Weekly China Insight – 31 October 2025

Xi and Trump strike trade war truce, easing tensions with one-year de-escalation deal

On 30 October, Chinese President Xi Jinping and US President Donald Trump met in Busan, South Korea, for their first face-to-face summit since 2019. Amid mounting trade tensions and retaliatory escalations, the two leaders essentially agreed on a one-year truce featuring several de-escalatory moves from both sides. According to the Chinese ministry of commerce (MofCom), the US agreed to cancel the 10% fentanyl-related tariffs and extend the suspension of 24% tariffs on Chinese goods for another year, with China reciprocating by pausing retaliatory tariffs and export restrictions on rare earths and battery technologies. Washington also agreed to delay implementation of its expanded “50% ownership” export control rule, while both sides postponed punitive measures targeting shipping and logistics sectors. According to US officials speaking to the press after the summit, China committed to purchasing 12 million metric tons of US soybeans this year and at least 25 million tons annually through 2028. Additionally, both sides pledged to enhance cooperation on fentanyl control, resume talks on high-tech export issues, and address unresolved corporate disputes, including TikTok’s future in the US.

The Busan summit delivered a tactical pause in the downward spiral of US-China trade relations, offering short-term relief to markets and multinational companies operating in both countries. However, entrenched structural issues and strategic distrust remain unresolved.

Xi sets China’s course for a new growth model anchored on industrial upgrading for the next five years

On 28 October, the Chinese Communist Party released its formal recommendations for the 15th Five-Year Plan (2026–2030), along with an explanatory speech by General Secretary Xi Jinping, signaling a bold economic pivot toward industrial innovation and productivity-led growth. The recommendations’ top priority is to build a “modern industrial system” by upgrading traditional sectors and nurturing emerging and future industries. The Party places this objective above technological self-reliance, which now ranks second. A third key focus is building a resilient domestic market under a “new development pattern,” aimed not at near-term consumption boosts, but at fostering competitive, world-class companies that can sustain long-term wage and income growth.

Xi’s explanatory speech emphasized that the next five years are critical for “laying a solid foundation” for socialist modernization and achieving breakthroughs in key areas amid rising global competition and domestic economic headwinds. The recommendations call for “extraordinary measures” to achieve self-reliance in core technologies such as semiconductors, machine tools, bio-manufacturing, and advanced materials. While boosting consumption remains a stated aim, the Party signaled it will rely on incremental policy tools and productivity gains, rather than large-scale stimulus or welfare expansion to drive domestic demand.

The Party’s recommendations for 15th FYP reflects Xi’s strategic bet that China can leap ahead by fusing industrial capacity with indigenous innovation.

At Beijing’s Financial Street Forum, China announces landmark financial opening steps

Between 27 and 30 October, the 2025 Financial Street Forum convened in Beijing, drawing representatives from over 30 countries. Vice Premier He Lifeng gave the keynote speech, where he emphasized that the financial sector must support the goals of the upcoming 15th Five-Year Plan, advancing high-quality development while expanding institutional-level openness. Key announcements included a major overhaul of the Qualified Foreign Investor (QFI) regime, offering streamlined approvals, broader investment scopes, and “green channel” access for long-term foreign investors. The foreign exchange regulator (SAFE) also announced nine new measures to ease cross-border trade payments and capital flows.

The SAFE reforms notably allow multinational corporations to manage onshore and offshore liquidity through unified RMB and foreign currency cash pools, simplify trade-related settlements, and extend netting-settlement options. These moves aim to address longstanding frictions in dollar-RMB operations while strengthening China’s role in global trade finance.

China’s latest financial opening steps mark a shift from passive liberalization to proactive facilitation. These move aim to use market access, liquidity tools, and governance ambitions to attract strategic capital and strengthen China’s voice in global financial architecture.

Li Qiang met with EU’s Costa in Kuala Lumpur in an attempt to stabilize relations

On 27 October, Chinese Premier Li Qiang met with European Council President António Costa in Kuala Lumpur on the sidelines of the ASEAN Summit, in a bid to recalibrate China-EU relations amid growing strategic tensions. Li emphasized that the China-EU relationship faces both opportunities and challenges and called for reaffirming political trust, advancing consensus implementation, and resolving trade issues through dialogue, mutual understanding, and accommodation. He proposed expanding cooperation in green tech, digital innovation, and supply chains, while urging the EU to provide a fair and non-discriminatory environment for Chinese firms.

President Costa stressed the EU’s commitment to stable and constructive ties with China but raised concerns over China’s expanding export controls on critical raw materials, calling for the restoration of “predictable and reliable” supply chains. He emphasized the need to follow up on recent EU-China summits with concrete progress in rebalancing trade. Costa reiterated the EU’s expectation that China plays a more active role in ending Russia’s war against Ukraine, which he called “an existential security threat” to Europe.

While China and EU still hold fundamental divergences, particularly over trade asymmetries and geopolitical misalignment, the Li-Costa meeting signaled a desire to stabilize relations and expand economic cooperation.