China and the World: IMF Pushes China on Domestic Demand, Taiwan Minister’s Secret Israel Trip, Leaders Tied to Covert Influence Campaigns
This week we track key shifts in China’s domestic and foreign policy landscape as well as critical international developments.
China Quote 🗩
“United States must handle the Taiwan question with the utmost prudence”.
- Guo Jiakun, Chinese Foreign Affairs Ministry spokesperson
Economic Activity🏦
IMF urges China to speed up shift from exports to domestic demand
CNBC reports that the IMF is pushing China to move faster away from export led growth and strengthen domestic demand, with Kristalina Georgieva calling for structural reforms, action on the property slump, tighter management of local government debt and improvements to social welfare in order to lift consumption, while the fund has raised its 2025 and 2026 growth forecasts due to stronger than expected exports.
Mexico’s Congress approves steep tariffs on Chinese and other imports
AP News reports that Mexico’s legislature has passed a bill raising tariffs on more than 1,400 imported products, mainly from China and other countries without free trade agreements, with levies of up to 50% set to take effect in January 2026. The ruling party backed the measure as a way to boost domestic production and address trade imbalances, but analysts say the move is also tied to ongoing negotiations with the United States over existing US tariffs on Mexican exports.
China’s local governments face mounting debt stress as Beijing resists major bailout
Financial Times reports that China’s local governments are struggling with severe debt pressure as falling land sale revenues and sluggish growth weaken their finances, while Beijing continues to avoid a large scale rescue, instead pushing debt swaps and stricter controls, with analysts warning that fiscal strain is constraining public services and investment and could drag further on economic recovery.
China signals flexible policy easing in 2026 to support economy
Bloomberg reports that China’s central bank has pledged to use interest rate adjustments and further cuts to banks’ reserve requirement ratios in 2026 to bolster weak economic activity, with officials indicating that policy will remain flexible as the property downturn, deflationary pressures and local government debt weigh on growth prospects.
ZTE may pay over $1 billion to settle US foreign bribery probe
Reuters reports that Chinese telecom equipment maker ZTE Corp could be facing a more than $1 billion settlement with the US government to resolve long-running allegations of foreign bribery under the Foreign Corrupt Practices Act, with the misconduct said to date back to at least 2018, ZTE shares tumbling sharply on the news, and any deal still requiring approval from Chinese authorities amid ongoing communications between the company and the Justice Department.
US Congress agrees to restrict investment in China under defence bill
AP News reports that negotiators in the US Congress have approved a defence bill that would bar American investment in Chinese firms operating in sectors linked to military, surveillance and advanced technologies, with the measure reflecting bipartisan concern over Beijing’s capabilities, while also advancing other provisions such as higher defence spending and limits on Chinese land purchases near sensitive sites.
Inside China🐉
Death toll rises to 12 in south China residential building fire
Xinhua reports that 12 people died in a residential building fire in Chaonan District of Shantou City, Guangdong Province, after the blaze broke out at about 9:20 p.m. local time on Tuesday and was extinguished roughly 40 minutes later, with the four-storey structure damaged over about 150 square metres and authorities investigating the cause of the incident.
International Relations🌏
Taiwan’s deputy foreign minister made secret trip to Israel
Reuters reports that Taiwan’s deputy foreign minister secretly visited Israel in recent weeks for talks on defence technology and intelligence cooperation, with the trip kept confidential to avoid provoking China, which views such exchanges as challenges to its claims over Taiwan, while both sides are said to be exploring deeper security links as regional tensions rise.
Germany targets rare earth supply security during foreign minister’s China visit
DW reports that Germany is seeking stronger cooperation with China on critical minerals as Foreign Minister Annalena Baerbock visits Beijing, with Berlin aiming to reduce supply risks for rare earths while still pushing China on issues such as market access, human rights and transparency, and the trip occurring amid broader European efforts to balance economic dependence with strategic resilience.
US and China reestablish military hotline after two year freeze
Financial Times reports that the United States and China have restored their military communications hotline following a two year suspension, with both sides framing the move as a step toward reducing risk of miscalculation amid heightened tensions, although analysts caution that deeper operational dialogue remains limited and broader strategic frictions persist.
