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China's state-led tech push and assertive foreign policy under Xi Jinping face external pressure from the US under Trump, who links cooperation to China's influence in the Strait of Hormuz, creating a dual-track dynamic of domestic consolidation and tense international bargaining.
March 2026
Week of Feb 23, compared to 12-week average
celebratory and promotional
China's tech sector is aggressively pivoting to AI and semiconductors despite mixed corporate results and foreign production shifts. Tencent reported strong profits with a major AI push, and Alibaba unveiled a new AI chip design, while Alibaba's earnings missed targets and Apple and Volkswagen shifted production away from China. The sector is also contending with external pressure, as a tech company co-founder was charged with smuggling Nvidia AI chips to China.
China's political focus is on managing a volatile US relationship under Trump while advancing its strategic partnerships. Trump delayed a planned summit with Xi Jinping and linked it to China's help in the Strait of Hormuz, forcing China's top diplomat to outline foreign policy positions. Concurrently, China and Russia supported Iran's new supreme leader, and China invited Taiwan's opposition leader for talks ahead of the Trump summit.
China is methodically enhancing its military capabilities and strategic positioning while managing tensions with the US over Taiwan. It announced a 7% increase in defense spending and is mapping the ocean floor to prepare for submarine warfare with the US. Military flights near Taiwan resumed after a pause, and a US intelligence report stated China does not plan to invade Taiwan in 2027, as Trump pressed China to help reopen the Strait of Hormuz.
The dominant tension is between state-driven social engineering for stability and the persistence of external misinformation. The state is advancing assimilation policies, as seen with the new Ethnic Unity Law, and building nationwide systems for eldercare and health services. This push for a controlled social order is challenged by incidents like false footage of a Hong Kong fire being linked to Israel, highlighting vulnerabilities to disinformation.
