a US president is usually considered a lame duck a week before the change of government. However, Joe Biden is using his last days in office to introduce the strictest export restrictions on advanced AI semiconductors. Not only will China, Russia and around 20 other countries be completely excluded from buying advanced US chips. Around 120 other countries could also only receive limited quantities of AI chips from US companies. This includes almost the entire Global South. Jörn Petring has written down why this regulation could backfire.
Our second piece is also about the economy. According to the latest figures from the National Bureau of Statistics in Beijing, Chinese exports rose 5.9 percent last year. However, our author Fabian Kretschmer does not consider this a reason to celebrate. Although Chinese companies have been selling more and more in global markets, they are benefiting less and less from this. Corporate profits in China have declined for the third consecutive year, and a quarter of Chinese companies are even in the red. With massive subsidies, low wages and an artificially weakened currency, Chinese companies generate massive overcapacities, some of which are dumped on the global markets at dumping prices. Read our second analysis to find out how resistance to this economic model is forming worldwide and what this means for China.
In our third piece, Amelie Richter portrays Deng Li, the new Chinese ambassador in Paris. Deng succeeds Lu Shaye, probably the most notorious envoy in the ranks of Chinese wolf-warrior diplomats. Among other things, Lu had questioned the sovereignty of former Soviet republics, and had ranted that Beijing should re-educate the people of Taiwan after reunification. “They will become patriotic again.” His message accused an undesirable sinologist of being a “criminal nobody” and a “crazy hyena.” Amelie Richter explains who Deng is and what signals the Chinese government may be trying to send with his appointment.
Have an inspiring read and a pleasant day.
Shortly before his term in office ends, Biden again starts stoking up the AI dispute with China. The US President used his last days in office to introduce the toughest export restrictions yet on advanced AI chips. The result: Not only China, but a large part of the world now faces new restrictions.
Under the planned rules presented on Monday, most European countries, Japan and other close allies of the US would still be allowed to purchase AI chips freely. However, this only applies to a tiny group of 18 countries, the US’s closest allies. In contrast, around two dozen countries, including China and Russia, would be excluded entirely from buying them.
More importantly, around 120 other countries could receive only limited quantities of AI chips from US companies. This includes almost the entire Global South. According to the Biden administration’s logic, the plan is intended to help close existing loopholes. The idea is to prevent China from being able to obtain US chips from other countries. In addition, US companies that offer AI services, such as Microsoft or Google, must keep at least 50 percent of their AI computing power in the USA, according to the new rule. 25 percent may be held by allies and only seven percent in other countries.
The US has been trying to cut China off from the best chips for years. Washington aims to prevent the Chinese military from developing advanced AI technology that could threaten national security. However, the US company Nvidia, a market leader in this field, has always criticized these measures.
The company would happily sell its most advanced chips to Chinese tech companies, which – like Google, OpenAI, Microsoft and Tesla – have a massive demand for them. These chips are a crucial commodity for training and operating complex AI models.
Instead of fuming in silence, Nvidia is going on the offensive like never before. The company called the move an “excessive intervention” on Monday. “We would encourage President Biden to not preempt incoming President Trump by enacting a policy that will only harm the US economy, set America back, and play into the hands of US adversaries,” Nvidia Vice President Ned Finkle warned last week. “This last-minute Biden administration policy would be a legacy that will be criticized by US industry and the global community,” Finkle added.
The new regulations will come into force 120 days after their publication on Monday, giving Donald Trump’s new administration time to amend them. The Information Technology Industry Council, representing companies such as Amazon, Microsoft and Meta, said the regulations would impose arbitrary restrictions on US companies selling their systems abroad, leaving the global market to competitors. The US chip industry’s biggest concern is that Chinese competitors will seize the global market.
Indeed, it seems plausible that China would benefit in the long term if the US restricted exports to over 100 countries. Chinese companies already investing heavily in developing their own AI chips could benefit from growing demand in these countries. These include Huawei, Alibaba and Tencent.
China has been forced to pursue its technological independence for years because the US constantly imposes new restrictions. Through massive investment in research, Chinese companies have made headway, reducing their dependence on US products. Emerging markets could become a new sales market for these companies. Overall, they could use this opportunity to forge new alliances and strengthen technological partnerships. Relations between the US and the countries concerned would suffer, especially in Southeast Asia, Africa and the Middle East.
