Welcome to Foreign Policy’s China Brief.
The highlights this week: U.S. chipmakers reach new deal on exports to China, a top Chinese diplomat is detained for questioning, and ships collide in the South China Sea.
Washington Reaches Deal With Chipmakers
In recent weeks, an intense debate has taken place in U.S. policy circles around the export of Nvidia’s H20 chips to China. The H20 was designed to evade U.S. export restrictions, and since entering the market last year it has proved very popular with Chinese firms desperate for more computing power in an intensifying artificial intelligence (AI) race.
Nvidia and fellow chip giant AMD, which is attempting to sell a similar chip called the MI308, have conducted an intense lobbying campaign to loosen U.S. restrictions on chip exports.
Some experts argue that the H20 and similar chips go against the spirit of the regulations and are a loophole that should be closed. Others have suggested that restrictions will pressure Chinese firms to develop their own chip ecosystem, as Huawei and other firms are already attempting with government backing.
Chinese state media has signaled that China might crack down on the H20 out of supposed security concerns, though that could be misdirection to keep the supply flowing. But all this debate was swept aside with the news over the weekend that Nvidia and AMD would pay an unprecedented 15 percent of their sales in China to the U.S. government, in what looks like a direct payoff.
It’s unclear how this money will be distributed, or if the process is even legal. But it’s clear that it is geared toward addressing U.S. President Donald Trump’s needs, not U.S. security interests. Both firms have been pandering to Trump since last November’s election, with Nvidia CEO Jensen Huang paying court on a regular basis.
As I argued last month, analysts have largely failed to understand Trump’s China policy, which prioritizes self-aggrandizing deals above all else. The chip shakedown is another clear example of how personalist court politics now rule in Washington.
It’s possible that Trump’s easily bruised ego will induce a flip back toward an aggressive China policy, as it did briefly during the tit-for-tat trade war that began in February. But U.S. firms have a lot to offer in return for the ability to keep doing business with Beijing. In the Wall Street Journal, Greg Ip makes the case that state capitalism in the United States under Trump looks more and more like the Chinese version.
That’s certainly true, but the court politics surrounding the U.S. leader look quite different from those in China. Ironically, because the personalist elements of Chinese policymaking are so well-established, they’re also less revealing. Fulsome praise of superiors is embedded into the hierarchy of the Chinese Communist Party (CCP), all the way down to small-town mayors and neighborhood committees.
This expectation bleeds into the private sector, where employees are often expected to praise their bosses at a level that might make a Silicon Valley thought leader blush. But because this style is demanded of everyone, it’s difficult to figure out when paying court is influential, rather than obligatory. If every CEO is heaping obsequious praise on Chinese President Xi Jinping, it’s unclear how much it matters in Xi’s actual decision-making.
Even Xi’s cult of personality is relatively banal, lacking the miraculous qualities attributed to former Chinese leader Mao Zedong or even the level of sycophancy that Trump demands from his subordinates. Unlike the business community’s open wooing of Trump, in China, the real personal politics—and payoffs—happen behind closed doors.
What We’re Following
Diplomat dismissal. The latest victim of Xi’s rolling purges of top officials is Liu Jianchao, a high-level diplomat and former official at the Central Commission for Discipline Inspection, the CCP’s internal watchdog. Liu was detained for questioning upon returning from a work trip abroad in late July.
Liu made headlines last year with his visit to the United States to meet with businesspeople and officials, which was seen by both sides at the time as a success. But that trip may have left him vulnerable to accusations of being too close to Americans—or even of espionage.
Liu’s downfall leaves another gap in China’s already weak diplomatic bench. He was considered a candidate to take over as foreign minister. That role is currently being filled by Wang Yi, who also holds the more important position of head of the party committee on foreign affairs and who took over the post in 2023 after the fall of Qin Gang, the former ambassador to the United States.
It’s possible that one reason the foreign minister role hasn’t been properly filled is that it’s seen as a poisoned chalice in an age of diplomatic uncertainty and tensions with Washington.
Ship collision. Two Chinese ships collided into each other on Monday while harassing their Philippine counterparts near the long-disputed Scarborough Shoal, located in the South China Sea. The incident, shown in footage released by Manila, saw a Chinese Coast Guard ship crash into a warship, costing the first vessel its entire bow.
Confrontations between Philippine and Chinese ships are common, including the use of water cannons, brawls between crews, and alleged rammings. China uses a mix of vessels, including its disguised maritime militia, in these interactions. With tensions always high in the South China Sea, there is a serious possibility for a deadly collision between the two sides that could spiral.
FP’s Most Read This Week
- The Mother of All Currency Crises Is on the Horizon by Daniel Altman
- Is China Changing Its Nuclear Launch Strategy? by Tong Zhao
- Meet the New Middle East, Same as the Old Middle East by Stephen M. Walt
Tech and Business
Tariff pause extension. As widely predicted, the 90-day pause in implementing Trump’s sweeping tariffs on China—agreed to by U.S. and Chinese negotiators in May—has been extended another 90 days. For now, Trump seems to have lost interest in further antagonizing China, either after China’s squeeze on rare earths alarmed U.S. businesses or because he’s distracted by domestic politics and his upcoming meeting with Russian President Vladimir Putin.
Similarly, while U.S. tariffs on China remain far higher than even in Trump’s first term, Beijing has little interest in pushing Washington on the issue as the Chinese economy slowly staggers forward. Times are still hard, as evidenced by the Chinese government’s continued efforts to prop up real estate.
Before that bubble began to burst in 2020, authorities introduced a range of measures, including new property taxes and multiple-home purchase restrictions. Now, they’re instead desperate to reinflate the bubble—even extending further lifelines to property giants that remain mired in debt.
Robo-nurse? Chinese robotics firm Fourier Intelligence, originally founded as a medical technology business, has unveiled a humanoid robot supposedly capable of aiding with care tasks for the elderly and frail.
Developing robotic geriatric aides has long been a priority for East Asian states, including South Korea and Japan, that have a shortage of the staff needed to look after an aging population. China’s public is also aging quickly, and the birth rate has collapsed since the late 2010s, making such technologies urgently needed.