without upper-secondary education. In Lei’s view, faster investment in human capital is therefore essential to contain inequality and keep common prosperity within reach.

Her reform argument is that employers increasingly value analytical thinking, resilience, creativity, judgement, and communication. China, therefore, should not simply produce more STEM graduates or sideline the humanities and social sciences. It should strengthen the foundations of both the humanities and the natural sciences, promote deeper interdisciplinary training, and build an accessible lifelong-learning system for adults already in the workforce.

Lei made these remarks on 29 March 2026 at an NSD session on “investing in people”, a policy phrase that first entered China’s 2025 Government Work Report and was later reinforced at the Central Economic Work Conference in December 2025. Set against the country’s long emphasis on infrastructure and other forms of physical investment, it advocates for more resources into education, healthcare, skills, social welfare, and broader human development.

Lei’s remarks were published on the NSD’s official WeChat blog on 3 April. Lei has kindly authorised the translation.

—Yuxuan Jia

雷晓燕：教育如何应对老龄化与科技快进

Lei Xiaoyan: How Education Should Respond to Ageing and Rapid Technological Acceleration

Drawing on the twin trends of population ageing and technological transformation, I would like to offer several reflections on China’s human capital development strategy.

The future: fewer workers, smarter machines

A clear-eyed understanding is essential. The defining features of future society will be a smaller workforce and more intelligent machines.

Long-term demographic projections show that the shares of both the working-age population and children in China will fall markedly in the years ahead. In cross-country comparison, meanwhile, the growth of China’s population aged 65 and above far outpaces that of other countries. By the end of this century, China will become the world’s most aged society.

During the 2026 “Two Sessions”—annual meetings of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC)—the effects of declining birth rates among school-age children sparked extensive discussion. The data show that the number of pre-school children in China has long since peaked and entered a downward trend, while the population of compulsory-school-age children has also begun to decline. As this trend continues, the upper-secondary-school-age population will reach its peak within the next three years before beginning to decline. A few years after that, the number of university graduates entering the labour market will likewise fall substantially.

The impact of declining birth rates is now moving up through the education pipeline. It is placing new demands on the allocation of educational resources and the configuration of the education system, while also reshaping the future scale of the labour market. The central task of educational development in China must now shift from expanding quantity to improving quality. The same logic applies to labour-market development: China needs to cultivate a higher-quality workforce.

On the technology side, China is currently in a phase of rapid advance. One indicator of such progress is the installation volume of industrial robots and the structure of market supply. The data show that China’s annual installations of industrial robots have grown rapidly. In 2024, China accounted for 54% of total global installations, reaching 295,000 units. Of these, the share supplied domestically rose to 57% in 2024, an important reflection of China’s technological progress.

Another indicator of technological progress that is profoundly reshaping society is artificial intelligence (AI). According to Stanford University’s AI Index Report 2025, China is already a world leader in both the total number of AI-related academic publications and patent filings. The number of representative AI models developed in China continues to rise, second only to the United States. In top-tier AI model development, the gap between China and the U.S. is also narrowing steadily, demonstrating the speed and the level of China’s technological advance.

As the demographic dividend fades and technological progress accelerates, can China rely on a technological dividend to sustain economic and social prosperity? How will the relationship between technology and human beings evolve? These are questions that require serious reflection today.

History: if education fails to keep pace with technology, inequality widens

A central argument advanced by Nobel laureate Claudia Goldin in her influential work is that technological progress creates demand for highly skilled labour. If educational expansion, especially high-quality and inclusive education, can keep pace with or even outstrip technological progress, it can raise the skill level of the wider population and enable shared prosperity. Conversely, if education lags behind, technology will primarily benefit a small group of highly skilled workers, thereby widening income inequality.

This argument is borne out by the historical experience of the United States in the twentieth century. Data show that in the decades after 1950, average years of schooling among the native-born population in the U.S. experienced a degree of stagnation, even as the country was going through a period of rapid technological advance. Over the same period, income inequality widened continuously, and the wage gap between university graduates and high-school graduates expanded sharply. This supports Goldin’s argument: when educational development fails to keep up with technological change, the incomes of high-skill groups rise substantially, while those of middle- and lower-skill groups fall behind, leading to a persistent widening of inequality.

China today is also experiencing rapid technological progress, and in some fields it is already approaching the U.S. frontier. On the education side, the China Family Panel Studies (CFPS) conducted by Peking University estimates educational attainment across birth cohorts from the 1940s through the 1990s. The data show that, thanks to the spread of compulsory education, more than 90 per cent of those born in the 1970s, 1980s, and 1990s completed primary and junior secondary education, while completion of compulsory education among the 1990s cohort is close to universal.

Yet the picture is far less encouraging at the upper-secondary and tertiary levels. Even among those born between 1990 and 1994, the upper-secondary graduation rate is only just above 60 per cent, while the share with junior college education or above is only around 40 per cent. Among those born in the 1980s, 1970s, and 1960s, the share with junior college education or above is even lower. It is worth stressing that the cohorts born in the 1970s, 1980s, and 1990s still make up the core of China’s labour force today.

Compared with other countries, average years of schooling among China’s adult population have continued to rise in recent years, but the gap with the U.S., the G7, and even Russia remains substantial. According to the OECD’s 2024 data on adult educational attainment, the share of China’s population with below upper-secondary education remains high by the standards of the world’s major economies, while the share with upper-secondary and tertiary qualifications remains relatively low.

Turning to educational investment. Education is a crucial component of “investing in people”. Although China has achieved the goal of public education expenditure amounting to 4 per cent of GDP, a clear gap remains compared with economies such as the U.S. and the EU.

Taken together, and viewed through the lens of Goldin’s framework, these facts point to a real source of concern. China is now at a stage where technology is sprinting ahead while education is still catching up. Could this imbalance between technological and educational development lead to a continued widening of income gaps, making the goal of common prosperity harder to achieve? To realise common prosperity, China must step up investment in people so that education can catch up with technological change as quickly as possible.

The CFPS data reinforce this judgement. Across age groups, for both men and women, higher education yields higher income returns, and those returns persist throughout working life. This fully demonstrates both the necessity and the urgency of increasing investment in human capital.

The AI era: what kind of talent should education cultivate?

Once the case for investing in education is clear, the next key question follows: in the age of AI, what kind of talent should the education system cultivate?

There is already extensive debate in both academia and industry over whether AI will substitute for human labour or complement it. The World Economic Forum’s Future of Jobs Report, released at the end of 2025, offers a systematic forecast of changes in the occupational structure ahead. According to employer expectations, the fastest-growing jobs globally over the next five years will be concentrated in technology-related fields, including Big Data Specialists, Fintech Engineers, AI and Machine Learning Specialists, and Software and Application Developers. By contrast, the jobs expected to shrink most rapidly are concentrated in clerical and secretarial occupations, including Cashiers, Ticket Clerks, Administrative Assistants, Executive Secretaries, Printing Workers, and Accountants and Auditors.

This suggests that technology does not affect labour by simply replacing “people” in the abstract. Rather, it replaces specific combinations of skills, because different skill combinations entail different requirements for human capability.

So what are the core skills employers will value most in the future? According to the same report, the top five are analytical thinking; resilience, flexibility and agility; leadership and social influence; creative thinking; and motivation and self-awareness. All are what are commonly described as “soft skills”.

This shift is already visible in hiring markets. The number of newly posted AI-related jobs has been rising year after year, especially in sectors most affected by AI. Compared with non-AI-related roles, AI-related jobs demand almost twice as much in the way of “soft skills” such as resilience, flexibility, and analytical thinking. These soft skills also command a significant wage premium.

A recent empirical study by Professor Erik Brynjolfsson and his team at Stanford Graduate School of Business provides further evidence. The researchers equipped more than 5,000 customer-service workers with AI assistants and tracked changes in their productivity and work content. They found a strong complementary relationship between AI and human labour: machines took over standardised information-processing tasks, while human workers focused more on judgement, decision-making, customer care, emotional connection, and other soft-skill-intensive tasks, with a significant improvement in overall productivity. This offers a vivid demonstration of why soft skills matter in the age of AI.

The conclusion is clear. The education system of the future should not be producing workers trained for a single task. It should be cultivating broadly capable people who can work alongside AI, continue learning, solve complex problems, and bring human judgment and care to what they do.

I recently came across a news report saying that of more than 200 graduating students this year from the computer science school of a top U.S. university, only 23 had secured jobs. This clearly illustrates that even specialised computing skills risk being displaced by AI, and that narrow technical competence on its own is no longer enough to meet the demands of the future labour market.

How should the education system break with the old and build the new?

Having clarified the core objectives of education, the next step is to ask where China’s education system is actually heading. In the process of breaking with the old and building the new, what kinds of reforms are already underway?

Recently, Professor Shen Yan and I, together with other colleagues, completed a study on changes in university discipline structure in the AI era. Public discussion often frames the trend as “science and engineering advancing while the humanities retreat”. But what do the facts show? Using the Ministry of Education’s full dataset on adjustments to undergraduate majors nationwide, we carried out an analysis. The data show that after 2017, universities across China added more majors in the natural sciences while discontinuing a fair number in the social sciences. That is the broad picture of current adjustment in higher education.

We then looked more closely at the pattern of change before and after 2016. Using the share of discontinued majors on the vertical axis and the share of newly added majors on the horizontal axis, majors can be grouped into three categories: relatively expansionary majors, relatively contractionary majors, and structurally reorganised majors (where additions and eliminations occur simultaneously). The data show that even after 2016, most majors in the social sciences, economics, and management still fell into the category of structural reorganisation. By contrast, humanities majors such as languages and design had clearly moved into contraction. Perhaps more surprisingly, foundational disciplines within the natural sciences, such as mathematics, also appeared to be in relative contraction, a result that differed from what we had expected.

At the same time, interdisciplinary majors have been growing vigorously. Since 2016, the majors with the largest net increases have all been in AI and related interdisciplinary areas, with AI plus engineering and AI plus management expanding particularly fast.

These changes suggest that Chinese universities are responding to market demand for STEM talent—science, technology, engineering, and mathematics. The rapid growth of AI-related interdisciplinary programmes can also, to some extent, help students adapt to changes in the demand for future jobs.

But a simplistic tilt towards engineering at the expense of the humanities and social sciences would be risky. Many of the core capabilities needed in the future labour market, including critical thinking, ethical judgement, communication, collaboration, and cultural understanding, are cultivated precisely through the humanities and social sciences. These soft skills are the foundation of innovation for good and effective governance in a complex society.

Educational adjustment should not be a one-way contraction, but a structural reconstruction. China should strengthen the foundations of both the humanities and the natural sciences, while fostering deeper integration between the humanities and social sciences, and science and technology.

Beyond the national education system for children and young people, attention must also be paid to those already in the labour market. Those born in the 1960s are gradually reaching retirement age, but many remain active in the labour market. Those born in the 1970s, 1980s, and 1990s make up the main body of the workforce, and as noted earlier, there remains significant room to improve their overall level of education. For these groups, the key instrument of human capital investment is a lifelong learning system, with in-service education as one of its most important vehicles.

The OECD’s Education Policy Outlook 2025 reports participation rates in in-service education across age groups in member countries. Even in developed economies, adult participation in education remains relatively low, and it falls further with age. Given that the overall educational attainment of the labour force in OECD countries is already higher than in China, this suggests that China’s need for in-service education is even more pressing.

The main funders of in-service education are employers. But the training they provide tends to focus on firm-specific skills tied to production and operational needs. We further analysed the content of formal degree and non-degree education undertaken by adults. In formal education, adults tend to pursue higher credentials, including postgraduate programmes such as MBAs and EMBAs. In non-degree education, training is concentrated in employer-relevant skills such as health and safety, computing, and software applications. General skills, including foreign languages, creativity, numeracy, physical activity, and literacy, especially the soft skills needed in the AI era, account for a much smaller share.

We have not yet found equivalent Chinese data, but the existing evidence suggests that China’s supply of training in general adult skills and soft skills is even weaker than that of OECD countries. That also means the country needs to accelerate the building of a lifelong learning system.

If lifelong learning is left only to the spontaneous actions of firms and individuals, it will remain focused mainly on specific vocational skills. If China is to cultivate the broad soft skills workers need in the AI era, it must build a lifelong learning system jointly sustained by government, enterprises, and individuals, with government providing policy support and basic guarantees, enterprises signalling demand and offering financial support, and individuals supplying intrinsic motivation. Such a system would not only help workers adapt to rapid technological and social change; it would also form a core strategy for responding to population ageing and activating China’s existing stock of human capital.

Conclusion: education must move faster

At the bottom, the answer to the changes of the age lies in moving education forward. On that basis, I would offer four recommendations.

First, continue investing in education and close the gap between educational development and technological advances. Soft skills should be placed at the centre, and the pace of educational progress should at least match, and where possible, modestly anticipate, the pace of technological change. This is fundamental to preventing wider inequality and advancing common prosperity.

Second, redefine the goals of education by putting soft skills at the centre. Curricula and evaluation systems should be reformed so that education moves away from rote knowledge transmission and towards the cultivation of capabilities centred on analysis, creativity, and resilience.

Third, optimise the structure of higher education and promote deeper interdisciplinary integration. While supporting the development of emerging interdisciplinary fields, China should also value and renew education in the humanities and social sciences to cultivate sectoral leaders with both technical depth and humanistic sensibility.

Fourth, build a society-wide lifelong learning ecosystem. The barriers between education and work should be broken down, and every worker, especially those in mid- and later career, should have access to convenient and effective pathways for upgrading their skills.

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In a recent article, Wang argues that China’s income distribution has shifted sharply in the government’s favour since the 2008 stimulus era. Using a broader gauge of government spending than conventional national accounts allow, he estimates that the state’s effective share of economic resources rose from 19 per cent in 1998 to 41 per cent in 2020, driven by debt-backed investment, hidden local liabilities, and land revenues. That shift, he says, has crowded out household and corporate income, narrowed the space for market allocation, and entrenched a spending model that favours investment and administration over welfare. His remedy is less stimulus, more neutral macro policy, and a fiscal pivot towards social protection and consumption.

The article was published on 25 February on 大势看财经 Dashi Kan Caijing, a macroeconomics-focused channel under Caijing.

王小鲁：国民收入分配，正在发生什么变化？

Wang Xiaolu: What Is Happening to the Distribution of National Income?

Whether the structure of national income distribution is sound has direct impact on people’s well-being and for social equity.

This article examines how the distribution of income among the government, enterprises, and households in China has evolved since the start of reform and opening up, with particular attention to the government’s relationship with the other two sectors. Before turning to that analysis, however, it is first necessary to clarify several theoretical issues involved in accounting for national income distribution.

Some Theoretical Issues in Accounting for National Income Distribution

1.

In national accounting, neither gross primary income and gross disposable income include debt income. Bad debt, if occur, is normally treated as transfer of assets between creditor and debtor, without changing income distribution. This assumption is reasonable in generally. However, in some circumstances, this may not reflect the reallty. For instance, if governments or firms overdraw persistently, they may actually appropriate a part of national income, and, in fact, compressed household and corporate income. History offers many examples of governments running chronic fiscal deficits and relying on continuous borrowing to finance spending shortfalls. Such liabilities were never recorded as government income, yet neither were they ever fully repaid. Much the same can be said of heavily indebted corporations that ultimately collapsed under debt burdens they could not service.

Debt may be written off on paper, but the loss is ultimately shifted, through various channels, onto households and firms. Large volumes of unpayable debt therefore function, in substance, as a form of reverse transfer payment. Where this occurs on a significant scale, the pattern of national income distribution is actually changed.

There are many channels through which debt burden can be shifted to others. Banks, for example, may absorb bad loans by keeping lending rates above normal levels while suppressing deposit rates below them, thereby passing the cost of bad debt onto households and firms. Governments and enterprises may also roll over bad debt by borrowing new funds to service old obligations, concealing the underlying problem and pushing it indefinitely into the future, where repayment may never in fact occur.

Similarly, governments and enterprises may obtain funding through bond issuance or deferred payment. Once these liabilities turn bad, creditors’ claims are effectively wiped out. Some issuers may also be able to rely on their credit standing to issue long-term bonds at below-market interest rates, while the real value of those bonds erodes over time. In all such cases, the debtor in effect appropriates income that does not truly belong to it, while the creditor bears the loss. Disposable income that creditors nominally hold is, in substance, transferred elsewhere and have been spent.

When such practices become widespread, national income accounting that ignores debt transfer can no longer accurately reflect the true state of income distribution.

2.

Excessive money creation by the government is similar to the cases discussed above. Even when it is used to finance fiscal shortfalls, it should not, as a matter of statistical principle, be counted as government disposable income, since money creation does not itself generate new value. Yet it can still reshape the distribution of national income. It may erode the real value of money, generate inflation, thereby shifting costs directly onto consumers. It may also generate bubbles in property or equity markets, leaving homebuyers and shareholders to bear losses when those bubbles burst. In addition, it may fuel a bubble in the real economic sector through overcapacity, the eventual unwinding of which can sharply reduce, or even wipe out, the assets of investors.

The value of such losses is already recorded in the disposable income of consumers, homebuyers, shareholders, investors, creditors, and depositors. But the additional purchasing power created by excessive money issuance is used or absorbed by other sectors, thereby altering the effective distribution of income. These shifts, however, are not captured by the conventional measures of gross primary income or gross disposable income distribution.

3.

In national income accounting, premium income from the sale of land and other assets is not treated as value added and therefore does not enter either gross primary income or gross disposable income accounting. Under normal circumstances, this is appropriate because in most cases, such premiums simply reflect random variations in asset prices arising in the course of transactions. These changes may be positive or negative, and at the aggregate level, they may offset one another. When such a premium arises, the asset itself has undergone no physical transformation. Asset transactions of this kind, therefore, do not create new value.

Because of this accounting principle, the enormous land transfer revenues obtained by governments at all levels in China over many years were not entered national income accounting and were counted as an increase in government disposable income. In 2021, for example, governments at all levels received RMB 8.7 trillion in land transfer revenue. In the same year, local fiscal budget revenue amounted to RMB 11.1 trillion, central fiscal budget revenue to RMB 9.1 trillion, and other “government-managed fund revenue” to RMB 1.1 trillion, bringing total government revenue to RMB 30.1 trillion. Yet according to the National Bureau of Statistics’ national accounts, the total government’s primary income that year was only RMB 12.3 trillion, while total government’s disposable income stood at just RMB 18.5 trillion—roughly 60 per cent and 40 per cent below, respectively, the revenue actually received by the government.

Why is the discrepancy so large? The reason is that China’s land transfer revenue does not represent an ordinary transaction premium. Over the past few decades, China has undergone rapid urbanisation, with the urbanisation rate rising from 17.9 per cent in 1978 to 67.0 per cent in 2024. As the population shifted on a vast scale from the countryside to the cities, land was also reallocated accordingly, with large areas of agricultural land converted into urban construction land.

In economic theory, land, as a factor of production, derives its value from its marginal return, capitalised at the market rate of return on capital. In traditional agriculture, the annual marginal return per mu [0.164 acre] of land is typically only several hundred to one thousand yuan. In urban industry, commerce, and services, by contrast, the marginal return may reach tens of thousands or even hundreds of thousands yuan. It follows that agricultural land and urban construction land can differ in value by handred times. This gap reflects the vast productivity difference between traditional agriculture and modern urban sectors, and the later enhanced by urban agglomeration effect.

Seen in this light, the large-scale conversion of agricultural land into land for modern industries during urbanisation is a process of major resource reallocation and optimisation. It is also part of the process of modernisation. The resulting increase in land prices is therefore not an ordinary transaction premium, but a genuine increase in value. National income accounting theory should accordingly be refined to distinguish between ordinary premiums in market transaction which do not create value, and creation of new value of land arising from optimal reallocation of land resources. Income generated by the latter should be recognised as disposable income accruing to the beneficiary.

The reason national income accounting theory does not distinguish between these two cases is largely historical. By the time the theory and its accounting methods were developed, the major Western economies had already passed through their phase of large-scale urbanisation. What prevailed in their markets was routine land trading, rather than large-scale reallocation of resources amid an economic transformation. This is likely the main reason the latter case was overlooked.

In China, the reallocation of land during urbanisation is taken place under specific institutional constraints. Under the current regulation on land, the conversion of agricultural land into urban construction land should be carried out by local governments only, which expropriate and develop the land, provide compensation to rural collectives, and transfer land-use rights through negotiated transfer, auction and other channels. The proceeds from land auctions can be hundreds of times greater than the cost of land acquisition, making land transfers an immense source of local government revenue. This reallocation of land resources does not occur under competitive market conditions, but within a monopolised market structure. Land prices are therefore monopolised , typically above the equilibrium level that would prevail in a competitive market.

As a result, transaction prices in China’s primary land market in fact contain two components. The first is land value as determined by its equilibrium price. The portion of which above the cost of expropriation—assuming expropriation cost is equal to the shadow price of agricultural land—constitutes value appreciation. The second is monopoly profit arising from monopolistic market power, namely the portion above the competitive equilibrium price. Theoretically speaking, this second component is not value appreciation. But under the principles of national income accounting, monopoly profit should still be counted as part of the seller’s disposable income.

It follows that, during the urbanisation process, land transfer revenue in the primary land market should be regarded as bona fide disposable income of local governments.

In sum, under certain specific conditions, using primary income and disposable income as calculated under the current national accounting framework to study China’s national income distribution may produce serious distortions. The discussion that follows, therefore, relies primarily on a comparison between the government’s actual expenditure and the official data of its primary income and disposable income to examine the actual pattern and its change in national income distribution. The reason for using expenditure as a proxy for income is that expenditure captures not only the spending entity’s disposable income, but also debt-financed income and land revenues, and may therefore offer a more faithful picture of reality.

Trends in Income Distribution Among Government, Enterprises, and Households

In a country where the people are the masters of the country, total output—usually measured by gross domestic product (GDP) or gross national income (GNI) should accrue to the people. Two basic deductions, however, must first be made.

The first deduction is the share that must be allocated to the government to meet the needs of society as a whole. This constitutes government income and may, in functional terms, be divided into three categories. The first consists of expenditure directly devoted to public welfare and social protection, including public education, public healthcare, social security, other forms of household welfare, and transfer payments to low-income and vulnerable groups. The second covers spending arising from citizens’ collective needs, including national defence, public security, foreign affairs, infrastructure, and basic scientific research. The third is the portion required to maintain the operation of government itself, derived from the needs of the first two categories.

The scale and allocation of these three categories of government expenditure should follow several basic principles.

First, spending directly devoted to public welfare and social protection is indispensable, but it must remain consistent with the country’s level of economic development. If it is too low, it will fail to meet people’s needs; if it is too high, it amounts to living beyond current means and imposes a burden on future development. At the same time, such spending should follow the principle of equalisation in basic public services, benefiting all citizens rather than favouring some groups over others, resulting in inequitable distribution.

Second, spending on derived needs such as national defence, public security, and infrastructure must be guided by the criterion of maximising the public interest. Externally, the state should not wage wars that do not serve the people’s interests or use superior strength to bully weaker parties. Internally, it should not invoke public security to suppress the legitimate demands and dissenting views of the people. Public investment in infrastructure and related areas must also align with the principle of social cost-benefit rationality: if too little, it will constrain socio-economic development; if too much, it will generate inefficient investment and waste public resources.

Third, spending required to sustain the government’s own operations should be limited to what is necessary to support the first two categories of need. If insufficient, the government cannot function effectively; if excessive, it becomes a wasteful misuse of public resources. More is not better. Excessive spending of this kind can also foster corruption and entrench vested interests. Government should have no special interests separate from the public interest, still less should it place its own interests above those of the public.

The second deduction is the income that must remain with enterprises, separate from both household and government income, in order to sustain their normal operation and development. Enterprises are the basic units of the economy. Only when they develop soundly can the economy grow, and only then can households’ future incomes be secured.

In a market economy, the distribution of income between enterprises and households is generally formed through market competition within a given legal framework. Households receive income in the form of wages, interest, dividends, rent, bonuses, and other returns, while enterprises retain operating surplus after dividend and bonus payments—that is, undistributed profits—as well as net property income. These income flows are usually determined by market supply and demand and by firms’ operating performance. But government and the central bank also influence them through such tools as minimum wage policies, taxes on different types of income, fiscal subsidies, transfer payments, and interest-rate intervention, to keep the distribution of income between enterprises and households within a reasonable range.

As the above discussion shows, in the distribution of income among the government, enterprises, and households, the government’s relationship with the other two sectors is the decisive variable, while the distributional relationship between enterprises and households is shaped mainly by the market, with the government playing a supplementary regulatory role. The discussion below, therefore, focuses on the government’s role in income distribution and how that role has evolved. To avoid the data distortions discussed in the first section, the analysis measures the share of comprehensive government expenditure in gross national income (GNI), using two indicators.

Comprehensive Government Expenditure I

In China, government expenditure extends beyond budgetary fiscal spending to include outlays through several other accounts, including government-managed funds (including land revenue), social insurance funds, and state capital operations. From 2010 onwards, these components are consolidated in the calculation of comprehensive government expenditure. For earlier years, the calculation is based on a combination of fiscal budget expenditure, expenditure financed by extra-budgetary funds (for which revenue data are used as a proxy in the absence of expenditure data), expenditure financed by land transfer fees (proxied by land transfer revenue), and expenditure from social security funds (from 1989 onwards). (Author’s note: for data after 2010, the portion of fiscal budget expenditure used to supplement social insurance funds has been excluded to avoid double-counting with social security fund expenditure. For data before 2010, state-owned enterprise income has been excluded from extra-budgetary funds revenue, since it does not constitute government income.)

The resulting ratio of comprehensive government expenditure to GNI can be a proxy of the share of economic resources actually allocated by the government (part of which is used for redistribution). It can therefore be compared with the official data of government’s share of gross primary income. The key distinction between the two measures is that the expenditure-based measure includes both debt-financed resources and land transfer revenue. Figure 1 presents this comparison, although data on gross primary income are unavailable before 1992.

Figure 1 shows that comprehensive government expenditure (I) rose rapidly and persistently from 1998 to 2020, increasing from 19 per cent to 41 per cent of GNI. This points to a steady expansion in the government’s role in resource allocation over this period, meaning that the combined share of enterprises and households fell sharply.

By contrast, the official data of government’s share of total primary income remained stable at 11–16 per cent, meaning the combined share of enterprises and households remained as high as 84–89 per cent. The great difference shaows the failure of it to capture the substantial changes in national income distribution.

Comprehensive Government Expenditure (II)

This measure is derived by excluding social insurance fund expenditure from comprehensive government expenditure (I) and adding back the annual balance of social insurance funds. Social insurance funds are the single largest component of income redistribution. With this deduction, comprehensive government expenditure (II) is used as an approximate comparator for the government’s total disposable income. As before, the key difference is that the former includes government debt-financed income and land transfer revenue.

The comparison reveals essentially the same pattern as Figure 1. Between 1998 and 2020, comprehensive government expenditure (II) rose rapidly from 17 per cent to 35 per cent of GNI, while the government’s total disposable income remained within a range of 14–21 per cent throughout the period. Here too, the income measure fails to capture the marked expansion in the government’s domination over resources. For reasons of space, no separate figure is presented.

To examine more fully how the government’s role in resource allocation has evolved since the start of reform, Figure 2 traces the shares of comprehensive government expenditure (I) and (II) in GNI from 1978 to 2024.

Figure 2 shows that, at the start of the reform era, comprehensive government expenditure accounted for about 40 per cent of GNI. After reform and opening up began, however, this pattern changed dramatically. As the government delegated power and shared benefits to enterprises and households, and as the economy shifted towards a market-based system, the government expenditure share fell sharply from 40 per cent in 1978 to 15–17 per cent in 1995.

It was precisely during this period of gradual government withdrawal from resource allocation that market-oriented township and village enterprises and private firms were able to expand rapidly. By the mid-1990s, the non-state sector was estimated to have accounted for more than half of total output. Household incomes also rose quickly, and living standards improved markedly.

Alongside market-oriented reform, the economy sustained an average annual growth rate of 9.7 per cent over 37 years. Above all, this owed to the rapid rise of the market-oriented private sector from near non-existence to a major economic force. Private firms competed actively, responded quickly to changes in market supply and demand, and operated with stronger incentive mechanism. As a result, they tended to be more efficient and to achieve faster technological progress. This was the most important driver of rapid economic growth.

At the same time, the sharp fall in the government’s share of revenue and expenditure also had some negative consequences, most notably a along with the decline in government revenue, the government capacity to provide public services was weakened. To address these problems and to clarify the respective powers, responsibilities, and revenue assignments of different levels of government, the tax-sharing reform was introduced in the mid-1990s. Following this reform, the share of comprehensive government expenditure rebounded and, after 2003, remained broadly stable for a short period at 27–28 per cent.

That pattern was broken, however, by the large-scale fiscal and monetary stimulus introduced in response to the 2008 global financial crisis. With monetary supply extremely loose, local governments were allowed to establish financing vehicles and borrow heavily for investment, and substantial amounts of local government debt went unpaid. As a result, comprehensive government expenditure began to rise rapidly and continuously. This dual loosening of monetary and fiscal policies did not end with the global financial crisis. Instead, the ratio of government expenditure to GNI continued to increase, exceeding 41 per cent by 2020 and rising above its pre-reform level.

This altered the relatively favourable pattern of national income distribution that had taken shape after reform. Because the principle of market-based resource allocation was not fully realised, government investment came to include large amounts of low-efficiency spending, leading to a decline in overall investment efficiency and total factor productivity. At the same time, an excessively high investment rate crowded out consumption, leaving demand too weak to sustain growth. Prolonged monetary stimulus also drove excessive investment, resulting in widespread overcapacity, mounting pressure on business operations, and falling profitability.

After 2020, the government expenditure share declined modestly. The main reason was the sharp fall in government land revenue following the collapse of the property bubble. Compounded by difficulties of burgetary revenue, government spending was constrained.

The prolonged rise in the government’s expenditure share has, in effect, changed the rules of “dividing the economic pie”, crowding out both enterprise and household income. Yet the Flow of Funds Table of China shows that in 2023, households still accounted for 61.2 per cent of gross disposable income, enterprises for 22.4 per cent, and the government for only 16.4 per cent. Given the scale of government expenditure, these figures clearly fail to capture the true pattern of resource allocation.

In recent years, mounting pressures on business operations, slow household income growth, and a falling consumption rate have all pointed to the adverse effects of changes in income distribution. Household consumption has, for several consecutive years, accounted for less than 40 per cent of GDP, compared with around 50 per cent in the 1980s and 1990s, after the start of reform. This is far below the level seen in most other countries. Excessive government involvement in resource allocation is also an important driver of pervasive corruption, with significant consequences for income distribution.

Alongside the expansion of government expenditure, the structure of government expenditure also has an important impact on national income distribution. Table 1 compares the structure of China’s comprehensive government expenditure (I) in 2020 with that of 35 OECD market economies, excluding a few countries for which data are unavailable.

Table 1 shows that, in 2020, China’s ratio of comprehensive government expenditure to GDP was similar to the OECD average, but the composition of that spending was markedly different. In OECD countries, the shares of social security, public healthcare, and public education in total government expenditure were each far larger than in China. Taken together, these three livelihood-related categories accounted for an average of 66 per cent of government expenditure across the OECD, compared with only 33 per cent in China. This suggests that, in most OECD economies, the bulk of public spending is channelled directly into social welfare or takes the form of transfers that raise household disposable income. In China, by contrast, only around one-third of government expenditure is allocated to the main livelihood-related items. Meanwhile, the shares devoted to administrative expenditure and government investment are much higher than in OECD countries.

It should also be noted that budgeted investment in China represents only a small portion of total government investment, accounting for less than one-fifth of “state-holding investment”. Most government investment is financed through borrowing and land transfer revenue. In 2020, state-controlled investment exceeded RMB 26 trillion, accounting for 59 per cent of total fixed-asset investment in the economy that year.

(Author’s note: The National Bureau of Statistics’ series on “state-holding investment” appears to include both government investment and investment by state-holding enterprises, but provides no explanation and does not distinguish between the two. Since 2018, the Bureau has stopped publishing the absolute level of state-holding investment and now reports only the growth rate. The figures used here are therefore calculated based on those published growth rates.)

This points to a high degree of government command over resources and a major departure from the more market-oriented pattern of resource allocation seen in the early reform period. Taken together, these developments suggest that both the scale and the composition of government expenditure have important consequences for national income distribution.

An important factor behind the expansion of government expenditure has been debt expansion. Debt cannot increase genuine GDP, but it does have a very real impact on the position of households and enterprises in national income distribution. China’s macro leverage ratio—the ratio of combined debt owed by government, non-financial enterprises, and households to GDP—has risen sharply over the past 26 years, climbing from 114 per cent of GDP in 2008 to 300 per cent in 2024, according to data on debt-based aggregate financing to the real economy published by the People’s Bank of China and the macro leverage ratios reported in the China Financial Stability Report.

The macro leverage ratio consists of debt owed by the government, corporate, and household sectors. How much does each account for? Table 2 draws on recent data from the China Financial Stability Report by the Centure Bank, while also offering an estimate of hidden government debt and making some corrections for distortions caused by misclassification.

It is now widely accepted that local governments at all levels carry a substantial amount of hidden debt. Much of this stems from the policy shift in 2008, when both monetary and fiscal policy turned expansionary. Since then, local authorities have set up large numbers of financing vehicles, including so-called “urban investment companies”, to borrow on behalf of governments and fund large-scale investment. Because these entities are usually registered as enterprises, their liabilities are counted in the statistics as corporate debt. In reality, though, they are not genuinely independent firms operating in the market, but financing arms of local governments. Their liabilities are therefore government debt in all but name. This means that the government debt figures reported by the People’s Bank of China in Table 2 are likely to understate the true burden of public debt, while corporate debt is correspondingly overstated.

How large, then, is hidden government debt? Estimates vary enormously. As of 2022, they ranged from RMB 13 trillion to RMB 70 trillion. The lower estimate, however, covers only the bond liabilities of local government financing vehicles and is therefore highly incomplete. The upper estimate, by contrast, may fail to exclude the portion that has in recent years already been converted into explicit government debt. For present purposes, RMB 50 trillion is provisionally adopted as a rough, and relatively conservative, estimate of hidden government debt in 2023 (also see an estimate by Zhang Ming, Deputy Director of the Institute of Finance and Banking at the Chinese Academy of Social Sciences), and the 2023 sectoral debt figures in Table 2 are revised accordingly.

On this basis, actual government liabilities in 2023 may need to be revised upwards from RMB 71 trillion to RMB 121 trillion, with the government leverage ratio (government debt to GDP) correspondingly rising from 56 per cent to 96 per cent. Corporate debt, by contrast, may need to be revised downwards from RMB 212 trillion to RMB 162 trillion, reducing the corporate leverage ratio from 168 per cent to 128 per cent. The household leverage ratio remains unchanged at around 72 per cent. The final row of Table 2 reports these revised estimates.

On a rough calculation, over the 14 years from 2008 to 2023, the revised government leverage ratio rose sharply from below 30 per cent to 96 per cent, an increase of more than 66 percentage points. This suggests that the expansion of government debt was the principal force pushing up the macro leverage ratio over the period. Hidden government debt is the riskiest component of that process.

After revision, the corporate leverage ratio in 2023 stands at 128 per cent. It is estimated to have risen by around 60 percentage points since 2008, making it the second-largest contributor, after government leverage, to the overall increase. The main driver was the excessive build-up of liabilities in the real estate sector. Over the same period, the household leverage ratio is estimated to have risen by around 50 percentage points, which is likewise substantial. Here too, the main driver was the expansion of housing-related debt, especially mortgage borrowing, again reflecting the overexpansion of the property sector. That overexpansion, in turn, was itself the product of unrestrained borrowing and prolonged monetary stimulus.

Ways to improve the national income distribution

It is clear that, since 2008, China’s pattern of national income distribution has evolved in several undesirable ways. These developments are closely linked to the crowding-out effects of large-scale government debt-financed investment and prolonged monetary easing on corporate and household income, as well as the resulting narrowing of the market’s role in resource allocation. They are also closely related to the structure of government expenditure, in which transfers to households have remained relatively limited, while direct government investment and administrative spending have been comparatively high.

To change this pattern, the basic objective of macroeconomic policy should shift away from short-term growth stimulus and towards safeguarding the long-term health of the economy and society, promoting a more balanced distribution of national income, and maximising long-term public welfare. This requires monetary policy to return to a neutral stance, and fiscal policy to move away from its heavy reliance on expanding government investment and towards improving livelihoods and supporting consumption, while reducing non-essential and inefficient investment and administrative expenditure.

The structure of government expenditure also needs to be reoriented, with greater emphasis placed on strengthening public services and social protection, improving household and corporate income and welfare, and ensuring that all citizens share in the gains from development, while leaving the primary role in resource allocation to the market. This requires further government reform and a transition from an all-encompassing, GDP-centred state to a more service-oriented one. Consideration should also be given to using a sufficient volume of state-owned assets, whether through market transfer or direct allocation, to strengthen the social security fund, reduce the contribution burden on firms, and promote universal social security coverage. Finally, the existing household registration system, which continues to divide urban and rural residents, should be reformed as soon as possible so that equal treatment as citizens can be realised at an early date.