Voices are now growing louder in the US, calling for a completely different approach. Instead of restricting chip sales to China, Washington should seek an agreement on the responsible military use of AI. The argument is that both sides could contain the dangers, for example, by agreeing on guidelines for research and development. For example, Scott Singer from the US think tank Carnegie Endowment for International Peace told the US magazine Time that there are “compelling reasons” to negotiate with China on AI. “China does not have to be leading to be a source of catastrophic risk.”
Singer warns that the country’s continued progress despite chip restrictions would mean that it could develop dangerous AI capabilities sooner or later. It therefore makes sense to hold talks to ensure that the systems on both sides remain safe.
China has impressively demonstrated that it is still the world’s workbench. On Monday, the National Bureau of Statistics in Beijing presented figures that consistently exceeded economists’ expectations: Chinese exports rose by 5.9 percent in 2024, while traditionally weak imports also grew by 1.1 percent.
If foreign trade is understood as a zero-sum game, then the People’s Republic is clearly the global winner: The country’s trade surplus is just under one trillion US dollars, a new record. The People’s Republic’s surplus with the US and the EU is massively positive, but China even has surpluses with most countries in the Global South.
Is it enough for the economic planners in Beijing to get in a party mood? Far from it. China’s current trade figures are only superficially a reason to celebrate. Although they certainly reveal the system’s strengths, for example, that Chinese companies are obviously competitive. However, the radically unbalanced foreign trade also reveals the flaws of the Chinese economic system.
As is so often the case, the devil is in the detail. Monday’s statistics also show that corporate profits in China have fallen for the third consecutive year. On average, they have slumped by 4.7 percent. And overall, a quarter of Chinese companies are even in the red. The worst performers are China’s state-owned enterprises, the companies that enjoy firm support from Xi Jinping.
What is particularly alarming is that the profit slump is even more severe than in 2022, when several factories were in a permanent lockdown due to the strict zero Covid policy. At first glance, this doesn’t seem to add up: Chinese companies are selling more and more in global markets, yet they profit less and less from this.
However, economists already predicted this development years ago: With massive subsidies, wages kept low and an equally artificially weakened currency, Chinese companies churn out enormous overcapacity in the party leadership’s designated core industries, some of which are then sold on the global markets at dumping prices. Brad Setser, an economist at the US think tank Council on Foreign Relations, argues that the nature of China’s growth “should make all trading partners, not just the US, uncomfortable.”
And indeed, many countries are already fighting back. The United States is not the only country blocking Chinese products with punitive tariffs. Last year alone, 28 trading partners initiated investigations against Chinese imports, including Beijing-friendly countries such as Pakistan and Brazil. This trend will undoubtedly continue this year.
The EU is also being forced to act. After all, among all markets with purchasing power, Europe is probably the last economic territory still largely open to Chinese companies. With a trade deficit of almost 250 billion US dollars per year, this is likely to change soon. Otherwise, entire industries in Europe would soon be decimated.
But even within China, the system only produces few winners. While the population has to accept a real loss of prosperity in the wake of record-high youth unemployment and an ongoing property crisis, companies – with a few exceptions – are hardly turning a profit either.
These are all signs of a deflationary spiral that is looming in China. The fact that prices are falling may seem good from a consumer perspective in the short term. However, deflation is even more dangerous for an economy in the medium term than high inflation. Because not only prices are falling, but also profits and wages.
In this respect, China is at risk of “lost decades,” as Japan has experienced since the 1990s. The parallels are obvious: an aging population, weak consumption, a burst real estate bubble and massive debt. Of course, it is by no means certain whether the stagnation scenario will also occur in China. However, all economists in China who even dare mention the word “deflation” are immediately silenced by the censors. More than a few have even lost their jobs.
The yield on ten-year government bonds shows just how shaken confidence in the Chinese economy has become: This currently stands at just over 1.6 percent, the lowest it has ever been. By comparison, investors who invest their money in the USA for the same period receive almost three times the yield. Fabian Kretschmer
Deng Li (邓励) has been China’s new ambassador to France and Monaco since the beginning of January. The career diplomat took over the post from Lu Shaye. Lu was notorious for his controversial statements and was regarded as a model wolf warrior. Deng has extensive diplomatic experience, has maintained a low profile so far, and is considered a skillful and calm negotiator. After the wolf warrior Lu, is Deng now a dove of peace in Paris?
