Advantage Does Not Equal Victory | Sinification: July 2026

US-China & Global Order | Europe | Chinese Economy & Going Out | Middle East | South China Sea | Neighbourhood Diplomacy | Regional Relations | AI & Tech | Society

sinocism.com

Politburo study session; Regulation on Exit and Entry Administration; US-China; AI; Scarborough Shoal/Huangyan Dao

I thought I would be on vacation already but there too many interesting things over the last few days to not do one more newsletter before heading off on my version of the “Beidaihe Break”. The Beidaihe Break has officially started, signaled by the CCTV report on Cai Qi visiting “experts vacationing in Beidaihe”:

sinocism.com

July 2026 Politburo meeting; Fifth Plenum set for October; Signals of marginal, incremental policy support

The Politburo held its July meeting today. Some of the highlights: Fifth Plenum scheduled for October, agenda is “to study major issues concerning the unremitting advancement of full and rigorous Party self-governance”; Diagnosis of economic situation section includes “it is necessary to attach great importance to the difficulties and challenges in economic performance 要高度重视经济运行中的困难挑战”, which suggests increasing concern about the state of economy; Readout language signals at least some additional, marginal policy support - promptly plan and introduce practical and effective incremental policies 及时谋划出台务实管用的增量政策

sinocism.com

A Memory-Maker Makes History; New Robot Rules; The Open Weights Debate Rages; End of July News and Notes

Show Notes:

sinocism.com

RMB and global imbalances; PRC missiles to Iran?; National Plan for Addressing Climate Change; Commercial space industry

We are still waiting for the July Politburo meeting. Gita Gopinath, Pierre-Olivier Gourinchas and Hélène Rey - two former IMF chief economists and the incoming chief economic advisor at the Bank for International Settlements, respectively - wrote “Don’t blame global imbalances on the undervalued yuan” for The Economist arguing that calling on the PRC to revalue the yuan to fix imbalances, as German Chancellor Merz has done, “gets both the diagnosis and the cure wrong”. They conclude the piece: The G7 and the IMF locate the problem correctly: it lies in the constellation of domestic macroeconomic choices on both sides of the imbalance. A policy package, whereby China pivots to consumption and services-led growth, and America reins in fiscal deficits, is less spectacular than a grand currency bargain. But it has the advantage of being both effective and achievable.

sinocism.com

Xi meets Slovak president; “Excess capacity” or “Overcapacity”? ; CXMT IPO; Overseas Chinese affairs conference; Li Qiang in Tangshan; Chips and AI

In this issue: Xi meets Slovak president “Excess capacity” or “Overcapacity”? CXMT IPO the day after Xinhua’s mid-year review of the Chinese economy Li Qiang commemorates the 50th anniversary of the Tangshan earthquake National Conference on Overseas Chinese Affairs Work AI and chips US to ban new PRC robots

sinocism.com

CXMT IPO; Taxing offshore assets; Fang Xinghai; US-China; AI; Lula supports China-Mercosur deal

The July Politburo meeting should happen this week, and should include as part of its agenda “analyzing and studying the current economic situation, and deploying economic work for the second half of the year 分析研究当前经济形势”. The 2025 July meeting was on Wednesday, July 30th, and also announced the date for the Fourth Plenum. And then on or around August 1 the top leaders will disappear from public for two weeks or so for the “Beidaihe Break”, even though we do not know if they all go to the seaside resort. Last year at this time there were lots of crazy rumors about Xi and possible coups; this year the rumor mill so far has been very quiet.

sinocism.com

Another CSRC meeting; DeepSeek CEO comments; SAMR warns about "externalization of involution 内卷外化"; US-China; Strengthening social work

President Trump confirmed that Xi will visit the US on September 24. That is not a surprise, the Rubio-Wang meeting readouts were clear they were working towards that visit. Vice Foreign Minister Ma Zhaoxu, one of the top contenders to eventually replace Wang Yi, has been in the Washington, DC this week, and today visited the Pentagon. A MOFCOM official said on Thursday that “at present the Chinese and US economic and trade teams are maintaining close communication on specific arrangements for the trade council, including its structure, functions, and mode of operation, and are discussing advancing reciprocal tariff-reduction framework arrangements of 30 billion US dollars in scale on each side.” So we are seeing practical applications of “constructive strategic stability” as the two sides try to manage the relationship while competing.