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Cheng was joined by senior Kuomintang officials, including Vice Chair and Secretary-General Lee Chien-lung, Vice Chairs Chang Jung-kung and Hsiao Hsu-tsen, and other party figures. The Xinhua readout said senior CPC leaders including Wang Huning and Cai Qi also attended.

The following is an English translation of the opening, on-the-record portion of the meeting between Xi Jinping and Cheng Li-wun, which was open to the media. Xi spoke first; his remarks below are transcribed from livestream footage. Cheng’s remarks follow and are based on the official transcript published on the KMT website. The meeting then continued in private, followed by a luncheon.

In the afternoon, Cheng held a press conference. An English translation, transcribed from livestream footage, is also included below.

All the emphasis is ours.

I would also recommend Fred Gao’s translation of the Xinhua readout and his observations.

—Yuxuan Jia

Xi-Cheng Meeting

Xi Jinping

Compatriots, friends,

Greetings. It gives me great pleasure to meet all of you at this season of spring warmth and blossoming flowers. Yesterday brought the drizzling rain of the Qingming season, while today is bright and sunny. I am delighted to see you all.

After an interval of ten years, the leaders of our two parties are meeting once again. Ten years have passed in what seems like no time at all. Who was here when we held our last meeting? [Cheng Li-wun points at Chang Jung-kung] Yes, exactly. That is right.

This meeting carries great significance for the development of relations between our two parties and for the development of cross-Strait relations.

First of all, on behalf of the Central Committee of the Communist Party of China, I wish to extend my welcome to Chair Cheng Li-wun and the delegation on their visit.

Compatriots on both sides of the Taiwan Strait are all members of the Chinese nation. [Xi turns to Lee Chien-lung] Eight generations in Quanzhou. [Lee is reportedly ancestrally from Anxi, Quanzhou, in Fujian Province.] The Chinese nation is a great nation with a civilisation spanning more than 5,000 years, and its history can be traced back even further. Including our Taiwan compatriots, people of all ethnic groups have jointly opened up the vast territory of our motherland, jointly created a unified multi-ethnic country, jointly written the splendid history of China, jointly fostered the magnificent Chinese civilisation, and jointly cultivated the great national spirit. In the process, they have also forged the common conviction that our territory cannot be divided, our country cannot be thrown into disorder, our nation cannot be fragmented, and our civilisation cannot be severed. This conviction has guided the Chinese nation in striving continuously to strengthen itself and ensured the continuity of Chinese civilisation through the ages.

Despite the vicissitudes of history, Taiwan compatriots have never forgotten that their roots are on the mainland, that their hearts are with the motherland, and that their souls belong to the Chinese nation. Even during the bitter years when Taiwan was occupied, Taiwan compatriots maintained a strong sense of belonging to the Chinese nation and a deep attachment to Chinese culture, proving with their blood and lives that they are inseparable members of the big family of the Chinese nation. The Chinese roots and the Chinese soul shared by all sons and daughters of the Chinese nation come from our bloodlines, are grounded in history, and are etched in our hearts. They can never be forgotten, nor can they ever be erased.

At present, changes unseen in a century are accelerating across the world. Yet no matter how the international landscape or the situation in the Taiwan Strait may evolve, the overarching direction of human development and progress will not change, the prevailing trend toward the great rejuvenation of the Chinese nation will not change, and the great tide of compatriots on both sides of the Strait becoming closer, more connected, and coming together will not change. This is the verdict of history, and we are fully confident of it.

Today’s world is far from tranquil, and peace is all the more precious. Compatriots on both sides of the Strait are all Chinese, members of one family. To seek peace, development, exchanges, and cooperation is the shared aspiration. The meeting between the leaders of our two parties today is precisely to safeguard the peace and security of our common home, advance the peaceful development of cross-Strait relations, and enable future generations to share in a better future.

We are willing, on the common political foundation of upholding the 1992 Consensus and opposing Taiwan independence, to strengthen exchanges and dialogue with all political parties including the Chinese Kuomintang, groups, and people from all sectors in Taiwan society to work for peace across the Strait, for the well-being of our compatriots, and for the rejuvenation of the Chinese nation, and to keep the future of cross-Strait relations firmly in the hands of the Chinese people ourselves.

That is all I wish to say. Next, I would like to hear Chair Cheng Li-wun’s views.

Thank you.

Cheng Li-wun

General Secretary Xi Jinping, distinguished leaders, ladies and gentlemen:

Today, after a lapse of ten years, leaders of our two parties are once again able to come together under the same roof for exchanges. At this very moment, I feel deeply that the attention of the world, and the heavy responsibility entrusted to us by history, rest upon each and every one of us here. What we face together today is an age of profound turbulence and uncertainty, but also an age full of hope; an age in which conflict has spread more widely than at any time since the Second World War, yet also one that may, after painful reflection, inspire all sides to rebuild peace with renewed resolve. Where cross-Strait relations go from here is a question we must face together.

There is no denying that, over more than a century of interaction, the relationship between the Kuomintang and the Communist Party has seen many twists and turns. Yet what we have both pursued, throughout, has always been to lead the Chinese nation from decline to rejuvenation. Since Chairman Lien Chan’s ice-breaking Journey of Peace in 2005, our two parties have, with a forward-looking historical vision and from the vantage point of the nation and the times, worked to advance reconciliation and peaceful development across the Strait.

In fact, peace and reconciliation across the Strait should be only the starting point of the joint efforts of our two parties. We bear an even greater responsibility and mission toward the people on both sides of the Strait, and toward all sons and daughters of the Chinese nation. Therefore, the “great rejuvenation of the Chinese nation” must be a shared rejuvenation for people on both sides of the Strait. It must be a renewed awakening and flourishing of the spirit of Chinese civilisation. It must also embody a broad-minded vision of Great Harmony (大同), rooted in compassion for humanity, and make a positive contribution to world peace and human progress. I firmly believe that this path of “rejuvenating China” will surely inspire hearts and minds and lead the times forward. It is the shared value of both sides of the Strait, and also our common responsibility.

The Mainland’s development under the leadership of General Secretary Xi has not only achieved the eradication of absolute poverty and the building of a moderately prosperous society in all respects, with extraordinary accomplishments, but has also continued to soar. The 15th Five-Year Plan has just begun, and it will surely take development to a new level. It is something well worth looking forward to. Although people on the two sides of the Strait live under different systems, we shall respect one another and also move toward one another. I believe that peace is a shared moral principle and shared value across the Strait. Both sides should rise above political confrontation and work together to think through and build a win-win and prosperous cross-Strait “community of shared future”, while seeking an institutional solution to prevent and avert war, so that the Taiwan Strait may become a model for the peaceful resolution of conflict in the world.

Moreover, even as the world grows more polarised, and even as some values shared by humanity are gradually cast aside, we should stand together in upholding humanity’s shared principle of sustainability. We should work hand in hand in areas such as new energy, disease prevention and control, and the ethics and applications of artificial intelligence, so that technology may serve human well-being and advance sustainable development of the world.

It is my hope that, through the tireless efforts of our two parties, the Taiwan Strait will no longer be a focal point of potential conflict, nor become a chessboard for external interference. The Taiwan Strait shall become a strait linking kinship, civilisation, and hope. It should be a symbol of peace jointly safeguarded by Chinese people on both sides of the Strait. We shall show the world that people on both sides, who share Chinese civilisation, possess the highest wisdom to resolve difficult differences, and great compassion to make pivotal contributions to peace and development for humankind. Our two parties should work together to build the modern Chinese civilisation, and set an example for the integration and flourishing of human civilisation.

I look forward to the Kuomintang and the Communist Party jointly advancing the institutionalisation of cross-Strait peace. On the shared political foundation of adhering to the 1992 Consensus and opposing Taiwan independence, both sides should further plan for and establish institutionalised and sustainable mechanisms for dialogue and cooperation, so that the peaceful development of cross-Strait relations may become irreversible, and all the underlying causes of conflict may be fundamentally removed. We should join hands in launching a “Chinese Civilisation Rejuvenation Initiative”: taking Chinese culture as the foundation, and harmony and coexistence as the core, both sides of the Strait should jointly study and promote all kinds of institutions and initiatives that help reduce disputes and create peace, and turn these successful experiences into models that other conflict regions around the world may draw upon.

Accordingly, there are at least three directions in which both sides can work together:

First, we should commit ourselves to preserving Chinese history and carrying forward Chinese culture.

The overwhelming majority of people in Taiwan are descended from ancestors who crossed from the Mainland to Taiwan. They bear Chinese surnames, speak Chinese languages, celebrate Chinese festivals, and worship Chinese deities. Over the course of several centuries, migrants who came to Taiwan from different parts of the Mainland at different times continuously enriched the Chinese cultural content of Taiwanese society. Chinese culture has always been part of the DNA of Taiwanese society, and it is lived out in the everyday lives of the people of Taiwan.

On the gravestones of many people’s forebears in Taiwan are inscribed their ancestral places of origin on the Mainland, such as Yingchuan in Henan, or various places in Fujian Province. Across Taiwan, temples are dedicated to deities such as the Yellow Emperor, Fuxi, Shennong, Guan Gong, and Mazu, as well as Baosheng Dadi, the Sacred Prince of Kaizhang, Qingshui Zushi, and the Kings of the Three Mountains, all of whom originated on the Mainland.

Therefore, people on both sides of the Strait are all descendants of Yan and Huang, all belong to the Chinese nation, all have been shaped by Chinese culture, and all are one family. In modern history, from the standpoint of being Chinese, both sides shared the experience of defending their homeland and resisting foreign invasion. By continuously affirming these shared roots, strengthening the understanding that the Mainland and Taiwan belong to one nation and share one culture, and jointly carrying forward historical memory, there will be no differences across the Strait that cannot be resolved, and no emotional knots that cannot be untied. Only in this way can history move forward.

Second, we should commit ourselves to enhancing shared well-being and promoting exchanges and cooperation.

In 2005, the Kuomintang and the Communist Party reached five shared visions, opening up a golden era of peaceful development in cross-Strait relations. Beginning in 2006, think tanks from our two parties jointly organised 11 Cross-Strait Forums, putting forward more than a hundred common opinions and promoting exchanges and cooperation in the economic, trade, and cultural fields. During the Kuomintang’s eight years in office, the two sides signed 23 agreements, which continue to benefit the livelihoods of people on both sides to this day. In February this year, after a ten-year interval, think tanks from the two parties resumed the Cross-Strait Forum and reached 15 common opinions, in the hope of once again mobilising public opinion that promotes mutually beneficial cross-Strait integration.

On the basis of these existing achievements, both sides should actively promote grassroots and people-to-people exchanges and cooperation at every level and in every field, including trade, culture, and youth. In doing so, we can steadily accumulate goodwill and deepen mutual understanding. When more people on both sides visit one another and make friends, industries across the Strait can strengthen coordination and expand interests. Continuous enhancemant of the common well-being of both sides will be the strongest safeguard for cross-Strait peaceful development.

Taiwanese businesspeople and compatriots are important drivers of cross-Strait exchange and cooperation. They are bridges of mutual understanding between people on both sides, and they are also the most important force supporting and overseeing the peaceful development of cross-Strait relations. The Chinese Kuomintang has always cared about the well-being, rights, and interests of Taiwanese businesspeople and compatriots on the Mainland. I look forward to and believe in even more comprehensive protection of their rights and interests in the future.

Third, we should commit ourselves to building a better cross-Strait future and improving people’s livelihoods and well-being.

Human society today is at its wealthiest stage in history, yet it is also an age in which development and distribution are more unequal than ever. At present, the global geopolitical landscape is becoming increasingly turbulent, and uncertainty in the world economy is correspondingly rising. Both sides of the Strait enjoy advanced technology and convenient modern lives, yet the difficulties and challenges we face are also unprecedented. I believe that no hardship or obstacle can stand in the way of the determination of people on both sides of the Strait to work together in pursuit of a better life.

Because the two sides are close to one another in geopolitical setting, social patterns, cultural customs, and industrial structure, our experiences and strengths can be mutually complementary when it comes to confronting modernisation challenges such as climate change, energy security, technology governance, and population ageing. I hope that both sides can continue to strengthen exchanges and cooperation in forward-looking areas such as energy conservation and carbon reduction, disaster prevention and mitigation, healthcare and eldercare, and artificial intelligence, and together build a shared vision for the future. This will surely contribute to improving the community of shared future for mankind.

The young people of our time on both sides of the Strait are, in the history of the Chinese nation, the generation with the highest level of education, the deepest and broadest understanding of the world, the greatest vitality and creativity, and the clearest grasp of how to make full use of peaceful development to realise their talents. The hope of both sides lies in the youth. Young people should be encouraged to engage more with one another, explore life’s questions and development visions together, and work side by side toward the future. When young people on both sides appreciate one another, learn from one another, and grow together, cross-Strait relations will continue to develop in a positive direction and endure over the long term.

With “cross-Strait peace and better livelihoods” as the aspiration guiding this visit, I would like to put forward the following five proposals.

First, to promote the peaceful development of cross-Strait relations.

The peaceful development of cross-Strait relations accords with the shared aspirations of people on both sides, and with the overall interests of the Chinese nation. It must be advanced with firm resolve.

Peace and development are basic needs of humanity. All the more so across the Taiwan Strait, the two sides should not stand in opposition to one another, but should instead live together in harmony. Both sides of the Strait, and both our parties, have a responsibility to carry forward Chinese culture, to promote peace through exchanges, to enhance development through cooperation, to institutionalise the peaceful development of cross-Strait relations, and gradually to reach a framework for peace.

Second, to seek the restoration of cross-Strait consultation mechanisms.

Consultation and communication mechanisms across the Strait once played an indispensable role in peace and development for both sides, and they should be restored.

The laws and regulations on both sides of the Strait each stipulate that relations between the two sides are not state-to-state relations. In 1992, the authorised bodies of both sides reached a consensus that each side would respectively express verbally its adherence to the one-China principle, while seeking common ground and setting aside differences. This became the political foundation for cross-Strait consultation and communication mechanisms. Historical facts cannot be denied. On this basis, consultation mechanisms should be restored to build up a positive cycle of goodwill.

Third, to safeguard peace and stability in the Taiwan Strait and enhance mutual benefit between both sides.

A peaceful and stable Taiwan Strait is what all parties in the region hope to see, and mutually beneficial cross-Strait relations are what public opinion on both sides looks forward to. The two go hand in hand. Relevant provisions on both sides, together with international reality, all embody the principle of one China. On the basis of these provisions and realities, both sides should cooperate with one another, manage differences, and consult on ways to resolve the state of antagonism, and contribute to regional security. The 23 agreements on economic cooperation, including the Three Direct Links [direct postal, transport, and trade links] across the Strait and tariff reductions and exemptions, promoted shared development and shared prosperity. Their benefits are plain for all to see, and they have been affirmed by sectors on both sides. On the basis of maintaining the shared political foundation, we should continue to expand concrete and practical benefits, and strengthen popular support for peace across the Strait.

Fourth, to expand Taiwan’s space for international participation on the basis of political mutual trust.

On the basis of the 1992 Consensus, Taiwan once participated, in an appropriate capacity, in the World Health Assembly and the International Civil Aviation Organization Assembly, only to lose that opportunity later.

In the future, once political mutual trust has been rebuilt, efforts should be made to enable Taiwan to return to the World Health Assembly and the International Civil Aviation Organization Assembly, and also explore Taiwan’s participation in the INTERPOL General Assembly. Regional economic integration bears directly on Taiwan’s economic development. Cross-Strait economic cooperation and Taiwan’s participation in regional economic integration can reinforce one another. Both sides may therefore explore Taiwan’s accession to the Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Fifth, to continue leveraging the communication platform between the Kuomintang and the Communist Party.

The communication platform between the Kuomintang and the Communist Party has always been a force for the right path in advancing peaceful development in cross-Strait relations and maintaining peace and stability in the Taiwan Strait. Its role should continue to be brought into play.

The mechanisms within this platform, including high-level dialogue, think tank forums, youth exchanges, grassroots exchanges, and protections for Taiwanese businesspeople, have all played a leading and supportive role in opening up cross-Strait relations. At present and in the future alike, we should continue to rely on this platform to keep encouraging exchanges, cooperation, communication, and consultation across all fields on both sides of the Strait, so as to bring peace to the Taiwan Strait and greater well-being to the people.

Finally, I would once again like to thank the Central Committee of the Communist Party of China and General Secretary Xi for the invitation. Exchanges should, by their nature, go both ways. I sincerely hope that one day in the future I may have the opportunity to serve as host and welcome General Secretary Xi and all those present here to Taiwan.

Thank you all.

Cheng’s press conference

Cheng Li-wun

First of all, I would like to express my sincere thanks to all our friends in the media for your hard work in covering this visit over the past few days. From the day we landed, everything has gone very smoothly. I am, of course, also very grateful to the Taiwan Work Office of the CPC Central Committee, as well as to our hosts in Jiangsu, Shanghai, and Beijing, for their thoughtful hospitality and highest-level reception, which made everyone in our delegation feel very comfortable.

Today was the centrepiece everyone had been waiting for. Early this morning, the weather was especially fine, with warm sunshine. It also seemed to bear out the fact that, after a lapse of ten years, the meeting between the leaders of our two parties once again reflected genuine feeling, candour, and sincerity, and fully demonstrated the shared wish, goodwill, and sincerity for peaceful development across the Strait.

This is precisely the outcome I had most sincerely hoped this visit would achieve: to send a clear message jointly to both sides of the Strait, to Taiwan, and to the whole world. So all the arrangements this morning proceeded especially smoothly. About five minutes after I delivered my remarks, members of the media left the meeting room, so I would like to take this opportunity to offer some further explanation.

In the talks that followed, the main points I raised were three directions in which both sides can work together. The first is to commit ourselves to preserving Chinese history and carrying forward Chinese culture. The second is to commit ourselves to enhancing shared well-being and promoting exchanges and cooperation. The third is to commit ourselves to building a better cross-Strait future and improving people’s livelihoods and well-being.

During the meeting, I also put forward five proposals with cross-Strait peace and better livelihoods as the aspiration guiding this visit. The first is to promote the peaceful development of cross-Strait relations. The second is to seek the restoration of cross-Strait consultation mechanisms. The third is to safeguard peace and stability in the Taiwan Strait and enhance mutual benefit between both sides. The fourth is to expand Taiwan’s space for international participation on the basis of political mutual trust. The fifth is to continue leveraging the communication platform between the Kuomintang and the Communist Party. We will provide the full details to our friends in the media later in a complete press release.

So today we had a very concrete exchange. Over the ten years since contact was interrupted, as everyone has felt, relations across the Strait have become increasingly tense, with a spiral of ill will rising ever higher. Nobody wants to see a negative turn of events. That is why I believe today’s meeting has very great and critical significance. People on both sides of the Strait can have confidence that, so long as our starting point is good and right, peaceful development across the Strait absolutely remains full of optimistic and positive possibilities. So today a successful first step has been taken, and what comes next will require the efforts of many more people working together.

Of course, the Chinese Kuomintang cannot shirk its responsibility. During this exchange visit, when I visited the Sun Yat-sen Mausoleum, I was struck in particular by the Three Principles of the People familiar to us all: nationalism, democracy, and people’s livelihood. But at the mausoleum, people’s livelihood is placed at the centre. When the mausoleum was built, the point specially emphasised was this: What are nationalism and democracy for? They are for people’s livelihood.

When we visited the Shanghai metropolis, we also saw General Secretary Xi Jinping’s expectations for Shanghai: that it should be a “people’s city”, and that all of Shanghai’s development and prosperity should ultimately be for the people. So the reason political division and confrontation across the Strait must be worked to resolve is also for the people, for people’s livelihood, so that everyone may live a good life. It is a wish as simple and plain as that. Whatever obstacles may stand in the way, I believe that so long as our original intention is right, and so long as we persevere together, the future will surely bear fruit.

That is my brief report to you. I would now like to leave more time for your questions. Thank you.

China Times

Madam Chair, hello. This is a question from the Taiwan-based China Times. During this visit, you repeatedly mentioned the differences and divergences across the Strait. The outside world is also very concerned about whether, during the closed-door meeting this morning, you raised this point with General Secretary Xi, especially the part about “one China, respective interpretations”.

In addition, the 1992 Consensus and the one-China principle have always been the common political foundation of the Kuomintang and the Communist Party. But it is also true that young people in Taiwan now in university or graduate school, as well as the new generation of first-time voters, are basically all post-2000s. In other words, they were born after the 1992 Consensus happened. And most young people feel rather indifferent to it. How will the Kuomintang show young people, or persuade party comrades, that the 1992 Consensus still stands the test of time and is not electoral poison? Thank you.

Cheng Li-wun

As for the cross-Strait differences you mentioned at the outset, in fact, what General Secretary Xi said in the closed-door meeting just now addressed this very point. I took some careful notes, although of course I was not able to record his remarks verbatim. Xinhua will issue a full report of the relevant content.

But this happens to answer your question. He spoke in particular about the divergences you just mentioned. I, too, mentioned them several times. He said there has been a very long historical process behind them, but also stressed that we must proceed with patience and perseverance, with the spirit of Yu Gong moving mountains and Jingwei filling the sea. The freeze does not happen overnight, but as long as there is open communication and a willingness to consult on matters together, and, indeed, everything is open to discussion.

On the divergences across the Strait that you mentioned, I was particularly struck by what General Secretary Xi said. He noted that, with regard to those divergences, the Mainland respects Taiwanese compatriots’ social system and their chosen way of life, which are different from those of the Mainland. But he also expressed the hope that Taiwan could acknowledge the Mainland’s development achievements. So we need more opportunities for exchange, more opportunities to know one another, and more opportunities to understand one another.

General Secretary Xi also especially noted just now that meeting face to face is particularly important, and that being able to see one another in person makes a very great difference. So I believe both sides share a highly common aspiration and starting point: hoping to narrow differences, deepen mutual understanding, expand mutual goodwill, and build up mutual trust. These are all important foundations for peaceful and stable cross-Strait relations in the future, and they are exactly what I have repeatedly emphasised. As I have said, so long as something helps peace across the Strait, I am willing to do it; so long as a person helps peace across the Strait, I am willing to meet them.

General Secretary Xi also said just now that so long as a proposition is conducive to the peaceful development of cross-Strait relations, it should be pursued with full effort; so long as a matter is conducive to the peaceful development of cross-Strait relations, it should be pursued with full effort. This is therefore a goal and direction both sides are jointly striving to achieve.

You also mentioned the 1992 Consensus and opposition to Taiwan independence. In my later remarks, I in fact once again fully restated the content of the 1992 Consensus. Just now—let me think—I cannot quite remember whether General Secretary Xi said this during the meeting or over lunch. He specifically referred to the 1992 Consensus across the Strait. Let me check. He mentioned that because I had referred in Shanghai to the Koo-Wang talks. I mentioned the Koo-Wang talks at Yangshan Port, so General Secretary also brought this up just now, saying that the talks at the time had in fact made the content of the 1992 Consensus very clear. General Secretary Xi then said that, unless one is very dark-minded or deliberately pretending to be confused, one should not fail to understand what the 1992 Consensus really means. There is therefore no need to maliciously distort it, still less to maliciously undermine reconciliation and peaceful development of cross-Strait relations.

So, to your first point, today’s successful meeting has confirmed what I have been telling everyone over the past few months: that the one and only political foundation for cross-Strait exchange and dialogue is adherence to the 1992 Consensus and opposition to Taiwan independence. Of course, we must keep pace with the times by using different language, or forms of expression suited to the present moment, so that each generation of young people understands what challenge we face at this stage, and how adherence to the 1992 Consensus and opposition to Taiwan independence can help avert war and tragedy, join hands in building peace, and on the basis of peace seek the greatest well-being for the people. I believe that should be the shared expectation and wish of any normal person. Unless, that is, someone maliciously wishes to destroy peace; unless someone has a special personal agenda and is willing to make the lives and property of the people of Taiwan the price of war across the Strait. That is what we oppose, what we must stop, and what we must prevent. We hope the two sides of the Strait can be like today’s weather: so pleasant, so comfortable.

People’s Daily

Thank you. A question from People’s Daily. This morning, General Secretary Xi Jinping met Chair Cheng Li-wun. What important significance do you think this has for promoting relations between the Kuomintang and the Communist Party and for the peaceful development of cross-Strait relations? Thank you.

Cheng Li-wun

I was especially grateful today that General Secretary Xi said that, on the same political foundation, the CPC Central Committee is willing to engage in exchange and dialogue not only with the Chinese Kuomintang but with all political parties in Taiwan. So I would also like to especially state here that the Kuomintang and the Communist Party have a complex and lengthy history of both civil war and cooperation. The Chinese Kuomintang therefore naturally has an important responsibility to help resolve the grievances and entanglements between the two parties.

But when it comes to the peaceful development of cross-Strait relations, we also hope that all political parties within Taiwan will not treat this as a tool for party competition or vote-gathering. This should stand above that level, because it is a choice between peace and war. I therefore very much hope that, on cross-Strait relations, all political parties in Taiwan can put aside their inter-party differences and work together for peace. General Secretary Xi, just now, also extended this major goodwill. Such exchanges are absolutely not limited to the Kuomintang and the Communist Party alone. I believe this breadth of vision and openness is also something the Chinese Kuomintang very much welcomes.

We have not come today for the private interests of one party. We have come because we bear a historical responsibility, because we cannot allow Taiwan and the Taiwan Strait to become a battlefield. So we are taking the lead. Once the road has begun to open, it will only become flatter and broader. Just as I said the other day at Yangshan Port, all are welcome to join; others may do even better and even more brilliantly than I have, and we would be glad to see that. So today I think that, at a moment when the world had become deeply pessimistic and no longer even dared to hope for anything from cross-Strait relations, the leaders of the Kuomintang and the Communist Party have shown the world that things are not as difficult as people imagine.

So I also believe there was one further point on which I felt quite in tune with General Secretary Xi during the exchange: political leaders must not forget their original intention, and must not allow personal or partisan interests to blind them to the role political leaders ought to play and the responsibilities they ought to fulfil. I believe this is also something I have always expected of myself. At this moment, each of us is very small. In the great arena and pivotal moments of history, one must make the right choice.

So in this process of exchange, I believe we have laid a foundation for moving ahead more firmly, no matter how complex and turbulent the global situation may become, and no matter what internal challenges may arise across the Strait. We must succeed; failure is not an option.

NBC

Thank you, Madam Chairwoman. When we spoke recently, you said that this trip was about seeking reconciliation with the Mainland as the best way forward for Taiwan. Having made this trip and having met with President Xi, would you now say that you share his goal of unification for Taiwan? Is that the way forward?

Cheng Li-wun

I think that, throughout today’s talks, what was truly highlighted and valued was the sense of kinship that comes from belonging to the Chinese nation. As I mentioned just now, in his remarks, General Secretary Xi in fact recognised and respected Taiwan’s different way of life and system, and also hoped that this would be reciprocal—that Taiwan, too, would respect and acknowledge the Mainland’s development achievements. He also specifically mentioned that he hopes there will be no conflict across the Strait, and that in future both sides, as one family, can engage in more exchanges and grow closer to one another.

Just now, he said that the freeze does not happen overnight; this requires a sustained process of effort, and it requires a firm hope for the future, so that both sides may strive together in solidarity to realise the great rejuvenation of the Chinese nation. So, in this process, matters must be handled one by one, every issue taken one by one, and the road walked step by step.

I think that, on this point, General Secretary Xi and I were both very pragmatic, and hope to proceed step by step, just as I said earlier. At the very outset, General Secretary Xi in fact said that although social systems and political propositions may differ, our common ancestors and the bloodline of the nation cannot be severed; differences in social systems should not be used as an excuse for division.

So I believe this was a very major expression of goodwill. We face pragmatically the many differences that have arisen over the course of the long historical development of cross-Strait relations. But Taiwan’s achievements today and the Mainland’s achievements today are both great and remarkable achievements of the Chinese nation. We can appreciate one another, respect one another, and even learn from one another. In the future, there are even greater opportunities for cooperation, so that the achievements both sides have already attained may be expanded further, to benefit not only both sides of the Strait but also humanity.

So, in answer to your question, we hope to consolidate and strengthen a peaceful and stable relationship. On that basis, we should handle matters one by one and move forward steadily, step by step. Thank you.

China Review News

Thank you. A question from China Review News. Chair Cheng, hello. We know this is your first meeting with General Secretary Xi. At noon today, General Secretary Xi also hosted a special luncheon for you and the main members of the delegation. Could you share with us whether there were any details in the course of that which left a particularly deep impression on you? In addition, what important outcomes do you think this meeting achieved? Thank you.

Cheng Li-wun

I am of course very grateful for General Secretary Xi’s hospitality. We have just had a very warm luncheon. The first detail that left a particularly deep impression on me was the very first dish, because General Secretary Xi specifically said it was a Fujian dish—Fujian sea clam. This was the same dish that had been served at the state banquet when the Communist Party hosted President Nixon. He said that banquet had included two Fujian dishes, and one of them was this sea clam in chicken broth. The sea clam was very special. That was the first point.

The second is that General Secretary Xi was also very thoughtful and attentive to the members of our delegation. In particular, because I do not come to the Mainland very often, he asked whether I had adapted well over the past few days, whether I was in good health, and whether everything else was going smoothly. He also conveyed particular concern for Chairman Lien Chan and Chairman Ma Ying-jeou, and asked us to pass on his regards and greetings to Chairman Lien and to Chairman Ma. He especially recalled the Ma-Xi meeting at the time, and many details from Singapore. All of this made us feel a very strong sense of warmth and familiarity.

Since today, we were fortunate to have the Chairman of the National Development and Reform Commission (NDRC) present, I also specifically discussed the situation of various sectors of Taiwanese industry, and whether there might in future be greater possibilities for alignment and cooperation. We talked about many things, including the ethnic minority group in Yunnan from which I come by birth, as well as various aspects of Taiwan’s Indigenous peoples.

So I felt that the whole course of the conversation was very pleasant and very cordial. Thank you.

As for the achievements, I have actually already touched on them. First of all, the most important thing I hope to bring back to Taiwan is a message of peace. It is clear, not vague; firm; and intended to continue over the long term. I believe that matters more than anything else. Of course, beyond the issues we raised regarding Taiwanese industry, especially the situation facing traditional manufacturing and the services sector, General Secretary Xi also showed particular concern for our agricultural and fishery products. He specifically said that Taiwanese agricultural and fishery products are very welcome to enter the Mainland market. We also exchanged views on the expectations, conditions, and needs of various sectors in Taiwan. Thank you.

United Daily News

Chair Cheng, hello. A question from United Daily News. In your remarks, you said that you hoped to institutionalise the peaceful development of cross-Strait relations, and gradually reach a framework for peace. Could you elaborate further on this concept of a peace framework? Also, in your remarks, you said you hoped to rebuild political mutual trust so that Taiwan could return to certain international organisations, and even join RCEP and the CPTPP. May I ask whether General Secretary Xi gave any concrete and positive response on these points during the closed-door meeting? Thank you.

Cheng Li-wun

In fact, General Secretary Xi’s response was especially positive. Beyond stressing our shared roots and our shared nationality, General Secretary Xi said that so long as both sides achieve a meeting of minds—as I have already mentioned several times—everything can be discussed. He also stated specifically that the proposals and expectations I put forward in my remarks, every single one of them, could be actively and comprehensively studied, coordinated, and facilitated. So, in our talks just now, I believe General Secretary Xi very clearly conveyed an extremely positive message, and showed that he attaches great importance to Taiwan’s expectations and needs.

I also forgot to mention just now that he spoke specifically about Taiwanese businesspeople as well. Because he spent such a long time in Fujian, he knew many old friends among Taiwanese businesspeople there. He also attaches great importance to them. Our vice chairman quoted what General Secretary Xi had just said: with regard to the expectations we mentioned, he said he would attach great importance to them and actively consider them.

You also asked about the framework for peace. In fact, during Chairman Lien’s first Journey of Peace, many comprehensive foundations were already laid. On that basis, we have continued to work in that direction. But what is more important is that, throughout this process—and General Secretary Xi repeatedly referred just now to much of the earlier history between the Kuomintang and the Communist Party, including many more recent exchanges and the Xi-Ma meeting, so on and so forth—he specifically said that we once had a very good opportunity, but unfortunately did not seize it firmly at the time. That is why, in my public remarks, I especially stressed that I hope a peaceful cross-Strait relationship can become irreversible and never move backwards.

That is why we hope for institutionalisation, and ultimately even the emergence of a cross-Strait peace framework. Once that uncertainty is removed, every possibility exists with regards to securing a peaceful and stable future across the Strait. This requires efforts from both sides. Of course, even more importantly, what we hope for is that the Kuomintang will return to office in 2028 and regain governing power, so that it can formally and officially represent the people of Taiwan and seek with the Mainland the institutionalised and sustainable cross-Strait framework I have just mentioned.

We also hope that such experience can be promoted and advocated to the rest of the world, so that all places where conflict may arise can draw on similar experiences and examples, turning swords into ploughshares and ensuring that war no longer takes place anywhere on earth. Thank you.

CTi News

Chair Cheng, hello. I am Chang Yang-hao from CTi News. Chair, I would like to ask: you just mentioned that, in your talks with President Xi, you raised the point that Taiwan’s space for international participation should be increased on the basis of political mutual trust. I heard in your response just now that General Secretary Xi gave a fairly positive response to that. So we would like to ask: under such circumstances, does that mean these things can only be achieved after the Kuomintang comes to power? Or is it possible that, in a more immediate sense, some of the county and city governments currently governed by the pan-blue/KMT camp could already carry out certain related cross-Strait exchanges?

Also, one report mentioned that, at the end of the meeting, you said that you hoped that one day you might have the chance to be the host in Taiwan and welcome everyone. We would like to ask whether that means you have ambitions to move up to an even higher position.

Cheng Li-wun

This is an exchange between the two parties. Today I came to the Mainland at the invitation of General Secretary Xi as the representative of the Kuomintang. So, in my capacity as Chair of the Kuomintang, I naturally also hope that, following another rotation of parties in government in the future, I may be able to invite General Secretary Xi to visit Taiwan, Penghu, Kinmen, and Matsu. So when I said I hoped one day to act as host in Taiwan, what I meant was that I genuinely look forward to and hope for an opportunity to invite General Secretary Xi and other leaders to Taiwan, so that they may come and take a look around.

Phoenix TV

Chair, hello. I am Peng Shih-ting from Phoenix TV. I wan to ask: since taking office, you have repeatedly stressed that you want to prove to the outside world that peace is a viable path, and one that can work. We also hope that through exchanges like this a great many peace dividends can be created. But the problem is that, so long as the Kuomintang is not in power, those peace dividends are difficult fully to realise. So in future, as the Kuomintang promotes these kinds of cross-Strait exchanges, how can it avoid having them manipulated by competing parties and then win the support of mainstream public opinion? How can that balance be struck? Thank you.

Cheng Li-wun

In fact, after I took office as party chair, there came from various quarters in Taiwan all sorts of very strange stories. Many false accounts were fabricated and many false messages spread. This only exposed their unease and lack of confidence, as if they were very afraid that we might successfully complete these tasks, just as we have done today.

From the day I formally took office as party chair on 1 November until today, it has only been a little over four months. That is why I have repeatedly told everyone that this is not some remote and unattainable goal, nor is it something harder than ascending to heaven. I do not have any extraordinary powers. I have stressed again and again that there are no other obstacles, no other demands, no so-called “admission ticket” of the sort they talk about. It is simply this: the 1992 Consensus and opposition to Taiwan independence.

Taiwan has sacrificed nothing, Taiwan has given up nothing, and yet we can still see spring returning, smiles on both sides, hands extended in greeting, and people sitting down at the table for exchange and dialogue. So many inner demons and obstacles have in fact been deliberately manufactured and manipulated by people.

I have also said that this will be a major electoral benefit for Taiwan, because you may not all have felt it yourselves, but after ten years of interruption, with cross-Strait relations growing ever more tense and confrontational, many sectors have suffered unspeakably and have not even known whether their industries or family businesses should continue. That kind of pain and torment is not something politicians can lightly brush aside in a few easy words. That is why I specifically stressed just now that all politics, in its original intention and breadth of mind, should take the people as its starting point.

In just these short four months, people from all walks of professions and industries have come to see me. I have travelled all over Taiwan—I have lost count of how many times I have circled the island—and everyone has consistently expressed their strong expectation for peaceful exchange across the Strait, not to mention their unwillingness to see Taiwan’s next generation sent onto the battlefield. All of this will be converted into votes.

Of course, in Taiwan, only by winning elections can we implement all our political propositions and ideals. That is a challenge the Kuomintang must face, and we are confronting this year’s election very seriously and with careful step-by-step planning. But I still want to say once again that I truly do not hope this becomes some calculation in terms of elections and votes. This issue should stand above that level. Yet in the face of the obstacles and opponents we may encounter, we must likewise overcome every difficulty and challenge. Winning the people’s endorsement through their votes will enable the path of peace across the Strait to be walked more steadily and more successfully.

TVBS

Chair Cheng, I am Feng Wei from TVBS. I would like to ask: just now you mentioned that you put forward five requests, and in the fourth point you spoke of expanding space for international participation. Did you raise that fourth point directly with General Secretary Xi? And was his reply positive? Secondly, there is a strong possibility that a Trump-Xi meeting will take place in May. In your remarks today, you also specifically said that you hope the Taiwan Strait will not become a chessboard for external interference. Did you exchange views with General Secretary Xi on that issue as well?

