Way back in the mists of time, twenty years ago and more, the late premier Zhu Rongji instituted a policy of lengthening holidays for Chinese citizens, basically in order to try to get them to spend more. Pretty much the same consumer problem that persists today—Chinese people for a host of reasons prefer to save money rather than spend it, which has economic consequences. This resulted in non-workdays being moved around, and the emergence of the dreaded working Saturday. Such as tomorrow in China. But the positive economic impact might be fading. Or rather, the numbers and the anecdotal evidence suggest that the beneficiaries of any extra holiday spending are to a large extent not in the Chinese mainland.

During the seven-day National Day holiday that just ended, there were 2.142 billion passenger trips recorded around the country, a stunning average of 306 million a day. But that was only up 0.7% year-on-year, according to data from the Ministry of Transport. This stands in contrast to the 6.2% growth seen in 2025, when to some extent the country was still recovering from Covid stay-put psychology. But on the other hand, the number of outbound trips by mainland residents this year rose 9.3% year-on-year, a boost for all those destinations yearning for a return of the profligate Chinese tourists of the 2010s.

The main drivers of all this are perhaps that the economy is not doing well, and those members of the middle class with some disposable income to play with are looking for a real break. Whatever, the whole idea of the longer holidays is probably flawed from an economic perspective in that, in spite of the “revival of spirits” possibilities, it probably in the end impacts negatively on overall productivity. Workers may disagree with this, of course, and a core stated principle of the system anyway is the slogan on that gate in Beijing saying, “workers of the world unite”. Possibly in a resort in Thailand.

Have a great weekend.

The big event of the last two or three weeks in terms of US-China relations was the visit by Mr Xi, to Washington. and the talks that he had with Mr Trump. The meetings were remarkable for the almost total lack of any substantive consequences. There was some discussion of trade and tariffs and some about AI, but apart from two pandas being offered to the United States, there was little else that resulted apart from some at least superficial good vibes.

But it was possibly—and then again maybe not—significant that at the press conference that occurred with Mr Xi sitting beside Trump in front of that ridiculously ornate fireplace and mantelpiece, the one topic on which Mr Trump declined to make any comment at all was the island.

There is no information at all about what was said on this topic, beyond the extraordinary information that Mr Trump offered to sell military equipment to China. Many observers, pundits and commentators see the last two years of Mr Trump’s second term as president as being a prime opportunity, if it is indeed the decision to take action. But then again, it’s never entirely clear what position Mr Trump is going to take on any issue. And there are significant groups in both the GOP and on the other side of the aisle in favor of maintaining the status quo.

In fact, the most likely next step in this saga is the forthcoming election, the result of which is going to have a significant impact on the thinking about where things will go. And by that I don’t mean the midterm elections in the United States, but the forthcoming elections on the island, scheduled for November 28. If the KMT does well, then that will send a signal, many observers seem to think, that there is an opportunity for an accommodation and a resolution of the issue in a way that doesn’t involve coercion. Maybe that’s true. And so, we wait. But we’re not waiting anymore for a holiday, which begins tomorrow, and we would like to take this opportunity to wish all our subscribers a very merry October break.

Around the world, governments are taking on extra debt as spending exceeds income—the gap has to be filled somehow, and China is no exception to this. The current high levels of debt in so many countries really date from during and after Covid, and China is no exception here. So, let’s look at some numbers first and then consider the implications.

The most basic data, according to the IMF, is the China central government debt/GDP ratio, and that was 44.7% in 2020, rising to 68.4% in 2025 and 75.1% this year. But if some kinds of local government debt are included as well to provide a reasonably accurate comparison with the debt/GDP ratios of other countries, then China is today at around 106% compared to 125% for the US and a whopping 204% for Japan.

What stands out for China is that the ratio is rising sharply, and it basically didn’t readjust at all after COVID ended. Also worth considering is transparency and to what extent the numbers for China are reflective of the real situation. But on the other hand, almost all of that debt is domestic and is held mostly by either state banks or other state-controlled entities. And that means that the nature of the system makes it possible to basically control the situation and be confident of no sudden collapse. But also there are consequences to high debt levels, and the consequences of this debt/GDP buildup is just one of a number of factors that will be weighing on the minds of Those in Command.