India speeds up visas for Chinese professionals to improve ties
The Economic Times reports that India has removed a layer of bureaucratic vetting and is now issuing Chinese business visas within four weeks, marking a significant easing of restrictions imposed after the 2020 border clash, with officials saying the change aims to reduce production losses, support industries reliant on Chinese technicians and signal a cautious diplomatic thaw as New Delhi reassesses its position amid US tariff pressure and seeks to improve the investment climate.
China, Japan and South Korea resume annual summit after four year gap
Financial Times reports that China, Japan and South Korea have revived their annual leaders’ summit for the first time since 2019, signalling an attempt to stabilise relations despite ongoing security and economic frictions, with discussions focused on supply chains, regional tensions and ways to rebuild high level communication.
South Korea and Japan scramble jets as China and Russia fly joint patrol
CNN reports that South Korea and Japan deployed fighter jets after Chinese and Russian military aircraft conducted a joint long range patrol that passed through air defence identification zones around the Korean Peninsula and near Japanese airspace, with both Seoul and Tokyo issuing warnings, while Beijing and Moscow described the flight as routine and not directed at any country, adding to regional tensions amid already strained security dynamics.
US flies bombers in show of support for Japan
The Wall Street Journal reports that the United States has carried out a visible bomber deployment near Japan to signal backing for Tokyo amid rising regional tensions, with the flight intended to reassure allies as China and North Korea expand their military activity and as Japan accelerates its own defence modernisation programme.
Panchen Lama says reincarnation must follow Chinese law and be approved by Beijing
SCMP reports that the Beijing backed Panchen Lama has stated that the reincarnation of Tibetan Buddhist leaders must comply with Chinese law and receive central government approval, reinforcing the state’s position on succession as China tightens control over Tibetan religious affairs amid ongoing dispute about the Dalai Lama’s eventual successor.
China says it wants to ease South China Sea disputes with ASEAN
SCMP reports that Beijing has told ASEAN counterparts it aims to reduce friction in the South China Sea and push forward negotiations on a long delayed code of conduct, even as tensions remain high due to recent confrontations with the Philippines and competing claims, with China signalling that cooperation is still possible despite ongoing maritime disputes.
China’s new underwater drones could threaten the US West Coast
Naval News reports that China has developed long range autonomous underwater vehicles capable of operating thousands of miles from home waters, raising concern among US analysts that these drones could monitor or target naval activity near the American West Coast, with the systems likely drawing on advances in batteries, navigation and quiet propulsion as Beijing expands its undersea capabilities.
Trump moves to coordinate rare earth and tech strategy with five allied nations
Politico reports that President Trump is assembling a coalition of five allied countries to counter China’s dominance in rare earth minerals and critical technologies, with the plan focused on securing supply chains, boosting joint investment and coordinating export controls, as Washington seeks to reduce strategic dependence on Beijing.
Tech in China🖥️
Chinese biotech firms prepare global expansion after domestic breakthroughs
SCMP reports that Chinese biotech companies are planning international expansion after achieving significant progress in areas such as gene editing, oncology and cell therapy, with firms now seeking foreign trials, regulatory approvals and partnerships, and analysts noting that rising scientific capability and strong state backing are accelerating China’s push to compete in global pharmaceutical markets.
Chinese biotech firm raises 108 million dollars in Series B round
Tech in Asia reports that a Temasek backed Chinese biotechnology company has secured 108 million dollars in Series B funding to advance its drug discovery and clinical development programmes, with the round led by major state linked and private investors, underscoring continued capital flow into China’s life sciences sector despite broader market volatility.
Global Risk🗺️
Foreign leaders accused of secretly backing online influence campaigns
AOL reports that several foreign leaders have been implicated in covert efforts to run online influence operations targeting political debates in the United States and Europe, with investigators identifying coordinated networks linked to multiple governments, while officials warn that such campaigns are becoming more sophisticated and harder to detect as elections approach.
