China’s economy is not in good shape, but exports are still booming—auto exports up 70% in the first half of 2026 even as domestic auto sales fell 20%. Total auto exports in June topped one million in one month for the first time, which considering this was from a standing start just a few years ago, is just stunning. The German, US and Japanese auto industries are shaking in their boots. And this is not the only industry. At the heart of the export surge is Chinese expertise, efficiency and value for money, but there are other factors too—systemic coordination, the rigorous control of the RMB’s value, and massive subsidies and benefits provided to chosen companies and sectors. Europe and the US, but also the Global South—many countries have to face this question: what is the long-term consequence of this ever-building China export drive?

Europe in particular is now in a fascinating position—its relationship with the US is unravelling even as the reality of China’s impact becomes clear. But will these two issues finally convince these countries to actually come together and coordinate policies and actions? Divide and rule is a strategy that the Chinese are very familiar with, and that has to be seen as the context of Chinese Foreign Minister Wang Yi’s trip to four Nordic countries earlier this week. The EU seems to be ever more vocal on the need for protective measures and is apparently increasingly willing to face the various factors playing into the Ukraine conflict. But with what result?

There are signs the Global South is getting the point too, though it is harder for these countries to respond effectively. South Africa’s recent decision to raise tariffs on certain Chinese imports, such as autos, in order to encourage Chinese brands to localize production, or at least assembly, is a good example. We will see to what extent other countries are able or willing to emulate such an approach.

At the heart of all this are tectonic factors such as the World Trade Organization—now basically a dead letter, it seems—the destabilizing influence of Trump on just about everything, and the controlled RMB exchange rate and other China systemic issues. Massive problems all awaiting some kind of resolution. When and where can we expect a break point, and in which direction does it all break?

Have a thoughtful weekend.

One of the core goals of China’s five-year plan just begun and an overall strategic economic direction is what is known as the low-altitude economy, and that means the use of all that space between the ground and the tops of buildings, and the altitude used by commercial aircraft. Drones have developed so far and fast in the past decade, and have provided the opportunity to look at all sorts of ways to moving goods and people from one place to another with maximum efficiency. But how easy is it to integrate the concept of the low-altitude economy into the real economy, into real life, particularly the major cities, and the answer is that it always seems slightly beyond the possible. Sort of like China’s currency being made fully convertible on the current account. It’s always going to happen in just a few years’ time, but never actually gets done.

We were talking recently to an entrepreneur, the founder of a state-funded “low-altitude economy company” producing drones with the capability of carrying one or several people with great speed and efficiency from one place to another over relatively short distances, and his confident view was that within three or four years, we would be seeing drones carrying both human beings and freight buzzing around in the air of China’s major cities. 

We’re not saying that’s not possible, because anything is possible in China. But especially in the major cities, one mistake, one error, one drone falling out of the sky into a crowd, one drone slamming into a building and everything changes. And of course, the risks involve not just drones. There are also small private planes. Speaking of which, there was the incident on Sunday in Beijing involving a plane that hit the façade of Beijing’s tallest building, an incident in which the pilot died and 13 people were injured. The official announcement later in the week was the pilot was a 66-year-old man who was depressed. The details are really not so important. The point is how to control airborne devices skimming around urban areas at high speed. The point is the problem of control. How to address a threat caused by an airborne device which is suddenly moving in an unacceptable direction. What is the response time required and what response should there be? Is it fighter jet or is it other drones? How to offset the risks? 

Right now, there is reported to be a nationwide ban on private planes flying. Overall, the low-altitude economy is undoubtedly a huge opportunity in terms of tourism in remote areas, sort of an extension of the use of helicopters. But drones should be safer than helicopters because they have many more motors. Having said that, and in spite of the news, we would still prefer flying machines with wings.

Have a good weekend!

At the heart of China’s economy, as it has been said many times, is the property market. And so, keeping an eye on this market, which has been on a slide now for several years, is important. People are always looking for some signs of the bottom of the market being reached, but there’s basically little or nothing to grasp on to yet. There is a vast quantity of vacant apartments out there all over China, land sales by local governments continue to slide, and prices in only a select few places around the country show any signs of defying gravity.