Cheng Li-wun

Regarding the fourth point, this is how I stated it: on the basis of the 1992 Consensus, Taiwan once participated, in an appropriate capacity, in the World Health Assembly and the International Civil Aviation Organization Assembly. But unfortunately, that opportunity was lost later. In the future, once political mutual trust has been rebuilt, efforts should be made to enable Taiwan to return to the World Health Assembly and the International Civil Aviation Organization Assembly, and also actively to explore Taiwan’s participation in the INTERPOL General Assembly.

In addition, regional economic integration bears directly on Taiwan’s economic development. So cross-Strait economic cooperation and Taiwan’s participation in regional economic integration can reinforce one another. Both sides may explore Taiwan’s accession to the Regional Comprehensive Economic Partnership and the Comprehensive (RCEP) and Progressive Agreement for Trans-Pacific Partnership (CPTPP). That was the substance of my remarks just now.

Taken as a whole, with regard to these and other requests and proposals we raised, as I said, General Secretary Xi viewed them and responded to them all very positively.

TVBS

And the Trump-Xi meeting?

Cheng Li-wun

No, that was not mentioned. That was not brought up.

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Inside China

Xi meets KMT leader Cheng Li-wun in Beijing

This meeting took place within the framework of the “One China” principle, with both sides defining the encounter as a party-to-party interaction. Accordingly, the official press release carried the title “General Secretary of the CPC Central Committee Meets with Chairperson of the Chinese Kuomintang…

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18 days ago · 6 likes · 2 comments · Fred Gao

After paying tribute at the mausoleum, Cheng delivered a speech that invoked Taiwan’s history under Japanese colonial rule, the founding of the Republic of China, and the Chinese Civil War, as she called for renewed dialogue and exchanges under the “1992 Consensus” and said she hoped to “plant the seeds of peace” for both sides of the Taiwan Strait.

This translation is based on the official transcript published on the KMT official website. A livestream clip of the speech is also available below.

Today, after 21 years, I have returned once again to the Sun Yat-sen Mausoleum. My heart is filled with emotion.

On 12 March 1925, Dr Sun Yat-sen, Father of the Nation, passed away. At the time, the international press devoted extensive coverage to his death. Some 300,000 people flooded the streets to see him off, shouting, “Down with imperialism! Down with the warlords!” By then, Taiwan had already been under Japanese colonial rule for 30 years. The Taiwanese people faced an awkward identity and a harsh predicament. Unlike the Chinese on the mainland, they had no way to openly give voice to their grief over Dr Sun’s passing. Yet even under Japanese repression and suppression, memorial services were held across Taiwan on an unprecedented scale. Elegies and memorial writings, however, were banned and censored by the Japanese authorities.

When news of the Father of the Nation’s death reached Taiwan, people from all walks of life were overcome with grief. Mr Chiang Wei-shui [founding member of the Taiwanese Cultural Association and the Taiwanese People’s Party] personally wrote an editorial for the Taiwan Minpao titled “Crying Toward the Horizon in Mourning for a Great Man: On the Death of Mr Sun.” At the very beginning, the article gave voice to disbelief that such a towering figure could really have fallen. It said: “At this moment, four hundred million of our compatriots must be in mourning and anguish. Gazing towards the Central Plain from afar, we too cannot restrain the torrent of tears.” Those words fully captured the grief and sorrow felt by the Taiwanese people at the time.

Likewise, Mr Zhang Wojun [Taiwanese-born writer and educator] wrote in another essay, “The Hero’s Tears Forever Soak His Robe”: “Mr Sun, do you know that on this lonely island overseas, there is also an unknown young man whose robe is drenched in tears of sorrow?” In that single sentence, he laid bare the anguish felt by the Taiwanese under colonial rule. Perhaps it was also because the Japanese authorities forbade Taiwanese from mourning Sun Yat-sen as “Father of the Nation,” he instead referred to him as “the father of the weak and oppressed peoples”.

On the mainland, mourning Sun Yat-sen’s death was only natural, open, and honourable. In Taiwan, mourning his death meant having to do so by stealth, with great caution, and by every possible device. Taiwan had become a colony only because China had grown weak and declined, and was defeated in the First Sino-Japanese War. For that reason, Taiwan’s intellectual elite and patriots followed Sun Yat-sen’s revolutionary cause of overthrowing the Manchu dynasty of Qing with deep concern, great expectation, and heartfelt admiration. Some actively devoted themselves to it, took part in it, supported it, emulated it, and learned from it.

After the success of the Xinhai Revolution, the people of Taiwan were filled with excitement. In Dadaocheng in Taipei, merchants collectively hung banners celebrating the restoration of Han Chinese rule, only for the Governor-General’s Office to immediately dispatch military police to tear them down by force. In Tainan, the Bao Mei Lou opera troupe adapted the story of Huanghuagang into a Taiwanese opera, The Seventy-Two Martyrs, only for the Governor-General’s Office to promptly ban it on the grounds that it endangered public order. In March 1912, members of the Lin family of Wufeng in Taichung collectively cut off their queues, burned their queue ornaments, and declared that they would follow Mr Sun’s revolutionary spirit. At the time, Taiwanese intellectuals hoped that, after the revolution succeeded, China would strive to strengthen itself, recover Taiwan at an early date, and bring Japanese colonial rule to an end.

Of course, it was not only Taiwan. China’s neighbouring countries, indeed Asia as a whole, especially those then under semi-colonial or colonial domination, were inspired by the Xinhai Revolution and the Three Principles of the People. After his death, Sun Yat-sen rose onto the international stage and entered the ranks of the world’s great figures not only because he overthrew the Manchu dynasty of Qing dynasty and founded the Republic of China, the first democratic republic in Asia, but also because throughout his life he laboured tirelessly for the weak and oppressed peoples of the world who shared a common fate. It was for this reason that Sun Yat-sen won such special reverence among the Taiwanese and became a guiding figure in the Taiwanese people’s liberation.

Four months before his death, Sun Yat-sen set out his vision of Pan-Asianism. Unlike the “Greater Asianism” propagated by Japan to disguise its ambitions of expansion and aggression, Dr Sun called for an alliance of Asian peoples that would raise the standing of Asia’s weaker and oppressed nations. He also urged Japan not to continue acting as the running dog of Western hegemonic culture, but instead to treat the weak and oppressed peoples in its colonies with decency. These ideas immediately won a warm response and active support among the Taiwanese.

Sun Yat-sen contrasted the Eastern culture of the humane authority (王道) with the Western culture of hegemony (霸道). He argued that we should take our own civilisational inheritance as our foundation, that we should speak of morality, and that we should speak of benevolence. Benevolence, righteousness, morality, and ethics, he said, formed the sound basis of our Pan-Asianism. With that sound basis in place, we must also learn from Europe’s science, revive industry, and improve our weaponry. But we are not learning from Europe to destroy other nations. We are learning to defend ourselves.

In the Father of the Nation’s last testament, he also placed special emphasis on this: “To achieve freedom and equality for China, we must unite in common struggle with all those nations of the world that treat us on a basis of equality.” Therefore, in China’s own pursuit of freedom and equality, we must not forget to extend what we seek for ourselves to others, to join hands with all weak and oppressed peoples of the world, to treat one another as equals, to pursue common ideals, and to bring imperialism to a complete end. China must never become like Japan once was, thinking only of its own rise, only to replicate Western imperialism after becoming strong.

After the success of the Xinhai Revolution came Yuan Shikai’s restoration of the monarchy, the fragmentation of China under warlords, and the pressure of the great powers on every side. Dr Sun’s ideals continued to move forward, step by step, through brambles and rubble. In Taiwan, anti-Japanese resistance also shifted from an earlier phase of armed struggle and bloodshed to one of cultural resistance. In 1921, the Taiwanese Cultural Association was founded. Chiang Wei-shui and other Taiwanese intellectual elites sought, through a cultural movement, to preserve the subjecthood of their national culture while also advancing the petition movement for the establishment of a Taiwanese parliament to demand self-government from Japan.

After Sun Yat-sen’s death, Chiang Wei-shui, following the organisational model of the Kuomintang, founded the Taiwanese People’s Party in 1927. Taking Sunism and the Three Principles of the People as its foundation, he drew up the party platform and completed both the discourse and the programme of action for the Taiwanese people’s liberation. China itself, however, was in such suffering that it could scarcely look after its own survival. After Generalissimo Chiang Kai-shek finally succeeded in the Northern Expedition, he was immediately confronted by the step-by-step advance of Japan’s invasion of China. The eight-year War of Resistance Against Japanese Aggression was marked by blood and tears. Only after Japan’s defeat did Taiwan finally emerge from the calamity of 50 years of colonial rule.

After the war, China, scarred and shattered, fell into civil war between the Kuomintang and the Communist Party. At the same time, Chen Yi was placed in charge of taking over Taiwan, and the February 28 Incident broke out. Two years later, the Kuomintang’s million-strong forces withdrew to Taiwan, Penghu, Kinmen, and Matsu. Thereafter, under the shadow of the conflict between the Kuomintang and the Communist Party, not only were the Rural Pacification Campaign and the White Terror launched inside Taiwan, but Taiwan also endured 38 long years of martial law.

To this day, because of the First Sino-Japanese War 130 years ago, the wound carved along the Taiwan Strait by the blade of Japanese imperialism still has not healed. China’s disasters have never come only from imperialist forces abroad. Many have also arisen from internal conflicts and divisions that led to fratricidal bloodshed. Yet those who truly suffer are always the innocent, the ordinary people, and those at the bottom.

Twenty-one years ago, at the beginning of 2005, cross-Strait relations were extremely tense. Chairman Lien Chan hoped to break the ice across the Strait on behalf of Taiwan’s latest mainstream public opinion. Deeply moved, I accepted Chairman Lien’s invitation, formally joined the Kuomintang, became a party member, and served as its spokesperson. Soon afterwards, in pursuit of the historic mission of breaking the ice across the Strait and promoting reconciliation between the Kuomintang and the Communist Party, I deliberately chose the eve of that year’s commemoration of the February 28 Incident to invite Mr Chen Ming-chung, the last death-row prisoner under the White Terror, to speak at the Kuomintang’s Central Party Headquarters.

Standing before the huge portrait of Dr Sun Yat-sen and the full text of his testament, Mr Chen delivered a speech on the distorted collective memory of the February 28 Incident. Mr Chen said: “My family and my wife were both political victims, among the most grievous victims of the February 28 Incident and the White Terror. I have come to the Central Headquarters of the Kuomintang today not to demand justice, but in the hope that the same suffering will never again befall any Taiwanese person. The root of this historical tragedy lies in the Chinese Civil War. Therefore, ending the state of hostility across the Strait and concluding peace is a historical responsibility and duty that the Kuomintang cannot shirk.”

He then handed Chairman Lien a key symbolising reconciliation. Chairman Lien immediately announced that Vice Chairman Chiang Pin-kung would first lead a delegation to the mainland to pave the way for the Journey of Peace. In April that same year, Chairman Lien led a delegation, including myself, to Nanjing and embarked on that historic Journey of Peace, becoming the first Kuomintang chairman to return to the former capital, Nanjing, since 1949.

Today, 21 years later, I have once again come to the Sun Yat-sen Mausoleum. I have climbed its 392 steps and seen the three great terraces symbolising the Three Principles of the People, the five great terraces symbolising the Five-Power Constitution, the 392 steps, and the 1992 Consensus, which made it possible for the two sides of the Strait to begin reconciliation, exchange, and dialogue. I have thought of the unfinished mission of Dr Sun and of the wound across the Strait that still has not healed. Here, I would also like to report to the founder of our party that, under the guidance of the Three Principles of the People, the Kuomintang successfully built Taiwan, Penghu, Kinmen, and Matsu into a fine society marked by democracy, freedom, the rule of law, and shared prosperity.

Likewise, on the mainland, we too have seen and witnessed progress and development that have exceeded everyone’s expectations and imagination. Our guide just mentioned that on 12 March this year, I also led the Kuomintang in a mourning and commemorative ceremony at the National Dr Sun Yat-sen Memorial Hall in Taiwan. On that occasion, a descendant of Dr Sun specially brought to Taiwan seeds from the tamarind tree that Dr Sun had once taken from Honolulu back to his native home, and gave them to me.

Today, 21 years later, I too hope to plant the seeds of peace. Throughout his life, Dr Sun loved nature, valued ecology, and encouraged tree planting. I was just told, and this is also something to which I have long paid close attention, that General Secretary Xi Jinping also places great importance on ecological conservation and advocates tree planting every year. Let us hope that today we may plant seeds of peace not only for the Chinese people on both sides of the Strait, but for all humanity. Let every one of us, every single day, diligently water and nourish this tree, so that it may spread its branches and leaves and grow into a towering giant. Forebears plant the tree so that later generations may enjoy the shade. May all our descendants, under the shelter of this great tree, pursue the dreams of their own lives without fear or hesitation.

So in closing, let us not forget the charge our leader left us before his death: “The revolution has not yet succeeded; comrades must still strive.” At the heart of Sun Yat-sen’s ideal that “all under heaven is for the public (天下为公)” have always been the values of equality, inclusion, and unity. We should work together to promote reconciliation and unity across the Strait, and to create regional prosperity and peace.

Here today, I hope that all of us, as comrades, may offer ourselves as fuel, carrying forward the Father of the Nation’s revolutionary spirit, his broad-hearted benevolence, and his ideal of Great Harmony (大同). May the flame be passed on as the fuel is consumed, so that the torch lit by the revolutionary pioneers a century ago may continue, like stars in the dark night, to guide those comrades who press on one after another along the revolutionary road, and may it become the Blue Sky with a White Sun [青天白日, the revolutionary emblem later adopted as the national emblem of the Republic of China and the Kuomintang party emblem], warming and nourishing every inch of land and every living being. Let us encourage one another together. Thank you all.

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Pekingnology

Taiwan's former parliamentary speaker proposes "separate jurisdictions, one sovereignty"

If world peace really hinges on, as many claim, what happens across the Taiwan Strait, you’ll have to bear with me for more posts on the seemingly niche subject…

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a year ago · 16 likes · Zichen Wang

Cheng delivered the remarks below at a welcome banquet in Nanjing, the former capital of the Republic of China under KMT rule before the KMT-led government retreated to Taiwan in 1949, and also the site of the Sun Yat-sen Mausoleum. Sun, who founded the Republic of China and the KMT, remains a revered historical figure in both the mainland and Taiwan.

The banquet was hosted by the Taiwan Work Office of the CPC Central Committee. Among those in attendance was Song Tao, head of the Taiwan Work Office, who also welcomed Cheng upon her arrival in Shanghai earlier in the day.

The English translation below is based on an Ifeng News transcript of Zheng’s speech at the Nanjing banquet. Ifeng News also published video coverage of the event, attached below.

郑丽文在南京欢迎晚宴上致辞全文：此访具有4项重大历史意义

Full text of Cheng Li-wun’s remarks at Nanjing welcome banquet: visit bears four major historical significances

Director Song Tao, good friends from the Taiwan Work Office of the Central Committee of the Communist Party of China (CPC), members of our delegation, good evening to you all.

First of all, I would like to express my sincere gratitude to Director Song Tao for the thoughtful and meticulous arrangements made for this visit, as well as for the warm reception extended to our party delegation. Please also allow me to convey my sincere greetings and heartfelt thanks to Director Song. To our friends from the Taiwan Affairs Office and to all members of the delegation present here, it is a great pleasure to gather together at this historic moment. I believe this visit carries four major historical significances.

First, in terms of the situation in the Asia-Pacific, we are creating a new model—one that shows the world that political differences do not inevitably lead to conflict. The two sides of the Taiwan Strait are not destined, as some in the international community worry, for war. Together, we will demonstrate that both sides have the capability, the determination, and the wisdom to resolve all issues peacefully, and to contribute to regional security and stability. We will not be troublemakers; rather, we will be builders of peace in the region. In today’s turbulent global environment, the significance of this journey for peace is all the more profound.

Second, in terms of cross-Strait relations, this visit once again demonstrates that the “1992 Consensus” and opposition to “Taiwan independence” remain a durable political foundation—a stabilising anchor for current cross-Strait relations. Over the past three decades, Taiwan’s society has undergone several changes in governing parties. Yet historical experience clearly shows that as long as the “1992 Consensus” is upheld and “Taiwan independence” is opposed, dialogue and exchanges across the Strait can proceed; otherwise, tensions and instability will prevail. Therefore, this visit will help further tilt cross-Strait relations toward peace and stability.

Third, regarding KMT-CPC relations, this marks the first visit in ten years led by the incumbent KMT chair to the mainland. Once again, the KMT is playing a key role in maintaining peace and stability in the Taiwan Strait. The cross-Strait peace approach advocated by our party is a correct and effective path, and one that best serves the interests of all people in Taiwan. Twenty-one years ago, I had the honour of accompanying Chairman Lien Chan on his journey of peace to the mainland, during which the two parties reached five shared visions. That historic visit ushered in what became a golden era of peaceful cross-Strait development during the KMT’s eight years in power. For the mainstream public opinion in Taiwan that cherishes cross-Strait peace and hopes for continued exchanges between the two sides, this visit is of great significance in opening a new chapter once again.

Finally, in the context of Taiwan’s history, this visit highlights that Taiwan should not be reduced to a pawn—or worse, an expendable one—in geopolitical competition. Between war and peace, between destruction and prosperity, the KMT offers the people of Taiwan a valuable choice for peace and prosperity. Even though the KMT is currently in opposition in Taiwan, we cannot and must not evade our responsibility for guiding Taiwan toward peace and prosperity.

In closing, with deep gratitude, I thank everyone for taking part in this historic journey for peace. Let me also raise this glass to wish that the coming days of our visit will be a complete success, serving the shared interests of people on both sides of the Strait, as well as the expectations of the international community.

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Pekingnology

Ma Ying-jeou Urges Return to Cross-Strait Dialogue on “Peace Journey” Anniversary

Since I've just covered Ge Jianxiong’s great insight on the unity and division in China’s history, as well as his dissection of the expression “Chinese territory since ancient times,” let’s look at a more current and concrete event…

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a year ago · 12 likes · 6 comments · Zichen Wang

Wang made the speech on 5 December, 2025, at a seminar jointly hosted by the NSD, ISSCAD, and the China Center for Economic Research (CCER). The seminar was dedicated to Conflict and Development: Studies on Ethiopia’s Politics, Economy and Society 冲突与发展：埃塞俄比亚政治、经济与社会研究, a new book published by Xinhua Publishing House and compiled by ISSCAD Belt and Road research group.

The article was published on 27 February 2026 on the NSD’s official WeChat blog.

Another speech from the same event has also been published on The East is Read.

王进杰：中国企业在埃塞潮起潮落的启示

Wang Jinjie: What the Rise and Fall of Chinese Companies in Ethiopia Can Teach Us

I would like to discuss the actual development of Chinese enterprises in Ethiopia. Although the book Conflict and Development: Studies on Ethiopia’s Politics, Economy and Society 冲突与发展：埃塞俄比亚政治、经济与社会研究 does not devote a specific chapter to Chinese enterprises, the topics covered in its various chapters, such as exchange rates, finance, industrial parks, and port development, are all closely related to Chinese-funded enterprises.

I first travelled to Ethiopia for field research in 2016. Between 2018 and 2019, I was going there every month or every other month. At that time, the country was in a remarkable period of rapid development, and the pace of construction was truly striking. On every visit, I could see newly completed infrastructure and roads. Things were changing so quickly that even navigation apps struggled to keep up. However, after 2020, frequent conflict and political instability led to a large-scale withdrawal of Chinese companies. The number of Chinese nationals in Ethiopia fell sharply, from a peak of more than 100,000 to fewer than 10,000 by October 2025.

Does Ethiopia still offer opportunities and hope for development? How should Chinese companies position themselves there in the future? I will address these questions from three perspectives:

1. The industrialisation practices of Chinese companies in Ethiopia;

2. The reasons behind the worsening conflict and the deterioration of the business environment in Ethiopia;

3. The new opportunities created by the new energy vehicle industry.

The hope is that Chinese companies will draw lessons from their experience in Ethiopia and build more resilient industrial and investment models in African countries in the future.

Ethiopia is a key frontier for Chinese companies in Africa’s industrialisation

Why are Chinese companies in Ethiopia seen as pioneers of Africa’s industrialisation? Ethiopia holds a unique position in the global footprint of Chinese enterprises. Whether during its high-growth years from 2016 to 2019, or in the current downturn, China has remained Ethiopia’s largest source of foreign investment and its biggest trading partner.

Export-oriented industrial development policies drove rapid growth in Ethiopia between 2016 and 2019. Industrial parks provided one-stop services, including water and electricity, factory facilities, tax support, and customs clearance, attracting a large number of processing and manufacturing firms. Among them, the Eastern Industry Park, which we have followed closely for many years, was the first industrial park in the country to be invested in and developed by a Chinese company, and it generated a very strong clustering effect.

In 2007, the Eastern Industry Park was established through a tender organised by China’s Ministry of Commerce and Ministry of Finance, and was developed by Jiangsu Yongyuan Investment Ltd, becoming Ethiopia’s first industrial park. This marked the starting point of Ethiopia’s industrial park strategy. It was later incorporated into Ethiopia’s national development strategy, the Growth and Transformation Plan, as an important vehicle for absorbing manufacturing transfers and promoting industrialisation, and that position has remained unchanged to this day.

Despite economic decline, inflation, and capital outflows, the Eastern Industry Park is still one of the most successful parks in the country. Workers there earn monthly wages of 3,000 to 10,000 birr, significantly higher than the average wage of less than 1,000 birr outside the park. The park has significantly boosted economic growth and urban expansion, and improved living standards. Analysis of nighttime light data also shows that its spillover effect extends for roughly 10 kilometres.

At present, Ethiopia has 24 industrial parks. Thirteen are government-led, while 11 others involve Chinese investment or construction to varying degrees. Even in government-led public industrial parks, Chinese urban construction companies are involved. This shows that Ethiopia’s development model is strongly centred on industrial parks, and that Chinese companies have participated in every stage of the country’s industrialisation process.

By the end of 2024, Chinese companies had participated in more than 3,000 projects in Ethiopia, including both investment and contracted construction, with cumulative investment exceeding $8.5 billion. In 2024, 60 per cent of new foreign investment projects came from China. These projects have created around 600,000 jobs in total, mainly in manufacturing and infrastructure. Since 2024, emerging sectors such as logistics and new energy vehicles have also attracted significant amounts of Chinese capital.

The main roles Chinese companies have played in Ethiopia’s industrialisation

First, they are producers and creators of value. In manufacturing and infrastructure, they have raised local industrial output and export capacity.

Second, they are job creators. Labour-intensive manufacturing and large-scale infrastructure projects have created large numbers of formal and informal jobs. For rural young people and low-skilled urban workers entering the modern industrial system for the first time, Chinese companies are often their first employers.

Third, they are agents of technology transfer and incubators for entrepreneurship. In a 2023 survey we conducted with students from the South-South Institute, it was found that among more than 200 business owners in the Addis Ababa area, over 40 per cent had previously worked in foreign-invested firms, and 70 per cent of that foreign-firm experience came from Chinese companies. Such experience showed a significant positive correlation with entrepreneurial motivation, opportunity recognition, and management capability. Chinese companies have effectively become training grounds and incubators for local entrepreneurs.

Fourth, they are talent developers. Faced with a shortage of skilled workers, companies have shifted from simply hiring people to actively training them, gradually forming a joint training model of “government + enterprises + educational institutions.” This has helped promote the overseas expansion of a range of Chinese vocational education programmes, including the Lu Ban Workshops, Ban Mo Workshops, the Overseas Learning Centers of the Open University of China of the Open University of China, and AVIC International’s vocational education projects, while also helping Chinese technology and standards go global.

A deterioration in the business environment caused by ethnic conflict

After 2020, Ethiopia experienced a serious outbreak of domestic security and political conflict. The intensification of conflict and the deterioration of the business environment created structural constraints that became the primary reason Chinese companies were forced to leave.

Overall, China-Africa trade has continued to rise year by year. Although there was a slight dip during the pandemic, the long-term growth trajectory remains unchanged. China’s exports to Africa mainly consist of electronics, machinery parts, and small commodities, while Africa’s exports to China are concentrated in primary goods such as minerals, energy, and coffee. Trade ties between the two sides have continued to deepen.

Yet against this broader backdrop, Ethiopia stands out as a special case. After peaking in 2019, Chinese investment in Ethiopia plummeted and remained low in 2024–2025. In 2024, Chinese direct investment in Ethiopia ranked among the lowest in Africa, far below that of neighbouring Kenya and Tanzania. These major East African nations have comparable population resources and are all committed to industrialisation, which has created a competitive dynamic. Since 2020, foreign investment has shifted away from Ethiopia towards neighbouring countries with better English-language environments and more stable relations with China. As a result, Ethiopia has gone from being one of the main destinations for Chinese investment in Africa to a country receiving only low to moderate flows.

Conflict and political uncertainty have brought enormous systemic risk. Political stability was once a major advantage that attracted Chinese firms to Ethiopia. But after the death of Meles Zenawi, political fragmentation, ethnic tensions, and disputes over resource distribution triggered unrest. The country declared a state of emergency twice in 2016 and 2018, and the death toll from the conflict is conservatively estimated at 500,000. Northern Ethiopia has remained mired in prolonged fighting, severely damaging investor confidence and directly disrupting industrial parks and Chinese business operations in the north.

Beyond domestic turmoil, the international environment has also dealt a serious blow. The African Growth and Opportunity Act (AGOA) once gave Ethiopia duty-free access to the U.S. market and strongly boosted its export-oriented manufacturing sector. But because of the conflict in the north, the U.S. removed Ethiopia from the list of beneficiary countries. That caused industrial parks to lose their tariff advantage, and many factories were forced to shut down while personnel were evacuated.

The book Conflict and Development: Studies on Ethiopia’s Politics, Economy and Society argues that ethnic conflict and periodic political instability may remain “given constraints” that Ethiopia has to face for a considerable period of time. Chinese companies operating in the country must therefore consider their strategic planning and risk management within the context of these structural risks.

Policy constraints

In addition, Ethiopia faces several other constraints.

First, under its export-oriented policy framework, domestic sales are tightly restricted. Industrial parks are required to export 80 per cent of their output. Only a small proportion of defective goods may be sold domestically, and taxes on domestic sales are relatively high. This has left many firms in a bind: exports do not always move smoothly, while domestic sales are restricted, dampening business incentives.

Second, there is mandatory foreign exchange conversion and an irrational foreign exchange structure. When firms earn export revenues, during periods of foreign exchange shortage in Ethiopia, they are required to settle 68.5 to 80 per cent of that income in the local currency, the birr, exposing them to major exchange-rate risk. At the same time, Chinese companies operating in industrial parks are often required to pay rent, taxes, and management fees in U.S. dollars. In other words, they struggle to earn dollars, yet still have to pay costs in dollars. This foreign exchange structure severely squeezes profit margins.

Third, there are restrictions on human resources and market access. In the Eastern Industry Park, for example, the ratio of Chinese to Ethiopian employees is capped at 1 to 15. At the same time, foreign investment is prohibited in sensitive sectors such as mining, coffee, and retail. Although Ethiopia opened its domestic market much more widely after 2024, driven by the IMF, and allowed Chinese companies to enter sectors such as retail, the entry threshold remains extremely high. The required scale of capital investment is beyond what most Chinese firms can bear, so most of them still have yet to enter these sectors.

Fourth, the relationship between the federal government and regional state governments also affects industrial park development. Again, taking the Eastern Industry Park as an example, its first phase, covering 2.33 square kilometres, has performed very successfully. Because occupancy is high, the company planned a second phase of 1.67 square kilometres. But that second phase has still not moved forward. The core reason is that although the federal government approved it, the regional state government vetoed it. Since taxes paid by companies in the park go to the federal government, the regional authorities do not receive direct revenue from it. To some extent, this institutional design has constrained further business expansion.

Taken together, these factors led to the large-scale withdrawal of Chinese companies in 2023 and 2024.

New opportunities for new energy vehicles created by the ban on fossil-fuel cars

However, when we revisited Ethiopia in 2024, we saw something new: the rise of the new energy vehicle industry. China’s technological strengths in this area align perfectly with Ethiopia’s industrial policy, and the country’s ban on fossil-fuel cars has become a key catalyst. Faced with foreign exchange shortages and difficulty importing oil, Ethiopia has turned to new energy vehicles.

Ethiopia’s new energy vehicle policy has been years in the making. Planning began in the early 2010s. In 2021, new energy vehicles and charging infrastructure were incorporated into the National Transport Policy and the Ten Years Development Plan. In January 2024, Ethiopia officially banned the import of fossil-fuel-powered private passenger cars. In March 2024, large-scale promotion began, and between April and October, the country imported 100,000 Chinese new energy vehicles. In June 2025, it banned the assembly of fossil-fuel cars, and in October, it required long-haul trucks to be replaced with new energy vehicles, marking the full phase-out of fossil-fuel vehicles.

The government is firmly committed to advancing this policy. In our conversations with local officials and car retailers, we raised concerns about possible policy reversals. But all parties told us the same thing: Ethiopia can no longer go back to the age of fossil-fuel cars, and it will continue firmly down the new energy path. The main reasons are, first, that foreign exchange reserves are insufficient to sustain oil imports, and second, that electricity prices are relatively low, which makes the rollout of new energy vehicles more feasible.

From March 2024 to the end of 2025, Chinese new energy vehicle companies established a broad presence across Ethiopia. This includes assembly operations for passenger cars, minibuses, and buses; imports ranging from economical to high-end models; and the rollout of sales and service networks as well as charging infrastructure. More recently, local authorities have also planned to promote vehicle manufacturing and battery production projects, with the aim of upgrading Ethiopia from a consumer market for new energy vehicles into a regional manufacturing hub. The country’s advantageous geographic location, its role as a transport hub, and the fact that Ethiopian Airlines serves as a key transit route for many African countries all provide support for that ambition.

Chinese vehicles are already highly visible in Ethiopia. Some brands that remain relatively niche in China have secured a place in the Ethiopian market. Some new energy vehicles that are viewed in China as part of overcapacity have successfully entered the Ethiopian market.

At present, the main bottleneck is the charging infrastructure. Over the past year, only 50 charging stations have been built nationwide, each with multiple charging points, which is far from enough to meet demand. When we asked local officials why they were not accelerating deployment, they said the issue was not funding. Chinese investors were willing to provide capital. The real problem was the shortage of local technical workers able to handle post-construction maintenance, which meant expansion had to proceed cautiously.

Ethiopia can fairly be described as one of the world’s most aggressive promoters of new energy vehicles, showing boldness and determination both in policymaking and in practical experimentation. The industry began to take shape in 2022 and was fully rolled out in 2024. Growth has been rapid, but the overall scale remains limited. Ethiopia has around 1.5 million vehicles in total, and new energy vehicles account for only 5 per cent, leaving a considerable gap between the current situation and the target. Although institutional constraints remain, the scope for future cooperation is vast, and the country is well worth continued attention and in-depth research.

Conclusion

Once the wave of overseas expansion recedes, what do Chinese companies leave behind? It is important to confront squarely the shift from a “surge” to a “relative contraction”. The number of Chinese nationals in Ethiopia once rose rapidly, but has since declined significantly due to multiple shocks, with only a handful remaining to continue their operations locally.

From the perspective of historical legacy, the projects themselves may end, but the capabilities built through them do not disappear. Industrial park development, infrastructure, manufacturing investment, and skills training have all become part of Ethiopia’s development foundation. Productive capacity, facilities, talent, and institutional practices continue to have an impact.

The collective withdrawal of Chinese companies should not be seen as a failure. Rather, it is a mirror. In Ethiopia, and in many other African countries, Chinese companies going forward must strengthen their analysis of the political and economic environment, build local partnerships, and diversify risk. They cannot simply enter blindly because labour is cheap or policies appear favourable. This is a lesson that all Chinese companies expanding overseas should take seriously.

So when looking at the current situation of Chinese companies in Ethiopia, the key question is not “how many people are still willing to invest there” or “whether Ethiopia can return to its golden years”. The real question is how Chinese companies can build more resilient industrial and investment models in Ethiopia and in similar countries. In the process of building that resilience, if they can continue to train local talent and pass on elements of Chinese commercial civilisation, then perhaps the “second chapter” of Chinese business in Ethiopia is only just beginning. We hope there will be more opportunities in the future for deeper field research and more substantial findings.

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Pekingnology

Zhang Xuefeng's pep talk to anxious undergraduates who wish to move up

The People’s Republic of China is unitary with no fedearlist system but its universities, all state-run in the socliast country, do NOT admit students fairly across provinces. All universities overwhelming favor local candidates in admission - that is to say, discriminate against candidates from outside the universities’ provinces or municipalities…

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3 years ago · 19 likes · 2 comments · Jiayao Liu, Lixing XIE, Zichen Wang, and Yuzhe HE

Both came from decidedly unglamorous beginnings. Zhang Xuefeng grew up in a poor county in China’s north-east and went not to one of the country’s grandest universities. Zhang Xue was born in a poor village, saw his parents split up early, grew up in hardship and started work as a repair-shop apprentice while still a teenager. Later he scraped together 20,000 yuan ($2,900) and went to Chongqing, a southwestern metropolis, to build a business around motorcycles. Their biographies did not make them unique. China is full of people from hard places. But they helped make both men believable.

Zhang Xuefeng became powerful because he filled a real need. China asks families to make life-shaping decisions about majors and careers in a system that is opaque, crowded, and stratified. He turned that fog into something ordinary people could act on. He did not speak the soft language of self-discovery. He spoke in the hard language of odds, returns and class constraints. He warned students away from journalism in language so blunt it caused a national argument. He also argued that finance was a bad bet for families without capital, elite credentials or access to networks. The substance of those remarks was not especially refined, and often not especially fair. But millions of people recognised the underlying instinct: he was describing a world in which class, information and connections matter, and in which many teenagers are asked to make life-shaping decisions long before they understand the rules.

Zhang Xue’s rise answered a different hunger. His appeal was not that of a counsellor but of a folk hero from the workshop floor: a boy from nowhere, obsessed with motorbikes, who fought his way into racing, then manufacturing, then entrepreneurship, and ended up with a motorcycle bearing his name winning on the world stage. That story would have spread even if he had been polished and bland. Success is persuasive. So is the spectacle of a Chinese brand beating established foreign names in a field where prestige still matters.

But success was not enough. What also helped him break out was the way he sounded. He was later asked what support Chongqing had given him as an outsider entrepreneur. Not even a cent, he said, necessitating immediate damage control from the Party’s mouthpiece. Asked how it felt to go from chasing reporters years ago to being chased by them now, he replied that if they were not connected, they would not even be in the room - he did not really want to do the interview. Then came the usual invitation to say something uplifting for confused young people. He batted that away too: he was not good at that sort of line. It was graceless, funny, and unmistakably alive.

That sort of exchange lands in China because the country has had more than enough of the opposite. Every society produces inflated public language. China is not unusual in that. And the authorities that still set much of the national agenda are especially given to it. Since power retains such influence over headlines, tone and acceptable expression, official language seeps everywhere: abstract, uplifting, ceremonial and often empty. Even the system itself has a name for the problem—jia da kong, or fake-big-empty talk.

That is why “authenticity” matters here, though it is not the whole explanation. Both men had obvious reasons to be admired. Zhang Xuefeng gave anxious families a usable map. Zhang Xue built a company and a machine that could win. But those achievements alone do not produce this level of attachment. What made both men larger than their niches was that they seemed to speak before the performance had time to arrive. Zhang Xuefeng sounded like a man too impatient to flatter his audience. Zhang Xue sounded like a man too uninterested to pretend. In an age of slogans, that carries unusual force.

This is also why their roughness helped rather than hurt them. Not because they were somehow unlovable in the ordinary sense. On the contrary, both inspired affection for clear reasons: one because he tried to spare ordinary families expensive illusions, the other because he turned a battered beginning into something tangible and victorious. What pushed them beyond admiration into something closer to devotion was that their rough edges felt unmanufactured. People did not just like what they did. They believed the person speaking.

So the two Zhangs belong together, even if they came from different worlds. One dealt in admissions, employability and the grim arithmetic of social mobility. The other dealt in speed, engineering and the fantasy that grit and competence can still punch through hierarchy. Both would have mattered anyway. What made them erupt across the internet was something simpler. In a culture saturated with polished uplift and official puffery, people are hungry for speech with some blood in it. A blunt line can travel further than a beautiful one. A refusal to sound inspirational can be more inspiring than the usual sermon. (Enditem)

Pekingnology

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 · 51 likes · 6 comments · Jiayao Liu, Lixing XIE, Zichen Wang, and Yuzhe HE

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Speaking to reporters in Taipei at around 11 a.m., Cheng said she would gladly accept the invitation and described the trip as an effort to ease tensions across the Taiwan Strait while maintaining Taiwan’s ties with the United States. The visit would be the first by a sitting KMT chair to the mainland in a decade.

The transcript below is an English translation based on a livestream replay of Cheng’s remarks and exchanges with reporters.