Deng will undoubtedly have a quieter media presence than his predecessor – but it could prove difficult to help ease Sino-French relations in the long term. Trade is a point of contention: Beijing’s anti-dumping measures on cognac have hit French producers particularly hard. In turn, France was the main driver behind the EU’s additional tariffs on Chinese EVs.
The topic is on the agenda in Paris: The new Prime Minister François Bayrou is due to visit China soon in order to achieve progress in the trade dispute over brandy exports, French President Emmanuel Macron announced at the beginning of the week at the annual conference of the French Ambassador Corps.
Against this backdrop, Deng’s inaugural words were initially conciliatory: “China-France relations have a solid foundation and broad prospects. I am committed to work with the French side to contribute to the greater progress of bilateral relations,” said Deng, who was promoted to Vice Foreign Minister in 2021. Before that, he was a close associate of Minister Wang Yi and ambassador to Turkey between 2015 and 2020.
With his education and previous experience, France is the perfect assignment for the diplomat: Deng majored in French at the China Foreign Affairs University, which is affiliated with the Ministry of Foreign Affairs. He eventually joined the ministry in 1987 and was responsible for North and West African affairs. He also served at embassies in former French colonies, including Mauritania and Algeria. Born in 1965 in Quanzhou in Fujian province, Deng has also held various positions in Central Europe – in the early 2000s as an embassy counselor in Belgium, and later as an embassy employee in France for several years.
Deng’s predecessor had not necessarily helped improve China’s image in France. Lu Shaye’s time in office was marked by controversial statements far removed from diplomatic standards. He insulted French researchers, journalists and parliamentarians who had planned to visit Taiwan in 2021.
In 2023, Lu Shaye also caused outrage when he repeatedly rejected the sovereignty of the former Soviet republics in an interview on the LCI news channel. Lu’s offensive behavior was apparently accepted in Beijing – there was never a public rebuke. Lu is said to have enjoyed a certain popularity within the government. Lu has now returned to Beijing. His future role is not yet known. Amelie Richter
Visiting a city without stopping by the farmers’ market is a wasted trip. That’s something young people in China are sure of. Chinese travel influencers are rediscovering the hustle and bustle of Chinese markets and are currently making sure that farmer’s markets in China go viral. Instead of tourist hotspots, young Chinese people are looking for authenticity at the markets.
a US president is usually considered a lame duck a week before the change of government. However, Joe Biden is using his last days in office to introduce the strictest export restrictions on advanced AI semiconductors. Not only will China, Russia and around 20 other countries be completely excluded from buying advanced US chips. Around 120 other countries could also only receive limited quantities of AI chips from US companies. This includes almost the entire Global South. Jörn Petring has written down why this regulation could backfire.
Our second piece is also about the economy. According to the latest figures from the National Bureau of Statistics in Beijing, Chinese exports rose 5.9 percent last year. However, our author Fabian Kretschmer does not consider this a reason to celebrate. Although Chinese companies have been selling more and more in global markets, they are benefiting less and less from this. Corporate profits in China have declined for the third consecutive year, and a quarter of Chinese companies are even in the red. With massive subsidies, low wages and an artificially weakened currency, Chinese companies generate massive overcapacities, some of which are dumped on the global markets at dumping prices. Read our second analysis to find out how resistance to this economic model is forming worldwide and what this means for China.
In our third piece, Amelie Richter portrays Deng Li, the new Chinese ambassador in Paris. Deng succeeds Lu Shaye, probably the most notorious envoy in the ranks of Chinese wolf-warrior diplomats. Among other things, Lu had questioned the sovereignty of former Soviet republics, and had ranted that Beijing should re-educate the people of Taiwan after reunification. “They will become patriotic again.” His message accused an undesirable sinologist of being a “criminal nobody” and a “crazy hyena.” Amelie Richter explains who Deng is and what signals the Chinese government may be trying to send with his appointment.
Have an inspiring read and a pleasant day.
Shortly before his term in office ends, Biden again starts stoking up the AI dispute with China. The US President used his last days in office to introduce the toughest export restrictions yet on advanced AI chips. The result: Not only China, but a large part of the world now faces new restrictions.
Under the planned rules presented on Monday, most European countries, Japan and other close allies of the US would still be allowed to purchase AI chips freely. However, this only applies to a tiny group of 18 countries, the US’s closest allies. In contrast, around two dozen countries, including China and Russia, would be excluded entirely from buying them.