sinocism.com

Wang Huning tours Tibet; US government officials go after Moonshot; Wang Yi-Rubio meeting; PRC-Philippines; H1 fiscal revenue and expenditure data

The head of the White House Office of Science and Technology Policy, the Treasury Secretary and a senior State Department official all tweeted similar things about Kimi and distillation today. Secretary Bessent was most specific about possible policy responses - ”sanctions and Entity List designations will be on the table”. Kratsios, the head of the OSTP, accused Moonshot of “a sophisticated internal platform to conduct large scale distillation against U.S. models, allowing them to quickly switch between multiple methods of access to avoid detection. Moonshot AI has also acquired GB300-equipped servers and has accessed GB300s in Thailand, likely to train its AI models.”

sinocism.com

Stock market rescue progress; "Open" AI with Chinese characteristics?; PRC-Philippines trade accusations as Wang Yi arrives for ASEAN; EU-China discussions

“Strengthening the guidance of capital-market expectations” likely means more positive talk about market prospects, and “further institutionalizing mechanisms for market stabilization” sounds like a call for more “national team” support, SOE buybacks, and long-term institutional money, in a more institutionalized way...“Industry institutions would step up counter-cyclical positioning and earnestly raise the level of their investor services; and that experts and scholars would actively offer advice and proposals and speak out rationally, so as to jointly foster a sound market environment” sounds like an instruction to not sell into weakness while ensuring commentary and analysis about the market are positive. The monster CXMT IPO is imminent, and they need it to go off well. Even more importantly, regulators need investors to keep putting money into the market to fund the national technology strategy.

sinocism.com

Sharp China: Kimi Madness; Xi's AI Vision and US Questions; Trump's Election Data Claims; The Connected Vehicle Security Act

Show Notes:

sinocism.com

Stock market rescue; World AI Conference and open models; Second Thomas Shoal fight; Involution battles

Operation stock market rescue - The National team is back to try to turn around the stock market, after losses approaching ten trillion RMB this month. China Reform Holdings Corp. Ltd. and China Chengtong Holdings Group Ltd. announced Sunday they were buying around 60B RMB of ETFs and domestic stocks, five insurance firms and multiple SOEs announced Monday they were buying stocks, and CSRC head Wu Qing held an “investor symposium” at a brokerage branch in Beijing to meet “with 8 representatives from various categories of investors — large, medium, small, and retail — to hear their opinions and suggestions on promoting the stable and healthy development of the capital market.” According to the readout, translated here: Wu Qing said that the broad mass of investors are the foundation of the market and the most important participant group in the capital market. The CSRC will persist in advancing capital-market risk prevention, strengthened regulation, and the promotion of high-quality development as an integrated whole; do everything possible to maintain the smooth operation of the market; work to improve the transparency and authenticity of listed companies and better reward investors; urge industry institutions to operate in a regulated manner and raise the level of investor services; continuously improve long-term mechanisms for investor protection; resolutely uphold an open, fair, and just market order; and let investors better share in the fruits of the high-quality development of the economy and the capital market. 吴清表示，广大投资者是市场之本，是资本市场最重要的参与群体。证监会将坚持一体推进资本市场防风险、强监管、促高质量发展，全力维护市场平稳运行，着力提高上市公司透明度和真实性、更好回报投资者，督促行业机构规范经营并提升投资者服务水平，不断健全投资者保护长效机制，坚决维护公开、公平、公正的市场秩序，让投资者更好分享经济和资本市场高质量发展成果。 So is a bottom in?

sinocism.com

WAIC; Another order for AI; Kimi's new model; Smart China hire by Australian government; Consumption; Extended dog days of summer 三伏天