Cheng Li-wun

Good morning, friends from the media.

About an hour ago, the Central Committee of the Communist Party of China (CPC) publicly announced that it, together with General Secretary Xi Jinping, welcomes and invites Li-wun to lead a delegation to visit the Chinese mainland. Here, I would like to express my gratitude and gladly accept the invitation.

In 2005, Chairman Lien Chan invited me to join the Kuomintang so that I could help him advance that historic, ice-breaking journey of peace. That year, I travelled with the delegation as its spokesperson. It was the first time in my life that I set foot on the mainland. Now, more than twenty years later, it is clear that Chairman Lien’s courage, resolve, and vision laid the foundation for the KMT–CCP platform, which became an important mechanism for cross-Strait communication and played an irreplaceable, pivotal role in safeguarding peace across the Strait. What followed was President Ma Ying-jeou’s eight years in office, during which cross-Strait relations were peaceful and stable, exchanges and interaction flourished, and our international space expanded across the board. There was even the very rare phenomenon of a diplomatic truce across the Strait.

It is deeply lamentable that a decade has now passed since the last visit to the mainland by a chairman of the Chinese Kuomintang. Today, I hope to take a solid first step for peace and stability across the Strait, and I want to make this clear to everyone: from Chairman Lien Chan, to President Ma Ying-jeou, to Cheng Li-wun’s visit to the mainland today, all of us have stood on the same political foundation — that is, opposition to Taiwan independence, and adherence to the 1992 Consensus. By opposing Taiwan independence, we can avoid war. By upholding the 1992 Consensus, we can create peace.

That is why my visit to the Chinese mainland today is neither more nor less than this, with nothing added and nothing taken away: we will continue to uphold the 1992 Consensus and oppose Taiwan independence. We want to prove to the people of Taiwan, and to the world, one thing: War between the two sides is not inevitable; the two sides do not need to descend into danger and armed conflict. With our own wisdom and effort, we can together forge a broad road to peace. We have a choice.

For the sake of both sides of the Strait, for regional stability, and for the well-being of the next generation, we must firmly choose the path of peace. Since Chairman Lien’s 2005 visit to the mainland, the principles of the 1992 Consensus and opposition to Taiwan independence have been formally written into the Kuomintang Party Charter. This has been the Kuomintang’s consistent cross-Strait line, and the eight years of the Ma Ying-jeou administration proved that it was the right line. In keeping with the party charter, it is also consistent with the provisions and spirit of the Constitution of the Republic of China.

Friends from the media, and all those concerned about the international situation and the future of cross-Strait relations: this is not only the Kuomintang’s party charter, and not only an express provision of the Constitution of the Republic of China. The whole world, in fact, follows a one-China policy and a shared position of not supporting Taiwan independence. That includes our long-standing ally, the United States, whose stance has remained consistent and clear regardless of which party is in power. On this shared foundation—a one-China policy and opposition to Taiwan independence—I believe no one wants to see the Taiwan Strait become a source of turmoil. Washington has stressed this again and again. It is also the earnest hope of the international community: that the two sides can stop confrontation through dialogue, communicate and engage with one another, and prevent hostility from escalating and war from spreading. I believe this is our shared expectation today, and the deeply felt expectation of Taiwan’s mainstream public opinion.

In recent years, the Taiwan Strait has even been described by international media as one of the most dangerous places in the world. We hope the April visit can mark the beginning of a somewhat warmer spring across the Strait—a first step toward expanding mutual goodwill and building shared trust. Peace across the Strait is not only Taiwan’s aspiration; it is also the highest shared expectation of the mainland and of Beijing. We are willing to work for peace across the Strait, for regional stability, and even to make a positive contribution to peace for humanity, so that the whole world can feel reassured and no longer fear the outbreak of war across the Strait.

Finally, I would like once again to thank our party’s two vice chairmen responsible for cross-Strait exchanges, Vice Chairman Chang and Vice Chairman Hsiao. You have worked very hard during this period. I also want to thank Song Tao, Director of the Taiwan Affairs Office of the CPC Central Committee, for his sincere, responsible, proactive, and thoughtful communication and arrangements throughout this process. In a very short period of time, we completed exchanges through the KMT–CCP think tank forum, and will soon proceed with the visit to the Chinese mainland. I hope this trip can mark a successful first step toward laying the foundation for lasting and enduring peace across the Strait.

Thank you all.

Chou Yu-hsiang, China Times

Hello. I wanted to ask whether, either before or after the Cheng-Xi meeting, there will be a meeting between you and President Lai to discuss matters related to it, such as its outcomes. I also wanted to ask whether you could introduce the members of this delegation, and whether there will be a media delegation as well.

Cheng Li-wun

First, with regard to the delegation members and other related details, we will probably report those to you later. As of now, we have only just confirmed the invitation to visit, so there is still much that needs further communication and confirmation. Going forward, I also hope we will be able to brief everyone again promptly on all the relevant details.

Let me add that, as I have repeatedly said in response to the media’s concerns, everyone has been very focused on when this visit to the Chinese mainland would take place. I have also said that, the moment it was confirmed, we would immediately hold a press conference to announce it. So after the Taiwan Affairs Office of the CPC Central Committee formally issued the invitation this morning, we immediately contacted all media friends across Taiwan and convened this press conference to brief everyone without delay.

Second, you asked whether I would meet President Lai Ching-te. In fact, on the day I took office as party chair, and throughout these past four-plus months, I have consistently sent a very important message to Taiwanese society: I very much hope the ruling and opposition camps can engage in dialogue, and that politics in Taiwan can return, rationally, to the democratic spirit and normal functioning of political life. Taiwan truly cannot go on tearing itself apart through endless partisan strife and internal attrition. So when it comes to cross-Strait exchanges and cross-Strait dialogue, I naturally hold very high hopes. I believe it is a shared wish in Taiwan that, regardless of party, we should work together to advance peace, dialogue, and exchange.

So, when it comes to President Lai Ching-te, I am of course very willing to meet and speak with him, whether before the trip or after the visit is over. There are simply too many knots that need to be untied. Taiwan cannot go on with this endless internal fighting.

Last Friday night, I went to see Secret Love in Peach Blossom Land. There is a famous line in it that left a particularly deep impression on me: Shanghai is so big, yet the two of us were able to meet there—who would have thought that Taipei would be what defeats us.

I have said publicly before that, for the sake of cross-Strait peace, there is no person I would not meet and no step I would not take. Today, I am prepared to cross the sea, cross the Taiwan Strait, and travel to the Chinese mainland to send an important message to the world about the pursuit of peace. Yet President Lai and I are only a short distance apart in Taipei, and still cannot meet or hold a conversation. I believe that, too, runs against the expectations of Taiwan’s 23 million people. Are we really going to keep fighting and grinding ourselves down like this? So I hope we can be open and candid. For the sake of Taiwan, Penghu, Kinmen, and Matsu, I am willing at any time to meet President Lai and engage in dialogue with him for regional stability and peace, for cross-Strait development, and even for resolving the domestic turmoil and constitutional deadlock.

Thank you.

Liu Kuan-ting, Central News Agency

Madam Chair, earlier today Mayor Lu [Lu Shiow-yen, Mayor of Taichung] said in a media interview that the arms procurement package she supports is in the range of NT$800 billion to NT$1 trillion. That seems somewhat at odds with the position of the KMT legislative caucus. Has there been any communication issue, or are people questioning whether this is out of step with the party leadership? Thank you.

Cheng Li-wun

Mayor Lu and I are as close as sisters. There has never been any problem with communication between us. Before her visit to the United States, I am also very grateful that she made a special trip to the party’s central headquarters to see me, and naturally we had a full exchange on all the issues everyone is concerned about, including arms procurement.

Let me say first that I am also very grateful to Mayor Lu. She has worked very hard. During her visit to the United States, she also clearly conveyed and explained our party’s position to the U.S. side. Let me briefly restate our legislative caucus’s position. We are the opposition party. Strictly speaking, arms procurement involves external affairs, especially concrete conclusions and agreements reached with the U.S. side, so it should be the Ministry of National Defense that bears the responsibility of explaining the matter, submitting a full report, and sending the proposal to the Legislative Yuan for review.

But up to now, what we have seen is still frustratingly vague. Apart from a broad framework and a headline figure, what exactly does the package contain? To this day, we are still waiting for a proper explanation and report from the ruling party. As a result, all we can base ourselves on is the very limited information available to us—not information provided by our own government, but what was formally announced by the U.S. side, together with a pricing letter sent to Taiwan. That is why our current party version is NT$380 billion plus n. The n reflects what remains unknown and unavailable to us. It also means that we are not saying we support only NT$380 billion. Once formal and complete information becomes available, we will immediately review the U.S. arms procurement package as well.

So what Mayor Lu expressed is, in fact, something everyone already knows: it is unlikely to be only NT$380 billion. We understand that too. The problem is that the specific follow-up details are still unavailable. As the opposition, this really puts us in a difficult position. We sincerely hope the government will be open and candid in explaining the matter.

And beyond U.S. arms procurement, this is not just about purchases from the United States. It also involves so-called commercial procurement, as well as possible U.S. procurement from and investment in Taiwan, and we have even less idea what those details actually are. So I apologise for taking a bit more time to clarify this.

That said, our party already has a very complete version and a well-developed argument. As you mentioned, our caucus meeting has also formally convened and decided the contents of the party’s version. We respect the caucus’s autonomy, and we believe that, in the course of future negotiations and clashes between the ruling and opposition camps—including whether certain adjustments may be needed to ensure the bill can pass smoothly—all of that will be handled in full by our caucus in the Legislative Yuan.

Thank you.

Huang Yang, Xinhua News Agency

Hello. I would like to ask what Chair Cheng expects from this trip. Thank you.

Cheng Li-wun

In early February, we very smoothly held the first KMT-CPC think tank forum in nearly a decade. Naturally, it reflected many things. After a ten-year interruption, there is strong expectation across Taiwan’s industries and trades for cross-Strait relations to return to normal, because this concerns industrial contraction as a whole, and even the loss of many people’s basic livelihoods.

But beyond that, we also raised more forward-looking issues: the challenges both sides of the Strait face together, and even the challenges facing humanity as a whole—climate change, energy conservation and emissions reduction, the age of AI, and energy issues. These are all challenges Taiwan is confronting today. So we also hope that, through these major issues, the wisdom of both sides of the Strait can be brought together not only to solve cross-Strait problems, but even to make a more positive contribution to humanity.

So this visit to the Chinesen mainland is meant not only to continue showing our deep hope for peace, but also to express concern for Taiwan’s industries and for Taiwanese businesspeople, who have been neglected for far too long. On some of these forward-looking issues, it is also about whether there is room for cooperation and exchange across the Strait, so that we can make a positive contribution to both sides and humanity more broadly.

Of course, the time is very limited. Even so, we hope that through this visit we can begin to change the atmosphere that has been built up around the Strait as one of looming danger and armed conflict, and instead create a different atmosphere, one that reflects the strong desire for peace on all sides. That is our broad direction and guiding principle. So I would also like to thank the Taiwan Affairs Office of the CPC Central Committee on the other side for its careful and thoughtful arrangements.

As for the final itinerary, it has not yet been fully settled. Once it is finalised, we will announce it to everyone in due course.

Thank you.

The New York Times

Madam Chair, The New York Times. We would like to understand why, after taking office, you appear to have given priority to arranging a visit to the Chinese mainland. How are you thinking about the U.S. side? Many people say you have prioritised engagement with the Chinese mainland, while placing interaction with the United States in a secondary position. How do you respond to that? Thank you.

Cheng Li-wun

I think both are extremely, extremely important to us. I have said this many times already: this is not an either-or choice, nor is it a question of which matters more. There is a popular line online: children choose—Taiwan wants it all. I have also said many times that I hope cross-Strait relations will not be a zero-sum game, no longer a matter of one side surviving only. We absolutely can achieve win-win outcomes, shared prosperity, and mutual benefit.

The same is true of U.S.-China relations. I also very much hope to see the active building of peaceful, friendly, and mutually beneficial ties between the U.S. and China. And within Taiwan itself, I hope for the same even more strongly. Since the question has come up today, let me say once again that Taiwan must not continue down the path of irrational internal confrontation. That is absolutely contrary to the welfare, interests, and expectations of the Taiwanese people. I sincerely hope party politics in Taiwan can return to reason, uphold and embody the spirit and norms of democracy, and work together for Taiwan’s future and well-being.

From the standpoint of the Chinese Kuomintang, this is all the more true. Cross-Strait relations are of paramount importance. Relations with the United States are equally so. There is no need to sacrifice one side’s relationship or interests to achieve peace across the Strait, or to preserve Taiwan’s solid friendship with the United States. I do not see any contradiction there, nor do I believe one side must be sacrificed to secure the other.

As I said earlier, the U.S. one-China policy and its non-support for Taiwan independence have been clear and longstanding. The U.S. has also long hoped that war will not break out across the Strait, and that the two sides can begin a dialogue.

So, because there has been no exchange and no visit for ten years, I naturally hope that, if this trip can proceed smoothly, we can share that good news with our friends at the earliest possible moment, so that our American friends can also see a dawn of peace. Here in Taiwan, we must be courageous and responsible, and take up the mission of safeguarding peace across the Strait, rather than becoming troublemakers. The moment our efforts receive a positive response of goodwill from the other side, the work of peace has already begun.

But we absolutely need the support and blessing of the international community, and we need the support and blessing of the United States all the more. So I also very much hope that our American friends can understand this and share in it at the earliest possible opportunity. This is not a question of what comes first or what matters more.

Thank you.

Reporter

Madam Chair, I would like to ask: if the Kuomintang is ultimately able to pass your version of the defence budget, can the party guarantee to the United States that it will submit another defence budget in six months’ time? Thank you.

Cheng Li-wun

Why six months?

Reporter

I mean, if this is to be done in instalments.

Cheng Li-wun

All right. I did not know why six months in particular, but that is fine. As I have just explained, when the Kuomintang’s party version was passed at our caucus meeting in the Legislative Yuan, we formally made clear the “plus n” component. The “plus n” means that once the specific contents and budget figures become available, and as we also expect there may be further U.S. arms procurement items, there is no fixed time limit saying it must be done within a certain period. That kind of restriction does not exist.

My understanding of our party version, the version passed by the caucus, is that whenever the U.S. side has new arms procurement items, the Legislative Yuan should immediately begin the review process. Yes.

Hsiang-ho, Awakening News Networks

Hsiang-ho from Awakening News Networks. Madam Chair, public opinion in Taiwan is generally very hostile towards the Chinese Communist Party, especially because of the frequent PLA aircraft sorties around Taiwan, which cause strong anger. People seem to be interested only in cross-Strait peace and agricultural trade. Do you expect this trip to deliver results in those two areas? Thank you.

Cheng Li-wun

I believe that if both sides across the Strait can send a clear public message to the world that they hope to resolve differences, as well as unnecessary misunderstandings and hostility, through peace and exchange, that in itself would already be the most precious and significant message, and the most important result.

And as I mentioned earlier, this goes well beyond the agricultural products you referred to. It involves far too many sectors. Our tourism industry is the engine of Taiwan’s entire service sector, yet over the past ten years tourism has been extremely depressed and difficult to sustain. That has in turn caused a serious contraction across Taiwan’s wider service sector. This affects a great many industries and a great many jobs.

In addition, the termination of certain items on the ECFA [Economic Cooperation Framework Agreement] early harvest list has in fact dealt a blow to many of Taiwan’s traditional industries. So this affects matters across the board. Even cross-Strait academic and cultural exchanges are now facing all kinds of unconstitutional and unlawful obstruction, creating a chilling effect and unnecessary barriers. These are all misguided policies that hinder cross-Strait dialogue and exchange, prevent the two sides from getting to know and understand one another, and block the accumulation of goodwill and the expansion of the foundations for peace.

All of this, I hope, can be actively addressed and eased in the future.

Thank you.

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Pekingnology

Taiwan's former parliamentary speaker proposes "separate jurisdictions, one sovereignty"

If world peace really hinges on, as many claim, what happens across the Taiwan Strait, you’ll have to bear with me for more posts on the seemingly niche subject…

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a year ago · 16 likes · Zichen Wang

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Beijing renews calls for Taipei to open up tourism upon my FT oped

Yesterday/Wednesday, March 5, at the first weekly press conference of the Taiwan Affairs Office after the Lunar New Year, my February 26 op-ed in the Financial Times Let Chinese mainland tourists return to Taiwan came up…

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2 months ago · 21 likes · 1 comment · Zichen Wang

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Ma Ying-jeou on Commemoration Day of Taiwan’s Restoration

Chinese and U.S. trade negotiators spent their Saturday talking in Kuala Lumpur, Malaysia, where Bloomberg just reported U.S. is saying the discussions were “very constructive…

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6 months ago · 21 likes · 1 comment · Zichen Wang

According to court filings made public this week, DJI contends that six disputed patents—covering drone flight-control, structural design and image-processing technologies—were created by engineers who left DJI to join Insta360 within a year of their departure, a period during which Chinese patent rules still treat inventions as “service inventions” belonging to the former employer.

Investors reacted swiftly. On 23 March, after news of the lawsuit became public, shares in Arashi Vision, Insta360’s parent company, tumbled seven per cent in Shanghai trading, wiping out more than $788 million in market value.

The legal dispute turns on China’s rules governing “service inventions.” Under Chinese law, inventions or creations made within one year of an employee’s departure may still be recognised as service inventions if they are related to the employee’s former job responsibilities or tasks assigned by the previous employer.

As Yang Anjin, a partner at Beijing Wis & Weals Law Firm, noted, the law can favour the former employer even where a departed employee develops the technology independently at a new company, so long as the work remains tied to the employee’s earlier role and is completed within a year of departure. But that principle has limits. Chen Yuanxi, a partner at Shanghai Hiways Law Firm, said that if a former employer can show only that an employee once participated in related work, but cannot prove when the disputed technical solution was formed, how it emerged, and why ownership should belong to the original company, its claim may not necessarily stand.

A key point of contention is Insta360’s handling of inventor names in patent filings. Some inventors were listed in Chinese patent applications as having “requested non-disclosure” of their names. But in corresponding filings under the Patent Cooperation Treaty, an international system for seeking patent protection in multiple jurisdictions, those same inventors were named, as international rules require. DJI said its comparison of the two sets of filings showed that one inventor Insta360 had sought to withhold was a former core member of DJI’s research and development team. It has presented the discrepancy as evidence that Insta360 was trying to obscure the identities of inventors at the heart of the ownership dispute.

Insta360 rejected that interpretation. In a public response on Weibo, China’s equivalent of Twitter, Insta360’s founder, Liu Jingkang, said the company routinely withholds inventor names in domestic patent filings and discloses them later in international applications, arguing that the practice is meant to delay the exposure of technical staff to headhunters rather than to conceal former DJI employees.

Another response by Insta360’s head of China operations added that DJI could itself infringe at least 28 Insta360 patents, but that his company has so far avoided litigation to focus resources on innovation.

Beyond the courtroom, the dispute reflects a widening rivalry across China’s consumer drone and imaging markets. Insta360, long best known for panoramic cameras, has expanded rapidly in recent years. Its revenue hit $1.42 billion in 2025, marking year-over-year growth of 76.85 per cent.

Insta360 made its ambitions in DJI’s turf unmistakable in July 2025 by announcing Antigravity, a new drone brand developed in collaboration with third parties. Its first product, the panoramic Antigravity A1, launched in December, and by January 2026, the company said global shipments had topped 30,000 units.

Meanwhile, DJI, which made an estimated $12.3 billion in 2025 and is aiming to top $14.5 billion in revenue in 2026, has been making a reciprocal push into Insta360’s home market. In 2025, it introduced the Osmo 360, its first panoramic camera, broadening its reach beyond consumer drones, a market where it still commands more than 90 per cent of global sales. By the third quarter of 2025, as competition in panoramic cameras intensified, Insta360’s share had fallen to 49 per cent from about 81.7 per cent in 2024, while DJI’s had risen to about 43 per cent.

Against that backdrop, the suit looks less like an isolated patent quarrel than another front in a broader commercial fight between the two Shenzhen companies.

The stakes could extend well beyond the two companies. The outcome could set a critical precedent for China’s high-tech sector, where poaching talent has become a common strategy for startups looking to accelerate research and development. A ruling in DJI’s favour would affirm employers’ rights to claim post-departure inventions, while a victory for Insta360 could reinforce a narrower view of those employer rights and give more room to employees and new companies to argue that post-departure work was independently developed.

In practical terms, the lawsuit may weigh more heavily on Insta360 than on DJI. This is not a contest between equals: DJI is almost nine times the size of Insta360, giving it far greater financial strength to absorb a protracted legal fight.

DJI has also shown a readiness to go on the offensive in major legal disputes, including its 2024 suit against the U.S. Defence Department over its “Chinese military company” designation and its 2026 challenge to U.S. import restrictions on new models and key components.

Insta360, by comparison, has only just come through a bruising legal battle of its own. Its nearly two-year patent dispute with GoPro, a U.S. action camera maker, concluded in February 2026. Although the outcome cleared the way for Insta360 to keep selling in the U.S. without restrictions, the cost was steep. Liu Jingkang said the company had spent more than $10 million on its defence. That history may leave Insta360 entering this new fight with less room for error.

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Pekingnology

China’s Spring Festival AI war

In China’s Lunar New Year, luck is delivered in red envelopes, traditionally a small packet of cash, handed over as a blessing made tangible…

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2 months ago · 23 likes · 1 comment · Yuxuan JIA and Zichen Wang

In a recent article, Hu argues that artificial intelligence is beginning to rewrite the grammar of sea power and that organisational adaptation is every bit as important as technological innovation.

This article first appeared in Issue 3, March 2026 of 现代舰船 Modern Ships, a magazine run by China State Shipbuilding Corporation Limited (CSSC)’s in-house think tank. It was also published on Mingkun Technology’s official WeChat blog on 7 March.

胡波：人工智能时代的海军与海权

Hu Bo: Navies and Sea Power in the Age of Artificial Intelligence

Driven by iterative upgrades in storage and computing power, broad improvements in computer hardware, and the accumulation of vast quantities of data in the Internet age, artificial intelligence (AI) has entered a new phase of rapid development in the 2020s after decades of repeated setbacks. The AI age has truly arrived.

What, then, does AI mean for navies and for sea power? Although the broad trajectories of technologies such as machine learning, industrial robotics, and materials science are already visible, the precise effects of their convergence on future warfare remain difficult to forecast. Even so, one point is already clear: for navies and maritime power, the implications of AI will be transformative. Its explosive rise may prove no less consequential than the opening of a new Age of Discovery. It is set to directly reshape the rules governing naval organisation, doctrine, policy, and operations, while also significantly expanding both the speed and the scope of competition at sea.

First, AI is changing how decisions are made and how quickly they can be made. In naval command and combat systems, AI is primarily used to enable more intelligent command and control through the integration of advanced software processes, thereby improving the overall operability of naval platforms. It can also strengthen combat systems by enabling more accurate targeting and more effective strikes against hostile assets. In this context, AI plays an auxiliary role, while final decisions are still made through a human command chain.

The world’s major powers have been actively investing in the research and development of autonomous weapons, yet they remain cautious about their actual deployment. One reason is the inherent difficulty of sensing and interpreting the maritime environment, especially the deep sea. Human operators cannot grant autonomous platforms full freedom to conduct offensive or confrontational missions, given the risk of unintended escalation. Another reason lies in the ethical and responsibility attribution problems raised by autonomous weapons, which impose policy constraints on their use.

Second, AI is also reshaping the force structure of navies around the world. Unmanned platforms, including unmanned surface vessels (USVs), unmanned underwater vehicles (UUVs), unmanned aerial vehicles (UAVs), and a range of cross-domain aircraft and vessels, are already widely used in support missions such as reconnaissance, transport, and mine countermeasures. Although most remain under human control, many platforms are acquiring ever greater autonomy.

The development of unmanned platforms and autonomous systems has greatly expanded humanity’s capacity to understand, exploit, and utilise the oceans. In the military sphere, in particular, underwater competition and confrontation will assume an entirely new character. The deep sea, with its low visibility, extreme pressure, and highly complex hydrological conditions, is inherently difficult to monitor and understand. These characteristics make it especially conducive to covert operations and surprise attacks, and its military value is now being explored by the world’s major maritime powers.

Unlike the past, when “point strikes” or asymmetric deterrence relied largely on submarines, underwater military competition in the AI age is becoming increasingly networked, integrated, and system-based. Unmanned platforms and autonomous systems have now formally become an important component of the force structure of major navies.

Third, AI is also transforming the patterns of maritime strategic competition and naval warfare. It is reshaping the strategic balance at sea, and the navies that possess an advantage in AI will command the oceans in the twenty-first century. Computing power and algorithms will, to a large extent, determine the success or failure of great-power competition for sea power. In this context, the application of AI, machine learning, autonomous systems, data management, and other advanced technologies will become a key factor in future maritime strategic rivalry.

Taking the undersea battlespace as an example, the function and role of submarines will undergo major changes. Their mission will no longer be direct attack; rather, they will function primarily as command-and-control platforms for unmanned underwater vehicles, unmanned sensors, and standoff weapons, directing them in combat. This evolution of submarines from tactical platforms into operational nodes is similar to the transformation of naval warfare in the mid-twentieth century, when fleets moved away from battleships and cruisers conducting direct bombardment towards expeditionary forces built around aircraft carriers and amphibious assault ships, using aircraft, ground forces, and missiles to conduct strikes.

The large-scale military application of AI has only just begun. For armed forces, organisational transformation is every bit as important as technological innovation. Between advanced military technology and actual combat effectiveness stands a vast military organisation. Past experience has shown that in each wave of military-technological revolution, the most successful country is not always the one that possesses the most advanced military technology, but rather the one that best integrates advanced military technology and equipment with its own military organisation, doctrine, and regulations. In other words, the most successful country is the one whose military organisation is best adapted to the trajectory and potential of military technological change.

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Wang Xiaolu received his PhD in Economics from the Australian National University in 1998. He received the first and the eleventh Sun Yefang Award for Economic Science Papers (1984 and 2004), the highest honour in Chinese economics and the first China Soft Science Award (2010). In 2010, he was recognised by China Financial Weekly as one of the economists who had exerted an important influence on China’s economy, and was selected by Southern People Weekly as one of the hundred Chinese public intellectuals. His research on “grey income”—income missing from official statistics—was ranked by People’s Tribune as the leading item among the Top Ten Social Viewpoints of 2010.

In this article, Wang challenges a widely accepted policy assumption in Beijing—that investment demand can reliably compensate for insufficient consumer demand. He argues that this logic, influential in Chinese macroeconomic thinking for many years, has been applied far beyond the temporary and limited circumstances in which it might be justified. In the Chinese context, he suggests, the prolonged use of such measures has helped entrench an economy that is overly dependent on government-led and state-directed investment, while leaving household consumption unusually low by international standards.

On that basis, Wang calls not for another round of familiar stimulus, but for a shift in the macroeconomic framework itself. Monetary policy, he argues, should return to a more neutral stance, while fiscal policy should move away from investment-heavy expansion and towards livelihoods, public services, and social security.

This article is drawn from Liu Shijin (ed.) (2026), Looking Ahead to the 15th Five-Year Plan: International Experience and China’s Strategy for Crossing into a High-Income Society, 前瞻十五五:跨进高收入社会的国际经验与中国战略, CITIC Press. Liu Shijin is a Former Vice President (Vice Minister) of the Development Research Centre (DRC), a comprehensive policy research and consulting institution directly under the State Council.

With the author Wang Xiaolu’s consent, this translation is based on a Chinese text provided by him and includes only Parts I, II, and IV of the original article. This text may differ slightly from the version published in the book. Both Wang Xiaolu and Liu Shijin authorised the translation.

提振消费需求的关键

The Key to Boosting Consumer Demand

I. Why Does More Stimulus Produce Even Weaker Demand?

A widely held view maintains that if aggregate demand is insufficient, the economy should be stimulated through loose monetary policy and an expansionary fiscal policy centred on increased government investment. Data shows that over the past decade and more, the intensity of China’s monetary stimulus has never weakened.

Figure 1 compares the growth of M2 and nominal GDP since 1990. The gap widened markedly over time, especially after 2008. By 2024, nominal GDP was under RMB 135 trillion, while M2 had risen above RMB 313 trillion, leaving M2 at more than 2.3 times the size of GDP.

Between 2008 and 2024, nominal GDP grew at an average annual rate of 9.8 per cent and real GDP at an average annual rate of 7.0 per cent, whereas M2 grew at an average annual rate of 12.8 per cent, 5.8 percentage points higher each year than the real GDP growth rate.

In particular, during the effort to counter the international financial crisis, M2 surged by as much as 28.5 per cent in 2009 and continued to rise by 19.7 per cent in 2010. The so-called “moderately loose” monetary policy was in fact extremely loose. From 2007 to 2012, M2 expanded from RMB 40 trillion to RMB 97 trillion, an increase of 141 per cent in just five years.

After the global financial crisis, monetary easing was never fully unwound. From 2012 to 2016, M2 grew by 11.3 to 13.8 per cent a year, roughly 5 to 6 percentage points faster than real GDP. M2 growth moderated to 8 to 9 per cent between 2017 and 2019, but still outpaced GDP by about 2 percentage points. In 2020, M2 growth returned to double digits. Official data show that from 2020 to 2024, real GDP expanded by an average of 4.7 per cent a year, while M2 grew by 9.6 per cent on average, maintaining a gap of about 5 percentage points.

On the fiscal front, the State Council launched an RMB 4 trillion investment programme in November 2008, scheduled for completion by the end of 2010. However, National Bureau of Statistics data show that total fixed-asset investment rose by RMB 3.7 trillion in 2009 and RMB 7.4 trillion in 2010 relative to 2008, equivalent to year-on-year growth of 26 per cent and 20 per cent. State-holding investment accounted for much of the increase, rising by RMB 2.2 trillion and RMB 6.1 trillion respectively over 2008, with growth rates of 35 per cent and 18 per cent. Its cumulative increase alone far exceeded the headline RMB 4 trillion package, making it the main driver of the investment boom.

Nor did this momentum end with the crisis. From 2008 to 2016, state-controlled annual fixed-asset investment expanded from RMB 6.4 trillion to RMB 21.4 trillion, reaching 3.3 times its 2008 level. The true increase was larger still, since the statistical methodology changed during this period and, from 2011 onward, investments below RMB 5 million were no longer included.1

The key to this surge in government investment was the decision to allow local governments to set up local government financing vehicles (LGFVs) to borrow for investment. That opened the door to a wave of debt-driven spending by local authorities with little regard for consequences. Ultra-loose monetary policy further enabled this borrowing binge and amplified the investment boom. Central bank data published in 2011 show that by the end of 2010, more than 10,000 LGFVs had been established nationwide, with outstanding loans of RMB 14.37 trillion. That was equal to 3.4 times total local fiscal revenue in 2010, which stood at RMB 4.24 trillion.

In the years that followed, even after the global financial crisis had passed, the push for government-led investment was not reversed, and lending to LGFVs continued to grow. The central bank does not appear to have released comparable figures later on, but industry estimates suggest that cumulative debt-financed investment by LGFVs during this period exceeded RMB 20 trillion, several times already the size of the original RMB 4 trillion stimulus plan.

According to the National Bureau of Statistics, nominal fixed-asset investment across the economy grew by an average of 10.2 per cent a year between 2008 and 2024, 0.4 percentage points faster than nominal GDP. Over the same period, state-holding investment—that is, government investment plus investment by state-holding enterprises—rose by an average of 11.6 per cent a year, nearly 2 percentage points above nominal GDP growth. The pattern of government and state-sector investment consistently outpacing economy-wide fixed-asset investment has persisted to this day.

In 2008, state-holding investment accounted for 44.3 per cent of total fixed asset investment across the whole economy; by 2024, that share had reached 55.1 per cent. Over the same period, state-holding investment as a share of GDP rose from 19.7 per cent to 25.1 per cent.2

The above makes clear that over the past decade and more, highly stimulative loose monetary policy and proactive fiscal policy centred on expanding government investment have never truly abated.

Yet despite persistently loose and proactive monetary and fiscal policy, insufficient demand and corporate overcapacity have remained central constraints on growth. Economic expansion has continued to slow from the high rates of the past. Most strikingly, the consumption rate, meaning final consumption as a share of GDP, accounted for just 56 per cent of GDP in 2024, 21 percentage points below the world average. Household consumption was below 40 per cent of GDP, an unusually low level by international standards. Insufficient consumer demand is now a principal source of economic weakness.

Figure 2 plots GDP growth from the start of reform and opening up in 1978 through 2024, using National Bureau of Statistics data. To smooth short-term volatility and clarify the longer-term trend, the series is presented as a three-year moving average. As the chart shows, China’s growth rate rose quickly from below 6 per cent in 1978 to around 10 per cent in the early 1980s, and then remained at roughly that pace for more than three decades.

But the post-2008 period of large-scale monetary and fiscal loosening marked a turning point. Growth remained above 9 per cent only briefly, from 2009 to 2011, before entering a prolonged slowdown. After 2015, China definitively moved off its previous high-growth path of above 7 per cent. Since then, growth has continued to trend down, albeit with fluctuations. More than a decade on, there is still no clear sign that this downward trajectory is ending.

Throughout this period of slowing growth, both monetary and fiscal policy remained loose. As the earlier data show, money supply and government investment continued to grow persistently and significantly faster than the economy itself, indicating that monetary stimulus and investment-led fiscal expansion were never meaningfully withdrawn. Yet sustained monetary and fiscal easing did not reverse the underlying pattern of weak demand and slower growth.

These circumstances suggest a strong case for fundamentally rethinking the macroeconomic framework that has guided policy for so long. The problem is not simply a shortfall in aggregate demand, but a deeper imbalance in its composition: investment has been excessive, while consumer demand has remained severely weak. That imbalance is closely tied to years of expansionary monetary policy and a government-investment-led expansionary fiscal strategy.

II. The Theoretical Defects of Keynesianism and the Chinese Experience

One obvious defect in Keynesian theory is its assumption that consumer demand and investment demand are in a fully substitutable relationship. According to this theory, if saving is too high and household consumption too weak, policymakers can offset the gap by loosening monetary policy to spur investment, or by having the state invest directly. The expansion of investment demand is thus expected to compensate for weak consumption, restore equilibrium between aggregate demand and aggregate supply, and put the economy back on a growth path. This logic implies that even wasteful public works—endlessly digging holes only to fill them in again—can generate growth, so long as money is spent.

In reality, however, any such effect is at best short-lived. Policies that boost investment may raise demand in the near term, but over the medium to long run, they further expand production capacity and increase supply, thereby worsening the structural imbalance between excess supply and weak demand.

To take one example, when the monetary authorities inject liquidity, encourage banks to issue loans for firms to build new factories, add equipment, and enlarge production capacity, demand does rise during the construction phase, particularly for investment goods such as steel, cement, and machinery. But once the projects are completed, that demand drops away abruptly, while new productive capacity appears. What has been added is supply. And final demand, which is already weak, becomes even less able to absorb the additional output.

At the level of the overall economic structure, only sufficiently strong consumer demand can ultimately absorb this intermediate capacity. If consumption remains weak while upstream and midstream capacity continue to expand, overcapacity becomes unavoidable. The imbalance between supply and demand then intensifies, inventories accumulate, products go unsold, and growth weakens further.

Government investment, of course, can be directed mainly toward infrastructure rather than productive capacity. When such spending creates genuinely useful infrastructure and relieves bottlenecks in transport, communications, and related areas, it can generate positive spillovers, support growth, and raise returns across the wider economy. But when infrastructure investment becomes excessive or duplicative, it too turns into low-yield or ineffective spending, consuming resources without generating commensurate returns and becoming little different from overcapacity. If continued, it will inevitably depress economy-wide returns, steadily erode the efficiency of resource allocation, and leave growth weaker. At the same time, high investment spends national income that might otherwise have gone to households, further suppressing consumer demand and deepening its inability to drive growth.

Therefore, the assumption that investment demand can fully substitute for consumer demand is a serious theoretical error. The two must remain in reasonable structural balance. Modern economics has long recognised this through the “golden rule of capital accumulation” and the “Golden Rule savings rate”: under given conditions, there is an optimal rate of accumulation and investment that maximises household consumption and overall social welfare. If the investment rate rises above or falls below that range, long-run economic performance suffers.3

Macroeconomic policy should prioritise maintaining long-term, balanced, and sustainable development, particularly by preserving a balanced investment- consumption pattern. If policymakers rely repeatedly on stimulus to boost investment and generate short-term growth, while sacrificing the long-term optimisation of household consumption and coordinated economic development, the result will be to damage both public welfare and overall economic performance. In the end, the costs will outweigh the gains.

For a long time, Keynesian demand-management theory has had a strong influence on economic research and macroeconomic policy in China. One distortion has been that short-run policy measures for particular circumstances have been treated as instruments for long-term use. This is, in fact, what has led to the persistent structural imbalance in demand, producing the paradox that the more stimulus applied, the more acute the insufficient demand has become.

