Welcome to Foreign Policy’s China Brief.

The highlights this week: Economic data shows the end of China’s zero-COVID policy hasn’t spurred major recovery, U.S. Secretary of State Antony Blinken meets top Chinese officials in Beijing, and China explores a joint military training base in Cuba.

China’s economic recovery since lifting its zero-COVID policy appears to be a flop: Data in the last month reveals record-high youth unemployment and shrinking credit demand. E-commerce companies didn’t release full sales numbers during a major shopping day on Sunday, suggesting low consumer spending. Small businesses are struggling, and the government is in crisis mode—seeking answers from business leaders and economists for a problem largely of its own making.

Even before the pandemic, the Chinese economy was showing signs of slowing down. But today, public confidence is the biggest single factor in the faltering economy. After the last few years, people are unwilling to spend and unwilling to make even slightly risky investments. COVID-19 lockdowns tested ordinary households’ savings—not only through income losses but also through delivery costs and price gouging as basic goods ran short. In 2022, household savings rose by 80 percent from the previous year; that money isn’t being spent now.

Compared to those in Western countries, small and medium-sized businesses in China received little financial aid, despite more severe restrictions. And while the Chinese government has done its best to pretend that the lockdowns—and the wave of mass infection after the zero-COVID policy was lifted—never happened, they are burned into public memory. Although people may not fear lockdowns at this point, even amid another rise in COVID-19 cases in China, they are much more aware of the power of the government to radically alter their lives.

The systemic curtailment of once-major private enterprises has reinforced that message. Regulations in 2021 upended the private education business, causing 60,000 layoffs at one firm alone. The government crackdown on video gaming led 14,000 companies to close down. In the last three years, the Chinese technology sector has gone from a government darling to a perceived threat. And all this just applies to domestic businesses; for foreign firms (and their many Chinese employees), the situation is much bleaker.

China’s new premier, Li Qiang, has tried to calm the private sector, but the problem is that the crackdowns have resulted from specific ideological or political reasons. Beijing saw private education as imposing excess costs on parents during a demographic crisis. Gaming was weakening teens’ masculinity. And the tech sector produced figures such as Jack Ma, who were willing to occasionally challenge the Chinese Communist Party (CCP) and eager to be listed on foreign stock markets. The government hasn’t backed off; it has only reasserted Chinese President Xi Jinping’s role as the “chairman of everything.”

Geopolitical tensions between the United States and China haven’t gone unnoticed by the public, either. It’s not merely the feeling that if Chinese regulation doesn’t wreck your business, U.S. regulation might instead. In private conversations, people in the Chinese upper class express a real fear that U.S.-China conflict could get bad enough to lead to war—or at least to a cold war, which would freeze trade on a much larger scale.

All of this has left people in China scared to take chances with their money. Ordinarily, that fear might lead them to funnel their money back into real estate, the main driver of the Chinese economy in the last two decades and a sector that makes up around 70 percent of Chinese investment. But with the ongoing property crisis, that isn’t an appealing option—and the government is still propping up prices to reassure the middle class. Some investors have turned to gold and jade as alternatives.

China’s government is likely to respond to the economic downturn in a familiar way: with a massive stimulus package, including more support for the real estate sector. As economist Michael Pettis pointed out, that is not a great solution; it could only reinforce the problem. The government has repeatedly tried to reform the real estate sector, but it keeps backing off measures such as property taxes after public complaints.

The bigger problem is this: China’s decades of growth came when people were willing to take risks. A control-obsessed regime has left them more afraid of the future.

Blinken in Beijing. U.S. Secretary of State Antony Blinken’s long-delayed trip to China produced amiable talk but no sign of actual progress in stabilizing the bilateral relationship. Beijing rejected one of the most critical steps toward that goal, restoring military-to-military talks. Blinken met with Chinese Foreign Minister Qin Gang, senior diplomat Wang Yi, and finally Xi.

Readouts from the meetings with Qin and Xi were relatively positive. But the official statement after Blinken’s discussion with Wang heaped blame on Washington for supposed provocations toward Beijing. And throughout the secretary of state’s visit, the Chinese side reasserted its claim to total control of Taiwan at every opportunity. The United States seems less worried about China offering military aid to Russia than before, though Blinken expressed concern about aid from Chinese firms. (China’s domestic rhetoric remains pro-Russian and anti-NATO.)

Blinken’s visit was given only brief coverage on Chinese TV. For his meeting with Xi, the setup was designed to emphasize the Chinese leader’s dominance, with Blinken sitting below Xi at the head of two long tables. That kind of messaging seems intended for domestic audiences—which prompts crowing by online nationalists, and which the U.S. should be able to just grin and bear. But it’s easy for U.S. politicians to use such actions to discredit any attempt at diplomatic outreach.

China’s Cuba base? China is reportedly negotiating with Cuba about a joint military training base on the island, following reports that it has operated a surveillance facility there since 2019. Blinken said he raised the issues with the Chinese, but such objections are a double-edged sword. They boost China’s argument that the United States wouldn’t tolerate the activities it conducts with Japan, South Korea, Taiwan, and other neighbors of China if the situation was reversed.

After all, Cuba is a sovereign country that can make whatever deals it wants; it might, like other islands, be inclined to look for a protector given the history of military action and political interference from its much larger neighbor.

• The Next Global Superpower Isn’t Who You Think by Ian Bremmer
• The United States Is Creating a Kosovo Crisis by Edward P. Joseph
• Why Putin Will Never Agree to De-escalate by Maxim Samorukov

Li’s Germany visit. While Blinken was in Beijing, Chinese Premier Li Qiang was in Germany, looking to drum up business. The German business sector has been a reliable ally for China in Europe; last year, for example, Volkswagen went out of its way to downplay atrocities at concentration camps in Xinjiang (apparently with little sense of historical irony). But China’s popularity with the German public has suffered, and the Green Party has emerged as a major critic of Beijing.

Li hopes to turn Germany’s business sector against U.S. efforts to contain China (or “de-risking,” as Blinken now puts it), which shouldn’t be that hard. But as ever, China’s grasp of Western politics may not be that strong, as shown by the Global Times trotting out Helga Zepp-LaRouche, the widow of conspiracy theorist Lyndon LaRouche and head of the fringe LaRouche movement today, as an expert on Germany.

China’s EV shift. China is a global leader in electric vehicle adoption, with 40 percent of cars sold in the country predicted to be electric by 2030. One reason for that is that long drives are relatively uncommon, except for in the trucking industry; car owners tend to be restricted to their own city, in part because road tolls are extortionate and high-speed trains or planes are usually a better alternative.

EV adoption in rural areas is slower because of the distance issue. In response, China’s government has promised an even larger charging network by 2030, which could be a model for other vast countries such as India, Russia, and the United States—if Beijing pulls it off. But it’s unclear how population density might shape the network; many of China’s most common long drives are within relatively unpopulated Western regions.