China’s Economy: A Tale of Two Temperatures
A prominent Chinese economist recently described China’s economy as a study in stark contrasts — blazing hot in some sectors, bitterly cold in others.
Mao Zhenhua, a professor at the University of Hong Kong’s Business School, made the remarks at a forum analyzing the outcomes of China’s “Two Sessions” — the annual meetings of the National People’s Congress and the Chinese People’s Political Consultative Conference — held earlier this month. The sessions approved China’s 15th Five-Year Plan, covering 2026 to 2030.
On the bright side, Mao noted significant technological advances over the past five years. Young people’s enthusiasm for the tech sector, combined with the wealth-generating capacity of capital markets, has boosted social efficiency. Driven by technological progress and private enterprise, China’s exports have also performed well despite a volatile global trade environment. In these areas, he said, the economy is running hot.
However, Mao painted a sobering picture elsewhere. China has entered its 12th consecutive quarter of deflation, with prices remaining persistently low. Declining corporate profits have slowed wage growth, and weakening investment appetite contributed to a historic contraction in investment last year.
“Outside of high-tech and exports, you know just how cold the economy really is,” he said.
Youth unemployment among those aged 16 to 24 remains stubbornly high despite government efforts. A fading demographic dividend — and the prospect of negative population growth — poses further long-term risks.
While the new Five-Year Plan prioritizes breakthroughs in high-tech and expanding domestic demand, Mao expressed skepticism. Investment is hard to stimulate due to a lack of attractive projects, while boosting consumer spending is equally challenging. With companies struggling to turn profits, taxes remaining high, and employment pressures mounting, he argued that meaningfully raising household incomes — and thus consumer spending — will be an uphill battle.
Source: Central News Agency (Taiwan), March 28, 2026
https://www.cna.com.tw/news/acn/202603280065.aspx
BYD Posts Revenue Growth but Profit Decline Amid China’s EV Price War
Chinese electric vehicle giant BYD reported annual revenue of 803.9 billion yuan (approximately $110.6 billion USD) for 2024, a modest 3 percent increase year-on-year. However, net profit fell 18 percent to 32.6 billion yuan (approximately $4.5 billion USD), marking the company’s first “growth without profit” financial report in four years. BYD Chairman Wang Chuanfu described the EV industry as enduring a brutal “elimination round.”
Despite the profit squeeze, BYD achieved record sales of 4.6024 million vehicles in 2024, placing it among the world’s top five automakers and retaining its title as the global leader in new energy vehicle sales. The company’s international footprint expanded significantly, with operations in 119 countries and overseas sales reaching 1.05 million units. Total sales for 2025 are projected to hit 5.12 million vehicles.
Monthly domestic sales were inconsistent in the second half of 2024, with BYD failing to break the 500,000-unit monthly threshold in Q4. October, November, and December figures came in at 441,700, 480,200, and 420,400 units respectively. Overseas revenue reached 310.7 billion yuan (approximately $42.8 billion USD), accounting for roughly 38 percent of total revenue, an increasing share compared to the previous year.
The broader context is China’s overcapacity crisis in the EV sector. After 13 years of government subsidies ending in 2022, China’s EV output surged to over 12.8 million vehicles in 2024, yet nearly half of production capacity sits idle. To offload excess supply, Chinese automakers have engaged in a fierce price war, with EV prices dropping 9.2 percent in 2024 and profit margins shrinking to just 4.3 percent. BYD itself launched an aggressive new pricing round in May 2024 with discounts as steep as 34 percent, drawing sharp criticism from industry peers and state media alike.
Source: Central News Agency (Taiwan), March 28, 2026
https://www.cna.com.tw/news/acn/202603280134.aspx
“AI Data Poisoning” and Manipulation of Chatbot Outputs in China
An article by The Epoch Times reports that a media investigation in China has identified a phenomenon known as “AI data poisoning,” in which fabricated information is deliberately introduced into online platforms to influence the outputs of large language models.
According to the report, investigators created a fictional product—a smart wristband called “Apollo-9”—and input falsified product information into a content-generation system. The system automatically produced more than a dozen promotional articles, including clearly implausible claims such as “quantum entanglement sensing” and “blood glucose monitoring without blood sampling,” along with fabricated user reviews and industry rankings. It then logged into preset accounts and published the content automatically, completing the process without human intervention.