More importantly, around 120 other countries could receive only limited quantities of AI chips from US companies. This includes almost the entire Global South. According to the Biden administration’s logic, the plan is intended to help close existing loopholes. The idea is to prevent China from being able to obtain US chips from other countries. In addition, US companies that offer AI services, such as Microsoft or Google, must keep at least 50 percent of their AI computing power in the USA, according to the new rule. 25 percent may be held by allies and only seven percent in other countries.
The US has been trying to cut China off from the best chips for years. Washington aims to prevent the Chinese military from developing advanced AI technology that could threaten national security. However, the US company Nvidia, a market leader in this field, has always criticized these measures.
The company would happily sell its most advanced chips to Chinese tech companies, which – like Google, OpenAI, Microsoft and Tesla – have a massive demand for them. These chips are a crucial commodity for training and operating complex AI models.
Instead of fuming in silence, Nvidia is going on the offensive like never before. The company called the move an “excessive intervention” on Monday. “We would encourage President Biden to not preempt incoming President Trump by enacting a policy that will only harm the US economy, set America back, and play into the hands of US adversaries,” Nvidia Vice President Ned Finkle warned last week. “This last-minute Biden administration policy would be a legacy that will be criticized by US industry and the global community,” Finkle added.
The new regulations will come into force 120 days after their publication on Monday, giving Donald Trump’s new administration time to amend them. The Information Technology Industry Council, representing companies such as Amazon, Microsoft and Meta, said the regulations would impose arbitrary restrictions on US companies selling their systems abroad, leaving the global market to competitors. The US chip industry’s biggest concern is that Chinese competitors will seize the global market.
Indeed, it seems plausible that China would benefit in the long term if the US restricted exports to over 100 countries. Chinese companies already investing heavily in developing their own AI chips could benefit from growing demand in these countries. These include Huawei, Alibaba and Tencent.
China has been forced to pursue its technological independence for years because the US constantly imposes new restrictions. Through massive investment in research, Chinese companies have made headway, reducing their dependence on US products. Emerging markets could become a new sales market for these companies. Overall, they could use this opportunity to forge new alliances and strengthen technological partnerships. Relations between the US and the countries concerned would suffer, especially in Southeast Asia, Africa and the Middle East.
Voices are now growing louder in the US, calling for a completely different approach. Instead of restricting chip sales to China, Washington should seek an agreement on the responsible military use of AI. The argument is that both sides could contain the dangers, for example, by agreeing on guidelines for research and development. For example, Scott Singer from the US think tank Carnegie Endowment for International Peace told the US magazine Time that there are “compelling reasons” to negotiate with China on AI. “China does not have to be leading to be a source of catastrophic risk.”
Singer warns that the country’s continued progress despite chip restrictions would mean that it could develop dangerous AI capabilities sooner or later. It therefore makes sense to hold talks to ensure that the systems on both sides remain safe.
China has impressively demonstrated that it is still the world’s workbench. On Monday, the National Bureau of Statistics in Beijing presented figures that consistently exceeded economists’ expectations: Chinese exports rose by 5.9 percent in 2024, while traditionally weak imports also grew by 1.1 percent.
If foreign trade is understood as a zero-sum game, then the People’s Republic is clearly the global winner: The country’s trade surplus is just under one trillion US dollars, a new record. The People’s Republic’s surplus with the US and the EU is massively positive, but China even has surpluses with most countries in the Global South.
Is it enough for the economic planners in Beijing to get in a party mood? Far from it. China’s current trade figures are only superficially a reason to celebrate. Although they certainly reveal the system’s strengths, for example, that Chinese companies are obviously competitive. However, the radically unbalanced foreign trade also reveals the flaws of the Chinese economic system.
As is so often the case, the devil is in the detail. Monday’s statistics also show that corporate profits in China have fallen for the third consecutive year. On average, they have slumped by 4.7 percent. And overall, a quarter of Chinese companies are even in the red. The worst performers are China’s state-owned enterprises, the companies that enjoy firm support from Xi Jinping.
What is particularly alarming is that the profit slump is even more severe than in 2022, when several factories were in a permanent lockdown due to the strict zero Covid policy. At first glance, this doesn’t seem to add up: Chinese companies are selling more and more in global markets, yet they profit less and less from this.
However, economists already predicted this development years ago: With massive subsidies, wages kept low and an equally artificially weakened currency, Chinese companies churn out enormous overcapacity in the party leadership’s designated core industries, some of which are then sold on the global markets at dumping prices. Brad Setser, an economist at the US think tank Council on Foreign Relations, argues that the nature of China’s growth “should make all trading partners, not just the US, uncomfortable.”
