Dear Readers,
The upcoming Trump–Xi meeting in South Korea will draw intense global attention, but expectations should be kept in check. Even if the two sides announce something on trade, it’s likely to be a narrow, tactical agreement rather than a major reset — similar to what we’ve seen in previous rounds.
On Taiwan, neither Washington nor Beijing is shifting its core position. The talking points are already set, and both sides will simply restate their established lines. In other words: expect continuity, not breakthroughs. Taipei is on edge, even if officials insist otherwise. Public sentiment is shifting quickly, and the next elections could look very different as a result. More on that soon.
Beijing is likely to emerge from this round of talks in a stronger position, as Washington still lacks a clear strategy to counter China’s leverage over rare earth exports.
China showcases Arctic deep‑sea breakthrough
On October 28, Chinese state media unveiled the Tan Suo San Hao, a polar research vessel that enabled China to conduct sustained manned dives under the Arctic ice. During trials, the vessel reached a depth of 5 277 meters in the central Arctic Basin, an area where the ice cover exceeds 80 percent. Beijing framed this success as part of its drive to develop deep‑sea and polar technology under the 14th Five‑Year Plan, noting that China now holds more than half of effective global patents for marine‑equipment manufacturing.
Beijing’s research vessels are roaming further across the Arctic than ever before, reflecting China’s view of the region as an extension of its strategic landscape. Russia, historically the gatekeeper of these icy seas, has few options left but to make room for its assertive partner.
China Signals Pivot Toward Consumption-Led Growth Amid Rising Global Pushback
China says it will “significantly” raise the share of consumption in its economy over the next five years, according to a detailed fourth plenum document outlining priorities for the 2026–2030 plan. Household consumption currently accounts for about 40% of GDP, compared with a global average of 56% and nearly 60% in high-income economies. The shift comes as China faces tighter U.S. and European trade controls and growing pushback against its export-heavy growth model, even as exports have remained unexpectedly strong this year.
Beijing will expand public services and employment support, while keeping tech and manufacturing as top priorities. The document also signals more flexibility: instead of keeping manufacturing’s share “basically stable,” China now aims for a “reasonable” level. At the same time, the government plans “extraordinary measures” to advance semiconductor, machine tool and biomanufacturing capabilities — likely involving subsidies and procurement support.
The broader goal is to strengthen domestic demand and reduce vulnerability to external shocks, as Xi Jinping urged faster construction of a “powerful domestic circulation” system. The full five-year plan will be finalized in March.
ASEAN Summit delivers upgraded China–ASEAN free‑trade pact
At the 47th ASEAN Summit in Kuala Lumpur on October 28, China and the bloc’s member states signed an upgraded “FTA 3.0” agreement. The new pact expands cooperation beyond goods trade into areas such as the digital economy, green transition, infrastructure and people‑to‑people exchanges. Premier Li Qiang highlighted that bilateral trade reached US$785 billion between January and September 2025—a 9.6 percent year‑on‑year increase—and he criticized unilateral protectionist policies while presenting the agreement as a win‑win outcome for ASEAN and China.
China and Australia ease tensions despite airspace dispute
During the ASEAN Summit, Chinese Premier Li Qiang told Australian Prime Minister Anthony Albanese that Beijing is ready to build a more stable and mature comprehensive strategic partnership. The remarks came shortly after Australia complained that a Chinese fighter jet had released flares near an Australian surveillance plane in the South China Sea. Albanese said he raised the incident during his meeting with Li; in response, China accused Australia of covering up an airspace intrusion and urged Canberra to halt provocations.
Trump’s Tokyo visit emphasizes shipbuilding cooperation
On October 28, U.S. President Donald Trump began a visit to Tokyo as part of his three‑nation Asian tour. He met Emperor Naruhito and Prime Minister Sanae Takaichi, who signaled that her administration would continue the security and economic policies of former leader Shinzo Abe. Japanese officials told Japan Today that the two countries were preparing to sign agreements that include cooperation on shipbuilding, critical‑mineral supply chains and high‑tech industries, as well as expanded imports of U.S. farm products. The U.S. administration has framed shipbuilding cooperation as a way to rebuild its domestic industrial capacity in response to China’s dominance in the sector.
North Korea announces cruise missile test ahead of Trump–Lee talks
North Korea said Wednesday it successfully test-fired sea-to-surface cruise missiles a day earlier, claiming the weapons flew for over two hours before striking targets in waters off its western coast. Pyongyang framed the launch as part of efforts to expand its nuclear-armed military’s operational reach.
South Korea’s Joint Chiefs of Staff confirmed detecting the launch and said Seoul and Washington are analyzing the missiles while maintaining readiness for a “dominant response” if needed. The announcement came just hours before U.S. President Donald Trump and South Korean President Lee Jae Myung were set to meet in Gyeongju during the APEC summit, a timing seen as a familiar show of leverage by Pyongyang.
Direct India–China Flights Resume After Five Years Amid Thaw in Ties
Direct flights between India and China have resumed for the first time since early 2020, marking a modest warming in relations after years of border tensions. IndiGo relaunched service on Sunday with a Kolkata–Guangzhou route, with China Eastern and additional IndiGo flights set to follow. Both governments say the move will help “normalize” exchanges as they continue gradual talks to ease frictions along their disputed Himalayan frontier. The direct flights between Shanghai and New Delhi will begin in December.
The resumption of direct flights doesn’t capture the overall tensions that still runs deep between the two Asian rivals. Now, its the need for minimal diplomacy and the business interest in India that is pushing for normalizing ties. The relations will go back being relatively normal until the next military crisis — given their history — we can bet on another round of hostilities.
Markets Brace for Another Trump–Xi “Deal” — With a Familiar Sense of Déjà Vu
It’s Trump–Xi week again, and investors are acting like they’ve seen this movie before — because they have. Markets surged on Monday after U.S. officials hinted that negotiators have lined up a deal framework: lower U.S. tariffs on Chinese imports in exchange for China easing its curbs on rare earth exports. The S&P 500 popped 1% to a record high. Stocks in South Korea, Taiwan and Japan also rallied, while gold — the classic safety play — slipped as investors felt bold enough to take on more risk.
There’s a pattern here, and Wall Street even has an acronym for it: TACO — Trump Always Chickens Out. The idea is simple: Trump talks tough, the market panics, then he pulls back just enough to declare progress. We saw it during the 2019 trade war, during this year’s tariff “Liberation Day,” and in the weeks leading up to this very meeting. Chinese stocks, too, have been climbing for days — traders betting that Trump won’t push all the way to the edge.
So the expectation going into Thursday’s Trump–Xi meeting isn’t some grand resolution. It’s simply de-escalation — a pause, a handshake, or even just a toned-down threat. That alone is enough for fund managers who have been sitting on the sidelines through months of tariff swings.
Still, nobody’s pretending this is risk-free. Stocks are already frothy, especially tech and AI names that have led the rally. If earnings disappoint or if Trump decides to revive tariff escalation for political optics, the downside could hit harder than any relief rally.
As one strategist put it, this is basically a prisoner’s dilemma with two leaders who don’t have much to gain from blowing things up — but who also don’t entirely trust each other. And history is not reassuring: the last U.S.–China deal in Geneva in May 2025 fell apart almost as soon as it was signed.
So yes, markets are hopeful. But they’re also hedged. The mood is: Celebrate the truce — but don’t believe it’s the peace treaty.
Reads:
China’s leaders’ meeting confirms Xi’s authority and shows technological self-reliance is now the priority — Chatham House
China upgraded missiles using UAE technology, Biden spies said — Financial Times