Asia Communique – Geopolitical Highlights

Tensions, trade spats and diplomacy: A 24‑hour snapshot of East Asia’s geopolitical landscape.

Hello all,

I hope your 2026 has kicked off well!

Cross-Strait Tensions

As we look back at the past day in East Asia, cross-strait tensions remain a central theme. Beijing has doubled down on its campaign against pro-independence politicians by extending its “secessionist” blacklist. On 7 January China’s Taiwan Affairs Office announced that Interior Minister Liu Shyh-fang, Education Minister Cheng Ying-yao and prosecutor Chen Shu-Yi are barred from entering mainland China, Hong Kong and Macau. The ruling Communist Party labelled them “die-hard Taiwan independence secessionists” and warned others not to challenge its sovereignty claims. Taipei fired back, calling the bans illegitimate and insisting that only Taiwan’s people have the right to decide their future. The Mainland Affairs Council said Beijing was trying to intimidate all Taiwanese into silence. This move comes just a week after the People’s Liberation Army staged its largest war games around the island, firing dozens of rockets and deploying a fleet of warships and aircraft, which forced flight cancellations and filled social media with AI-generated disinformation and millions of cyber-attacks.

China-Japan Trade and Rare-Earth Dispute

The Taiwan issue is also coloring China’s economic relations with Japan. The Chinese Commerce Ministry has opened an anti-dumping probe into dichlorosilane, a chemical used for semiconductor manufacturing, alleging that Japanese imports surged while prices fell by more than thirty per cent between 2022 and 2024. The investigation covers shipments from July 2024 through June 2025 and could last until January 2027. Observers see the probe, which follows China’s ban on exports of dual-use items to Japan, as retaliation for Japanese Prime Minister Sanae Takaichi’s remark that a Chinese attack on Taiwan could be an existential threat to Japan. Financial markets took notice: shares of Japanese chemical giants Shin-Etsu Chemical and Mitsubishi Chemical slipped in Tokyo trading, while Chinese rivals Tangshan Sunfar Silicon Industries and Hubei Heyuan Gas surged to their daily limit up. The dispute underscores how quickly geopolitical grievances can spill into trade and how both countries are scrambling to secure supplies of critical chip-making materials. Tokyo, which depends on China for around 60% of its rare-earth imports, has described Beijing’s export ban as “absolutely unacceptable”.

Beijing has also signalled that its spat with Japan could soon extend beyond semiconductor chemicals. According to state-run reports, Chinese officials are considering limits on exports of rare-earth elements to Japan in retaliation for Prime Minister Sanae Takaichi’s comments on Taiwan. These minerals are indispensable for high-tech manufacturing, and a new curb could reverberate through Japan’s auto and electronics industries. Analysts note that Japan has reduced its dependency since China last throttled rare-earth shipments in 2010, yet it still obtains roughly 60% of its supplies from China and remains almost entirely reliant for heavy rare earths used in electric-vehicle motors and other magnets. A Nomura Research Institute economist warned that even a three-month embargo—akin to the 2010 episode—would cost Japanese businesses about ¥660 billion (roughly US$4.2 billion) and shave 0.11 percentage points off GDP; a year-long ban, he added, could cut nearly 0.43 percentage points. Japanese automakers such as Subaru say they are closely monitoring the situation, but the prospect of broader rare-earth curbs underscores just how quickly a political row can threaten industrial supply chains.

Cambodia Extradition and Fraud Crackdown

Another significant development comes from Cambodia, where authorities have extradited three Chinese nationals, including an individual named Chen Zhi, to China. The country’s interior ministry said the men’s Cambodian citizenship had been revoked and that the handover followed a joint investigation into transnational crime. Chen Zhi’s name matches that of a Chinese-Cambodian tycoon whose Prince Group conglomerate has been sanctioned by the United States and Britain over accusations of running online scam centres that exploited trafficked workers. It is unclear whether the Chen Zhi extradited this week is the same person, but the case highlights a growing regional crackdown on online fraud networks. U.S. prosecutors have charged Chen with wire-fraud and money-laundering conspiracies, alleging he operated forced-labor cryptocurrency scams. Authorities across Asia—Singapore, South Korea, Taiwan and Hong Kong—have seized assets linked to such networks.

Technology and Economic Policies

China’s techno-industrial ambitions also made headlines. Regulators reportedly asked Chinese companies to halt orders for Nvidia’s advanced H200 AI chips while Beijing considers whether to block or approve the high-performance processors. The move is part of a broader push to steer companies toward domestic AI chips and reduce reliance on U.S. technology. In parallel, the industry ministry warned battery manufacturers to curb over-investment in electric-vehicle and energy-storage batteries, cautioning that unchecked capacity expansion could mirror the boom-and-bust cycle seen in the solar sector. Rising demand for energy-storage batteries—driven by the expansion of data centres—has encouraged companies to build new plants, but officials are urging orderly competition and better market supervision. On the financial front, sources tell Reuters that China’s financial regulator has extended a programme allowing banks to bulk-transfer non-performing personal loans until the end of 2026. The initiative, which initially covered major state banks but now includes regional banks and consumer finance firms, aims to help lenders cope with rising consumer defaults amid a slowing economy and property-sector slump.

Diplomatic Manoeuvring

Diplomatic maneuvering rounded out the day’s stories. During South Korean President Lee Jae-myung’s state visit to Beijing, President Xi Jinping used the proverb “three-foot-thick ice does not melt all at once” to signal that China’s informal ban on Korean pop culture will be eased gradually. Lee proposed Go tournaments, soccer matches and even panda loans to help thaw public sentiment and called for balanced people-to-people exchanges. Xi agreed that such exchanges were acceptable but stressed that progress must be incremental. Meanwhile, China’s public security minister Wang Xiaohong hosted his Pakistani counterpart and pledged deeper cooperation against terrorism and telecom fraud, stating that Beijing and Islamabad must work together to counter security risks and safeguard national stability.

Conclusion

In summary, the last 24 hours have shown how geopolitics, trade and domestic politics are tightly interwoven across East Asia. The cross-strait dispute continues to cast a long shadow, prompting punitive actions, war games and cyber-operations. Trade tensions between China and Japan have escalated from rhetorical sparring to concrete investigations and market volatility. Regional authorities are cracking down on sophisticated scam networks that exploit workers and launder funds. And within China, regulators are balancing their ambitions for technological leadership with the need to manage overcapacity and financial risk. All of this is unfolding against a backdrop of cautious diplomacy, with Beijing signalling a gradual relaxation of its cultural chill with South Korea while urging Pakistan to collaborate more closely on security.

Have a great week!