The news this week that relates includes a report that revenue from residential land sales in Beijing was down 66% in the first half of 2026, but at the same time, a handful of prime plots in the city attracted fierce bidding among developers. That points to an obvious trend—property developers have abandoned the long-standing policy of aggressive expansion because the first job is to soak up inventory, and focus instead on prime parcels in key cities, of which Beijing is of course one. 

Another is Hong Kong where the property market has been doing quite well in the past month or two, due in part to people abandoning Dubai in the face of war and potential missiles, and the overall prime office vacancy rate in the enclave fell to a seven-month low in May, with premium offices in key locations at close to full occupancy. There also seems to be core buying activity in Shanghai and a couple of other major cities, but it’s cherry picking and not enough to declare a turnaround.

To round it out, Evergrande, once the biggest property developers in China and now flat out and bankrupted, ls back in the news this week and not in a positive way. Talks to sell a controlling stake in Evergrande Property Services collapsed after liquidators of the parent failed to reach a formal agreement with a prospective buyer, it was reported. That prospective buyer, interestingly, was a state-owned player in Guangdong, and the fact that even the system won’t touch it suggests ever more that Evergrande is ever gone.

Have a good weekend.

Only last month, the leaders of China and the US had an apparently friendly few days together in Beijing. Lots of smiles and words of hope. But the reality is very different, and this week saw a couple of developments that emphasize just how difficult the relationship is becoming, with consequences that bear a lot of thought.

First came a report from the US-China business council saying that 75% of US companies surveyed are finding it difficult to obtain rare earths from China and are now looking for alternative sources. China is the world’s dominant supplier of rare earth minerals, which are crucial for making a wide range of things, including hi-tech components needed to produce smart phones, weapons, batteries and semi-conductors. By limiting access, China is forcing them to find alternatives, and alternatives exist in Brazil, Australia, Greenland and under the sea, but developing the mines, building the refineries… it doesn’t happen overnight. That’s the window of opportunity the Center wants to exploit.

Meanwhile, the US added several top China tech giants to the list of companies it believes are aiding the Chinese military, including BYD, Alibaba, Baidu and the robot maker Unitree. If Trump was not now the US President … who knows. But he is, and this is the other window of opportunity Those in Command are quite rightly looking to make use of. The US domestically is set for more than two years of chaos domestically, with all sorts of repercussions in other parts of the world, all of which helps the Middle Kingdom. This is a situation Washington should be truly focused on, but they are instead distracted by Hormuz, Cuba and immigration.

We sit and watch. This weekend and beyond.

Mr Xi has held many meetings with leaders of other countries in the past couple of years but almost always in Beijing. He doesn’t travel outside China much, but next week he will make a visit to Pyongyang to see comrade Kim Jong-un—which provides an opportunity to mull China’s position and relations with not only North Korea, but also the region as a whole.

North Korea exists today because of the CCP’s support, from the Korean War on down, and regardless of whatever might have happened to the current leader’s uncle, it remains a crucially close relationship, as reflected in so many geopolitical ways, including Ukraine. 

Trump’s second term has changed so much, and has been instrumental in improving China’s global positioning, at the very least relative to the perception of the US. Regionally, it’s harder to take a longer-term view, in spite of all the aircraft carriers. The Philippines and Japan are strengthening defense cooperation, South Korea seems be doing well systemically, culturally and in terms of Samsung. 

Meanwhile China’s economy is not in good shape, in spite of EVs and batteries and AI, and whatever happened to the generals and defense ministers? The core issue is the island, and while the red line seems to be getting ticker, there seems for now to be no immediate plans, and the hope of Those in Command, one would guess following Trump’s visit, is to get the Trumpists to decide against supplying the island with the arms package already approved by Congress. Rubio said a couple of days ago that it is “under review”, whatever that means. 

The top priority of the talks in Pyongyang, one tentatively supposes, is to do all that can be done to shore up Mr P. Any categorical change there would have massive implications for both these countries. But it’s all speculation. Transparency is a wonderful thing.

Have a great weekend.