Within a short period, several AI chatbots began recommending the non-existent product in response to user queries, treating the fabricated information as credible.
The article states that this practice, referred to as “generative engine optimization” (GEO), has developed into a commercial service aimed at influencing AI-generated responses. Experts cited in the report note that such techniques can affect the reliability of AI outputs, as many systems rely on publicly available online content that can be mass-produced or manipulated.
Source: Epoch Times, March 19, 2026
https://www.epochtimes.com/gb/26/3/19/n14722264.htm
Chengdu Implements Tiered Surveillance System Targeting “Persons of Concern”
Authorities in Chengdu, China have established a classified surveillance system targeting specific population groups, according to reports first circulated on the overseas social media platform X and subsequently verified by journalists through multiple local sources.
The system, executed at the neighborhood and police station level, categorizes residents into four alert tiers — red, orange, yellow, and blue — with red designating the highest level of monitoring. Six broad categories of people have been labeled “unreliable persons,” including Tibetans, Uyghurs, Christians, unemployed individuals, Han Chinese who have worked in Xinjiang or Tibet, and those with mental illness, criminal records, or a history of petitioning the government. Officials have also expanded the classification in recent years from “three-loss-one-deviation” to “five-loss-one-deviation” groups, reflecting a widening net.
Sources familiar with the situation noted that enforcement intensifies during politically sensitive periods such as the annual National People’s Congress session in March, when local governments enter a heightened stability-maintenance mode. During such periods, individuals on the watchlist may face home visits, restrictions on movement, or pressure channeled through landlords to vacate their residences.
The surveillance does not end when a person relocates. According to accounts gathered by journalists, individuals who move to other cities continue to be tracked for months, with authorities conducting follow-up checks at new addresses and monitoring travel records. Hotels in Chengdu are also required to report guests from Tibet and Xinjiang to the local police station — a practice said to have been in place for many years.
Members of unregistered Christian congregations, such as the Qiu Yu Covenant Reformed Church, reported that believers have long faced pressure to join state-sanctioned churches, with some detained or barred from gathering. Observers noted that similar surveillance practices are not unique to Chengdu but reflect a broader national trend of tightening control over designated population groups.
Source: Radio Free Asia, March 23, 2026
https://www.rfa.org/mandarin/shehui/2026/03/23/china-chengdu-surveillance-human-rights-activists-church/
PLA Air Force Employs “Smart Dispatch” System in Aerial Refueling Operations
According to a report by People’s Daily, during a recent People’s Liberation Army (PLA) Air Force exercise involving Y-20 tanker aircraft for aerial refueling operations, several fighter jets—located at similar distances—chose to refuel from the same tanker. This resulted in a queue forming near that aircraft, while other tankers in adjacent airspace remained largely underutilized.
To address this imbalance, a “smart dispatch” system was introduced to assist with operational coordination. The system processes real-time data, including aircraft fuel status, mission requirements, and airspace conditions, to generate optimized refueling plans and allocate tanker resources more efficiently.
The report states that the system enables faster decision-making and improves coordination during refueling operations, allowing multiple aircraft to carry out their missions more effectively.
Source: People’s Daily, March 16, 2026
http://military.people.com.cn/n1/2026/0316/c1011-40682662.html
Turkmenistan Reaffirms Energy Partnership with China’s CNPC
Turkmenistan’s People’s Council Chairman Gurbanguly Berdimuhamedov met with China National Petroleum Corporation (CNPC) Chairman Dai Houliang in Beijing, reaffirming his country’s commitment to deepening cooperation in the natural gas sector. The meeting took place during Berdimuhamedov’s friendly visit to China at the invitation of President Xi Jinping.
During the talks, both sides emphasized that Turkmenistan-China cooperation in the oil and gas sector stands as a model of effective bilateral partnership. A key highlight of this relationship is the joint pipeline project delivering Turkmen natural gas to China. The two parties also underscored the significance of agreements reached regarding the next stage of development of the Galkynysh gas field, one of the world’s largest natural gas deposits.