And indeed, many countries are already fighting back. The United States is not the only country blocking Chinese products with punitive tariffs. Last year alone, 28 trading partners initiated investigations against Chinese imports, including Beijing-friendly countries such as Pakistan and Brazil. This trend will undoubtedly continue this year.
The EU is also being forced to act. After all, among all markets with purchasing power, Europe is probably the last economic territory still largely open to Chinese companies. With a trade deficit of almost 250 billion US dollars per year, this is likely to change soon. Otherwise, entire industries in Europe would soon be decimated.
But even within China, the system only produces few winners. While the population has to accept a real loss of prosperity in the wake of record-high youth unemployment and an ongoing property crisis, companies – with a few exceptions – are hardly turning a profit either.
These are all signs of a deflationary spiral that is looming in China. The fact that prices are falling may seem good from a consumer perspective in the short term. However, deflation is even more dangerous for an economy in the medium term than high inflation. Because not only prices are falling, but also profits and wages.
In this respect, China is at risk of “lost decades,” as Japan has experienced since the 1990s. The parallels are obvious: an aging population, weak consumption, a burst real estate bubble and massive debt. Of course, it is by no means certain whether the stagnation scenario will also occur in China. However, all economists in China who even dare mention the word “deflation” are immediately silenced by the censors. More than a few have even lost their jobs.
The yield on ten-year government bonds shows just how shaken confidence in the Chinese economy has become: This currently stands at just over 1.6 percent, the lowest it has ever been. By comparison, investors who invest their money in the USA for the same period receive almost three times the yield. Fabian Kretschmer
Deng Li (邓励) has been China’s new ambassador to France and Monaco since the beginning of January. The career diplomat took over the post from Lu Shaye. Lu was notorious for his controversial statements and was regarded as a model wolf warrior. Deng has extensive diplomatic experience, has maintained a low profile so far, and is considered a skillful and calm negotiator. After the wolf warrior Lu, is Deng now a dove of peace in Paris?
Deng will undoubtedly have a quieter media presence than his predecessor – but it could prove difficult to help ease Sino-French relations in the long term. Trade is a point of contention: Beijing’s anti-dumping measures on cognac have hit French producers particularly hard. In turn, France was the main driver behind the EU’s additional tariffs on Chinese EVs.
The topic is on the agenda in Paris: The new Prime Minister François Bayrou is due to visit China soon in order to achieve progress in the trade dispute over brandy exports, French President Emmanuel Macron announced at the beginning of the week at the annual conference of the French Ambassador Corps.
Against this backdrop, Deng’s inaugural words were initially conciliatory: “China-France relations have a solid foundation and broad prospects. I am committed to work with the French side to contribute to the greater progress of bilateral relations,” said Deng, who was promoted to Vice Foreign Minister in 2021. Before that, he was a close associate of Minister Wang Yi and ambassador to Turkey between 2015 and 2020.
With his education and previous experience, France is the perfect assignment for the diplomat: Deng majored in French at the China Foreign Affairs University, which is affiliated with the Ministry of Foreign Affairs. He eventually joined the ministry in 1987 and was responsible for North and West African affairs. He also served at embassies in former French colonies, including Mauritania and Algeria. Born in 1965 in Quanzhou in Fujian province, Deng has also held various positions in Central Europe – in the early 2000s as an embassy counselor in Belgium, and later as an embassy employee in France for several years.
Deng’s predecessor had not necessarily helped improve China’s image in France. Lu Shaye’s time in office was marked by controversial statements far removed from diplomatic standards. He insulted French researchers, journalists and parliamentarians who had planned to visit Taiwan in 2021.
In 2023, Lu Shaye also caused outrage when he repeatedly rejected the sovereignty of the former Soviet republics in an interview on the LCI news channel. Lu’s offensive behavior was apparently accepted in Beijing – there was never a public rebuke. Lu is said to have enjoyed a certain popularity within the government. Lu has now returned to Beijing. His future role is not yet known. Amelie Richter
Visiting a city without stopping by the farmers’ market is a wasted trip. That’s something young people in China are sure of. Chinese travel influencers are rediscovering the hustle and bustle of Chinese markets and are currently making sure that farmer’s markets in China go viral. Instead of tourist hotspots, young Chinese people are looking for authenticity at the markets.