Moonshot is the latest PRC firm showing the way to building open-source AI, with the release today of Kimi K3, which from early reviews is a frontier-class model. Kimi obviously timed the release for the eve of the WAIC, and I will assume they coordinated it with the relevant organs. If it is as good as the initial reviews say it is, this could change lots of assumptions.

sinocism.com

Sharp China: K-Shaped Economic Data And Its Implications; Ma Xingrui News; Closing Window for Open Source AI?; The SCS and International Law

On today’s show, Andrew and Bill begin by parsing the economic data released by the PRC this week, including slower-than-expected growth, the Party’s response to the status quo, export-powered growth that is widening trade imbalances, and the questions all of this will raise for foreign policymakers. From there: The Party's findings on Ma Xingrui, questions that remain unanswered, and cadre risk aversion for the next 18 months. Then: PRC messaging around openness in AI, an ongoing U.S. debate over open-source AI models, three chip bills that may end up in the NDAA, and the continued adventures in China policy on Capitol Hill. At the end: Reflections on the 10th anniversary of The Hague ruling on the PRC’s territorial claims in the South China Sea, as well as the state of play today.

sinocism.com

Xi inspects Shanghai; GDP data; Problems in the US-China trade deal; Foreign Correspondents Club on reporting challenges

The PRC economy slowed more than expected in Q2. Real GDP growth declined from 5.0% year-on-year in Q1 to 4.3%, below the 4.5% consensus and the lower bound of the government’s 4.5–5.0% full-year target. First-half growth was 4.7%. Sequential Q2 growth of 0.9% was in line with expectations. AI, high-tech manufacturing, exports and selected modern services are expanding rapidly. Property, private investment, conventional infrastructure and household consumption remain weak. The official Q&A noted that “new growth drivers” contributed more than 40% of economic growth, while officials largely avoided explaining why aggregate investment is contracting. The GDP deflator turned positive for the first time in 12 quarters. The data is not great but probably not bad enough for significant new policy measures coming out of the upcoming July Politburo meeting that will discuss the economy. But in his meeting with experts and economists earlier this week, Premier Li, whom I assume already knew today’s data, said “counter-cyclical adjustment must be stepped up; existing policies must be used well and to the full while incremental policies are studied and reserved in advance”.

sinocism.com

Ma Xingrui case; Trade data; Themes for Xi's WAIC speech; Kevin Rudd on Xi and China

At present two entirely different logics of development exist in the AI field: some media have summed them up as "oil thinking" and "water-flow thinking" — the former treats data and computing power as exclusive scarce resources, fostering barriers, blockades and zero-sum games; the latter treats AI as a universally beneficial public good, nurturing connectivity, sharing and mutual benefit. The vitality of technology lies in open flow. The development of AI must never move toward a technological monopoly that walls itself in, but should always be anchored to the fundamental goal of serving humanity. - People’s Daily commentary previewing the themes of the upcoming World Artificial Intelligence Conference

sinocism.com

Xi to speak at WAIC; Preparing for July Politburo meeting on the economy; Unemployment at 10.2%?; Another American arrested for spying

The July Politburo meeting is usually about the economy, and adjustments needed for the rest of the year, and as part of the work ahead of that meeting the Premier solicits feedback. Today he held a meeting with several experts and entrepreneurs to “hear their views and suggestions on the current economic situation and the next steps in economic work.”

sinocism.com

China-Russia military cooperation; Deadly shoe factory fire; June price data; Developing the retail sector; Carbon peaking action plan

A joint investigation by The Insider, Der Spiegel, and Le Monde provides shocking but unsurprising revelations about China-Russia military cooperation. The reports should destroy any lingering illusions of PRC “neutrality” in the Russia-Ukraine war.

sinocism.com

Sharp China: A Missile Test and New PLA Generals; The CITIC Plane Crash; America's Taiwan Interests; Guo Wengui Jailed and Ezra Jin Released

This episode of Sharp China is outside the paywall.

sinocism.com

Xi on Science and Technology; PBoC Q2 Monetary Policy Committee meeting; H200 orders?; PRC open-source and global AI governance