Turkmenistan is a critical supplier of pipeline natural gas to China, delivering approximately 40 billion cubic meters annually through three pipeline routes — Lines A, B, and C — running through Uzbekistan and Kazakhstan.
In terms of energy reserves, Turkmenistan holds the world’s fourth-largest proven natural gas reserves, trailing only Russia, Iran, and Qatar. The country’s total hydrocarbon resources exceed 71 billion tons of oil equivalent, including over 20 billion tons of oil reserves and more than 50 trillion cubic meters of natural gas.
In 2025, Turkmenistan’s total natural gas extraction exceeded 76.5 billion cubic meters, while oil production surpassed 8.3 million tons, reflecting the country’s robust and growing energy output.
The meeting signals both nations’ intent to further strengthen an already substantial energy relationship, with Turkmenistan positioning itself as a long-term and reliable supplier to meet China’s considerable and growing energy demands.
Source: Sputnik News, March 19, 2026
https://sputniknews.cn/20260319/1070330307.html
CNA: China’s Share of the Global Economy has Shrunk Significantly
Primary Taiwanese news agency Central News Agency (CNA) recently reported that, China’s export trade is robust, and many of its industries lead the world. However, due to the double blow of domestic deflation and a weakening yuan, China’s share of the global economy has shrunk significantly.
In dollar terms, China’s GDP accounted for a peak of approximately 18.5 percent of the global economy in 2021, at which time its economy was about three-quarters the size of the United States. Many economists predicted that China’s explosive growth would eventually make its economy surpass that of the United States. Contrary to expectations, China’s share of the global economy has now declined, falling to approximately 16.5 percent by the end of 2025. According to the International Monetary Fund (IMF), China’s current economy is less than two-thirds the size of the United States.
However, the combined effects of domestic deflation and a weakening yuan have reduced the relative size of the Chinese economy, denominated in US dollars. Deflation has lowered the value of goods and services in the economy. As a result, even though China produces a record number of goods, the dollar value of its output has stagnated.
For multinational corporations, the shrinking share of China in the global economy is worrying, as the returns they receive from their investments in China have shrunk when converted into US dollars.
Source: CNA, March 20, 2026
https://www.cna.com.tw/news/acn/202603200296.aspx
Europe’s Auto Giants Lose Ground as China Closes the Gap
For decades, European automakers dominated the global car market — but that dominance is now eroding fast. According to an analysis by Ernst & Young (EY), reported by Germany’s Der Spiegel, the European Union imported more cars and auto parts from China last year than it exported there for the first time ever. EU exports to China fell 34% to €16 billion (roughly $17.4 billion), having been cut in half since 2022, while imports from China rose 8% to €22 billion (roughly $23.9 billion). A trade surplus once worth tens of billions of euros has flipped into a deficit in just a few years.
German automakers are feeling the pressure too. Exports to China have dropped from a record €30 billion ($32.6 billion) in 2022 to €13.6 billion ($14.8 billion), while imports from China have grown by two-thirds to €7.4 billion ($8 billion). EY warns that if current trends continue, exports and imports could reach parity by 2026. Chinese brands have yet to make major inroads in Germany itself — Volkswagen, Mercedes-Benz, and BMW have held their ground — but they have advanced significantly elsewhere in Europe, and further competitive pressure is expected.
The troubles extend beyond trade balances. Germany’s auto industry saw revenues fall 1.6% in 2025 to nearly €528 billion ($574 billion), with profits declining sharply in some cases. Employment dropped 6.2%, or nearly 50,000 jobs, to around 725,000 — the lowest level in 14 years. Major layoff plans are underway at Mercedes-Benz, Volkswagen, and suppliers including Bosch and Mahle. Suppliers have fared even worse, with revenues down 4% and employment falling more than 10%. Since 2019, nearly one in four supplier jobs has disappeared — some 73,000 positions in total.
EY attributes the crisis to a combination of rising Chinese competition, weak export markets, sluggish economic growth, geopolitical instability, and underwhelming electric vehicle demand, compounded by Germany’s high operating costs and bureaucratic hurdles.
Source: Radio France International, March 21, 2026
https://rfi.my/CY3R