It should be noted that Keynesian policies do not necessarily produce a structural imbalance of excessive investment and weak consumer demand. In most advanced Western economies, monetary and fiscal expansion is used with restraint, and short-term stimulus is generally withdrawn in a timely manner. Fiscal expansion, moreover, is usually not centred on government investment. More often, it takes the form of transfers to households to improve livelihoods. That tends to raise, rather than depress, consumption. These economies also have a very different structure: consumption rates are much higher than in China, while investment rates are much lower. As a result, even if short-term stimulus causes the investment rate to rise, it generally does not lead to serious overcapacity.

Figure 3 traces changes in China’s demand structure, focusing on the final consumption rate (final consumption share of GDP) and the capital formation rate/investment rate (capital formation share of GDP). Net exports are omitted because they account for only a small portion. From the start of reform in 1978 to 2002, the final consumption rate fluctuated modestly around an average of 63 per cent, while the investment rate hovered around 36 per cent. After 2002, however, the pattern shifted markedly: the investment rate kept rising as the consumption rate kept falling. This divergence became even more pronounced after 2008. By 2010, the consumption rate had dropped below 50 per cent, while the investment rate had climbed to nearly 50 per cent, marking the point of greatest imbalance between the two.

After 2010, the investment rate edged down, mainly as a result of spontaneous market adjustment—that is, reduced investment by private enterprises—while the consumption rate recovered slightly. Even so, the investment rate has remained above 42 per cent, well above the 36 per cent average recorded during the first two decades after reform. The consumption rate has recovered modestly, to around 55 to 56 per cent, still far below its earlier average of 63 per cent. Most strikingly, household consumption has accounted for just 37 to 39 per cent of GDP in recent years, an exceptionally low level by international standards.

Table 1 compares China’s investment and consumption rates both over time and against global levels. Longitudinally, China’s investment rate was 38.4 per cent in 1978, falling to 34.0 per cent in 1990 and 33.7 per cent in 2000 during the reform period. Over the same period, the consumption rate rose from 61.9 per cent in 1978 to 63.3 per cent in 1990 and 63.9 per cent in 2000. By 2010, however, the pattern had reversed sharply: the investment rate had climbed 15.3 percentage points to 47.0 per cent, while the consumption rate had fallen 14.6 percentage points to 49.3 per cent. By 2023, the latter had recovered only partially, to 55.7 per cent.

Against global benchmarks, China’s investment rate was about 20 percentage points above the world average, while its consumption rate was about 20 points below it in 1978. By 1990 and 2000, the investment rate was about 17 and 15 percentage points above the global level, and the consumption rate about 19 and 18 percentage points below it, respectively. Thereafter, the trend reversed. By 2010, China’s investment rate stood 28 percentage points above the world average, while its consumption rate was 32 percentage points below it. By 2023, the gap remained: China’s investment rate was still 16 percentage points above the global level, and its consumption rate 22 percentage points below it.4

From the launch of reform in 1978 to 2000, China maintained an average investment rate of around 36 per cent and an average consumption rate of around 63 per cent. Although the investment rate was already well above the world average and the consumption rate well below it, the pattern broadly reflected the conditions of that time. Reform and opening up had placed China on a path of rapid growth, industrialisation, and urbanisation, all of which generated exceptionally strong investment demand. In that context, an investment rate significantly above the global norm and a consumption rate significantly below it were generally consistent with the economy’s stage of development.

But as industrialisation and urbanisation have moved ever closer to completion, industry’s share of GDP has fallen, the tertiary sector’s share has expanded, and China has gradually moved toward a more post-industrial economy. Meanwhile, urban residents have become a major part of the total population. Demand for urban construction and infrastructure has also moved progressively closer to saturation, even as equal access to public services and social security for migrants to the cities has yet to be fundamentally resolved.

Under these conditions, the investment rate should gradually decline, and the consumption rate should rise, particularly as fuller social protection and more equal public services become necessary to match the economy’s changing structure. Yet over the past two decades, the investment rate rose sharply and, in recent years, has retreated only modestly from its peak. That is closely linked to monetary easing and the continued expansion of government-led investment.

An excessively high investment rate has led to serious overcapacity. Beginning in 2015, China implemented the policy of “cutting overcapacity, reducing excess inventory, deleveraging, lowering costs, and strengthening areas of weakness”, and carried out large-scale capacity cuts in sectors suffering from severe oversupply. Capacity in industries such as steel, coal, and cement contracted sharply for a time. Yet by 2023, according to the National Development and Reform Commission (NDRC), overall industrial capacity utilisation still stood at only 75 per cent, unchanged from the level reported when China first moved to tackle severe overcapacity in 2013–2015. Firms continue to face broad-based difficulty in selling their output. That suggests that serious overcapacity remains widespread across the economy.

The reason is that earlier efforts relied mainly on administrative measures to cut capacity in a few sectors, while leaving the underlying drivers of overcapacity largely intact—excessive investment, excessive monetary expansion, and excessive government borrowing. To address the structural imbalance at its root, those deeper institutional and systemic causes must be changed first.

It should also be noted that China’s official capacity utilisation figures differ markedly from those reported in other research. In a 2012 report, for example, researchers of the International Monetary Fund estimated that China’s industrial capacity utilisation rate had fallen to around 60 per cent. Several studies by Chinese research institutions reached similar conclusions. On those estimates, actual utilisation at the time was well below 75 per cent, suggesting that the official figures may have overstated the level of capacity use. That discrepancy may well persist today.

Overcapacity leaves firms struggling to sell their output, intensifies competition, fuels destructive price wars, raises the share of loss-making enterprises, and depresses overall efficiency. It is thus an important drag on economic growth. In recent years, the producer price index (PPI) has continued to fall, a pattern commonly described as deflation. Some take this to mean that money is too tight and that the answer is another round of monetary expansion. That reading is incorrect, both in theory and in practice.5

Under normal conditions, monetarist theory would predict that excessive money creation pushes prices higher and generates inflation. In China’s current circumstances, however, prices have continued to weaken. The explanation is straightforward: overcapacity and unsold output have forced firms into repeated price cuts and aggressive price competition simply to stay afloat, pulling prices down rather than pushing them up. And the root cause of that overcapacity is precisely the prolonged monetary easing that has encouraged excessive investment.

The property sector, however, followed a markedly different pattern from industry. Because land is finite and non-reproducible, and because its supply is monopolised by local governments, property did not for many years face the same kind of price-cutting competition seen in manufacturing. Under those conditions, continued monetary expansion translated instead into sharply rising asset prices. In the two decades to 2021, the average selling price of newly built commercial housing nationwide increased fivefold. In major cities, housing prices rose by 10 to 20 times, and in the most extreme cases by 30 to 40 times, notably in the central districts of megacities such as Beijing and Shanghai.

Stimulated by the surge in housing prices, the scale of property construction expanded ever further, and the problem of excessive investment became even more pronounced (see Table 2).

Note: 2022 marked a turning point for the property sector, so the cumulative increase reported in the table is split into two periods, 2001–2021 and 2022–2024. Floor space under construction and total liabilities are stock variables, so their cumulative increase is measured as the value in the final year minus the value in the year immediately preceding the period. Floor space completed and floor space sold are flow variables, so their cumulative increase is measured as the sum of annual values over the period. A dash indicates that no data are available.

As Table 2 shows, floor space under construction for housing nationwide rose from just over 600 million square metres in 2000 to more than 4 billion in 2010, and continued to expand rapidly even during the period of “property destocking”, surpassing 9.7 billion square metres by 2021. By contrast, annual completed floor space remained broadly below 1 billion square metres. In effect, this amounted to a large-scale build-up of disguised inventory.

The reasons are, on the one hand, persistently rising land and housing prices encouraged developers to acquire and hold as much land as possible, and to delay the sale of completed units in order to capture further capital gains. On the other hand, policy restrictions on hoarding land and housing pushed developers toward a different strategy: expanding construction. Once land had entered construction, it no longer counted as land hoarding, so a larger land area under construction, combined with slower housing completion and sales, became a lawful way to hoard land and housing.

Yet excessive investment and an outsized expansion of housing construction ultimately produced a severe oversupply. Once economic conditions weakened and speculative demand withdrew on a large scale, these contradictions surfaced all at once. From 2022 onward, the property market entered a prolonged downturn, with house prices shifting from sustained increases to decline, and both floor space under construction and floor space sold falling sharply. Yet the run-up in property prices over the two decades before the bubble burst was entirely consistent with the monetarist view of the link between money creation and inflation. In China, excessive monetary expansion did generate inflation, but for the reasons discussed above, it showed up not in manufactured goods, but primarily in the property sector.

Because the problems of excessive money supply and excessive investment were never resolved, past efforts at deleveraging also failed to achieve their intended effect. China’s macro leverage ratio—the combined debt of government, non-financial corporates, and households as a share of GDP—rose from 114 per cent in 2008 to 194 per cent in 2015, and reached 300 per cent by 2024.6 The forces behind this steady rise in leverage are the same ones that produced industrial overcapacity and the property boom: persistently loose monetary conditions and the continued expansion of debt-financed investment.

…

IV. A Recovery in Consumption Depends on Macroeconomic Policy Adjustment and a Restructuring of Government Spending

China’s weak consumer demand is closely tied to fiscal policy and the composition of government expenditure. Table 6 offers a simple cross-country comparison of spending structures. In 2020, China’s broad measure of government expenditure—combining budgetary fiscal spending, government-managed fund spending, social security fund spending, and state capital operating expenditure—reached 41 per cent of GDP.

The comparison in the table covers 12 OECD countries whose economies rank among the world’s 20 largest: Australia, Canada, France, Germany, Italy, Japan, the Netherlands, South Korea, Spain, Switzerland, the U.K., and the U.S. On the surface, then, China’s government spending, measured as a share of GDP, appears broadly comparable to that of OECD countries. In reality, however, the structure of that spending differs markedly.

First, spending on public services—education, healthcare, and social security—amounts to just 13.9 per cent of GDP in China. Across the 12 OECD countries in Table 6, the average is 23.5 per cent, nearly 10 percentage points higher.

Second, China’s administrative expenditure stands at 9.7 per cent of GDP. Because of data limitations, this excludes the portion of government-managed fund spending used for administrative purposes, so the true figure is likely higher still. The average for the 12 OECD countries is 5.1 per cent of GDP, roughly half of China’s level.

Third, budgeted fixed-asset investment amounts to 5.7 per cent of GDP in China, compared with an estimated average of 2.5 per cent in the 12 OECD countries. But even this understates the scale of government-led investment in China. Budgeted investment accounts for only a small share of total government investment in China, much of which takes place outside the budget and therefore does not appear in Table 6. As noted earlier, state-holding investment in 2024 was equivalent to 25.1 per cent of GDP, several times the size of budgeted government investment.

Measured against broad-based total government expenditure, spending on public education, public healthcare, and social security accounts for 56 per cent of government outlays in the major OECD economies, meaning that more than half of public revenue is used directly to support households’ welfare. In China, by contrast, although spending on these three livelihood items has risen over time, it still accounts for only 33 per cent of broad-based total government expenditure, 23 percentage points lower than in the major OECD countries. Much of the remainder is directed instead toward two areas: 1) government investment, 2) administrative and institutional spending. Outlays in these categories are twice as high as in advanced market economies, while livelihood spending is markedly lower.

In practice, much of government investment takes place outside the fiscal budget, through channels such as government-managed funds and debt raised by governments at different levels via financing platforms. The scale of this off-budget investment far exceeds the budgeted government investment. Some of it is, of course, reasonable and necessary: effective infrastructure, when well targeted, can support economic development. But both government investment and administrative spending also contain waste, undermining efficient resource allocation and limiting improvements in public welfare.

In addition, China’s household saving rate, that is, household savings as a share of household disposable income, is too high, standing at 23 per cent in 2023, and this is also an important cause for insufficient consumer demand. The main reason for the high household saving rate is that income redistribution, social security, and the public service system do not provide comprehensive coverage and have failed to furnish households with adequate protection and services, forcing many households to reduce consumption and increase savings to cope with future risks relating to illness, old age, unemployment, children’s education, and similar concerns.

Therefore, to resolve weak consumer demand and restore healthy, sustainable economic growth, China’s macroeconomic framework needs to change. Monetary policy should return to a more neutral stance, while fiscal policy should shift away from focusing on government-led investment to improving livelihoods. Without such a shift, it will be difficult to correct the structural imbalance in demand.

To advance this transformation, it is desired that the consumption rate rise by at least 10 percentage points, returning to the 65 to 70 per cent range, while the investment rate should fall by around 10 percentage points, to the 30 to 35 per cent range, with further adjustment according to changes in the economic structure.

She argues that monetary policy should make a rebound in prices a binding objective, shift back towards aggregate demand management, lower risk-free interest rates more decisively, and reform the banking system in ways that improve monetary transmission rather than subordinating policy to concerns over banks’ NIM or overcapacity in certain sectors.

何晓贝：促进物价合理回升有必要成为货币政策的硬指标

He Xiaobei: Promoting a Reasonable Rebound in Prices Should Become a Binding Target for Monetary Policy

Looking back at 2025, the global trade landscape experienced unprecedented and profound changes. Confronted with a complex and rapidly evolving international environment, China’s economic growth not only successfully withstood external pressures but also achieved a record high in export volume. Annual GDP growth is expected to have reached the government’s initial target of around 5 per cent. This outcome was made possible by a series of proactive policy measures adopted by the Chinese government, which effectively responded to the challenges and uncertainties of the international market.

However, it is noteworthy that since the second half of 2025, both investment and consumption have exhibited signs of weakening growth. More importantly, price indicators suggest that aggregate output has remained below potential for several consecutive years.

As 2026 marks the first year of the Fifteenth Five-Year Plan period, the Central Economic Work Conference explicitly noted that “the contradiction between strong domestic supply and weak domestic demand remains prominent,” and emphasised that “promoting stable economic growth and a reasonable rebound in prices should be an important consideration of monetary policy.” Nevertheless, significant challenges remain regarding how macroeconomic policy can facilitate a reasonable rebound in prices. In particular, there exist considerable divergences of opinion regarding the role that monetary policy should play.

This report analyses China’s macroeconomic performance and policy environment in 2025 and, on the basis of forward-looking assessment, proposes policy recommendations on how monetary policy can support a reasonable rebound in prices.

I. Macroeconomic Performance and Policy Dynamics

(1) Three Core Features of Economic Performance

China’s macroeconomic performance in 2025 exhibited clear structural characteristics, with growth drivers and potential risks coexisting.

First, exports played a significant role in driving growth. Although the effective tariff rate imposed by the United States on Chinese goods increased from 11% to 29%, China’s total exports still recorded a year-on-year growth of 5.4% as of November 2025. Net exports contributed 29% to GDP growth, reaching the highest level since 1997 (excluding the pandemic period in 2020). This development reflects both the strong competitiveness of Chinese products and the gradual adjustment of China’s export market structure since 2018. In particular, part of China’s export share has shifted from the U.S. market toward ASEAN and other emerging markets, effectively offsetting the impact of trade barriers in a single market.

Second, economic momentum weakened over the course of the year. GDP growth reached 5.2% in the first three quarters of 2025, but momentum slowed toward the end of the year. Value-added industrial output and the Index of Services Production both decelerated in October and November relative to earlier months, and market expectations suggest fourth-quarter GDP growth may fall to around 4.5%. Domestic demand remains the primary weakness. By November, fixed-asset investment had declined by 2.6% year-on-year, the first contraction since the pandemic year of 2020. Meanwhile, seasonally adjusted month-to-month growth of the total retail sales of consumer goods was negative for most of the second half of the year, with cumulative growth reaching only 4% by November.

Third, a striking divergence emerged between real activity and price indicators. Perhaps the most unusual feature of China’s economy in 2025 is the coexistence of steady GDP growth with persistently weak inflation. CPI inflation remained below 1% for 33 consecutive months through November, while PPI has been contracting for 38 months in a row. Even more notable, the GDP deflator—a broad measure of price dynamics—has remained negative for ten consecutive quarters, the first such occurrence since China began publishing comparable data in the 1990s. This prolonged price weakness has also affected the exchange rate in real terms. Although the renminbi appreciated by about 4% against the U.S. dollar in nominal terms during 2025, China’s persistently lower inflation relative to major economies has caused the real effective exchange rate of the RMB to decline by roughly 20% since 2022.

Overall, China’s growth rate of around 5% remains relatively strong in the global context. However, judging from price indicators and labour market conditions, actual output is clearly below the economy’s potential, implying a negative output gap. A persistently negative output gap deserves particular attention. A large body of research shows that prolonged negative output gaps can generate hysteresis effects. For example, long-term unemployment can lead to skill deterioration (human capital depreciation) and detachment from the labour market, making it difficult for unemployment to return to its previous equilibrium level. In other words, even when economic downturns originate primarily from demand shocks, severe and prolonged recessions often produce long-term negative effects on the supply side. Through channels such as human capital loss and declining labour force participation, they can lead to a permanent reduction in potential output.

(2) The Strength of Macroeconomic Policy in 2025

In 2025, China’s fiscal policy showed a more proactive shift compared with previous years, while monetary policy remained relatively conservative.

Specifically, in terms of fiscal policy, both the official deficit ratio and the broadly defined deficit ratio—which includes local government special bonds and special treasury bonds—were two percentage points higher than in 2024 and even exceeded the level observed during the pandemic in 2020. More importantly, the orientation of fiscal policy has begun to change. Instead of the previous model of “investing in things,” which focused primarily on infrastructure investment, fiscal policy has partly shifted toward “investing in people,” emphasising consumption and social welfare.

Key measures include issuing 300 billion yuan in ultra-long-term special treasury bonds to support consumer goods trade-in programs; providing interest subsidies for personal consumption loans; introducing an annual 3,600 yuan childcare subsidy per child; and promoting policies such as free preschool education. In addition, 500 billion yuan in special treasury bonds were issued to replenish the core Tier 1 capital of large state-owned commercial banks, providing strong support for financial system stability.

However, China’s monetary policy stance in 2025 remained relatively conservative. Although the 2024 Central Economic Work Conference clearly emphasised a policy orientation of “moderately loose monetary policy,” the policy interest rate declined by only 10 basis points in 2025. Given the very low inflation rate, real interest rates remain relatively high. For example, although the nominal yield on ten-year government bonds has been declining since 2023, the inflation-adjusted real yield remains higher than the average level of the past decade. Similarly, the real lending rate—after adjusting for inflation—has remained roughly in line with its past-decade average, even though real GDP growth has slowed significantly during the same period. This implies that despite a decline in the economy’s average rate of return, borrowing costs have not fallen correspondingly in real terms. In other words, monetary policy has not played an especially countercyclical stabilising role.

II. Policy Debate: Price Recovery and the Role of Monetary Policy

China’s fiscal policy should play a key role in promoting economic growth and a recovery in prices. However, there remains significant debate regarding the effectiveness and necessity of monetary easing, with disagreements largely centred on three core issues.

(1) Debate One: Can Persistently Weak Prices Self-Correct?

Some argue that subdued prices are a temporary phenomenon resulting from structural economic adjustment, and that the economy will gradually move out of low inflation through market self-correction. However, international experience does not support this view.

From a theoretical perspective, persistently weak prices are a direct reflection of a negative output gap, and a prolonged negative output gap can cause irreversible damage to the economy. In a deflationary environment, the real debt burden of borrowers increases, prolonging the deleveraging cycle and suppressing investment and consumption. At the same time, falling prices can easily interact with wages to produce a downward spiral: declining corporate profits make wage increases difficult, slower income growth weakens household consumption, and the economy ultimately falls into a vicious cycle of “stagnant prices—stagnant wages.”

Japan provides a particularly instructive example. Inflation expectations among households became anchored at zero for a prolonged period; firms were reluctant to raise prices, and wage growth remained weak. This eventually produced a zero-inflation equilibrium that proved extremely difficult to break even after many years of policy intervention.

China is beginning to exhibit similar signs. Data from the National Bureau of Statistics show that the growth rate of average wages in urban units has declined significantly since 2021, closely mirroring the trend of persistently weak prices.

More importantly, one of the key determinants of inflation is expectations of future inflation. Inflation, therefore, has a self-fulfilling effect. Once firms and households form entrenched expectations that “prices will not rise,” they tend to postpone consumption and reduce investment, turning expectations into reality. Reversing such expectations is often very difficult. In recent years, Japan and Europe managed to exit prolonged periods of low inflation largely due to external shocks such as the pandemic and geopolitical conflicts, which pushed prices upward. This further demonstrates that market self-adjustment alone is unlikely to break a low-inflation equilibrium.

(2) Debate Two: Would Monetary Easing Worsen Overcapacity and Price Decline in a “Strong Supply, Weak Demand” Economy?

In its Q1 2025 Monetary Policy Implementation Report, the People’s Bank of China argued that under a development model emphasising investment and supply, increasing the money supply may lead to continued expansion of capacity and supply, thereby exacerbating the problem of excess supply and ultimately hindering a recovery in prices. Some scholars also contend that China’s investment and financing structure is unbalanced. In their view, monetary easing tends to channel funds into the production sector rather than the household sector, which may further aggravate the imbalance between excess supply and insufficient consumption.

This view, however, should be evaluated in a balanced and objective manner. It is undeniable that market distortions can affect the transmission efficiency of monetary policy. Problems such as soft budget constraints among some state-owned enterprises and the continued presence of “zombie firms” may lead to capital flowing into inefficient sectors and exacerbate localised overcapacity. However, these factors are not the root cause of economy-wide deflation, nor do they negate the overall effectiveness of expansionary monetary policy.

First, investment itself is an important component of aggregate demand. The assumption that “monetary easing stimulates investment and therefore worsens excess supply” is based on the premise that a large share of funds flows into sectors with soft budget constraints. Yet this situation has improved significantly. Local governments were once the main source of soft budget constraints, but with the ongoing local debt resolution process, they have instead become a source of tightening pressures. At the same time, overcapacity in certain industries cannot by itself trigger economy-wide deflation. Malignant competition in specific sectors should be addressed through sectoral regulatory policies, while monetary policy should focus on the overall price level. Localised problems should not constrain macroeconomic demand management.

Second, the benefits of monetary easing for the household sector should not be judged solely by the scale of newly issued household loans. More importantly, attention should be paid to the debt-relief effects of lower interest rates for households. International experience shows that after a sharp decline in housing prices, household deleveraging is a normal process. China’s household sector is currently undergoing such a deleveraging cycle: the ratio of mortgage balances to GDP has fallen from 33% in 2020 to about 27% today. For households with existing mortgages, interest rate reductions can significantly ease debt burdens. At present, outstanding personal housing loans in the banking system amount to roughly 37 trillion RMB. If mortgage interest rates were reduced by 100 basis points, households could save approximately 370 billion RMB in interest payments each year.

(3) Debate Three: Does Monetary Easing Threaten Financial Stability by Compressing Bank Net Interest Margins?

A key factor constraining the People’s Bank of China (PBOC), China’s central bank, from further interest-rate cuts is concern about the narrowing of banks’ net interest margins (NIM). Over the past decade, the NIM of Chinese commercial banks has gradually declined from 2.5% in 2015 to 1.4% in 2025. Since profits are the primary source through which banks replenish their core Tier 1 capital, the compression of interest margins has raised concerns about the financial soundness of the banking sector.

However, these concerns involve two misconceptions.

First, a low-interest-rate environment does not necessarily lead to an extreme compression of NIM. After the 2008 financial crisis, the United States implemented a seven-year zero-interest rate policy, yet the banking sector maintained an NIM of over 3%. By contrast, during the interest-rate tightening cycle from 2002 to 2006, U.S. banks’ NIM actually declined from 4% to 3.5%.

In essence, NIM reflect banks’ risk-pricing capability, that is, their ability to cover real-sector risks by raising risk premiums. China’s current interest rate system contains distortions: in some cases, corporate lending rates are even lower than government bond yields. This is not an inevitable consequence of low interest rates but rather the result of multiple factors, including the fragmentation of the monetary policy framework.

Second, the “safety floor” for NIM is not absolute. Cross-country comparisons show that over the past decade, banks in the Eurozone have maintained NIM of 1.4%–1.6%, while in Japan, margins have been even lower, at 0.5%–0.7%, without triggering systemic financial risks. A key reason Japanese banks have been able to sustain such low margins is that, following the banking crisis of the 1990s, the government used fiscal resources to recapitalise banks, thoroughly resolved non-performing assets, and repaired bank balance sheets. China’s issuance of special treasury bonds in 2025 to replenish the capital of large state-owned banks represents a step in this direction, though further work remains necessary to address potential non-performing assets.

More concerning is the approach of maintaining high interest margins to protect bank profitability. This approach creates cross-subsidisation, forcing high-quality borrowers to subsidise inefficient firms, and blurs the functional boundary between monetary policy and financial stability policy. Financial stability should rely on macroprudential regulation and risk-resolution mechanisms, rather than sacrificing the independence of monetary policy.

III. Policy Recommendations: How Monetary Policy Can Promote a Reasonable Rebound in Prices

To ensure that economic growth remains within a reasonable range during the 15th Five-Year Plan period and to achieve the goal of raising China’s per capita GDP to the level of moderately developed countries by 2035, it is essential to prevent the economy from operating below its potential output level for an extended period, which could cause permanent damage to potential growth.

Looking ahead to 2026, the economy will continue to face significant challenges. Promoting a reasonable rebound in prices and narrowing the output gap should therefore become the central task of macroeconomic policy. This requires effective coordination between fiscal and monetary policy. Monetary policy must break through its current constraints and play a larger role. To this end, the following four policy recommendations are proposed.

(1) Make “Price Rebound” the Primary Objective of Monetary Policy

The key reason monetary policy remains constrained at present is the ambiguity of policy objectives, which makes the policy stance vulnerable to interference. The objective framework should therefore be clarified on three levels.

First, “promoting stable economic growth and a reasonable rebound in prices” should be established as the primary objective of monetary policy. The 2025 Central Economic Work Conference described this goal as an “important consideration.” It should be elevated to the level of a “primary” objective to prevent policy stance from being weakened by conflicts among multiple targets.

Second, a binding inflation target should be established. At the 2025 Two Sessions, the inflation target was lowered from within 3% to 2%, a more pragmatic adjustment. This target should be treated as a binding policy indicator. Government authorities, including the PBOC, should make clear commitments and take concrete actions to prevent the market from forming entrenched expectations of persistently low inflation.

Third, monetary policy should return to its aggregate policy orientation. The core responsibility of monetary policy is to address inflation, which is a macroeconomic issue affecting the economy as a whole. Overcapacity in specific industries should be addressed through sectoral regulation and credit-structure adjustments, and should not become a constraint on aggregate monetary policy.

(2) Monetary policy should focus on lowering risk-free interest rates and reduce its emphasis on quantitative indicators.

Monetary policy should shift from a focus on quantitative management—such as credit scale—to a price-based framework centred on interest-rate adjustments. This includes the following measures:

First, further reduce short-term risk-free interest rates. At present, China’s short-term risk-free rates still have considerable room to decline. Lowering policy rates in the interbank market could push down deposit rates, reduce banks’ funding costs, ease pressure on NIM, and effectively lower corporate financing costs.

Second, reduce emphasis on credit quantity targets. Against a downturn in the real estate sector and ongoing household deleveraging, slower credit growth is a normal cyclical phenomenon and should not be interpreted as evidence of ineffective monetary policy. Credit expansion driven by quantitative targets may force banks to assume excessive risk, which would undermine financial stability and efficient resource allocation.

Third, place greater emphasis on interest rate adjustments for existing debt. For household mortgages and outstanding corporate loans, market-based mechanisms can be used to push interest rates downward, thereby alleviating the debt—deflation cycle.

(3) Encourage banks to compete through differentiation and avoid homogeneous and rigid performance targets.

Currently, banking business models are highly similar, and performance evaluation metrics are largely homogeneous, which weakens banks’ ability to price risk and reduces the effectiveness of monetary policy transmission. The policy environment should therefore be improved by reducing industry-wide assessment targets and encouraging differentiation. Excessive sector-specific policy targets—for example, mandated credit growth in certain sectors—can cause credit resources to become overly concentrated and increase the accumulation of risk. Banks should instead be encouraged to compete based on their own institutional endowments, customer bases, and risk preferences, thereby expanding their autonomy in risk pricing. The establishment of independent bank risk-pricing mechanisms is also a key step in advancing interest-rate marketisation reforms.

(4) Clarify the policy boundary between “price stability” and “financial stability”.

Under the dual-pillar framework of monetary policy and macroprudential management, the PBOC should clearly delineate the policy boundaries between the objectives of price stability and financial stability. Price stability should fall under the responsibility of monetary policy, while financial stability should be addressed within the macroprudential regulatory framework. Issues such as narrowing bank NIM, exchange rate volatility, and risks in the interbank market should be managed through improvements in the macroprudential policy toolkit, stronger financial supervision, and well-established risk-resolution frameworks, rather than through monetary policy adjustments. The PBOC should further expand and refine the macroprudential toolkit and strengthen its ability to identify and prevent financial risks. In doing so, monetary policy can be freed from the burden of maintaining financial stability and focus on its core objectives: stabilising economic growth and maintaining price stability.

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Liu provided a citation for each winner, and The East is Read has excerpted and translated the winning pieces beneath each citation.

—Yuxuan Jia

第七届“记者的家”新闻奖获奖名单：真实推动社会进步

The Winners of the 7th Journalists Home News Prize: Truth Moves Society Forward

Dear colleagues and friends:

Our prize may be a modest one, but it continues to attract wide attention across journalism, academia, and broader society. And today, a new edition is out again.

This year’s list was originally due to be released earlier this month, but a set of unforeseen circumstances delayed the selection process until the end of the month.

Truth moves society forward. The Hong Kong fire was the most serious public disaster of 2025, and this year, the judges selected two winning works in different genres in recognition of reporting on that tragedy. The final list also includes works that lay bare the harsh realities of the marriage market in China’s counties, including reporting on the Datong engagement rape case; pieces that revisit the origins of the COVID-19 pandemic; reporting on the pension plight facing China’s rural elderly; investigations into environmental pollution; and works focused on the course of legal reform and individual cases. Together, these entries make up this year’s winners’ list. Among the biggest winners were the traditional media outlet Southern Weekly and the independent platform The Aquarian.

In view of the exceptional quality of the entries, the judging panel decided at the last minute to add four shortlisted prizes, bringing with them nearly RMB 50,000 in additional prize money.

Finally, let us thank the four judges for their hard work. For this year’s prizes, they made time to read more than 500,000 words of submissions and supporting materials, consulted a large body of additional reference material, and worked together to decide which entries and authors would ultimately stand out.

Below is the list of winners and the reasons for their selection:

Nonfiction Reporting Prize

Grand Prize

Luo Ting 罗婷, “The Rape in the Marital Home 婚房里的强奸案” (19 April 2025, Daily People)

Citation:

The engagement rape case in Yanggao County, Datong, Shanxi Province, was selected by the Supreme People’s Court as one of the “Top Ten Cases of 2025 Advancing the Rule of Law in the New Era”, underscoring its landmark significance. Reporting this story was exceptionally difficult. The case drew intense public attention and became highly controversial because it sat at the intersection of bride price practices and sexual violence, making meaningful reporting especially hard to carry out. Yet the author arrived on the ground at an early stage and became the only journalist to gain access to both families. Drawing on extensive court files, audio recordings, video materials, and interviews with both sides, she reconstructed the core facts of the case in a comprehensive and balanced way.

The report not only reconstructs what happened during the three crucial hours in which the crime took place, but also traces what happened afterwards in a case shaped both by law and by human relationships. It shows how the case reached this point, how the two families manoeuvred against one another, and, in the process, lays bare the harsh realities of the marriage market in China’s counties.

They were newly engaged: he was 27, she was 24. The day before, the two families had held an engagement banquet. On the day of the incident, they shared another meal, this time hosted by the woman’s family in keeping with a Datong custom known as “inviting the son-in-law”. After lunch, the couple went to the flat the man had prepared as their future marital home. At 10:52 that night, however, the woman called the police and said she had been raped by her fiancé.

What happened inside the flat became the central question of the case. In police interviews, both sides agreed on the broad outline at first: after arriving, exhausted from the engagement arrangements, they took a nap. At around 5 p.m., the man suggested they have sex. From there, their accounts split sharply.

The woman said she refused. The couple had agreed not to have sex before marriage. She said that when she resisted, she hid in the corner of the room, but he snatched away the quilt she was holding. She screamed, kicked the wardrobe, and tried to fend him off; he told her not to shout. She then hid behind the curtain, but he pulled it down. After forcing himself on her, she tried to leave, but he stopped her. In desperation, she set fire to a cabinet in the bedroom and a curtain in the sitting room. While he went to check the fire, she ran out. When the lift failed to arrive, she headed for the fire stairs, but had only gone down one floor before he caught up with her. “I shouted for help,” she said, “but no one responded.”

The man gave a very different version. He said she did not resist at all, and that the fire and her attempt to flee happened only afterwards, when she had become emotionally unstable.

...

Several months later, the Yanggao County People’s Court ruled at first instance that the man had acted against the woman’s will and was therefore guilty of rape, sentencing him to three years in prison. As public controversy grew, the court also issued a statement answering reporters’ questions. The judge said that although the couple were engaged, the woman had clearly expressed opposition to premarital sex, and that the man had nonetheless forced her to have sex that day. “Although there was negotiation between the two sides afterwards, this does not affect the finding that the man’s conduct constituted the crime of rape.”

...

Much of the public debate, meanwhile, revolved around the 188,000 yuan bride price. Online speculation quickly took on a life of its own. Some assumed the money was meant to help marry off her three brothers, though in fact all three were already married. Others argued that the deeper issue was the bride price itself: that when a man’s family stretches its finances to secure a marriage, he may come to see the woman as someone over whom he has rights of disposal. In that reading, the case laid bare not just one crime, but a wider structure in which women’s dignity and autonomy can be eroded even before marriage begins.

Finalists

Wang Wenqing 王雯清, “Mengcun Village, Hebei: The Death of a ‘Perfect Wife’ 河北孟村，一个“完美妻子”之死” (September 5 2025, Phoenix News) [The original article was later removed by the publisher, but has survived in reposts elsewhere.]

Citation:

On the evening of August 24, 2025, a fatal domestic violence case in Mengcun Village, Hebei, shocked the country. Amid heavy restrictions on information, the author rushed to the scene at the earliest opportunity and, going beyond the official account, reconstructed in depth the full course of the tragedy that befell a so-called “perfect victim”.

The strengths of the piece are threefold. First, it achieved an on-the-ground reporting breakthrough: the author reached both the residential compound where the incident took place and the victim’s hometown, and succeeded in interviewing key relatives, classmates, and neighbours, uncovering important first-hand details. Second, it brought real analytical depth: rather than stopping at a straightforward denunciation of violence, the report contrasts the victim’s social image—as a “perfect wife” and a seemingly glamorous county-town woman—with the reality of her life, exposing both the hidden nature of domestic violence in close-knit small-town society and the structural predicament faced by women. Third, it had a clear social impact: within a week of publication on WeChat, the story had been read more than 140,000 times and shared over 11,000 times. Although it was ultimately deleted because of the sensitivity of the subject, the legal debate it sparked provided important material for a more serious public reckoning with domestic violence and the protection of women’s rights.

The death of this young mother spread quickly across the Chinese internet. People mourned the shocking destruction of a young life that had seemed so full of promise: she was beaten to death by her husband, with his parents helping him. Some saw their own fate in her—a woman who loved life, gentle by nature, trapped in an abusive marriage yet afraid to leave. Others, reading through all of her Weibo posts from the husband’s point of view, could not comprehend how the husband could have acted with such brutality. “A girl this gentle is almost unheard of,” one wrote. “Is a wife like this really so easy to find? She was only 25. She hadn’t even grown old.”

…

Just a week before her death, on 13 August, Liu Yuqing [the victim] had messaged the owner of a restaurant on WeChat to ask about a job opening. It was a steamed-bun shop about a 20-minute walk from her home, working on shifts, and if she took the morning shift, she would still be able to pick up her child. “I don’t know how to make steamed buns. Could I learn after I start, sis?” she asked. She agreed over WeChat to take the job. The pay was only 10 yuan an hour, but she said she would begin work once she had dropped her child off at nursery. Not long afterwards, however, she found an excuse to turn it down. The bun-shop owner later learned from news reports that her husband had refused to let her go, saying it would be embarrassing.

...

Her efforts to find work may have reflected a growing awareness of how important financial independence was within marriage. Last winter, while having dinner with a friend in Mengcun Village, Liu said she really liked the trousers her friend was wearing, but had already spent too much recently and could not afford to buy any more. She said that in the month after moving into their new home, she had spent 5,000 yuan, and her husband had become angry, telling her that because she did not earn money herself, she had no idea how hard it was to make it. She also said that she felt worthless, that staying at home to care for the child counted for nothing.

That change in her thinking became unmistakable in a Weibo post she wrote in February 2025: “In future, I must be financially independent.” A woman who had always put others first was beginning to say something else: “Please always put yourself first.”

Wang Huanrong 王焕熔, “After the Hong Kong Hung Fuk Court Fire, Both Bereaved Families and Ordinary Citizens Need Healing 香港宏福苑大火后，丧亲者和普通市民都需要疗伤” (11 December 2025, Guyu Lab)

Citation:

Hong Kong’s social work system is highly developed and responded with notable speed. In the aftermath of the fire, social workers acted as both witnesses and bridges, linking survivors with the media and the wider public. Yet post-disaster recovery is never only about rebuilding homes and restoring material life; emotional recovery matters just as much. For Hong Kong, this fire was a collective traumatic event.