It is necessary to seize the window period of global talent flows and actively recruit outstanding young talent and teams from overseas. 要抓住全球人才流动窗口期，积极引进海外优秀青年人才和团队。- Xi Jinping at the July 8, 2026 National Science and Technology Award Conference

sinocism.com

Floods and Xi’s instructions; PRC to limit access to top AI models?; PBoC policy support for Hong Kong; Tax burden on private firms

Reuters reported Tuesday that the Ministry of Commerce convened a meeting to discuss “putting limits on the most advanced AI models — ⁠both closed-source and more open versions”. This report comes ten days before the start of the WorldAI Conference in Shanghai, where we should expect much discussion about PRC leadership in AI governance as well corporate announcements about advances in models, chips and other AI tech and services. There is even talk that Xi Jinping will give the keynote speech. Given what we have seen wit the US government and Anthropic’s Mythos, it makes sense that the PRC government would be thinking about controlling access to the most advanced models. And companies that are shifting Ai usage to PRC models, and especially American companies that handle sensitive data and/or work with the US government, should probably have a backup plan given the mood in DC towards the PRC and AI. The politics matter more than the technology. The world needs open models, from countries other than China or the US.

sinocism.com

Two new PLA generals; Submarine-launched missile test; Ezra Jin released; "Routine" patrols of waters east of Taiwan

These two new generals have survived the PLA purges, but as the PLA Daily reminds everyone in a full page article in the Monday edition - Carry the Rectification of Thought Through to the End 将思想整风进行到底 - the rectification will continue: Rectify in defeat, and rectify likewise in victory; the tempering of thought has never ceased. From the Sanwan Reorganization to the Gutian Conference, from the Yan’an Rectification to the New-Type Army Rectification Movement, from the rectification of Party work styles and Party organization in the early days of New China to the comprehensive Party rectification after reform and opening up, and again to advancing political rectification and training in the spirit of rectification in the new era — in different historical periods, we have always persisted in reforming thought and rectifying work styles in the spirit of rectification, ensuring that army building always advances along the correct political direction.

sinocism.com

American Decline, Chinese Exposure | Sinification: June 2026

US-China & Taiwan | Middle East | Europe | Going Out | East Asia | Russia | Economy | Society & Local Governance | Tech & AI | Critical Minerals

sinocism.com

Official explanation of CITIC Tower crash; EU-China; Japan-PRC; Tungsten; Global significance of Xi Thought on Party Building

The PRC’s throttling of tungsten exports to Japan is starting to hurt Japanese firms, and some of their overseas customers. Japanese supplies of tungsten hexafluoride WF6 gas needed for advanced semiconductor manufacturing are struggling, as are makers of carbide tools for the US aerospace, defense, auto and oil industries. At what point does the US government show more support for Japan, especially since export controls on Japan that hurt US companies would seem to be a violation of the US-China “understanding”?

sinocism.com

CPC’s 105th anniversary ceremony; July 1 Medal recipients; AI model regulation; Coupang's Shanghai adventure; Alibaba settles with US government

The US government has removed export controls on Anthropic’s Claude Fable 5 and so it is again available to the public. In its post announcing the restoration of that service, Anthropic downplayed the security concerns that triggered the US government response: Our testing confirmed that many less capable models—including Claude Opus 4.8, GPT-5.5, and Kimi K2.7—could identify the same vulnerabilities as Fable 5 did in the report. When it came to the demonstration of how to exploit the single vulnerability, every model we tested could produce the same demonstration as Fable 5 (including Claude Haiku 4.5, Sonnet 4.6, Opus 4.6, Opus 4.7, Opus 4.8, GPT-5.4, GPT-5.5, and Kimi K2.7). It certainly feels like PRC models are gaining momentum, and with the World AI Conference convening in Shanghai July 17-20 we will probably see more announcements soon that increased that momentum. Since I am watching the World Cup as I type this, did the Trump Administration score a significant own goal?

sinocism.com

June Politburo meeting; CPC turns 105; Decent June economic data; Meituan's LLM; 30 years for Guo Wengui