So how does it play out? China is always and forever all good until it’s not. But it will be increasingly hard to control the debt to GDP ratio as economic growth is slowing and debt is rising a lot faster than it was. The consequences will probably be even more pressure on businesses to cough up tax payments, pressure on the wealthy to pay a slab of their global assets, increasing difficulties at the local level in terms of paying salaries and maintaining services, and a growing number of bankruptcies of private companies. Perhaps some of this helps to make the vision of common prosperity a reality, who knows.

Have a good weekend.

The news item that caught our eye most intriguingly this week was about the G20 finance ministers meeting in North Carolina at which the concluding communique draft was accepted by all participants except for China. And G20 includes not only the obvious Western countries, but also all the key BRICS countries and more—India, Brazil, even Russia. They all agreed to the final communique, but China did not. The reason is that the communique listed out the key problems including “excessive” trade surpluses and “non-market” policies. And all other 19 countries were up for endorsing it. This creates an interesting new dynamic, and highlights that these issues are not simply a concern for not just Western countries. In other words, the world.

This problem, the China export tsunami, has been growing since around 2020 and in a way grew out of the property market slump which began in that year and continues still. Property had been the main pillar of China’s economy, and then it wasn’t. Something had to replace it, and it is arguable that exports were identified as the only alternative to keep the economy healthy—boosting domestic consumption would be the obvious method but it has so far proved to be unattainable for the system. Boosting exports has associated risks—strained relations with trading partners as a start, and that is what we saw at the North Carolina meeting.

Now it is out in the open, it will be interesting to see how this topic will be addressed at other meetings coming up, including another G20 finance ministers meeting Bangkok next month, APEC meetings in Hong Kong and Shenzhen in October and November, and then the G20 leaders’ summit in Miami in December. One can expect a lot of behind-the-scenes lobbying to take place before these meetings aiming to shift that 19-1 score.

Have a great weekend.

As the world gets ever more complex and the prospects for the midterm elections in the United States become more and more terrifying for the Republican Party—a situation which has global implications for sure—we have a visit apparently scheduled for Mr Xi to visit Washington in the middle of next month. It’s not certain it will happen, and this is certainly a strange time in many ways for such a meeting, particularly given the rather chaotic situation with Trump at its center.

The Chinese leadership has much to consider given the possibility that the GOP loses control of the House of Reps and maybe the Senate as well. That would mean the last two years of Trump’s second presidency would be a long lame duck waddle with much chaos and no doubt impeachment proceedings and an increasingly concerned group of Trumpists facing the prospect of all their work to Make America Different being rolled back if the other team w2ins the 2028 presidential election. The bottom line is that even if a meeting takes place, it’s difficult to know how long whatever is agreed to holds.

On the other hand, the Trumpian chaos directed so many global opportunities for Beijing. And there is for sure a truly long list of issues that the United States and China should address, including, but not limited, the two wars in progress, the island, Korea, trade, semi-conductors and that’s just the start of a wide range of tricky bilateral issues.

Trump’s visit to Beijing earlier in the year in many ways seemed to acknowledge the Chinese position that the two countries are equal superpowers on the world stage. And in some ways at least, that is now true, and more sop every day given the impact the Trumpists are having on America’s standing. Trade war with Canada? What? But the US continues to operate from a position of great strength, regardless of how many Patriot missiles are left in the pantry. The US has not only military strength, but also economic, social and institutional strength. There is also a fluidity to the US situation which doesn’t exist in so many other countries, and while is here today, he will almost certainly not be in 2029.

On the Chinese side, they may see an opportunity Ouse a meeting to further their goals, and there is for sure pressure from China business circles for Mr Xi to work on providing China with continued access to US technology and US markets. What Mr Xi will presumably want to avoid is the kind of fireside chats that Mr T likes to stage with many foreign leaders.

Unlike many of these weekly chats, we’re dealing here with something that is speculative, that is a visit which might not occur. So close to the midterms, it would be fraught with political danger for both sides. We are bystanders as the world keeps getting ever more interesting. And not necessarily in a good way.

Have a great weekend.