Told from the third-party perspective of frontline social workers, this piece not only captures the circumstances of survivors, bereaved families, and ordinary citizens but also focuses on the question of relief: what kind of support is truly effective, and what language, attitudes, and actions can genuinely help people in Hong Kong. In doing so, it creates a space in which grief can be expressed, the dead can be mourned, and the living can be comforted.

Giving families a farewell that carries meaning and a sense of ritual is an important part of healing trauma after disaster. In the course of speaking with social workers, some bereaved relatives voiced a need that had not initially been anticipated: they did not want their loved ones’ bodies to be cremated.

Chan Muning, Director of Hospice Services at the Hong Kong Sheng Kung Hui Welfare Council, explained that many of the victims’ bodies had suffered burns, and some families could not bear the thought of their relatives going through anything resembling that pain again. Instead, they hoped to arrange a burial. Although burial is not the mainstream funeral practice in Hong Kong, social workers did their utmost to coordinate resources and help make appropriate arrangements.

One young man was killed in the fire, and his family’s first question to social workers from the Sheng Kung Hui Welfare Council was whether it might be possible to hold a funeral in a Japanese style. He had loved Japanese manga and music, and his home had been filled with anime figurines. The social workers told the family that the funeral could be personalised around his interests and the way he had lived. The answer brought them comfort. “In the end,” Chan said, “they were still able to put thought into it and send him off properly, in a way he would have liked.”

Yuan Lu 袁璐, “Abusive ‘Psychological Counselling’: A Girl’s Final Thirteen Days 越轨的“心理咨询”：一个女孩的最后十三天” (13 June 2025, The Paper: People)

Citation:

This work reconstructs, in full, a case in Shijiazhuang, Hebei Province, in which an in-house publication editor and psychological counsellor working within the local education system exploited the counselling relationship to exert psychological control over a female university student. He repeatedly engaged in sexual relations with her and ultimately drove her to take her own life.

According to consultation recordings left by Li Bingyao [the victim], on 2 October, 2024, she met Wang Shuguang [the counsellor/perpetrator] at his workplace. During that session, Wang told her a series of things: that she was “naïve and inclined to oversimplify matters”, that she was “easily controlled”, that “the desires in your heart are very strong”, and that she possessed “tremendous energy”. He advised her to “be independent and refuse help from your parents”. At one point, he added that “sometimes there is also physical communication. That is part of the function of face-to-face counselling”. He told her to “treat me as somewhere safe to confide in”, described her mother as “strongly manipulative”, urged her to “distance yourself from your parents”, and characterised himself as “a guide who leads you onto the right path”.

Among the materials Li Bingyao left behind were 27 consultation recordings with a total duration of nearly 30 hours. In most of them, Wang does the bulk of the talking, analysing Li’s psychology and telling her that she must “feel and experience things”. Li largely listens to his interpretations, occasionally responding with brief acknowledgements such as “mm”, “ah”, or “oh”. At times, before Li finishes speaking, Wang steps in to summarise her thoughts. In addition to the consultation sessions, Li also recorded personal monologues and classroom audio. Li’s father said she may have recorded the sessions partly so she could review what the counsellor had said. In her “Psychological Growth Diary”, Li wrote that Wang sometimes listened back to the consultation recordings together with her.

During the 2 October session, Wang also suggested telling her fortune, proposing to combine “the I Ching with psychology” to “see what her destiny looked like”. He asked whether there were problems in her relationship with her boyfriend, and “how far things had developed” between them, adding that “he does not really understand you.”

Public Service Prize

Grand Prize

Xie Chan 谢婵, “Back to Wuhan: The Untold Story from Five Years Ago 回到武汉：五年前没有说完的故事” (8 April 2025, The Aquarian)

Citation:

On the fifth anniversary of the Wuhan Covid-19 outbreak, the author returned to the city to revisit journalists, artists, volunteers, and ordinary citizens concerned with public affairs, reflecting with them on the memories the pandemic left behind: the chaos of the early lockdown, the fear bred by incomplete information, the helplessness caused by an overwhelmed medical system, and the way grassroots civic action, mutual aid, and trust helped people survive their most desperate moments.

By recovering a missing layer of social memory from a public disaster, the report highlights journalism’s vital role in public service, historical preservation, and collective reflection.

The night Dr Li Wenliang died was perhaps the moment during the pandemic when public anger on the Chinese internet burned most intensely.

Part of that anger stemmed from the fact that, as early as December 30, he had warned former classmates in a WeChat group to take precautions, only to have his message treated as a rumour and himself reprimanded by the police. Another source of outrage was the confusion surrounding the timing of his death. Wang Jiaxing and another reporter stayed at the hospital until the very end that night, as conflicting accounts of the time of death kept circulating. Looking back, Wang said: “People had no right to speak, and not even the right to die.”

That anger soon turned into action.

Two young people, Zhang Wei and Yan Senlin, were members of the same music-fan chat group. All night, people in the group were furious and wanted to do something—“We couldn’t let this just disappear silently into the long river of history.”

Zhang Wei, one of the participants, recalled that he began by taking a photograph of a handwritten message: “A healthy society should not have only one voice.” To him, the phrase meant that the spread and worsening of the epidemic had something to do with controls on speech. He felt he had to take the lead: once someone stepped forward, others would follow.

After some discussion, the memorial-cum-protest quickly took shape. The group announcement read: “We want to make some waves, so we are calling for a photo protest/memorial action.” Participants were invited to write phrases such as “freedom of speech” or “I will not desist, I do not understand” on their masks, and to hold up a sheet of paper carrying further demands or a message in memory of Li Wenliang.

It was a form of action that would be rare today: openly organised, openly shared, and explicitly encouraging participants to post their photos on as many social-media platforms as possible and invite others to join.

Yan Senlin does not remember whether the group discussed security very much when the call first went out. “Everyone knew the internet would leave traces, and everyone knew there was definitely some risk,” he said. “People just needed an outlet. Maybe no one thought too much about it, especially when you’re in a group. Once it starts, it starts.” There was, however, some discussion about using old masks, partly because masks were still scarce at the time, and partly because they covered people’s faces.

The response from fellow group members and from strangers online was overwhelming. Photos poured into the submission inbox like snowflakes. Before long, they had been assembled into a composite image featuring 100 participants.

Finalists

Zhao Jiajia 赵佳佳, “My Child Is Dying. Can They Have Peace at Last? 我的孩子就要死去，能否让他最后安宁” (13 April 2025, Nanfeng Chuang)

Citation:

This report examines the end-of-life predicament faced by terminally ill children under five in China. In many cases, hospitals that admitted these children and provided palliative care were criticised by higher authorities because doing so pushed up the district’s under-five mortality rate. As a result, many of these children were left to die at home in pain.

Through interviews and close reading of official documents, the author gradually identifies the crux behind this dilemma: the under-five mortality rate as a governance indicator. Originally intended to safeguard children’s right to health and survival, the metric became entangled in the logic of bureaucratic management. Once tied to local government assessments and hospital evaluations, it began to affect the interests of all parties involved, and in the process hardened into a formidable barrier within the healthcare system.

The piece also documents the efforts of individual medical workers, hospitals, and charitable organisations to carve out room for change despite these constraints, pointing towards potentially workable structural solutions.

In December 2025, the report was selected as one of the year’s ten best cases in the Solutions Journalism Case Library.

Xu Yali, now a doctor at Chongqing No. 13 People’s Hospital, said that more than 20 years ago, when she was working at a county-level people’s hospital, she had already heard that if a child aged between 0 and 5 died in hospital, staff would have to complete a large volume of reporting paperwork. To avoid that risk, once a child’s condition worsened, doctors would tell the parents that the hospital could no longer treat the child and urge them to transfer the child as quickly as possible to a specialist children’s hospital in the city. If the parents were unwilling to leave, she said, the hospital would sometimes take the initiative and send the child away by ambulance.

In recent years, Xu has begun developing palliative care services at Chongqing No. 13 People’s Hospital. For a long time, however, even when dealing with patients whose deaths were clearly inevitable, she remained wary of this indicator. She once told a social worker at a partner charity: “We only admit children over five. We absolutely do not take those under five.”

Her concerns were not unfounded. The operations director of a private medical institution in a first-tier city told Nanfeng Chuang that in 2015, the hospital set up an end-of-life care department and, without fully realising the implications, admitted a number of children under five over the following two years. In 2017, she said, the local health commission approached the hospital’s medical affairs department and repeatedly criticised it verbally. “Every time they came for an inspection, they would give us a dressing-down,” she said. From that point on, the hospital no longer dared admit children under five, and at one stage even printed the age limit on its promotional leaflets.

Originally, such children had accounted for about 10 per cent of the hospital’s patients, most of them referred from the local children’s hospital. Once the hospital stopped accepting them, the children’s hospital gradually stopped referring patients as well. “We used to have a paediatrics department, but paediatrics was never a money-making department,” she said. “After the door was closed on children under five, we simply shut the paediatrics department too.”

Lu Yaxuan 吕雅萱, “A Railway Running Through the Village: A Western Hunan Village and 17 Train-Pedestrian Collisions 铁路穿村而过：一个湘西村庄与17起火车撞人事故” (12 May 2025, Jiemian News)

Citation:

This report documents the grim reality in Songjiawan Village, Zhangjiajie, Hunan, where the Jiaozuo–Liuzhou railway cuts directly through the village and has, over the years, claimed at least 17 lives in train-pedestrian collisions. The author travelled to the village and conducted door-to-door reporting, not only verifying the number of victims, but also unpacking the multiple factors behind the repeated deaths: the railway’s many bends, the lack of basic protective fencing along the line, and the risks villagers take in crossing the tracks as part of ordinary life.

The report generated a strong public response. It was republished by outlets including China National Radio Online and China News Service, and circulated widely online, with multiple posts surpassing 100,000 views. Commentaries followed from a range of major media outlets, including Beijing News, The Paper, Chengdu.com, and Upstream News. In the wake of the coverage, the Zhangjiajie Engineering Section of China Railway Guangzhou Group installed protective fencing along six sections of the Jiaozuo–Liuzhou railway.

The value of the piece lies not only in exposing a long-neglected safety hazard but also in showing how investigative reporting and sustained public attention can push the authorities to respond quickly and adopt meaningful corrective measures, improving safety for residents living along the railway.

For four generations of Song Sanding’s family, their fate has been bound up with this railway. In the 1980s, his father, Song Shaotong, was crossing the tracks with a basket on his back on his way up the mountain to farm when he was struck by a train. He was still alive when he was taken to a nearby county in Cili for emergency treatment, but he did not survive.

In 2005, Song Sanding, his son, and his daughter-in-law were all working in Guangdong, leaving his two-year-old grandson, Song Yixin, in the village in the care of his grandmother. When the adults were not paying attention, the child climbed onto the railway and was hit and killed by a speeding train. Song Sanding collapsed on the spot when he heard the news. His daughter-in-law, unable to bear the blow after returning to the village, developed a mental illness; whenever she saw a train, she would pick up stones and throw them at it.

Most of the villagers live at the foot of the mountain, but nearly half of their farmland lies uphill, and some of the fatal accidents occurred as people travelled back and forth between the two. One morning in 2005, Zhang Cuiying’s father, Zhang Hongliang, went up the mountain to work at daybreak. At around seven or eight, he was on his way back down for breakfast when he was struck and killed while crossing the railway.

Liu Suiwei 刘思维, “Behind Two Lawsuits, a Megacity Faces the Challenge of Disposing of Tens of Thousands of Tonnes of Medical Waste 两起官司背后，超大城市面临万吨医疗废物处置难题”(5 September 2025, Beijing News)

Citation:

This report turns its attention to medical waste in the magacity of Chongqing, a crucial yet often overlooked part of the urban public health system. Drawing on detailed data, professional analysis of disposal processes, and multiple well-sourced interviews, it clearly reveals the risks of infection and environmental pollution that can arise when disposal capacity is operating at or beyond its limit.

The piece also offers a penetrating examination of the contradictions built into the concession model in practice. While such arrangements can help ensure the stable operation of essential infrastructure, they may also suppress competition, weaken service quality and efficiency, and dampen market vitality. The report presents, in a balanced way, the positions and constraints of multiple stakeholders—the government, concession holders, rival firms, and medical institutions—and in doing so brings into focus a deeper governance question: how the provision of public services in megacities can evolve and balance efficiency and fairness. As such, it provides a valuable case study and a strong basis for public discussion and policy reflection.

Wang Chen (pseudonym), an operator of several private medical institutions in central Chongqing, told Beijing News that the hospitals he runs have signed annual contracts with Tongxing for the collection and disposal of medical waste for more than a decade. But Tongxing, he said, often failed to collect waste in a timely manner, sometimes coming only once every one or two weeks. Hospitals had to phone repeatedly to chase them, and the collection staff were often poor in their attitude as well.

Wang said he had reported these problems to the health authorities, but nothing came of it. Although he wanted to switch to another provider, failing to renew with Tongxing would mean “you can’t pass the hospital’s annual review”. Yet if medical waste was not collected on time, the hospital could also be fined and still fail that same review. Wang found himself in an impossible bind.

It was not only private hospitals that faced such difficulties. Chongqing People’s Hospital, a large public institution with multiple campuses and a substantial volume of medical waste, had also considered changing providers because of delays in collection by Tongxing. In July 2024, the hospital publicly released its procurement plan for medical waste disposal services for 2025 to 2027, indicating its intention to replace the supplier. A member of the hospital’s logistics department told Beijing News that the hospital had long worked with Tongxing, but that “their service quality during the Covid period was infuriating”. Delays in collection occurred from time to time, sometimes stretching to “three or four days”. “Because they were the only provider, with no competition, they were hard to manage,” the person said.

Outstanding Journalist Prize

Grand Prize

Zhou Zhimin 周智敏

Citation:

Zhou Zhimin, born in 1989, graduated from the Television Department of the Communication University of China and is a senior reporter with Shanghai Media Group. Zhou has won the China Journalism Award, the Shanghai Journalism Award, and the Golden Angel Award for Best Television Documentary of the Year at the Chinese American Film Festival. Zhou’s work has consistently been marked by a commitment to the public interest. Zhou’s most recent major work is “680 Days of Relatives Demanding an Investigation Report After 13 Primary School Students Died in the Fangcheng School Fire 13名小学生火灾遇难后 亲人追问调查报告的680天” (video report, KNews, 8 December 2025).

After the school fire in Fangcheng County, Henan, on January 19, 2024, local authorities promised that the investigation results would be released “promptly”. Yet 16 months later, no report had been made public. Zhou travelled to Henan to interview several bereaved families, and also interviewed two criminal law professors and a criminal defence lawyer in Shanghai, producing a 24-minute in-depth video report.

Two spin-off short videos each drew more than 100,000 likes and shares on WeChat Channels, WeChat’s short video service, with over 1,000 comments. Chao News, under Zhejiang Daily, published an excerpt that received 478,000 likes and 82,000 comments; Phoenix News drew 442,000 likes and 63,000 comments. Beijing News, Guancha.cn, Shandong TV’s “Investigation” programme, Jiangxi People’s Radio, Harbin Daily, Xi’an Evening News, Jinan Daily, Qilu Evening News, and dozens of other outlets helped push the story back into the centre of public debate. For several days in a row, it topped trending lists on platforms including Weibo and Douyin.

That renewed attention in turn drove wider commentary. Building on the reporting, multiple outlets published follow-up opinion pieces, and the question “Why has the investigation report not been made public?” became one of the most closely followed issues online.

Nine days after the report was published, the investigation findings were released through Xinhua News Agency and China Media Group. The court also changed what had originally been designated a non-public hearing into an open trial. The three defendants, charged with the crime of a major safety accident at educational facilities, all pleaded guilty in court and accepted punishment. After more than 700 days of persistent questioning, one father finally received a substantive answer.

The work not only brought solace to the dead and gave due weight to the demands of the living; it also served as a warning to society as a whole, pressing all sides to learn the lessons in full and do everything possible to prevent such a tragedy from happening again.

Finalists

Zhu Wenqiang 朱文强

Citation:

Born in 1981, Zhu Wenqiang graduated from the Journalism Department of Hebei University in 2004. Zhu has worked for media outlets including Yanzhao Metropolis Daily, Insight China, The Economic Observer, and Sohu. In recent years, Zhu has been running a personal media account, Empty Bottle 空瓶子.

In April and May 2025, Zhu published three consecutive articles about Dong Xiying of Peking Union Medical College Hospital: “Compared with the 4+4 Programme, the Mistress Scandal Is the Least of China-Japan Friendship Hospital’s Problems 比起4+4，小三小四的瓜是中日友好医院最小的”, “Ms Dong Has Been Protected Far Too Well 董小姐被你们保护的太好了”, and “Who Is Helping Ms Dong Falsify the Record? 谁在帮董小姐造假？” These pieces shifted attention away from salacious gossip towards the deeper issues surrounding the “4+4” Medical Doctor (MD) pilot programme.

In July, Zhu turned to the lead-poisoning case involving preschool children in Tianshui, Gansu, publishing a series of reports: “233 Preschoolers Suffer Lead Poisoning—The Children Had Been Fed Coloured Paint 233名幼儿血铅中毒，他们给孩子吃的竟然是彩绘颜料”, “Twenty Years On, Lead Poisoning Returns to Gansu—The Real Focus Should Be Falsified Blood-Lead Tests 20年后，甘肃“铅中毒”再现，血铅检测造假才是提及调查重点”, and “In the Tianshui Lead-Poisoning Case, Blood-Lead Test Data Was Indeed Tampered With 天水“铅中毒”事件果然篡改血铅检测数据”. These reports showed how independent media, with its agile and flexible style, can bring major social issues vividly into public view.

In October, Zhu published “Eleven Shijiazhuang Police Officers Sentenced for Beating to Death a Detainee Held Under Residential Surveillance at a Designated Location 打死“指居者”，石家庄11名警察获刑”, the most detailed account of the verdict to appear. In November, Zhu published “A Case Within the Tangshan Anti-Corruption Case: The Suspicious Bribe-Giver 唐山反腐案中案——蹊跷的行贿者”, an exclusive report exposing how Tangshan’s disciplinary authorities had fabricated a false case. The report quickly drew official attention in Tangshan and prompted intervention; the case has since been remanded by the court for supplementary investigation.

On December 12, Zhu published “The Home of a Retired Shandong Vice-Governor Was Burgled—More Than RMB 2 Million Worth of Maotai and Wuliangye Was Sold Off 山东一退休副省长家被盗，茅台、五粮液卖了200多万”. For an independent media account, reporting on officials at the provincial or ministerial level carries substantial risk. As an exclusive and ambitious attempt, this report achieved strong results and was widely reposted online.

In the early hours of July 7, 2022, officers from the Shijiazhuang Public Security Bureau, the Xinle Public Security Bureau, the Yuhua branch of the Shijiazhuang police, and other members of the “May 25 Task Force” detained Bao Jizhong, Bao Jiye, Bao Yanqiang, Bao Qinrui, Bao Jitao, Gao Aili, and others on suspicion of “picking quarrels and provoking trouble”, then placed them under residential surveillance at a designated location (RSDL) at the Xinle Hotel.

Between July 7 and July 19, task-force officers allegedly used torture to force confessions from the Bao family. According to later accounts, detainees were slapped, beaten on the soles of their feet with PVC pipes, and shocked with an old hand-cranked telephone.

The turning point came on the night of July 19. At the RSDL site, Bao Jiye overheard security guards muttering: “Shit—they’ve shocked him to death.”

Four days later, officers from the criminal investigation unit of the Xinle Public Security Bureau told him that his son, Bao Qinrui, was dead.

After Bao Qinrui’s death, the case fell silent. Others detained in the same case were gradually released on bail pending trial, and those bail measures were later lifted altogether. The official explanation was that it had been “determined that criminal responsibility should not be pursued”.

The Bao family later told the media that all of them had suffered beatings and electric shocks to varying degrees while under RSDL. What haunted them most was the old hand-cranked telephone: wires were clipped to both hands, and as the handle was turned, current ran through the body, causing uncontrollable trembling and convulsions.

For more than a year afterwards, the family petitioned and sought accountability over Bao Qinrui’s death.

Only at the end of 2023 did the case begin to move. Eleven members of the Shijiazhuang “May 25 Task Force” were placed under the cross-regional jurisdiction of Baoding and subjected to compulsory measures designated by the Baoding People’s Procuratorate. In early 2024, those involved were arrested on charges including intentional injury and torture to extract confessions.

The case was later split in two. Eight police officers from the Xinle Public Security Bureau were prosecuted by the Lianchi District People’s Procuratorate in Baoding, while three officers from the Yuhua branch of the Shijiazhuang Public Security Bureau were prosecuted by the Wangdu County People’s Procuratorate in Baoding.

On September 28, 2025, verdicts in both cases were delivered on the same day.

—“Eleven Shijiazhuang Police Officers Sentenced for Beating to Death a Detainee Held Under Residential Surveillance at a Designated Location 打死“指居者”，石家庄11名警察获刑”, 28 October 2025

Fu Yibo 傅一波

Citation:

Born in 1993, Fu Yibo previously worked as an investigative reporter for Phoenix Deep Dive at Phoenix News and for the social affairs desk of Xiaoxiang Morning Herald. He is now a reporter with Mammoth Studio at The Time Weekly and has won the SOPA Awards twice.

His recent work includes “A Life Lived 0.8 Metres from the Tracks: 44 Years On 离轨道0.8米的生活，他过了44年” (23 May 2025), “After 38 Days of Drought, Farmers in Zhumadian, Henan Finally Get Rain 干旱38天后，河南驻马店农民等来了一场雨” (9 August 2025), “In Yinle’s First Month in Office, What Has Changed and What Has Not at Shaolin Temple 印乐上任首月，少林寺的变与不变” (29 August 2025), “Hong Kong’s Tai Po Fire Is Largely Under Control; Foam Insulation May Have Been the Deadly Culprit, Originally Used to Protect Exterior Window Glass 香港大埔火情已基本受控，发泡胶或成致命元凶：原为保护外墙窗玻璃” (27 November 2025), and “‘Reviving’ Shuisi Tower: A New Chapter in Dushan’s RMB 40 Billion Local Debt Story “复活”水司楼：独山400亿地方债的新故事” (28 November 2025).

On his way back, Xu Shoujun saw vast stretches of maize scorched yellow by the sun. The ground was mottled and cracked, and in some plots the crop was almost dead from drought. Only a few scattered patches of green remained, belonging to the village’s bigger farming households—the ones close to the wells, with enough labour on hand to keep irrigating. “To use your city people’s language, they’re the ones with capital,” he said.

The Xu family had little capital of their own. Their land lay more than 500 metres from the village’s drought-relief well, and anyone drawing water had to follow the pecking order of “same extended family, same surname, same village”. Xu Shoujun, relying on his youth and strength, would hurry over early just to get the hose connected first.

Watering the fields was gruelling, labour-intensive work. Once more than 500 metres of pipe had filled with water, it became extremely difficult to move. Without shutting off the flow, it could irrigate less than a mu [0.16 acres] of land. To tend the next mu, they had to stop the water, lift the pipe section by section to drain it, then shift it forward bit by bit. By the time two mu had been watered, an entire night and half the next day had already slipped by. And by the end of that other half-day, the land they had just irrigated was already drying out again.

Xu Shoujun scooped up a handful of soil. It trickled through his fingers like sand. The maize still drooped. Drought has a way of snuffing the life out of everything green, and the Xu family found themselves confronting a suffocating despair: they kept working, kept trying, and yet nothing changed.

—“After 38 Days of Drought, Farmers in Zhumadian, Henan Finally Get Rain 干旱38天后，河南驻马店农民等来了一场雨”, 9 August 2025

Xiang Kai 向凯

Citation:

Born in 1991, Xiang Kai received a master’s degree in journalism from Jinan University in 2017. He has since worked as a reporter for the “Origin” section of Jiefang Daily, the in-depth reporting desk of Beijing News, and Caixin’s South China News Centre. He is now a freelance writer.

His reporting has long focused on public safety, the Covid-19 pandemic, and investigations into law and justice. His series on Sun Xiaoguo won Beijing News’s 2019 Gold Award for Exclusive Reporting, while his coverage of the Xiangshui explosion received the paper’s 2019 Gold Award for Breaking News Reporting.

On 6 December, 2025, his investigation into the Hung Fuk Court fire in Hong Kong, “Mainland Testing Exposed: Undercover Inquiry Shows ‘Passing Reports’ Can Be Obtained in Two Hours for RMB 1,000 Without Submitting Samples; Even the ‘Official’ Verification Website Is Fake 內地檢測｜放蛇實測　無需送樣、付千元兩小時獲「合格報告」　供查核「官網」同屬冒牌”, revealed that the cause of the deadly blaze and the unusually rapid spread of the fire may have been linked to substandard scaffold netting. Some of the netting involved had been produced in the Chinese mainland and came with purported inspection certificates. But such “inspection reports” could in fact be fabricated out of thin air and bought cheaply online, while both the certificates themselves and the websites supposedly used to verify them were counterfeit.

In less than two hours after submitting the required information and making payment, the reporter received a flame-retardancy test report certifying the product as “compliant”—without ever having to send in a sample. The document purported to have been issued by Jilin Zhongfu Testing Technology Service Co., Ltd., and bore CMA (China Metrology Accreditation) and CNAS (China National Accreditation Service for Conformity Assessment) logos, along with a report number.

Ten minutes later, the seller sent over a “preview version” of the report and said revisions could still be made. The document fabricated a sample receipt date of 2 December, despite the fact that no sample had been submitted, and listed the testing period as running from 2 to 5 December. It also provided detailed results for six testing items, including flame-retardant performance, oxygen index, insulating properties, and fire-extinguishing performance. Under the fire-extinguishing test, for instance, it claimed that “the flame was extinguished within 12 seconds; after 17 minutes of continuous observation, no re-ignition occurred; and the blanket body showed no sign of burn-through”. The report concluded that “all tested items meet Class A flame-retardant standards and relevant technical requirements, and the product is therefore deemed compliant.”

—“Mainland Testing Exposed: Undercover Inquiry Shows ‘Passing Reports’ Can Be Obtained in Two Hours for RMB 1,000 Without Submitting Samples; Even the ‘Official’ Verification Website Is Fake 內地檢測｜放蛇實測　無需送樣、付千元兩小時獲「合格報告」　供查核「官網」同屬冒牌”, 6 December 2025

Major Public Affairs Reporting Prize

Grand Prize

Han Qian 韩谦, “Can the New Rules on Residential Surveillance at a Designated Location End the Disorder? “指居”新规，能否终结乱象？” (5 November 2025, Southern Weekly)

Citation:

Beginning with a September 2023 report on an individual case of residential surveillance at a designated location (RSDL), Han Qian spent more than two years producing over a dozen reports that turned the distortion of RSDL in practice from a specialised legal topic into a narrative the broader public could understand. Following Southern Weekly’s reporting on the death of Bao Qinrui while under RSDL, multiple police officers involved in the case came under investigation. In 2025, eight people were sentenced on charges including intentional injury and torture to extract confessions.

A further report published in July 2024, “Multiple Deaths Under RSDL Raise Questions Over Whether the System Should Survive 多名被“指居”者死亡，背后的制度陷存废之争”, moved beyond individual cases to focus on the system itself. It examined why RSDL had become so badly distorted in practice, and what possibilities there might be for future reform. The report drew wider public attention to the issue and also helped push legal scholars to engage more deeply with the question.

As the public came to see how judicial procedures were warped in practice, the judiciary itself also came to realise the loopholes in the system. In October 2025, a new set of RSDL rules jointly issued by the Supreme People’s Procuratorate and the Ministry of Public Security began circulating among lawyers, though the document was never formally released through official channels. After confirming the information through multiple sources, Han published “Can the New Rules on Residential Surveillance at a Designated Location End the Disorder? “指居”新规，能否终结乱象？”, becoming the first journalist to report on the new rules. Many other outlets followed with their own coverage.

This body of reporting stands as a strong example of how rigorous journalism can help drive institutional reform, and of the enduring value of a press that remains committed to public accountability.

A former political instructor at a police station in Jingjiang, Jiangsu, once told Southern Weekly that, from the standpoint of criminal investigation, RSDL is indeed a “convenient” system.

The designated locations are typically hospitals, hotels, or guesthouses, where the guards and interrogators are managed by the same investigative team. In practice, that means the suspect remains under the team’s control around the clock.

If, by contrast, a suspect is held in a detention centre, investigators have to work around the centre’s office hours when arranging questioning. There is also a lunch break, and sometimes a single interrogation lasts only an hour or two. In Qiu’s view, that was “very inconvenient” for investigators.

Chen Yongsheng, a professor at Peking University Law School...noted that the general provisions of the new RSDL rules require a separation between case-handling and custodial enforcement. The detailed provisions go further, specifying that personnel responsible for investigation or supervision may not take part in custodial enforcement, and that investigators may not enter the designated location itself.

In his view, if this separation mechanism can be implemented to a standard comparable to that of detention centres, it could play a substantial role in supervising and preventing torture and forced confessions under RSDL.

—“Can the New Rules on Residential Surveillance at a Designated Location End the Disorder? “指居”新规，能否终结乱象？”, 5 November 2025

Finalists

Huang Siyun 黄思韵, “Hong Kong Fire” Series

1. “Hong Kong Fire Survivor: Windows Were Sealed with Foam, and the Alarm Did Not Sound Until Half an Hour Later 香港火灾亲历者：窗户被发泡胶粘住，半小时后报警器才响” (28 November 2025, Caijing Magazine’s official WeChat blog)

2. “Strangers in the Hong Kong Fire 香港火灾中的异乡人” (4 December 2025, Caijing Magazine’s official WeChat blog)

3. “Hong Kong’s Healing Process 香港疗伤” (8 December 2025, Caijing Magazine)

Citation:

The first report was among the earliest by Chinese mainland media to interview multiple survivors from Hung Fuk Court and add substantial new reporting. Arriving at the scene on the second night after the fire, the reporter was able, at an early stage, to piece together a relatively clear account of how the disaster unfolded. At a time when public debate was centred on bamboo scaffolding, the report drew attention instead to the role of foam insulation and delayed fire alarms, building a fuller chain of evidence through first-hand reporting.

The second report focused on foreign domestic helpers, a group that remained largely at the margins of coverage of the fire. They attracted limited public attention, faced language barriers during rescue efforts, and were left grappling with job loss and visa insecurity. The reporter spent a full day accompanying the workers as they searched for missing compatriots and sought help with work visas. The piece also secured interviews with three survivors and added the perspectives of third-party rescue organisations as well as the broader social context of foreign domestic helpers in Hong Kong. Closely observed and carefully reported, it brought an important and often overlooked group perspective into mainland coverage of the fire.

The third report offered a fuller overview of the disaster and its aftermath, incorporating the perspective of volunteer rescuers and further information on post-fire recovery and support. It showed that the impact of the blaze extended far beyond Hung Fuk Court itself, reaching into Hong Kong society more broadly.

In news reports, they were cast as “heroes” who had risked their lives to save their employers. But having lost their passports and identity documents, they spent the entire day shuttling between migrant labour NGO booths, relief supply stations, community centres, and various government offices, filling out forms and trying to replace their papers.

At a migrant workers’ organisation booth, a volunteer named Shiela told Caijing that most of the affected foreign domestic workers were still on the job. They had no time to process their trauma. Even when they managed to rush over, they often came only in the afternoon or late at night, filled in a form, picked up a few daily necessities, and left again.

For foreign domestic helpers, no job means no home. One volunteer helping Mariz said they had wanted to visit her earlier, and had thought they might be able to see her at 9 p.m., but her employer did not want to be disturbed, leaving them little room to talk.

—“Strangers in the Hong Kong Fire 香港火灾中的异乡人”, 4 December 2025

Lin Ling 林灵, “Thallium Sinks to the Bottom, Awaiting Oblivion 铊沉入水底，正等待被遗忘” (26 May 2025, The Aquarian)

Citation:

This report is a deep investigation into thallium pollution in the Leishui River basin in Chenzhou, Hunan. Through on-the-ground reporting, cross-checking of multiple sources, and professional analysis, the author systematically reconstructs the origins of the contamination, the official response, and the risks left behind.

Drawing on the perspectives of villagers, construction workers, local officials, and environmental experts, the piece not only traces the source of the pollution—thallium-laden dust released during the dismantling of an old production line at the Liangtian cement plant and washed into the river by rain—but also exposes serious flaws in the emergency response and the opacity surrounding it. Large quantities of thallium sulphide settled on the riverbed and were left uncleared; villagers helped build emergency containment ponds without protective equipment; local officials concealed key facts from the public; and residents remained unaware of the dangers posed by the pollution.

The report also pushes beyond the immediate incident to examine deeper structural problems in the industry: cement plants using tailings as raw materials without monitoring for thallium, environmental impact assessments that fail to account for heavy-metal risks, and regulatory standards that lag behind real-world sources of contamination.

Drawing on expert interpretation, the piece makes clear that the sedimentation method used in the emergency response did not eliminate the thallium but merely transformed it into thallium sulphide deposited on the riverbed, creating a new form of hazardous waste. In that sense, the emergency measures may themselves have introduced fresh risks of secondary pollution and ecological accumulation.

Thallium is classified as hazardous waste, not ordinary solid waste. Handling hazardous waste properly requires additional licences, as well as greater technical capacity and financial investment. Although the industry generally accepts the use of solid waste as input material in cement plants, it tends to overlook the possibility that hazardous waste may be present, and almost never invests in production lines equipped to handle it.

Environmental filings for the Liangtian cement plant show that its new production line uses tailings—including tungsten tailings slag and iron-bearing corrective materials such as waste slag from ironworks—as key raw materials. In on-site reporting outside the plant, The Aquarian observed a raw-material storage area labelled “tungsten tailings slag”, but found no indication anywhere that the material might contain thallium.

According to the National Pollutant Discharge Permit Management Platform, there are 976 enterprises nationwide whose wastewater pollutant profiles include thallium. Not one of them belongs to the cement industry.

...

That points to a deeper problem: under the current system of industry regulation, cement plants are not regarded as being associated with thallium at all. Yet research published as early as 2019 had already shown that “coal combustion and cement production are another important anthropogenic source of thallium”, and that “global annual thallium output is about 10 tonnes, while cement plants likewise release significant amounts of thallium into the environment.”

Wu Xiaofei 吴小飞, “Behind a Judge’s Defence of His Mother: Three Generations of Upheaval in a Family Accused of Organised Crime 法官为母辩护背后，被控涉黑家族的三代喧嚣” (27 May 2025, Southern Weekly)

Citation:

In March 2025, after Judge Bi Qiqi made the highly unusual decision to appeal publicly online, Wu Xiaofei first followed the story as breaking news and then went on to produce an in-depth feature of more than 11,000 Chinese characters on the judge’s attempt to defend his mother. Wu continued to follow the case closely, reporting on issues including the splitting of the criminal cases, Bi Qiqi’s subsequent detention, and the revocation of his right to act as a defender.

It is exceptionally rare for a judge to speak out publicly to defend a parent. Once the report appeared, the case quickly prompted wide discussion, not only about the family’s alleged ties to organised crime, but also about the long-contested practice of splitting criminal cases, and the question of whether family members should be allowed to defend their relatives.

The case is still being heard in court. Its twists and reversals, the often striking turns it has taken, and the tactical contest between the authorities and the defence team after the case entered formal proceedings have been unusual by recent standards. Just as importantly, the case lays bare the enforcement logic and institutional mindset of local judicial actors. What it reflects is not merely a problem in one city, Nanyang, but a revealing window onto the workings and the strains of local justice in China.

The indictment states that even after the government abolished fees on individual businesses in 2008, after merchants collectively complained in 2014 that the charges were unreasonable, and after a 2018 township government inspection found unlawful fee collection in the market, Ji Tingmei still instructed the establishment of a property-management company to continue charging fees. The money collected was never brought under the financial supervision of the village. All spending was decided personally by Ji Tingmei: some of it was used to cover the village’s tax obligations, some for routine personnel expenses, and some for meals, entertainment, and hospitality.

...

In early 2025, some media outlets published findings from a defence team survey of merchants in the case. Hundreds of merchants from the markets said they had paid the fees voluntarily and had not been coerced. Some also said that, because the jade market had once attracted a large volume of customers and shopfronts were hard to come by, people had in fact competed for a place there. Among those surveyed were merchants whom the police had identified as victims.

“Of course, as a merchant, you’d rather not pay management fees if you could,” one merchant, who was interviewed twice by both sides, said. “But that was never realistic. All the surrounding markets charged fees, too. Does that make it coercion? I don’t see myself as a victim.”

Commentary Prize

Grand Prize

Peng Yuanwen 彭远文’s Commentaries on China’s Rural Pension Problem

Citation:

Peng Yuanwen, formerly a producer and editor in the commentary department at CCTV News, has published a sustained series of opinion pieces on China’s rural pension problem since January 2025. Covering more than 30 articles, the series ranges from basic explanatory pieces and rebuttals to common counterarguments to commentaries tied to current news events. Taken together, it represents an unusually persistent effort.