Flood and drought risks must be especially acute right now. The June Politburo meeting had as its agenda “study and deploy flood control and drought relief work”. From the readout (translated here): The Political Bureau of the CPC Central Committee held a meeting on June 30 to study and deploy flood control and drought relief work. CPC Central Committee General Secretary Xi Jinping presided over the meeting.

sinocism.com

Plane flies into Beijing’s tallest building; More export controls on Japanese firms; Pause in march towards EU-China trade war?; Premier Li on AI

small plane flew into Beijing’s tallest building - the CITIC Tower aka “China Zun” - killing the pilot and injuring 13 people. The authorities released a brief statement that did not name the pilot or even the building, and then censorship went into overdrive. It looks to have been intentional. The crash exposed some major gaps in Beijing’s security, it was likely shocking to the leadership, and heads will roll, but it probably will not hurt the low altitude economy in the long-term, and may end up being constructive as it forces a regulatory revamp that derisks efforts going forward. Developing the low altitude economy 低空经济 is written into the 15th five year plan: 加快新能源、新材料、航空航天、低空经济等战略性新兴产业集群发展。 Accelerate the development of strategic emerging industry clusters such as new energy, new materials, aerospace, and the low-altitude economy. There are lots of interests and reasons to not slow development in this area once they fix the security holes.

sinocism.com

Xi in Shandong; Premier Li on “China Opportunity 2.0”; Tightening Supply Chain Security; Long Arm of the Law on Promoting Ethnic Unity and Progress; Basic Research

Li Qiang told the audience in Dalian used “steady, new, vibrant, integrated” to describe “both the overall profile of China’s economy at present and its general posture going forward.” He apparently is a tokenmaxxer, as he said “by the end of May, China’s average daily token call volume had reached the hundreds of trillions, leading the world”. I have posted a translation of his speech here. He pushed back on the idea that subsidies played a role in the development of industry leading firms: The vigorous growth of China’s new-energy and intelligent connected vehicle industries is precisely the result of technological breakthroughs in new materials, power batteries, communications, and the like. This is the key to the competitiveness of Chinese products—not mainly government subsidies, as some speculate; we could not afford that either. Expect to hear a lot more about “China Opportunity 2.0”:

sinocism.com

Sharp China: Party Building and Xi's Dominance; Memory Chips and ASML Accusations; Germany's Puzzling Push for Plaza Accords

On today’s show Andrew and Bill begin with Xi Jinping Thought on Party Building and further signs that one year after from a summer of rumors and one year out from the 21st Party Congress, Xi’s power remains entrenched as ever. Then: MOFCOM and the Ministry of Finance announced restrictions on several dozen US firms, the global memory chip shortage is an opportunity for CXMT and YMTC, what to make of the U.S. government's scrutiny of ASML, and Elon Musk's alarmism at the West’s China vulnerabilities. At the end: Takeaways from the EU Council meeting on China, Germany's push for PRC currency revaluation, structural forces that yield EU inertia, and emails on Chinese soccer, space warfare, and the JIm Cramer of weather.

sinocism.com

Wang Yi on lessons of US-Iran war; Selected Works of Xi Jinping on Party Building; Policy support for auto consumption; Liu Guozhong and biopharma and brain interfaces; Alibaba sues US government

Politburo member and Vice Premier Liu Guozhong inspected Wuxi and Nanjing on June 22-23, touring biopharmaceutical, AI, and cloud computing firms along with the Jiangsu Provincial Institute of Industrial Technology. According to the readout biopharma is to be built up as an “emerging pillar industry” (新兴支柱产业), while brain-computer interfaces are to be “cultivated and developed” as a “future industry” (未来产业). On drug development he calls for making enterprises the principal actors in innovation, strengthening industry-university-research platforms, putting AI and big data to work in pharmaceutical R&D, and delivering “whole-chain” policy support for innovative drugs. During his visit to the Brain-Computer Interface Research Institute at Nanjing University Liu said: Brain-computer interfaces are a major international frontier technology and a commanding height of industrial competition.

sinocism.com