Machado backs US tanker seizure and vows to continue fight against Maduro
The Guardian reports that Venezuelan opposition leader and Nobel peace laureate María Corina Machado has endorsed the US seizure of an oil tanker off Venezuela, calling it a necessary step to cut resources to Nicolás Maduro’s regime, while detailing her covert escape from the country to attend events in Oslo, reaffirming her commitment to return to Venezuela and continue her struggle despite the risks, as Maduro allies condemn her award and frame it as foreign interference.
MAGA aligned policymakers push to reshape US approach in the Balkans
The Irish Times reports that figures linked to the MAGA movement are working to overturn long standing US policy in the Balkans, including support for Kosovo’s sovereignty and pressure on Serbia, with analysts warning that the shift risks destabilising a fragile region, empowering nationalist actors and weakening Western coordination at a time of rising geopolitical competition.
US military industry faces scrutiny over waste and inefficiency
The New York Times reports that America’s defence industrial base is under renewed criticism for chronic waste, cost overruns and slow delivery of key systems, with analysts warning that decades of consolidation, weak oversight and political incentives have produced a system ill suited for rapid modernisation, and the editorial argues that reforms are needed to ensure resources match strategic needs.
Gunmen kill three Iranian Revolutionary Guard members in ambush
Siasat reports that three members of Iran’s Revolutionary Guard were killed in an ambush by unidentified gunmen in the country’s southeast, a region long troubled by militant and smuggling activity, with authorities launching a search for the attackers amid heightened security tensions.
North Korean soldiers fire at South Korean border post
BBC reports that North Korean troops fired shots at a South Korean guard post near the Demilitarised Zone during a brief incursion, prompting South Korean forces to return warning fire, with neither side reporting casualties and Seoul describing the incident as part of a pattern of recent border provocations.
Global trade expected to pick up in 2026 after a weak year
Bloomberg reports that global trade growth is forecast to improve in 2026 following a sluggish 2025 marked by geopolitical tensions, supply chain adjustments and uneven demand, with economists expecting modest recovery driven by easing inflation, stabilising shipping costs and gradual rebound in manufacturing, although risks remain from conflicts, protectionist policies and potential disruptions in key trade corridors.
Mexico’s tariff hike threatens one billion dollars in Indian car exports
Reuters reports that Mexico’s sharp tariff increases on countries without trade agreements, including India, are expected to affect about one billion dollars worth of Indian car exports, despite lobbying from automakers, with industry officials warning that the new levies will disrupt supply chains and reduce competitiveness in one of India’s key overseas markets.
OpenAI faces growing pressure as rivals gain ground in AI race
The Atlantic reports that OpenAI is losing its early dominance in the AI sector as competitors in the United States and China rapidly advance, with concerns over internal instability, slower product rollouts and strategic missteps weakening its position, while rivals leverage stronger hardware access, tighter integration with large platforms and faster commercial deployment to capture market share in consumer and enterprise AI.
AI’s future may resemble the history of railroads
Bloomberg reports that the evolution of artificial intelligence may mirror the development of railroads, with early rapid growth giving way to consolidation, heavy regulation and significant infrastructure demands, and the column argues that understanding these historical parallels can help policymakers and firms prepare for the economic and political shifts likely to accompany the maturation of the AI sector.
Barron Trump sought access to Andrew Tate compound during Romania trip
The New York Times reports that Barron Trump attempted to visit Andrew Tate’s compound in Romania while travelling with Secret Service protection, with officials denying the request due to security and legal concerns surrounding Tate, who remains under investigation, and the episode prompting internal discussions about managing high profile protectees’ interactions with controversial public figures.
Decypher Data Dive📊
In the 2025 China Pharmaceutical Innovation and Invention Index, Hengrui leads both the Innovation and Invention rankings, underscoring its position as the country’s most balanced and research-driven pharma company. Everest Medicines stands out as a rising force in China’s biopharmaceutical landscape, ranking 10th in invention and 23rd in innovation. The top 30 Chinese companies obtained 24 innovative drug approvals in 2024, with biologics accounting for half.
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Data By Bhupesh
Edited By Aurko
Produced by Decypher Team in New Delhi, India
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