Representative essays include “Eight Reasons to Raise Farmers’ Basic Pension to RMB 800 提高农民基础养老金到800元的8个理由”, “The Next Time Someone Says ‘Farmers Didn’t Pay into Social Security’, Throw This Article in Their Face 再有人拿“农民没交社保”说事，请把这篇呼他脸上去”, “Who Says the State Cannot Afford to Raise Farmers’ Basic Pension? 谁说“国家没钱”提高农民基础养老金的？”, “If Farmers ‘Have Land’, Does That Mean Their Pension Should Not Be Raised? Is It That Farmers Have Land, or That the Land Has Farmers? “农民有地”就不应该提高养老金吗？是“农民有地”还是“地有农民”？”, “Basic Pensions Should Offer Help in Hard Times, Not Merely Add Comfort to Those Already Secure 基本养老金要“雪中送炭”不要“锦上添花””, “Ten Questions and Answers on Farmers’ Pensions 农民养老金十问十答”, “Nine Reasons China Should Adopt a Universal Basic Pension 中国应该实行普惠养老金的九个理由”, and “The Five Deadly Sins of China’s Excessively High Social Security Contribution Rates 中国社保高存缴比例的“五宗罪””.

[Peng Yuanwen’s personal WeChat blog, where the articles above were originally published, has been blocked. He has since started a new WeChat blog, where he continues to publish commentary, including on farmers’ pensions. The links above point to versions of these articles Peng posted on other platforms or preserved by secondary sources.]

Across these pieces, Peng argues that raising rural pensions would help reduce old-age poverty, promote fairness, boost domestic demand, ease destructive competition, support childbearing, improve elderly care, respond to population ageing, and strengthen the legitimacy of public policy. As he suggests, “it is hard to think of another single policy measure that could deliver so many benefits, each one addressing one of the central strains in China today. That is why using commentary to spread basic facts, rebut misconceptions, and gradually build social consensus matters: it helps create the public foundation on which policy change becomes possible.”

In 2025, calls to raise rural pensions grew steadily louder, and the number of voices joining the debate increased. Advocates included economists such as Zheng Gongcheng and Xiang Songzuo, as well as social security specialists, legislators, CPPCC members, and government officials. A broader consensus now appears to be forming quickly. Raising rural pensions no longer looks impossible; it may arrive sooner than many had assumed.

What I find especially hard to understand is this: if they are so worried that farmers will lose their basic security once they lose their land, why do they never propose raising the basic pension for farmers? If farmers who lose their land could still enjoy a basic livelihood guarantee, wouldn’t the problem largely disappear?

Yet the moment someone suggests raising farmers’ pensions by just one or two hundred yuan a month, they immediately jump out to warn about unbearable fiscal pressure and the dangers of a “welfare trap”. They say things like: farmers don’t really need money; money isn’t everything; farmers have little desire for material consumption; they have not been “corrupted” by urban consumerism, and so on...

Remember this: what they truly fear is not that “farmers might lose their land”. What they fear is losing the convenient excuse that “farmers still have land”, which allows the state to wash its hands of farmers’ unemployment and old-age security. That, in their words, is China’s “unique institutional advantage”. And this so-called “protective urban–rural dual structure”—how different is it really from the “separate but equal” doctrine during racial segregation in the United States? There is nothing new under the sun.

They have never regarded farmers as independent individuals. In their eyes, farmers are ignorant and short-sighted, people who need the guidance of their own supposedly enlightened minds. They claim that if farmers were truly given ownership of land, they would simply sell it off to drink and gamble. Of course, such people exist in rural areas—but are they the majority? Aren’t there plenty of wastrels in the cities as well? Why not call for taking away their right to sell their property?

And then there are those influenced by these ideas: people who have gone to the cities, seen a bit of the world, picked up a few fashionable terms, and before even washing the mud off their shoes, begin looking down on the farmers back home—returning only to lecture them and decide what is best for them, as if they were entitled to play the role of their fathers.

—“If Farmers ‘Have Land’, Does That Mean Their Pension Should Not Be Raised? Is It That Farmers Have Land, or That the Land Has Farmers? “农民有地”就不应该提高养老金吗？是“农民有地”还是“地有农民”？”

Finalists

Lin Feiran 林斐然’s Commentaries on the Dong Xiying–Xiao Fei Affair at China-Japan Friendship Hospital

When the Dong Xiying scandal at China-Japan Friendship Hospital erupted in late April 2025, Lin Feiran responded quickly and persistently. Writing on the personal WeChat blog Like a Ray of Light 像一道光, the author published a string of sharp commentaries, including “A Privileged Life Tailor-Made for Dr Dong 为名医董小姐定制开挂人生” and “Investigating Ms Dong Is Not a Task the National Health Commission Can Handle Alone 查董小姐的任务，卫健委还真揽不下”, questioning the health authorities’ capacity to conduct a credible investigation and calling for a far more rigorous and far-reaching inquiry.

After the authorities issued an initial update, Lin continued with “The Silence Reserved for the Ms Dongs 专属于董小姐们的沉默”, arguing that the case was not an isolated aberration but the product of a system in which routine assessment and academic review had long ceased to function as meaningful checks. It was this wider institutional decay, the author argued, that had allowed someone like Dong to move unchallenged through the system for years.

When the final official findings were released on August 15 2025, Lin followed up with “No One Ordered It—Everyone Willingly Helped Ms Dong Cheat 无人指使，大家自愿帮董小姐舞弊” and “The Nineteen Names Hidden in Ms Dong’s Web of Corruption 藏在董小姐窝案中19个名字”. Refusing to accept an official account in which 19 people appeared only as anonymous placeholders, the author painstakingly reconstructed the network behind the case, using the positions and careers of those involved to show how each had played a role in moving Dong from an unqualified outsider to a PhD at Peking Union Medical College and, ultimately, into the operating theatre. Widely circulated across multiple platforms and reaching millions of readers, it also came at a high cost: the complete disappearance of the author’s WeChat blog.

[Links to Lin Feiran’s commentaries are likewise sourced from Lin’s own posts on other platforms or secondary sources.]

And so the National Health Commission issued a statement saying that it had set up an investigation team and, in line with the principles of seeking truth from facts and maintaining objectivity and fairness, would work with relevant parties to carefully investigate Xiao, Dong, and the institutions involved, and would deal seriously with any disciplinary or legal violations uncovered.

On paper, the language sounded thunderous and righteous. In practice, it served mainly to carve the problem up neatly, narrowing the focus to Dr Xiao and Ms Dong and preventing scrutiny from reaching the deeper issues beneath the scandal.

What the authorities still seem not to understand, even now, is that the public no longer cares much about Dr Xiao, nor about the stream of lurid personal episodes attached to him. What people care about is how many supposedly elite Peking Union Medical College doctors, their credentials padded through the “4+4” route, have made it all the way to the operating table. They care about how such dissertations ever passed blind review, and how the authors of such work could end up as white-coated arbiters of life and death. They care about why the company where Ms Dong’s father worked was able to take on the supervision of construction projects for the institutions where Ms Dong and her mother worked, as if the whole affair had been kept within one family. And they care about how these academic clans manage, generation after generation, to keep a hereditary grip on power, turning even people whose doctoral theses may well have been ghostwritten by relatives or students into untouchable heirs dancing on the grave of the public interest.

If the matter were faced head-on—laid bare, properly investigated, and dealt with—the public would surely welcome it. But instead, after rummaging around in its trouser pocket for half a day, the system has produced the weakest possible player: the National Health Commission. And beyond deflection and damage control, what exactly can it solve?

—“Investigating Ms Dong Is Not a Task the National Health Commission Can Handle Alone 查董小姐的任务，卫健委还真揽不下”

Lu Yijie, “Behind the Punishment of a ‘Courtroom Observer’: Revisiting Three Issues in Judicial Openness “旁听士”被罚背后，重温司法公开的三个议题” (17 September 2025, Jimen Decision Forum, the official WeChat blog of the Public Policy Research Centre at the China University of Political Science and Law)

Citation:

In September 2025, a citizen courtroom observer surnamed Wu was given five days of administrative detention for “fabricating facts to disrupt public order”. The authorities said Wu’s conduct violated Article 29(1) of the Public Security Administration Punishments Law, which prohibits “intentionally disturbing public order by intentionally spreading rumours, making false reports of dangerous situations, epidemics, disasters, or warnings; or by other means”. Whether Wu’s attendance at the hearing was illegal, and whether Wu’s courtroom notes amounted to “rumours”, has put the legitimacy of the punishment under scrutiny and revived debate over judicial openness.

Before entering legal practice, the author spent many years as a legal affairs reporter and had first-hand experience of how difficult it can be to attend court hearings in certain cases. Drawing on that background, this commentary revisits three issues in judicial openness.

First, it asks why Wu could attend only in the capacity of a family member, pointing to the ways in which some judicial authorities artificially create obstacles to public observation. Second, it considers whether ordinary members of the public have the right to write and publish accounts of what they observe in court, analysing from both the perspective of legal text and legal principle. Third, it examines whether the decision to detain Wu was justified, arguing that any finding of “spreading rumours” must respect the principle that subjective and objective elements should be assessed in combination, and insisting that state authorities bear a duty to show a reasonable degree of tolerance towards citizens’ expression.

A useful point of reference is the Supreme People’s Court’s Understanding and Application of the Court Rules of the People’s Courts of the People’s Republic of China. In discussing whether courtroom observers may take notes during a hearing, it states that “what is not expressly prohibited by law is permitted”, and goes on to note that “courtroom note-taking is a legitimate extension of the right to observe. When members of the public make necessary notes while attending a hearing, they lay the groundwork for accurately understanding and supervising the court’s trial activities. In other words, allowing citizens to observe while forbidding them from taking notes amounts only to formal openness, not substantive openness.”

Although this passage speaks specifically about note-taking in court, what it really makes clear is that the substantive aim of protecting the right to observe is judicial openness. People do not take notes in court simply to go home, write a diary, and lock it away in a drawer. They have a legitimate need to discuss and exchange views with others. As a matter of legal principle, if a hearing is public, then such discussion and exchange should not be prohibited. And if discussion and exchange are permissible, there is no sound reason to forbid one particular form of them — namely, publishing a public written account.

Seats in the public gallery are always limited, and many people who have a legitimate interest in observing a case will inevitably be unable to attend in person for one reason or another. To confine knowledge of a case to the small number of citizens who can physically fit inside the courtroom is, in effect, to deprive many more citizens of their right to know and their right to supervise.

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Against that increasingly settled consensus, Yu Yongding has stood out as a notable dissenter. One of China’s most influential economists, and a former member of the monetary policy committee of the People’s Bank of China, the central bank, Yu has argued with unusual clarity and consistency that the prevailing diagnosis is wrong. In his view, there is no such thing as a “consumption-driven” growth model. China’s growth, he insists, should still rest on investment, and the country still has ample room to invest.

Yu contends that much of the current debate muddles together short-term macroeconomic stabilisation with long-term growth theory. In the long run, growth is driven by capital accumulation, labour, and technological progress, not by consumption as such. Consumption can support growth in the short run when effective demand is weak, but it cannot, by itself, raise productive capacity or an economy’s long-term growth potential.

If the goal is to raise consumption on a lasting basis, he argues, the key is not to treat consumption itself as the source of growth, but to raise households’ permanent income. And under current conditions, he sees faster infrastructure investment, financed by a more expansionary but still sustainable fiscal policy, as the most practical way to do that.

Crucially, he rejects the now common view that China’s infrastructure build-out is close to exhaustion. On the contrary, he argues that investment space remains substantial, from transport and energy to underground utility networks and other basic public works. He also argues that the returns on such investment should not be judged narrowly by short-term commercial profitability alone, but by a broader assessment of long-term economic and social benefits, even while acknowledging the need to guard against waste, duplication, and poorly designed projects.

Yu Yongding is a former director-general of the Institute of World Economics and Politics (IWEP) at the Chinese Academy of Social Sciences (CASS). He currently serves as a research fellow at IWEP and a member of the Chinese Economists 50 Forum, a non-governmental think tank comprised of first-class Chinese economists. He also holds the title of Academician (学部委员), reserved for CASS’s highest-ranking scholars.

He delivered the following lecture on 29 October 2025, though the transcript was not made public until 2 March 2026. The Chinese transcript is available on Tencent Finance’s official WeChat blog. The transcript has been slightly edited for clarity. The video recording of the lecture has been uploaded to Tencent Video.

—Yuxuan Jia

余永定：不存在 “消费驱动”的增长方式，中国基础设施投资远未饱和

Yu Yongding: There Is No “Consumption-Driven” Growth Model, and China’s Infrastructure Investment Is Far From Saturated

Key takeaways

1. Without a concrete analysis of the specific causes, it is highly unreliable to infer, based on per capita income levels alone, whether China’s economy has already entered a stage of low growth.

2. Overcapacity is resolved primarily through market mechanisms. Through competition, price declines, losses, bankruptcies, and mergers and acquisitions, overcapacity will eventually be eliminated. Industrial policy and environmental policy can, to some extent, accelerate this process and reduce the costs of adjustment.

3. There is no “consumption-driven” growth model. Consumption can be said to “pull” economic growth only in the limited sense that, when effective demand is deficient, it helps offset the shortfall in demand.

4. Compared with China, service prices in other countries are much higher, which is why their consumption ratios are substantially higher than China’s. Once these factors are excluded, China’s consumption ratio is indeed somewhat lower, but the gap may in fact not be very large.

5. Household income, income expectations, and wealth, or in other words, permanent income, are the key determinants of consumption behaviour. Only a stable rise in permanent income can deliver sustained growth in consumption. How, then, can permanent income be increased? Under current conditions, the most feasible path is to raise the growth rate of infrastructure investment.

6. China’s fiscal position is fully sustainable. At present, inflation in China remains low, and the government should therefore adopt a more expansionary fiscal stance, raise the deficit ratio, and issue additional government bonds, especially long-term government bonds, to finance infrastructure investment and achieve an economic growth rate of around 5 per cent.

Yu Yongding is a member of the Chinese Economists 50 Forum, an Academician of the Chinese Academy of Social Sciences (CASS), and a Research Fellow at the Institute of World Economics and Politics at CASS.

Yu Yongding’s principal fields of research include macroeconomics, international finance, and the world economy. He served as a member of the Monetary Policy Committee of the People’s Bank of China and as a member of the expert committees for the 11th (2006-2010) through the 15th Five-Year Plans (2026-2030).

On 29 October 2025, at the 431st session of the Chang’an Forum organised by the Chinese Economists 50 Forum, Yu Yongding was invited to deliver a lecture titled “Several Conceptual Issues in Current Macroeconomics and Macroeconomic Policy.”

Yu Yongding argues that current academic debates on China’s macroeconomic policy are marked by a number of conceptual and logical errors. Long-term factors and slow variables should not be used to explain short-term phenomena. For example, demographic change, as a slow variable, cannot account for short-term fluctuations in economic growth. Nor should issues that differ in domain, time horizon, and underlying nature be conflated.

On the transformation of the growth model, Yu argues that, in practice, there is no meaningful sense in which growth can be described as “consumption-driven.” Economic growth is investment-driven and rests on savings. In the short run, however, when effective demand is insufficient, an increase in consumption demand can help support growth. As for boosting consumption, he maintains that only a sustained rise in permanent income can deliver lasting growth in consumption.

With respect to fiscal policy, Yu argues that the central issue in public finance is sustainability rather than a balanced fiscal position. Given that infrastructure investment in China remains far from saturated and inflation is very low, the government can adopt a more expansionary fiscal stance, raise the deficit ratio, and issue additional government bonds to finance infrastructure investment, thereby sustaining economic growth at around 5 per cent.

The following is a transcript of Yu’s lecture.

当前宏观经济与政策的几个认识问题

Several Conceptual Issues in Current Macroeconomics and Macroeconomic Policy

I am very pleased to share some of my thoughts. My views do not necessarily reflect the mainstream in the academic community, and some may well be incorrect. My aim is simply to engage in a frank exchange, and I welcome criticism. In my view, economists should first follow Chen Yun’s principle of “not blindly following superiors, not blindly following books, but only following facts”; that is, they should seek truth from facts.

In addition, scientific thinking is essential. My study and research in economics began with Das Kapital, moved from Marxist political economy to Western economic theory, and eventually returned to the concrete economic problems of China. One strong impression I have formed is that insufficient importance has been attached to the teaching of formal logic, especially at the university level. As a result, when economic principles are applied to the discussion of economic issues, logical errors often lead to mistaken conclusions.

Today, I would like to discuss some of the conceptual and logical errors that have arisen in debates over China’s macroeconomic policy.

01 Long-term factors and slow variables should not be used to explain short-term phenomena

Long-term factors, that is, stable and often non-quantifiable conditions, and slow variables, which are measurable but change only very gradually relative to the outcome variable, cannot account for changes in short-term phenomena measured on an annual or quarterly basis. Long-term factors and slow variables influence GDP growth through cumulative and incremental processes. Their effect on the growth rate of GDP in any particular year or quarter is typically small and difficult to identify with precision.

For example, population ageing is a slow variable. A particular indicator of population ageing cannot, by itself, explain why economic growth in a given quarter falls short of expectations. China’s GDP growth rate was 9.6 per cent in 2011, but had declined to 7 per cent by 2015. Yet in 2015, both the size of the working-age population and its rate of growth were higher than in 2011. China has indeed entered an ageing society, but the principal problem at present is unemployment rather than labour scarcity.

Moreover, there are many long-term factors and slow variables that are conducive to growth, including urbanisation, industrial upgrading, technological revolutions such as big data and artificial intelligence, and the accumulation of human capital. It is difficult to determine ex ante what the net effect of these different long-term factors and slow variables will be once their respective influences interact and partially offset one another.

Some argue that China’s growth slowdown, or at least its decline to the current range, was inevitable. I am very fond of Benjamin Franklin’s famous remark: “In this world, nothing is certain except death and taxes.” There are far fewer inevitable outcomes than is often assumed. Human agency matters. To a considerable extent, outcomes are shaped by human action. If one begins with the prior assumption that a particular long-term factor has made a decline in growth unavoidable, one may then act on the basis of that presumption, thereby helping to generate a self-fulfilling expectation.

A line of argument often employed by Chinese economists is to divide economic development into stages on the basis of a particular indicator, such as per capita income, and then to draw cross-country comparisons to demonstrate, or predict, that a given phenomenon observed in China is inevitable, or that China is bound to experience it sooner or later. This mode of reasoning is highly prone to the fallacy of hasty generalisation.

China’s per capita GDP currently stands at roughly US$13,400. As a general proposition, when a country’s per capita GDP exceeds US$10,000, certain phenomena may tend to emerge. Such comparisons offer a certain point of reference for China. But without a concrete analysis of the specific causal mechanisms at work, it is highly unreliable to infer from per capita income levels alone whether China’s economic growth has already entered a phase of low growth.

Since the beginning of the twentieth century, the United States has experienced three golden eras of economic growth: the 1920s, when annual GDP growth averaged 4.7 per cent; the period from 1945 to 1973, when annual GDP growth averaged 4.1 per cent; and the period from 1992 to 2000, when annual GDP growth exceeded 4 per cent and reached 4.8 per cent in 1998. Measured in 2023 U.S. dollars at purchasing power parity, U.S. per capita income in the initial years of these periods was US$8,000 in 1920, US$21,000 in 1947, and US$42,000 in 1992. All three were periods of rapid economic growth, yet the levels of per capita income differed enormously. This suggests that one cannot infer, merely from whether per capita income has crossed a particular threshold, that China’s growth rate must necessarily have entered a low-growth phase.

One further point deserves emphasis: in reasoning, one must not arbitrarily skip intermediate steps. A causal chain takes the form of “a-b-c-d”, with each link connected to the next; one cannot jump directly from “a” to “d”. Between the explanatory variable and the outcome variable lies a very long causal chain. For example, to begin with the proposition that “China is ageing”, bypass multiple intervening links in the causal chain, and then use that proposition to explain why China’s economic growth rate was 6 per cent in 2019 is to commit the formal logical fallacy of non sequitur.

02 Issues that differ in domain, time horizon, and underlying nature should not be conflated

Economics not only spans multiple fields, but also addresses questions defined over different time horizons. Macroeconomics, for example, is concerned with short-term issues, over horizons of a year, a quarter, or even less, whereas the study of economic growth focuses on long-term issues, typically over five, ten, or twenty years. The concepts employed in growth theory and in macroeconomics are formulated under different assumptions and therefore carry substantially different meanings; they should not be conflated. Indeed, the meaning of “economic growth” differs markedly between the short run and the long run, and between growth theory and macroeconomics.

Economic phenomena can be classified into distinct categories. A growth slowdown, deflation, overcapacity, asset bubbles, income inequality, market distortions, industrial development, urbanisation, and demographic change all constitute separate fields of inquiry. Corresponding to these are different policy domains, including macroeconomic policy, institutional reform, structural adjustment, competition policy, industrial policy, urban planning, and population policy. Policies designed for different domains should not be treated as interchangeable.

Macroeconomic stabilisation, for instance, is a short-term matter, and the relevant policies may need to be adjusted quarterly or annually. Urbanisation, by contrast, is a long-term issue, with a policy horizon of five, ten, or twenty years. Urbanisation policy may help alleviate annual deflationary pressures, but only to a limited extent. Likewise, a reduction in income inequality may have a positive effect on economic growth, but it cannot resolve deflation within the current year.

In analysing economic phenomena, close attention must therefore be paid to the domain to which a problem belongs, its time horizon, and its underlying nature. One must also determine which branch of economic theory is appropriate for analysing the issue in question. Each branch of theory should perform its proper function and operate in coordination with the others; they should not be indiscriminately lumped together.

03 “Overapacity” is not a macroeconomic problem

There is no denying that China faces a problem of overcapacity. However, overcapacity is a sectoral and product-specific issue, that is, a structural problem rather than a macroeconomic one.

In 2012, serious overcapacity existed in traditional heavy industries such as steel, cement, flat glass, electrolytic aluminium, and shipbuilding. At the same time, however, many sectors were characterised by excess demand, including semiconductor chips, precision machine tools and industrial robots, infant formula, high-end consumer goods, advanced materials in the photovoltaic supply chain, wastewater treatment and air-purification equipment, cloud computing and big-data services, and key smartphone components. Even within industries suffering from overcapacity, many subsectors and products remained in short supply, such as high-end automotive sheet steel, especially high-strength steel and galvanised sheet, silicon steel, especially high-grade non-oriented electrical steel and grain-oriented electrical steel, high-end bearing steel such as GCr15, gear steel for high-speed rail, high-end stainless steel, special alloy steels such as high-temperature and corrosion-resistant alloys, and ultra-thick or ultra-wide steel plate.

Overcapacity is resolved primarily through market mechanisms. Through competition, price declines, losses, bankruptcies, and mergers and acquisitions, overcapacity will gradually be eliminated. Industrial policy and environmental policy can, to some extent, accelerate this process and reduce the costs of adjustment.

For a long time, a prevailing view of China’s macroeconomic conditions has been that “overcapacity”, understood as aggregate supply exceeding aggregate demand, is the principal macroeconomic problem, and that the objective of macroeconomic policy should therefore be to eliminate such “overcapacity”. In theoretical terms, however, macroeconomic policy has four standard objectives: full employment, economic growth, price stability, and external balance. In general, the primary objective of macroeconomic policy in market economies such as Australia and New Zealand is to contain inflation. Advanced economies typically adopt an inflation target of 2 per cent, while developing economies generally target a higher rate. In the United States, the two principal objectives of macroeconomic policy are price stability and employment. No country other than China treats “overcapacity” as an objective of macroeconomic policy.

Since John Maynard Keynes, overcapacity has not been understood as a macroeconomic problem. The overcapacity narrative omits a crucial time dimension: aggregate supply is determined by past investment and is therefore given in the current period. Policymakers can influence aggregate demand in the short run, but they cannot directly alter aggregate supply within the same period. At the macroeconomic level, therefore, only two forms of disequilibrium are possible: either aggregate demand exceeds aggregate supply, producing inflation and economic overheating, or aggregate demand falls short of aggregate supply, producing deflation and economic slack.

The choice between expansionary and contractionary macroeconomic policy depends primarily on two indicators, namely economic growth (or employment) and inflation, rather than on whether “overcapacity” is said to exist. The macroeconomic policy toolkit contains no instruments for resolving overcapacity at the industry level. The price mechanism in the market remains the principal means of addressing it. The disciplining function of market competition, in which more efficient firms survive and less efficient ones exit, should therefore be allowed to operate fully. Local governments should avoid subsidising industries with overcapacity in ways that keep alive firms that ought to be merged, acquired, or closed.

A person cannot walk in two directions at the same time. But it is entirely possible to use macroeconomic policy to stimulate effective demand while also relying on the market price mechanism, competition policy, industrial policy, environmental policy, and tax policy to address overcapacity. These two approaches are not contradictory. They can proceed in parallel and complement one another.

04 There is no “consumption-driven” growth model

Paul Krugman, Larry Summers, and others have argued that China’s “investment-driven” growth model has reached its limits and that China should shift from an investment-driven to a consumption-driven model. Economic growth, however, is driven by capital accumulation, effective labour input, and technological progress. The rapid accumulation of capital has been the single most important reason China became the world’s largest manufacturing power and acquired strong international competitiveness.

In reality, there is no “consumption-driven” growth model. In the Harrod-Domar model, the rate of growth of output = savings ratio / capital-output ratio, under the assumption that the saving rate equals the investment rate. It is important to note that growth theory abstracts from demand constraints. Its implicit assumption is that supply generates its own demand, broadly in the spirit of Say’s Law.

In growth theory, output, or GDP, is understood as a supply-side concept. The growth rate, therefore, refers at once to both the actual growth rate and the potential growth rate. In macroeconomics, by contrast, when effective demand is insufficient, actual output falls below productive capacity, and actual growth falls short of potential growth. The purpose of macroeconomic policy is to raise effective demand and close the gap created by deficient demand. For analytical convenience, macroeconomics assumes that supply is unconstrained in the short run, while actual output, or GDP, is determined by effective demand. Hence, “growth” in growth theory and “growth” in macroeconomics are not the same concept: in the long run, growth is not constrained by demand, whereas in the short run, it is not constrained by supply.

The formula for the dynamic model of the production function is as follows:

It follows from the production function that there are three principal determinants of output growth—capital, labour, and technological progress—and that GDP growth is driven by the joint expansion of these three factors. Consumption does not enter the model as an independent variable. Indeed, throughout the long historical period preceding the Industrial Revolution in Britain, economic growth was extremely slow. The reason is straightforward: labour productivity was so low that, apart from the output required to maintain simple reproduction and replace the means of production, virtually all output was consumed. Without the accumulation of means of production, there could, of course, be no sustained economic growth.

Clearly, then, economic growth is not driven by consumption, but by investment grounded in saving. Consumption can be said to “pull” economic growth only in the limited sense that, when effective demand is deficient, it helps offset the shortfall in demand. Consumption cannot increase an economy’s growth potential; it can only help ensure that growth potential is fully realised.

This does not imply any denial of the importance of consumption. Karl Marx observed that “Without production there is no consumption, but without consumption there is no production either, since in that case production would be useless”, but he also argued that “the expansion of production implies the conversion of surplus-value into additional capital, and thus also an expansion of the capital forming the basis of production.” By definition, the “expansion of the capital” is investment. Within a given period, consumption and investment are in a relationship of trade-off: more investment implies less consumption.

In the early years of the People’s Republic, for the sake of future generations, China tightened its belt, endured hardship, consumed less, and saved or invested more; the result was a decline in current consumption. Today, younger generations are more inclined to consume, and consumption accounts for a larger share. Consumption and investment, therefore, are not fundamentally opposed; the issue is one of intertemporal choice, and different choices reflect different social welfare functions.

In Capital and Interest, Eugen von Böhm-Bawerk developed the concept of roundabout production, arguing that the means of production, or capital goods, must first be produced before they can be used to produce consumer goods. Robinson Crusoe offers a simple illustration. At first, he catches fish with his bare hands and can secure only a few each day. He then makes a fishing net, raising his daily catch to as many as fifty fish. Later, he builds a raft, and then a fishing boat, and his catch rises substantially further.

In 1936, Soviet economist Grigory Feldman argued that if a larger share of capital goods is allocated to the capital-goods sector, that is, if more investment is directed towards the production of capital goods, then output in the consumer-goods sector will initially be lower. However, because output in the capital-goods sector expands more rapidly, the quantity of capital goods available for the production of consumer goods will also increase rapidly over time, even if the allocation ratio remains unchanged. As time passes, consumer-goods output will correspondingly expand, and may eventually catch up with, and surpass, the level that could have been achieved had a larger share of investment initially been directed towards consumer-goods production.

Should a society consume more now, or consume more in the future? Feldman’s model addresses precisely this question. One of its key variables is the allocation of investment goods. I denotes total capital goods, and I₁ the portion allocated to the production of means of production. Then r = I₁ / I denotes the share of investment goods allocated to Department I (production of means of production) in total capital goods. As the equation below shows, when t is small, a higher value of r implies a lower level of C. As time passes, however, a higher value of r implies a higher level of C. A lower value of r corresponds to “more consumption now, less later”, whereas a higher value of r corresponds to “less consumption now, more later”.

Here, C, Y, K, and V denote consumer goods, the output of Department II (production of means of consumption), capital, and the capital-output ratio, respectively. The subscripts 1 and 2 refer to the two departments.

In the long run, consumption and investment are not related by a simple either-or contradiction. The relevant choice is, rather, between consuming more in the present and consuming less in the present to consume more in the future. How that choice is made depends on collective preferences.

The stronger growth performance of East Asian economies relative to Western economies, and to those in Africa and Latin America, is to some extent closely related to the influence of Confucian culture, with its emphasis on family obligations, accumulation, and intergenerational transmission. East Asian economies tend to exhibit relatively high saving and investment rates, and they have also tended to grow more rapidly. Before reform and opening up, China faced a problem of forced saving, with both the consumption share and the level of consumption being excessively low. The situation today, however, is very different.

Some empirical studies suggest that the higher the share of net fixed capital formation in GDP, the higher the rate of GDP growth. In turn, the higher the rate of GDP growth, the faster the growth of consumption.

05 Correctly interpreting China’s consumption data

A common view holds that China’s consumption share is too low. But what is the actual situation?

Judging from the official data and from cross-country comparison, China’s consumption share is indeed relatively low. In 2023, for example, the consumption share in the United States was roughly 80–82 per cent, whereas in China it was 53–55 per cent; in other major economies, too, the consumption share was higher than in China.

However, such comparisons are complicated by differences in the composition of consumption. In the United States, services account for more than two-thirds of household consumption, whereas in China, per capita expenditure on services accounted for 43.2 per cent of per capita household consumption expenditure in 2022.

Compared with China, service prices in other countries are much higher, which is why their consumption ratios are substantially higher than China’s. Once these factors are excluded, China’s consumption ratio is indeed somewhat lower, but the gap may in fact not be very large. Judging from the ratio of goods consumption in final consumption to GDP in China and the United States, a simple calculation suggests that China’s ratio is 1.25 times that of the United States. In this sense, China’s consumption share is not exceptionally low.

China’s ratio of service consumption to GDP is clearly lower than that of the United States. How much of this difference reflects disparities in quantities, and how much reflects differences in prices, requires further analysis. Even so, ordinary observation suggests that service prices in the United States and other Western economies are substantially higher than those in China.

In practice, the level of consumption is a more important concept than the consumption share. Indeed, the countries with the highest consumption shares are often among the poorest in the world. In some African countries, the consumption share reaches, or even exceeds, 100 per cent. According to a 2021 World Bank report, once price adjustments are made, China’s consumption volumes in housing, education, recreation, and healthcare are roughly twice as large as those measured at market exchange rates. Judged by indicators of material consumption, the consumption level of Chinese households does not lag behind that of developed economies and, in some respects, may even exceed that of the United States, including caloric intake, protein intake, children’s height, urban living space, homeownership, years of schooling, luxury goods sales, and per capita meat consumption. Life expectancy in China also exceeds that in the United States: in 2021, it was 78.2 years in China, compared with 76.1 years in the United States.

Another common view is that the ratio of household disposable income to GDP in China is too low. The National Bureau of Statistics of China publishes two sets of data on household disposable income. The first is national household disposable income derived from household surveys; the second is reported in the Flow of Funds Table. For various reasons, the household survey data may be subject to systematic bias. Although the National Bureau of Statistics has adjusted these figures using tax data, household disposable income may still be understated in the official statistics. As the figure below shows, the discrepancy between the two series is substantial. In 2022, the gap between the household disposable income-to-GDP ratios derived from these two sources reached as much as 16 percentage points.

China’s ratio of household disposable income to GDP is lower than that of most developed economies, but the gap is not as large as some analyses suggest. For example, in 2022, the ratio of household disposable income to GDP was 56.22 per cent in Japan and 46.1 per cent in Denmark, both below China’s ratio as measured in the Flow of Funds Accounts; in the United Kingdom, the ratio was 61.47 per cent, only slightly above China’s.

Since national conditions differ, such simple comparisons are not, by themselves, sufficient to establish the point. Raising household disposable income generally implies reducing taxation, social security contributions, and related charges. Yet China’s aggregate tax burden is already in the lower-middle range among the world’s major economies. Thus, although China may consider further increasing the ratio of household disposable income to GDP, it is difficult to say how much scope there is for doing so.

Under the income approach, GDP = household disposable income + retained earnings and depreciation of enterprises + net government income. With GDP given, any increase in household disposable income must be matched by a reduction in one or both of the other two components.

As regards retained earnings and depreciation, firms require sufficient internal funds to support technological innovation. The fact that a large number of Chinese firms have achieved major technological breakthroughs in recent years is inseparable from their substantial investment. Depreciation also accounts for a relatively large share in China’s GDP statistics because China produces more than 30 per cent of global manufacturing output and remains the world’s largest manufacturing power; it is therefore natural that depreciation should exceed that of many other countries. The relatively high share of depreciation in GDP is related to the fact that manufacturing accounts for a much larger share of China’s economy than it does in most economies. Whether it is also related to a faster pace of technological upgrading requires further study. If China is to maintain its position as a major manufacturing power and continue to pursue technological innovation and technological revolution, the share represented by retained earnings and depreciation cannot be reduced.

Net government income = government revenue (including value-added tax and income tax) - government subsidies. The ratio of China’s fiscal revenue to GDP reached a low of 11.2 per cent in 1994. With the implementation of the tax-sharing reform, this ratio gradually rose to above 20 per cent, before falling to 16.29 per cent in 2024. Overall, China’s fiscal revenue-to-GDP ratio remains low by international standards; in developed economies, the comparable figure is generally in the range of 35 to 40 per cent.

In short, whether the Chinese government should further reduce taxes to raise the share of household disposable income, whether the share of retained earnings and depreciation should be lowered, and, if so, how this should be done, are all complex questions that require separate analysis. Without a detailed argument, it is rash to conclude, based on simple international comparison alone, that the share of household disposable income in China’s GDP is too low.

The principal problem in household consumption in China is the excessively wide gap in income distribution. Although China’s Gini coefficient has declined somewhat, it remains at a relatively high level. Professor Li Shi, Dean of the Institute for Common Prosperity and Development at Zhejiang University and one of China’s leading scholars of income distribution, stated at the 2024 annual meeting of the China Foundation Forum that over the past two decades, China’s income gap first widened, then narrowed, and has now broadly stabilised at a relatively high level. The Gini coefficient reached 0.491 in 2008, close to 0.5. If a country’s Gini coefficient exceeds 0.5, it is generally regarded internationally as exhibiting extreme income inequality. Before reaching that threshold, however, a turning point emerged, and the Gini coefficient entered a period of gradual decline. Yet the magnitude of this decline was limited, amounting to less than 3 percentage points over seven years. Since 2016, the Gini coefficient has fluctuated within a relatively stable range of 0.46 to 0.47, indicating that the income gap has shown no further tendency to narrow and has remained persistently high.

06 Effective paths to boosting consumption demand growth under insufficient effective demand

In the long run, consumption cannot drive economic growth. In the short run, however, when effective demand is insufficient, an increase in consumption demand can support economic growth.[1] When aggregate demand is inadequate, the GDP growth rate for a given year can be derived from the achievable growth rates of the various components of aggregate demand and their respective shares in GDP.

[Yu Yongding’s note: It should be emphasised that an increase in consumption does not raise output, aggregate supply, or productive capacity. Output, or productive capacity, in any given period, is determined by inputs undertaken in earlier periods. In the short run, under insufficient effective demand, an increase in consumption demand can bring existing productive capacity into fuller utilisation, so that actual output rises to potential output and the actual growth rate converges to the potential growth rate.]

GDP growth = (growth rate of final consumption × share of final consumption in GDP) + (growth rate of capital formation × share of capital formation in GDP) + (growth rate of net exports × share of net exports in GDP)

In 2024, China’s GDP grew by 5 per cent, with consumption, investment, and net exports, or the trade surplus, contributing 2.2, 1.3, and 1.5 percentage points, respectively. After Trump launched the trade war, I had expected China’s imports and exports to be severely affected. Unexpectedly, they rose sharply in 2024 and again recorded double-digit growth in 2025, becoming an important driver of economic growth. This pattern is inconsistent with China’s long-term development strategy and with the central authorities’ dual-circulation framework. It can only intensify trade tensions, provoke resentment abroad, and induce other countries to adopt protectionist measures. Economic growth in 2025 should rely primarily on the expansion of domestic demand, which mainly consists of consumption demand and investment demand.

