Welcome to Foreign Policy’s China Brief.
The highlights this week: China’s trade war rhetoric with the United States heats up, China’s rubber-stamp parliament concludes the annual Two Sessions, and Beijing launches a venture-capital fund focused on technology and innovation.
Sign up to receive China Brief in your inbox every Tuesday.
China Pledges a Trade Fight to the End
China has toughened up its rhetoric amid U.S. President Donald Trump’s tariff increases. Last week, Chinese Foreign Ministry spokesperson Lin Jian said that if the United States “insists on a tariff war, trade war or any other war, China will fight to the end”—a statement reiterated by state media and embassy social media accounts.
With Trump flip-flopping on his trade threats against Canada, Mexico, and other countries, China remains the only consistent target of escalating tariffs, which now average 33 percent on Chinese goods.
China is now throwing its weight around, with new tariffs against Canada aimed at dissuading it from giving in to U.S. demands to place tariffs on Chinese goods. This move seems misplaced: Though Canada cooperated with the United States on electric vehicle tariffs against China during U.S. President Joe Biden’s term, there is little appetite in Ottawa for dealing with Trump.
But there is a lot of built-up Chinese resentment against Canada for its outspokenness on China’s election interference and human rights abuses. Beijing’s approach to Ottawa contrasts with its cautious outreach toward Europe, where China is trying to take advantage of the Atlantic split—though it remains held back by its insistent closeness to Russia.
With little end in sight to Trump’s trade wars, the Chinese government might be prepared to fight to the end, but it is uncertain whether the Chinese public feels the same. Serious trade wars in part reflect a government’s trust that the public will tolerate the pain that they cause, whether it comes in more expensive or unavailable goods, lost jobs, or slumping stock markets.
There is long-standing pride in China about the public’s ability to “eat bitterness”—to endure hardship in service of national goals. But though poverty persists for hundreds of millions of people in China, the country’s urban middle classes who matter most to the Chinese Communist Party (CCP) are able to put up with less pain, especially the younger generations.
It’s worth noting that until 2020, China had experienced four decades of a boom economy, with bad times largely regionally confined. People built their lives on the promise that next year would be better than this one. Chinese government slogans focused on the good times guaranteed by CCP rule, and President Xi Jinping preached the gospel of “moderate prosperity.”
That ended harshly under COVID-19 lockdowns, when the public’s tolerance for suffering proved to have limits. Government attempts to revive the Maoist spirit of toughing it out through hard times haven’t worked. Xi revived the “eat bitterness” directive to cope with unemployment numbers, then switched to talking about “high-quality” jobs a year later.
And while Xi has tried to push for greater autarky, China’s failure to build sustained domestic consumption has left the economy more dependent on exports than ever.
Times are already hard in China. Trump’s threats haven’t led to the surge in national pride and defiance that is visible in Canada or Mexico. In part, that is because those countries depend on a David-vs.-Goliath narrative vis-à-vis the United States that can’t work for China, where nationalism is closely tied to the idea that the country is unstoppable.
But there is also a long-held belief among the Chinese leadership that Americans won’t tolerate hardship, and that the United States is on the way down. That might be correct—or it might mean overconfidence that China can outlast the United States in a game of economic chicken.
What We’re Following
Two Sessions closes. The National People’s Congress, China’s rubber-stamp parliament, and the associated Chinese People’s Political Consultative Conference, have wrapped up their annual plenary sessions in Beijing, which lasted for seven days. As usual, the so-called Two Sessions largely consisted of long applause after CCP leaders gave speeches or presented annual reports.
This year’s Two Sessions closely focused on economic promises, though the stimulus package remains limited compared to the post-financial crisis effort in 2009, and growth targets are fixed at last year’s 5 percent rate. With China’s consumer prices hitting deflationary lows, the sessions emphasized boosting consumption, as well as highlighting China’s hoped-for artificial intelligence boom in the aftermath of Chinese firm DeepSeek’s breakthroughs.
However, increased spending remains a hard sell to a Chinese public that is saving more than ever and is still traumatized from the stresses of the COVID-19 pandemic—and the knowledge that the government could turn ordinary life upside down at any moment.
China-Russia cooperation . At the Two Sessions, Chinese Foreign Minister Wang Yi took his second media question from a Russian outlet and made a point to reiterate Beijing and Moscow’s friendship. Some U.S. officials have suggested that Trump’s compliance with Russian demands is a strategy to split up China and Russia; Beijing is making it clear that won’t work.
China and Russia also regularly cooperate on military exercises, whether through the Shanghai Cooperation Organization or during annual events such as the naval drills alongside Iran that just kicked off for a fifth time. Russia has been to war more often than China in recent decades, and these exercises present opportunities for Chinese officers to improve their limited military skills.
However, the military exercises also serve to spread a shared worldview—mostly focused on U.S. iniquity and a mutual fear of domestic subversives.
FP’s Most Read This Week
What I Got Wrong About Trump’s Second Termby Stephen M. Walt
How Trump Is Killing the U.S. Defense Industryby Elisabeth Braw
Trump’s Economy Is Flashing Redby Keith Johnson
Tech and Business
Long-range VC fund . China’s National Development and Reform Commission has announced a new 1 trillion yuan ($138 billion) venture capital fund focused on the “global frontiers of technology and innovation”—meaning AI, quantum computing, and robotics. Former Chinese Premier Li Keqiang focused on similar themes during his Two Sessions speech in 2023. The money for the fund will come from a mix of local governments and the private sector.
It is a lot of money—but China’s record with this sort of top-down fund isn’t great. AI firm DeepSeek came out of a private and under-the-radar hedge fund. In contrast, the chip development project known as the Big Fund largely failed to boost domestic production, and Chinese semiconductor firms suffered a wave of bankruptcies last year.
The first two rounds of the Big Fund raised roughly $45 billion—much of which was stolen by officials and bankers involved, resulting in a round of corruption purges in 2022. Keep an eye on who is involved in this new fund; they may end up arrested around 2030.
Tesla drops in China. Tesla sales are declining worldwide as CEO Elon Musk increasingly ties himself to far-right causes, and the company’s stock has followed suit. China is no exception, but for different reasons: Chinese consumers don’t particularly care about Musk’s politics, since he avoids saying anything negative about the CCP.
Indeed, Chinese investors have been increasing their holdings in his firms, likely to try to buy influence in a Washington where bribery laws aren’t enforced. But Chinese EV firms, especially BYD, are simply outdoing Tesla on both price and quality. That is undermining Tesla’s Chinese market—and if other countries start to warm to Chinese goods, it could affect the firm elsewhere.