Welcome to Foreign Policy’s China Brief.
The highlights this week: The United States and China enter another round of trade negotiations, Beijing mulls a local government bailout, and a leak of material from the Great Firewall exposes Chinese surveillance and censorship exports.
Another Round of U.S.-China Trade Talks
The United States and China kicked off a new round of trade talks in Spain on Sunday.
Their first achievement was a “framework” deal on the fate of TikTok, which the United States banned last year unless Chinese owner ByteDance sells the app to a U.S. company. The deal is still far from certain, however. U.S. President Donald Trump has delayed implementation of the ban a few times, just this week extending the pause until Dec. 16, and will almost certainly do so again if needed.
Trump seems interested not in blocking TikTok but in turning it into a platform that is more friendly to his administration. The White House’s preferred buyer of TikTok would likely be Oracle, whose billionaire owner, Larry Ellison, is a close Trump ally. Ellison’s son, David, now the CEO of Paramount, is turning CBS News to the right and attempting to acquire CNN, too.
Should ByteDance sell TikTok, China would lose a considerable source of soft power in the United States, but Beijing may see it as advantageous to do Trump such a large favor. If reports that the app would still use ByteDance’s algorithm are accurate, then China would get the best of both worlds: effectively complying with the law while keeping control over the content that U.S. users consume.
But it’s uncertain how much of TikTok’s user base would choose to stay in the event of a sale. The app is roughly equally divided between right-leaning and left-leaning political content and has a diverse group of U.S. users. News of the initial ban elicited backlash and sparked a brief enthusiasm for Chinese apps such as RedNote. If the new ownership tries to reorient the app’s content to the right, it might face new problems.
Meanwhile, prospects for a bigger trade deal remain weak. Despite optimistic statements from both sides, tariffs are at record levels, and the United States continues to act aggressively. On Friday, Trump called for NATO allies to sanction China and blacklisted two Chinese firms that support chipmaking efforts, prompting Beijing to launch an anti-dumping investigation into the U.S. semiconductor sector.
One of the paradoxes at play with these talks is that both sides are negotiating from a position of economic weakness. The United States is seeing dwindling job numbers and rising inflation. Farmers are in crisis from the loss of Chinese markets, where agricultural exports such as soybeans were one of the few items on the U.S. side of the balance sheet.
At the same time, China’s economy has seriously slowed amid a real estate collapse. While the country’s exports to the rest of the world have compensated for big losses in the United States, prices are declining sharply for producers, and key manufacturing regions are struggling.
If I had to bet on who comes out ahead from the trade negotiations, I would slide my chips to China’s side of the table. The Chinese team is more experienced, more persistent, and less beholden to one man’s ego, and trade talks often come down to days of hacking out details. Mass federal firings have cost the Trump administration a lot of the expertise that it needs to handle these.
All of this assumes that eventually an agreement will be reached and that tariffs will be dialed back. If Beijing and Washington can’t strike a deal and punt talks forward another three months, then both wings of the global economy look shakier than ever.
What We’re Following
Local government bailout? China is seriously considering a bailout for debt-burdened local governments, according to a recent Bloomberg report. Chinese local governments had a big debt burden even before the COVID-19 pandemic, but two years of lockdowns exposed many problems.
This situation, compounded by the real estate crisis, has left local governments cutting public services and struggling to make basic salary and pension payments. The first round of proposed bailout funding would total at least 1 trillion yuan ($140 billion) and be directed toward paying off private firms—consistent with Beijing’s increased focus on the private sector.
But even this is only a drop in the bucket: The official estimate of debt through local government financing vehicles alone puts the total at 44 trillion yuan ($6.2 trillion).
Disputed territorial claims. Scarborough Shoal, an area in the South China Sea that has long been disputed between China and the Philippines, will soon become a Chinese nature reserve. Though it’s true that the shoal has a coral reef ecosystem and plentiful fishing stock—making it attractive to both countries—this is an aggressive step, seeking to further China’s claim to the chain of islands and reefs. The Philippines and the United States have both refused to recognize the move.
China tends to favor an approach to territorial conflicts that layers claim after claim on disputed areas. This latest claim is not that significant in itself, but it’s part of a repeated push in a very risky area. That clashes between Chinese and Philippine ships in the area—as recently as Tuesday—haven’t killed anyone yet is sheer luck.
FP’s Most Read This Week
- The End of Development by Adam Tooze
- Iran’s Foreign Policy Is Changing in Real Time by Sina Toossi
- The Golden Age of Multilateralism Is Over by Jo Inge Bekkevold
Tech and Business
Great Firewall leak. The largest-ever leak of material from the Great Firewall, China’s system of internet censorship and surveillance, was made public last week. (There’s a good breakdown of the technical side here; ChinaFile also has a comprehensive explanation of China’s online censorship for a general audience.)
The whopping 600 gigabytes of files come from the Chinese firm Geedge Networks, which seems to play a central role in operating the firewall. The biggest revelation is that China has been quietly exporting surveillance and censorship tools to at least 40 countries, including Ethiopia, Kazakhstan, Myanmar, and Pakistan. Much of this digital trade seems to be linked to the Digital Silk Road project.
In my experience, internet blocking efforts in other states are relatively easy to avoid using a virtual private network (VPN), and they are usually restricted to a limited number of sites. That’s not the case within China, where there is a constant arms race between VPN providers and Great Firewall providers, and where the vast bulk of the non-Chinese internet is blocked.
That contest is visible in the documents: Geedge staff discuss singling out particular VPNs and developing new techniques to stop them.
Accounting standards. In a Truth Social post on Monday, Trump called for U.S. firms to use more lax financial reporting standards, saying: “China has a 50 to 100 year view on management of a company, whereas we run our companies on a quarterly basis???” This is not true, but it’s nonetheless telling.
The Orientalist claim that “China thinks in centuries” goes back years and is often repeated by U.S. business leaders. But the notion falls apart upon the slightest consideration of the Chinese government: Its goals regularly shift with the political winds, and its leaders often prioritize short-term outcomes and wasteful projects.
It’s even more ridiculous to apply this notion to Chinese businesses, most of which are a couple decades old at most. Their strength is often in their willingness to change rapidly, invest in new fields, and crush competitors. As for reporting requirements, in mainland China, they are quarterly—just like the United States.
The fact that misplaced ideas of Chinese master plans still circulate among U.S. politicians, pundits, and business leaders is a sign of how little they have bothered to learn about the country over the past three decades of competition.
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