Let me first make it clear that I personally support measures to boost consumption. Many scholars have put forward relevant proposals in this regard. Taken together, these can be grouped into three categories.

The first is the direct distribution of cash or consumption vouchers. Standard consumption theory holds that consumption is a function of income, income expectations, and wealth, or, put differently, of permanent income. If disposable income does not rise and expectations do not improve, it is difficult to achieve a sustained increase in household consumption. When a low-income household receives a temporary government subsidy, it may save a substantial portion of it as a precaution, because such income is transitory rather than permanent.

At a more microeconomic level, there is also the question of which goods should be targeted by vouchers or subsidies. In 2024, total retail sales of consumer goods in China rose by 3.5 per cent year on year. Among major categories, the sharpest decline was in the retail sales of gold and silver jewellery, followed by building and decoration materials, whereas essential consumer goods continued to record growth. Plainly, the government will not issue consumption vouchers or subsidies for high-end consumer goods. Subsidies for basic necessities, meanwhile, are unlikely to have a large effect on aggregate consumption demand. By contrast, the issuance of vouchers or subsidies for the purchase of electric vehicles and certain electronic products, in conjunction with industrial policy, has played an important role in stimulating consumption. Yet as market penetration of these products rises rapidly, and for other reasons as well, the effectiveness of such measures is gradually diminishing.

There is, of course, also a wealth effect: a decline in house prices reduces the consumption demand of homeowners, especially property investors. Under such circumstances, the impact of cash transfers and various forms of consumption vouchers on their consumption behaviour is likely to be limited. A further practical difficulty is that local governments have constrained fiscal capacity and are therefore unlikely to be able to sustain large-scale voucher programmes and subsidies over time. Moreover, the potential inflationary consequences of such policies in the future cannot be disregarded.

The second category is a reduction in personal income tax. There is no theoretical objection to this proposal, but its effect is likely limited. China’s annual personal income tax revenue is about RMB 1.45 trillion [$210 billion], while the size of the economy is roughly RMB 135 trillion [$19.6 trillion], so the relative weight of personal income tax is modest. Moreover, the relevant policy adjustment would not involve abolishing the tax altogether, but rather measures such as raising the exemption threshold or lowering marginal tax rates. The resulting income release would likely amount to only several hundred billion RMB, so its effect in stimulating consumption would probably be fairly limited.

The third category is reform of the social security system. There is, in fact, considerable scope for discussion in this area, but I will focus here only on the core proposal: lowering social insurance contribution rates. China’s social security system currently comprises five main programmes, including pension insurance for urban employees, pension insurance for urban and rural residents, minimum living allowances, medical insurance, and work injury insurance. Of these, the urban employees’ pension system is the most important.

Internationally, pension systems for urban employees generally fall into two broad categories: defined contribution schemes and defined benefit schemes. China’s current system combines features of both and is a hybrid model.

The core logic behind calls to lower contribution rates, for example, from 20 per cent to 12 per cent, is that releasing part of current income would help stimulate household consumption. Yet this proposal raises several complex issues.

First, the scale of any rate reduction would need to be estimated carefully: how much income would be released by each 1-percentage-point cut, and what share of that income would actually be translated into consumption rather than saved?

Second, there is a clear intertemporal trade-off. Social insurance contributions follow the actuarial principle that higher contributions are associated with higher benefits. If the contribution rate were reduced only modestly, the additional income released for consumption would be limited. If it were reduced substantially, however, future pension payments might be affected. Whether some form of Ricardian-equivalence effect may arise here is worth considering.

Third, the responses of high-, middle-, and low-income groups to a reduction in contribution rates would differ, adding further uncertainty to the policy’s effects.

Fourth, any reduction in contribution rates would most likely have to be implemented gradually and would therefore be unlikely to generate a significant boost to consumption in the short run.

The urban employees’ pension system is actuarially grounded and functions, in effect, as a form of implicit contract. It is therefore difficult to adjust, slow to reform, and unlikely to be altered substantially in the short term. Even so, two areas within the social security system remain open to policy improvement.

The first is the pension scheme for urban and rural residents. In substance, this is not a purely insurance-based system, but rather a social welfare arrangement financed predominantly by the government, with 80 to 90 per cent of funding coming from public finances. At present, average monthly benefits for farmers are only around RMB 100 to 200 [$14.5-29], which is clearly too low and ought to be raised.

The second is the minimum living allowance system. Current benefit levels are likewise low, and although the urban-rural gap in minimum living allowances is less pronounced than that in pension provision, there remains room for improvement. The precondition for either reform, however, is additional government funding. How to finance such measures is the key issue for implementation.

Overall, all three of the above proposals for boosting consumption have positive aspects, but each requires rigorous actuarial analysis and empirical study before its likely effects can be properly assessed. Their practical effectiveness, therefore, remains uncertain. In short, household income, income expectations, and wealth, or in other words, permanent income, are the key determinants of consumption behaviour. Only a stable rise in permanent income can deliver sustained growth in consumption.

How, then, can permanent income be increased? Under current conditions, the most feasible path is to raise the growth rate of infrastructure investment. A given increment in infrastructure investment can be converted immediately into an equivalent increase in income for firms and households. The resulting increase in household income leads, in turn, to higher household consumption expenditure. At the same time, government investment will generate a crowding-in effect, inducing an increase in private investment expenditure. Through the multiplier process, the resulting increase in consumption and investment expenditure gives rise to a further round of income growth, which in turn supports a further expansion of consumption demand and investment demand. In this way, infrastructure investment can ultimately help close the shortfall in effective demand.

07 China’s infrastructure investment is far from saturated, and its efficiency should be evaluated comprehensively

Two common doubts are raised with respect to infrastructure investment: first, that it has already reached saturation; and second, that its efficiency is too low. The first point that must be made clear is that China’s infrastructure is far from saturated.

Consider first the transport network. China’s transport infrastructure is highly developed, but it remains incomplete. For example, China has only a few hundred small airports, whereas the United States has more than ten thousand. The disparity is enormous, indicating considerable room for further development in aviation infrastructure. Intercity rail transit, likewise, remains far from sufficient to meet the needs of economic development.

Consider next urban public lighting and communications networks. Even today, just outside my own residence, one can still see hundreds of electrical wires hanging in a chaotic tangle. This exposed and disorderly form of installation poses serious risks. In the event of strong winds or other severe weather, it may not only lead to widespread disruption of electricity and communications, but also create major safety hazards.

The gap is even more evident in underground utility networks. I took this photograph of a sewer in Milan myself, lying on the ground to do so. Although it does not appear especially deep in the photograph, its actual depth is more than ten metres, and this project was completed more than a century ago.

From airports and air routes to underground utility networks, all these examples suggest that China continues to lag significantly behind developed economies in the quantity, quality, and planning philosophy of infrastructure development. There remain many areas in which catch-up is needed. The claim that infrastructure investment has already reached “saturation” is therefore clearly untenable.

The scope for further infrastructure investment in China remains very large. Take the energy network as an example. As Zhu Yunlai has observed, “Northwestern China possesses uniquely favourable solar resources. The region enjoys abundant sunshine, and much of its terrain consists of flat Gobi desert with, for the time being, relatively little alternative economic value, making it exceptionally well-suited to the construction of large-scale photovoltaic bases. A transmission line 3,000 kilometres long can deliver 200 million kilowatt-hours of electricity per day. China’s average daily electricity consumption is about 27.4 billion kilowatt-hours. In principle, 100 such transmission lines would be sufficient to meet nationwide electricity demand. At present, the cost of photovoltaic power generation has fallen sharply, and total system costs are only about half those of thermal power. In addition, advances in battery storage may make it possible for photovoltaic power to provide a stable, round-the-clock supply.”

Some reports also suggest that the infrastructure investment required for urban underground drainage systems alone could amount to as much as RMB 4.5 trillion [$652.5 billion]. Many studies conclude that China still has very substantial room for infrastructure investment in areas such as energy, electricity, and communications.

During the Fifteenth Five-Year Plan period, the government could consider further advancing the Western Development Strategy by extending large-scale infrastructure investment into Central Asia along the Hexi Corridor and establishing a corresponding economic corridor. Central Asia occupies a pivotal position in the centre of the Eurasian landmass, linking the continental heartland with its surrounding regions. Connecting the Western Development Strategy with the construction of a Central Asian economic corridor would be of considerable significance, both for stimulating domestic demand and for strengthening China’s domestic security and geopolitical position.

During a recent field visit to northwestern China, I was struck by the region’s vast land area, favourable natural conditions, and abundant underutilised space, all of which point to substantial potential for further development. From a geopolitical perspective, such a strategy carries even broader significance. In the past, strategic competition centred on sea power and rights of passage. Today, China could revive the pioneering spirit of Zhang Qian’s mission to the Western Regions by opening a corridor running through Xinjiang, Kyrgyzstan, Uzbekistan, Turkmenistan, and other neighbouring countries and regions, thereby turning the west into a secure strategic hinterland for national development.

At present, China possesses ample supplies of steel, cement, and other construction materials, as well as a large stock of idle production equipment, all of which could provide strong support for infrastructure construction in the western region and across borders. Whether in the transport networks and public-service facilities of the northwest, or in the improvement of basic infrastructure in Tibet, there is no shortage of investment projects that could be implemented on a large scale. It is reasonable to assume that the central authorities have already given consideration to such a strategic configuration.

The central authorities have recently introduced the “Two Major Tasks 两重”—the implementation of major national strategies and the building of security capacity in key areas. The latter encompasses such critical fields as food security, energy security, industrial and supply-chain security, and national defence security. This policy framework is both strategic and forward-looking.

I will not dwell here on the “Two New 两新” initiatives (new types of infrastructure and a new type of urbanisation), since the central authorities have already introduced a series of policy measures in these areas. As a member of the National Planning Advisory Committee from the Eleventh to the Fifteenth Five-Year Plans, I would particularly like to see a comprehensive list of investment projects under the “Two Major Tasks” and “Two New Developments.” I have asked the relevant departments whether such a list might be made available for consultation, but it remains unclear whether it can be disclosed publicly.

[Yuxuan’s note: Yu Yongding’s reference to the “Two New 两新” initiatives reflects an earlier policy usage from former Premier Li Keqiang’s 2020 Government Work Report, where “Two New and One Major 两新一重” referred to new types of infrastructure, a new type of urbanisation, and major transportation and water conservancy projects. Since 2024, however, official usage has shifted. In February 2024, Xi Jinping called for a new round of large-scale equipment renewal and trade-in of consumer goods, and subsequent government measures institutionalised this agenda with substantial fiscal support. In current official policy discourse, “Two New 两新” now generally refers to large-scale equipment renewal and consumer-goods trade-in, and it is often paired with the “Two Major Tasks 两重,” which first appeared in the 2024 Government Work Report.]

In fact, the project pipeline is ample. Looking back at the response to the global financial crisis in 2008–09, local governments competed vigorously to secure project approvals from the National Development and Reform Commission (NDRC). Officials at the time noted that many projects previously set aside were reactivated and accelerated in order to offset the impact of the crisis. Although implementation inevitably gave rise to some problems, project rollout was exceptionally rapid.

What is needed now is an early release of the investment project list under the “Two Major Tasks” and “Two New” initiatives. During a recent visit to the Yalong River, I observed that along a stretch of little more than ten kilometres, the vertical drop reached several thousand metres, with more than twenty power stations distributed along the route. Western China possesses many such advantages for clean energy development. China enjoys exceptionally favourable conditions for infrastructure and energy project construction.

As for the returns to infrastructure investment, some argue that projects lacking profitability should not be undertaken, since they would merely generate losses. This view is mistaken. Infrastructure projects are characterised by their foundational, public-interest, and long-term nature. Their public character means that their primary objective is social benefit rather than commercial profit alone. Because markets tend to underprovide such investment, government leadership or support is often necessary.

China’s high-speed rail system provides a clear example. Had commercial returns been treated as the overriding criterion, the high-speed rail network would never have reached its current scale. In practice, the network has transformed China’s economic and social life and become one of the country’s most visible national achievements. Some lines do, admittedly, have low occupancy rates. But this is a common feature of public infrastructure: the core purpose of public services is to meet aggregate social needs rather than maximise a single measure of commercial return.

During research in the United Kingdom, I made a point of observing rail operations. On a 10 a.m. train from Kent to London, many carriages were almost empty; during the morning and evening peaks, however, trains were overcrowded. This tidal pattern of use means that public infrastructure cannot maintain high utilisation rates at all times, and its value cannot be assessed solely in terms of commercial profitability. The efficiency of infrastructure investment should therefore be evaluated not only in terms of short-term economic returns, but also in light of its long-term social returns and broader social significance.

At the same time, however, it must also be recognised that infrastructure investment has indeed problems such as duplicative construction, resource waste, and low efficiency. In fact, the relevant authorities are acutely aware of these issues. On 25 December 2024, the General Office of the State Council issued the Negative List for Local Government Special-Purpose Bond Projects, establishing clear red lines for infrastructure investment. As for inefficient and wasteful projects that have already been completed, there is little to be gained from dwelling on the past. What matters more is to proceed from present realities: to use the negative list as a benchmark, tighten scrutiny over the approval of new investment, direct subsequent investment towards areas of genuine need and value, and avoid repeating earlier mistakes.

Beyond the availability of projects, a central problem facing infrastructure investment at present is the lack of funding. In my view, since the 2009 RMB 4 trillion stimulus package, the contribution of the central government’s general public budget to infrastructure financing has been far too limited. Responsibility for infrastructure construction generally rests with local governments. Even where major projects are coordinated by the centre, the concrete burden of financing usually falls on local authorities.

Looking back at the 2008 RMB 4 trillion stimulus package, the central government directly contributed RMB 1.18 trillion in fiscal funds. By 2021, however, central support for local infrastructure investment had fallen to only RMB 24.981 billion, accounting for just 0.1 per cent of total infrastructure investment that year, a virtually negligible share. With insufficient central funding, local governments have had little choice but to raise funds through multiple channels to push projects forward. Among these channels, the share of low-cost financing, such as bank lending, has been limited, whereas the share of high-cost financing, such as trust financing, has been relatively high. Combined with the waste and low efficiency observed in some local infrastructure projects, this has made the accumulation of debt risks all but inevitable. This is a major issue in infrastructure investment that must be squarely confronted and resolved.

Moreover, the Ministry of Finance has imposed increasingly stringent constraints on local government indebtedness. Under the Ministry’s definition, the local government debt ratio is calculated as outstanding local government debt divided by comprehensive fiscal capacity, where the latter includes general public budget revenue, government-managed funds budget revenue, and income from state-owned assets, among other items. In many regions, this ratio has already risen into the range of 120 to 200 per cent, and in some cases has exceeded 300 per cent.

The debt ratio, therefore, places tight constraints on local governments’ ability to raise debt financing. On 29 January 2022, the Ministry of Finance classified debt risk into four categories based on the debt ratio: red (debt ratio above 300 per cent), orange (200–300 per cent), yellow (120–200 per cent), and green (below 120 per cent), in descending order of risk.

[Yuxuan’s note: According to available reports, by 2019, China’s Ministry of Finance had established a risk-rating system for local government debt based on debt-ratio thresholds, under which jurisdictions were classified into four categories—red, orange, yellow, and green. The framework became especially consequential in early 2021, when bond regulators and self-regulatory bodies reportedly began to use these categories as a reference for imposing differentiated constraints on Local Government Financing Vehicle (LGFV) bond issuance. It remains unclear to me why Yu Yongding cited 29 January 2022.]

Strengthening debt risk monitoring is entirely necessary. At the same time, however, the accountability system linked to these debt thresholds has significantly weakened local governments’ incentives to raise financing for infrastructure investment. This raises an important question: should the debt ratio thresholds be adjusted to reflect differing levels of economic development across regions? How to strike a balance between rigorous debt risk control and the legitimate financing needs of infrastructure investment is a central policy challenge at present.

Measured by the ratio of local government debt to central government debt, China’s figure stands at 138 per cent (RMB 47.54 trillion relative to RMB 34.57 trillion in 2024), compared with less than 10 per cent in the United States, 16–17 per cent in Japan, 10 perc ent in France (230.4 relative to 2,202.0 in 2022), and an even lower ratio in the United Kingdom. The increase in central government transfer payments to local governments in 2025 is a step in the right direction. Consideration should also be given to reforming China’s fiscal system, particularly the allocation of revenues and responsibilities between the central and local governments, to strengthen local fiscal capacity.

China should adjust the debt structure between the central and local governments and significantly increase the share of central government bonds in total general government debt. The specific mechanisms for doing so can be discussed separately. In infrastructure finance, in particular, the contribution of the central budget should be raised substantially. The central government should also repay, as soon as possible, the debts incurred during the pandemic that ought properly to have been borne by the centre but were in fact serviced by local governments.

08 The key lies in fiscal sustainability rather than fiscal balance

The Chinese central government has long adhered to a principle of fiscal prudence, and that stance is worthy of recognition. But the logic governing central government finance is fundamentally different from that of local governments and households. Households and local governments must, by necessity, live within their means. The central government, by contrast, should focus on fiscal sustainability rather than fiscal balance.

At present, China still retains substantial fiscal policy space. Yet for many years, the rule that “the deficit ratio must not exceed 3 per cent” has been treated by many as a red line. In fact, this benchmark has no direct connection to China’s own national conditions. It emerged after the establishment of the European Union as a means of constraining fiscal expansion in Southern European member states and preventing excessive spending that might ultimately require support from others. The rule itself has no particular theoretical foundation.

Japan’s experience further illustrates the limitations of conventional fiscal rules. In 1996, Japan’s fiscal deficit stood at about 5 per cent of GDP, while government debt amounted to 91 per cent of GDP. The Hashimoto government concluded that Japan’s public finances were approaching collapse and responded with austerity measures, including cuts in fiscal expenditure and an increase in the consumption tax. The result was a severe recession in 1998. Today, Japan’s government debt has risen to around 250 per cent of GDP. Although economic growth has remained weak, no fiscal collapse has occurred. Experience thus suggests that traditional fiscal indicators can be seriously misleading when treated in isolation.

Fiscal sustainability ultimately depends on demand for government bonds. If investors have confidence in a country’s prospects and future development, they will willingly purchase government debt, thereby driving yields lower. Conversely, when market confidence is weak, governments can only attract investors by offering sharply higher yields, as occurred during the European sovereign debt crisis, when yields on Greek ten-year government bonds once rose to 44 per cent. At present, the yield on China’s ten-year government bonds is only 1.7 per cent, and at one point fell as low as 1.5 per cent. These low yields reflect strong market confidence in the Chinese economy and suggest that China still has considerable room for fiscal policy manoeuvre.

Following my visit to Japan, I identified a regularity: the ratio of government debt to GDP tends to converge to the limiting value given by the deficit ratio divided by the GDP growth rate. For example, if the deficit ratio is 3 per cent and GDP growth is 5 per cent, the limiting value of the debt-to-GDP ratio is 60 per cent. I later learned that European policymakers at the time assumed that euro area growth would reach 5 per cent. Once the deficit ratio was capped at 3 per cent, it followed directly that the limiting value of the debt-to-GDP ratio would be 3/5, or 60 per cent. This is how the 60 per cent debt ceiling was derived. It is therefore clear that the 3 per cent deficit rule and the 60 per cent debt rule are not universal fiscal laws.

Conversely, if economic growth is zero, the limiting value of the debt-to-GDP ratio becomes unbounded; the higher the growth rate, the lower this limiting value. In 2001, China debated whether to adopt an expansionary fiscal policy. At the time, I firmly supported such a policy, although some argued that, once non-performing debt was taken into account, China’s debt-to-GDP ratio was in fact above the officially reported figure of 12 per cent and that the fiscal deficit should therefore not be expanded further. My conclusion, derived from the model, was that regardless of how high the current debt-to-GDP ratio may be, that ratio is merely the initial condition in the solution to a differential equation. So long as the deficit ratio can be kept at around 3 per cent and GDP growth maintained at around 7 per cent, China’s debt-to-GDP ratio would remain below 50 per cent and thus well within a safe range. The interest rate and the growth rate are the two key variables determining fiscal sustainability.

China’s fiscal position is fully sustainable. With inflation currently very low, the government should adopt a more expansionary fiscal stance, raise the deficit ratio, and issue additional government bonds, especially long-term bonds, to finance infrastructure investment, eliminate deflationary pressures as quickly as possible, and achieve growth of around 5 per cent. Excessive caution and hesitation would be costly. If inflation were to worsen for some reason, such as an energy shock, China’s policy space would narrow rapidly, making it far more difficult to rely on expansionary fiscal and monetary policy to stimulate growth. In that event, the economy would face a much more complex and severe set of challenges.

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Pekingnology

Yu Yongding calls on Beijing to stimulate growth via fiscal expansion, believes 6% growth achievable

In late September, at the 30th-anniversary celebration and academic symposium of the Shanghai Development Research Foundation (SDRF), Yu Yongding, of the Chinese Academy of Social Sciences (CASS) and chairman of the academic committee of the SDRF, delivered a keynote speech titled "Some Thoughts on China's Macroeconomic Issues…

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3 years ago · 2 likes · Yixiu Wei, Shangjun Yang, and Zichen Wang

CCG Update - Center for China and Globalization

Transcript of May 14 CCG VIP Luncheon on China's economy

The Center for China and Globalization (CCG), supported by the Beijing International Club, held a CCG VIP Luncheon on Tuesday, May 14 centering on China’s economy. The luncheon was held in the historic Xianhe Hall of the club and featured Yu Yongding…

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2 years ago · 5 likes · Jiawen Zhang, Yuxuan JIA, Jiaoyang Du, Ziluan Zeng, and Zichen Wang

In that ecosystem, articles do not disappear neatly. Often, the original link remains active, but the page is replaced by a stock notice saying the content is unavailable “due to a violation”. When an article is quietly revised instead, however, there is usually no sign that anything has changed, unless an earlier version has been archived elsewhere.

That makes reporting on WeChat particularly difficult to track, especially business coverage. Companies involved often pursue takedowns by filing complaints through WeChat’s public-account system or by approaching publishers directly to seek deletions and revisions. Without systematic archiving, it is hard to know what was changed, what disappeared, and what kind of intervention lay behind it.

Cheng Chunxiao 程春晓, who writes the personal WeChat blog Bottom Observer 底层观察家, has kept a running record of such changes. His compilation, drawn from four highly influential, market-oriented, non-state-run outlets known for their reporting on China’s internet economy, technology companies, and AI sector in 2025, offers a revealing archive of what was changed or removed: sometimes straightforward factual corrections (and rightly so), but often reporting on executive reshuffles, unannounced products, tax and regulatory manoeuvres, and signs of strategic uncertainty. Some stories disappeared. Others remained, but in a cleaner and more carefully managed form.

This should not be read as a complete record. These outlets published far more than the items listed here, and the true number of deletions and revisions was almost certainly higher.

Nonetheless, the list points to a more structural weakness in China’s commercial media market. Business outlets often depend heavily on the very companies they cover, through advertising, paid partnerships, and other commercial ties. That leaves them with limited leverage to resist when a company asks for softer wording or the removal of awkward details, and, in some cases, with a clear financial incentive to accept such requests.

The following article was written and published on 31 December 2025 by Cheng Chunxiao on his personal WeChat blog Bottom Observer. Strikethrough indicates deleted text, while italic and bold indicate text added later. All hyperlinks were added by The East is Read.

Cheng has been working for ByteDance since 2020. The tagline of his personal WeChat blog describes him, tongue in cheek, as “the most educated person at the bottom of society”.

—Yuxuan Jia

2025大厂最在意什么？看头部商业媒体的删文与改文清单

What mattered most to China’s tech giants in 2025? A Look at Removed and Revised Articles from Leading Business Media Outlets

There are two kinds of truth in this world: historical truth and narrative truth. Historical truth may forever be beyond reach, but narrative truth can still reveal both the storyteller and the times in which they lived.

This article brings together records of edited and deleted pieces from four leading business media outlets—LatePoint 晚点, 36Kr 36氪, leiphone.com 雷锋网, and DeepWeb 深网—in 2025. As noted earlier in “Humanity’s Path in the AI Era: Doing What AI Won’t Bother With,” it is intended purely as a factual archive, without commentary.

1. Deleted Articles

LatePost

The sole survivor in the crack: Tesla and CATL’s “American factory,” 24 April 2025. “This content has been deleted by the publisher.”

The beginning of the end | TikTok’s five-year struggle reaches its conclusion, office quiet as usual, 26 Sept 2025. “This content is unavailable due to a violation.”

Exclusive | AITO M6 expected to launch in Q2 next year, will not replace M5, 24 Nov 2025. “This content has been deleted by the publisher.”

Exclusive | Wey CEO Feng Fuzhi takes “leave of absence,” 12 Feb 2025. “This content has been deleted by the publisher.”

36kr

At Baidu Cloud’s all-hands meeting, Shen Dou discusses performance, model competition, and DeepSeek | Exclusive by Intelligent Emergence, 13 Feb 2025. “This content has been deleted by the publisher.”

[Note: Intelligent Emergence is an AI-focused WeChat blog under 36Kr.]

JD takeout is just three steps away from the battlefield | DeepKr Lite, 5 Mar 2025. “This content has been deleted by the publisher.”

Baidu Cloud launches new round of restructuring: key executive roles shuffle | Exclusive by Intelligent Emergence, 4 Jun 2025. “This content has been deleted by the publisher.”

Alibaba leads largest single funding round in AI video generation sector | Exclusive by Intelligent Emergence, 10 Sept 2025. “This content has been deleted by the publisher.”

TikTok reaches a fateful turning point, 20 Sept 2025. “This content is unavailable due to a violation.”

Trump signs new executive order, details of TikTok sale in U.S. revealed, 26 Sept 2025. “This content is unavailable due to a violation.”

leiphone.com

NetEase shuts down strategic investment department: overseas investment setbacks trigger shakeup, over 100 employees affected, 17 Jan 2025. “This content has been deleted by the publisher.”

Exclusive | Leading domestic outbound platform lowers annual growth forecast, may open warehouses in Vietnam to avoid taxes, 18 Feb 2025. “This content has been deleted by the publisher.”

Exclusive | Pinduoduo has formed multiple large model teams that compete internally, 24 Feb 2025. “This content has been deleted by the publisher.”

News of large-scale layoffs a false alarm? Several mysteries surrounding Cainiao, 27 Feb 2025. “This content has been deleted by the publisher.”

Days spent with the Xiaomi robot, 19 Mar 2025. “This content has been deleted by the publisher.”

DeepWeb

Behind Seres Auto’s Hong Kong IPO push: as Huawei’s halo fades, what “new story” will it tell? | DeepWeb, 9 Apr 2025. “This content has been deleted by the publisher.”

2. Modified Articles

LatePost

LatePost Exclusive丨ByteDance’s Seedance explores DeepSeek support; new mobile head Cao Dapeng assumes role, 25 Feb 2025

ByteDance is increasingly prioritising model research and development. In January this year, it established the AGI Research Institute Project “Seed Edge” In February, ByteDance recruited top talent Wu Yonghui from Google to take overall responsibility of join Seed.

LatePost Exclusive丨Meituan internal meeting: grocery retail, internationalisation, and AI are Wang Xing’s “new” focus areas, 5 Mar 2025

Internationalisation refers to the overseas expansion of businesses like food delivery, including Keeta, which has already entered the Middle East market, and drone services. Meituan aims for its Keeta’s food delivery market to reach a scale of $100 billion, which means its food delivery business cannot be confined solely to the Chinese market.

ByteDance’s AI reboot: an independent organisation and a full-chain offensive, 31 Mar 2025

Leveraging its formidable talent pool, ByteDance has also marshalled resources to its AI division that are far beyond the reach of start-ups. This enables the company to harness Douyin’s reach: starting last April, other AI products were no longer allowed were once barred from advertising on Douyin and other ByteDance platforms, but later gained access to ad placements.

Exclusive | Richard Qiangdong Liu shares for the first time his logic behind expanding into food delivery and travel services: JD pursues all businesses to strengthen its supply chain, 17 Jun 2025

Within three months of launching its food delivery service, it secured 25 million orders through billions in subsidies, disrupting the stable market landscape that had persisted for years. It then shifted focus to instant retail, building its own fulfilment centres to sell fresh produce, beverages, and cosmetics under its own brand. Next, JD plans to expand into the wine and travel sectors.

LatePost Exclusive| Food delivery war escalates as Taobao pours resources rivalling Double 11; Meituan launches first full-scale counterattack, 7 Jul 2025

Meituan acquired Maiyatian at a low price earlier this year, further strengthening its delivery capacity moat. At the time, frontline employees and even senior executives in the food delivery business at Meituan, Alibaba, and JD did not anticipate a head-to-head clash this year.

During the weekend subsidy war, some merchants noticed that when using Maiyatian and Qingyun to place orders, they had to wait longer than usual, sometimes even one or two hours before a rider picked up the order. This caused significant fulfilment delays, further slowing down order processing speeds on other platforms. Sources close to Meituan informed us that the surge in orders overloaded the servers of Maitian and Qingyun, leaving some merchants temporarily unable to place orders through aggregator delivery platforms. Meituan’s own merchant-side settlement system ran into similar problems.

Exclusive interview with Meituan’s Wang Puzhong: We don’t want to a price war, but we have no choice but to fight back, 16 Jul 2025

Richard Qiangdong Liu said their food delivery service only aims for a 5% profit margin. Bro...no one has ever managed to turn a 5% profit in the food delivery business. When Zhang Xuhao sold Ele.me to Alibaba in 2018, he openly stated that the food delivery model would never be profitable, which is precisely why he sold it.

Taobao Flash Sale’s Double 11 battle plan: the new beginning of the retail war of attrition, 7 Nov 2025

At the end of August, during Alibaba’s second-quarter earnings call, Jiang Fan, CEO of Alibaba E-commerce Business Group, stated that instant retail would generate an incremental market of 1 trillion yuan for Taobao and Tmall over the next three years, referring solely to merchandise transactions, excluding food delivery. This primarily includes non-food retail orders from Taobao Flash Sale, orders delivered via Flash Sale from brand flagship stores on the Taobao app, and Alibaba-operated half-day delivery services like Freshippo and Tmall Supermarket.

LatePost Exclusive丨Another key member has left ByteDance Seed, bringing this year’s total departures to seven, 17 Nov 2025

ByteDance continues to maintain an exceptionally high density of talent. LatePost learnt that within each research area prioritised by Seed, at least three several teams are simultaneously advancing their work, exploring different technical directions while also competing with one another.

LatePost Exclusive | Zhou Jingren becomes an Alibaba partner as Tongyi Lab continues to adjust amid intensifying competition, 10 Dec 2025

“Jingren doesn’t really manage us much,” said a Tongyi Labs insider. But They’ve all set ambitious goals for themselves—like Lin Junyang aiming to make the Qwen model rival Gemini and gain greater international influence.

Chinese tech giants’ AI battle boils down to Alibaba versus ByteDance, 16 Dec 2025

ByteDance’s applications focus more on content generation and emotional companionship universal assistants. By encroaching on users’ time across the board with dozens of products like Doubao (conversation), Maoxiang (social companionship), and Xinghui (AI camera), it has transplanted the “app factory” model into the AI era.

If Alibaba aims to help users “save time,” then ByteDance is helping users “kill time.” Alibaba and ByteDance broadly represent two distinct visions for AI: the super assistant (tool-oriented) and the super companion (partner-oriented universal assistant).

Yet within ByteDance’s domain of emotional AI social interactions and content creation, challenges around privacy, ethics, and psychology remain equally complex. As tens of thousands of young people grow accustomed to confiding in AI, even forming deep, intimate bonds with it, where does authentic social interaction fit into this landscape?

Reinventing offline business on Douyin, 26 Dec 2025

To address this need, Douyin Life Services will roll out a one-stop managed-service tool, internally codenamed “One Sum”. In future, merchants will only need to commit a single budget, which the platform will allocate through intelligent management across advertising, coupon distribution, influencers, commissions, and other channels, with the ultimate goal of maximising merchants’ redeemed GMV.

36kr

Exclusive | Meituan Select exits loss-making cities as Meituan moves beyond cut-throat competition, 23 Jun 2025

36Kr has learned from multiple independent sources that Meituan Select has announced the closure of will withdraw from certain regional operations cities experiencing losses, while retaining business in places such as Guangdong and Hangzhou. This decision was discussed internally last week and finalised today. Many members of the Meituan Select team have been reassigned to the newly launched offline business of Little Elephant Supermarket, “Project N”, where they will be responsible for brick-and-mortar store operations. The project is led by Gao Yulong. The rest are seeking internal transfers.

The organisation was clearly moving towards a more middle-office-driven structure. A source close to Meituan Select told 36Kr that in September 2024, the company initiated an internal restructuring, consolidating its original 17 provincial divisions into 9. The goal was to “reduce costs and improve efficiency.” In addition, the operations and commercial analysis lines were merged, with Li Pengju in charge strengthening coordination. The idea was to use real business data to inform strategy, a longstanding hallmark of how Meituan runs its businesses.

Against this backdrop, traffic-driving products, unbranded goods, and subsidies were all scaled back sharply. In addition to phasing out unbranded products on a broad basis, the platform also required higher profit margins across all categories. A person close to Meituan Select gave 36Kr one example: “Whether online or offline, eggs are the classic traffic-driving item in retail. But during the period when the profit mandate was at its most extreme, even eggs were treated as a profit-making product. That was clearly the wrong approach.”

A Meituan Select insider told 36Kr that “Pinduoduo runs a platform model, with multiple revenue streams including merchant commissions and marketing income.” That is also consistent with Pinduoduo’s platform DNA. For Meituan, which grew out of food delivery, the features of Meituan Select, such as its focus on lower-tier markets and low average order values, were unfamiliar terrain. “The business was positioned differently from the start. Meituan approached it in a more self-operated way. Without sustained subsidies and traffic support, it was hard to beat Pinduoduo on market share.”

leiphone.com

ByteDance Games: 365 days of reboot, 24 Apr 2025

Reporting to Zhang Yunfan is a “think tank” “core team” of around five people. This core team coordinates key strategies for ByteDance Games around Zhang, overseeing metrics such as revenue, data, and costs, as well as adjustments to product strategy. When Zhang is in the United States, this group manages the business on his behalf from China. According to Luna, members of this think tank are ranked no lower than the GMs of the various studios.

Exclusive | Douyin Life Services to launch nationwide order push tomorrow, with some directly operated cities told to work overtime, 15 Aug 2025

After months of intense competition in food delivery, Douyin Life Services had so far kept a relatively low profile. Now, it appears ready to make a serious push of its own.

In response, a person in charge of Douyin Life Services said that August 16 marks the platform’s “Food, Drink and Fun Day”. Through premium content supply and related traffic support, the platform aims to boost the summer culture-and-tourism economy, encourage more in-store spending, and get users to experience the atmosphere of offline life through dine-in and other forms of consumption.

DeepWeb

Former ByteDance Volcano Engine AI solutions head Luo Yihang joins Shengshu Technology as CEO | DeepWeb, 12 Mar 2025

It is understood that Luo Yihang, a former senior AI executive at ByteDance and head of the AI application product line at Volcano Engine, recently joined Shengshu Technology as CEO, taking full charge of the company’s R&D, products, commercialisation, and team management.

More profitable than Pop Mart? A post-1970s couple built an RMB 60 billion fortune selling trading cards to the post-00s generation | DeepWeb, 18 Nov 2025

Kayou’s core audience is elementary school students the post-2000s generation. In recent years, the company’s trading cards based on popular IPs such as Ultraman, My Little Pony, and Harry Potter have swept school campuses across China.

Challenges and concerns: Alibaba’s “two-front gamble” for 2025 | DeepWeb, 26 Dec 2025

Its market capitalisation has climbed steadily from the trough, driven by the new leadership’s mix of “blitzkrieg” and “war of attrition”: pouring over 36 a hundred billion yuan to prise open a gap in the seemingly locked-in food delivery market; and committing over 380 billion yuan over the next three years to stake its future on AI as the fuel for tomorrow.

“Burning capital blindly is the easiest yet hardest decision to make,” said Zhou Jun, an Alibaba insider. Data from the three companies’ financial reports shows that in just six months from Q2 to Q3 of 2025 (calendar year), Meituan invested over 20 billion yuan 56.786 billion yuan in marketing expenses, JD invested 14 48.063 billion yuan in marketing expenses, and Taobao Flash Sale, a later entrant, invested more than the combined total of the first two, reaching 36 billion yuan 119.674 billion yuan in marketing expenses.

DeepWeb Exclusive | Behind Manus’s multibillion-dollar acquisition by Meta: founder Xiao Hong reflects on the company’s darkest hour, 30 Dec 2025

Xiao Hong: This thinking grew out of what we observed while building Monica. I remember speaking with an entrepreneur at the time, who broke down the cost structure of AI products today, using Monica as an example: in 2024, roughly one-third of costs went to employee salaries, another third is token fees (for large model calls), and the remaining third to user acquisition spending on internet advertising platforms. We’re competitive in part because of our cost-effective talent pool of Chinese engineers. Silicon Valley engineers command higher salaries, making it difficult for them to compete with our cost structure.

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