For the first time ever, the Chinese leader had the upper hand in this summit. And the potentially game-changing outcome was that the US and China are now trying to work together to put into place what China calls a constructive China-US relationship of strategic stability.
Welcome to China Decode. I'm Alice Han.
In today's episode of China Decode, we're discussing the postgame analysis of the Trump-Xi summit, what Apple, Tesla, and Nvidia stand to gain after the trip, and the infusion of technology and creativity that Chinese companies are bringing to this year's Cannes Film Festival in France. That's all coming up. But first, let's do a quick check-in with how the Chinese markets are starting the week. On Monday, the Shanghai Composite Index ticked up 0.2%. Standout stocks including Naura Technology, a semiconductor equipment firm, up 4.9%, and Hikrobot up 10%, with positive signals through the AI and semiconductor sectors. The Shenzhen Component rose 0.3%.
Retail sales sharply eased to 0.2% year-on-year growth in April, marking the weakest growth since December 2022. Industrial output also slowed to 4.1% year-on-year, the softest pace since July 2023.
All right, let's get into it. We're still decompressing from last week's big summit between US President Donald Trump and Chinese President Xi Jinping. Both leaders left the event after trading praise and touting massive progress in stabilizing what they agreed is the world's most important bilateral relationship. Trump hailed fantastic trade deals and said a lot of different problems, quote-unquote, were settled. Although no major agreements or breakthroughs were announced before he departed Beijing, Taiwan and Iran loomed large over the talks, but much of the trip seems centered around economic and business-related progress between the two nations. James, we have been talking about this at length. We had a Substack live video about this as well. How do you perceive this summit? What are the main takeaways? And what do you think we should expect after this main summit?
Yeah, I find myself slightly at odds with, I think, conventional wisdom on this. A lot of the news reporting has called this things like the stalemate summit. Others have called it a nothingburger, but I think those are very much missing the mark. To me, this summit was important. There was one what I would call historic aspect and there was one potentially game-changing outcome. I think the historic aspect was that, from my perspective, for the first time ever, the Chinese leader had the upper hand in this summit, and the potentially game-changing outcome was that the US and China are now trying to work together to put into place what China calls a constructive China-US relationship of strategic stability. I know that's a bit of a mouthful, but to me that means they're trying to climb down from a situation in which China and the US are constantly adversarial in their relationship and moving towards a much more stable relationship. And I think one of the pointers towards this is that Trump invited Xi to visit the US in September this year, and Xi has agreed to go. So there's a measure of continuity there. I think quite a lot of people will be wondering whether or not this really was a historic summit. And in the sense that I reckon China had the upper hand, I think you can see that from the fact that Trump was trying to be as friendly as possible. He said to Xi, 'You are a great leader.' He said, 'It's an honor to be with you. It's an honor to be your friend. The relationship between China and the US is going to be better than ever before.' And I think one piece of essential background has changed a lot in the way these two countries see each other, and that is China's enduring chokehold over rare earth and critical minerals supplies. These rare earths and these critical minerals are essential to make US weapons. The Pentagon needs them. US arms manufacturers need them, and so do all the big US tech companies, many of which were on the plane with Trump. The other thing is, of course, that the US needs China to some extent to help resolve the war in Iran. We don't know whether China will play ball in that regard, but it seems clear that Washington thinks it might need China. So that's why I come to the conclusion that this was the first US-China summit ever where China appeared to have the upper hand. The second point about stability, I guess we can discuss, Alice, but how did you see it? I mean, how did you see the interplay? Did you think it was important or did you think it was a nothingburger, as some people say?
Well, just very, very quickly, I've been watching all the videos in terms of their interaction, and I think President Xi knew how to play that relationship very, very well. He was speaking to the right audience when, in his banquet speech, the state banquet speech over dinner, he said that the great rejuvenation of the nation, which is a big slogan of his, can go hand-in-hand with Make America Great Again. And I thought it was very smart and apt of him to link these two narratives that these countries have about their greatness together, to say that effectively he and Trump are, you know, singing from the same choir sheet. And effectively, I think it is reviving this G2 relationship that China wants to see on the global stage. But to bring it slightly away from the personal, I want to sort of talk a little bit about what has happened in the last few days since the summit, since Trump has left. And it's always very helpful to compare notes in terms of the two sides' readouts, Washington versus Beijing. Washington's White House readout made it very clear that China had agreed to a number of things which still the Chinese haven't confirmed. So just to run through them very, very quickly: the Chinese, according to the White House, have agreed to purchase 200 Boeing aircraft. Now, that is slightly down from the 500 that was originally speculated. China has also agreed, according to the White House, to purchase at least $17 billion per year in US products in 2026, 2027, and 2028. And that's on top of the soybean deal that it agreed to late last October. And China is going to renew the expired licenses for the 400 or so US beef facilities. They're going to work with regulators to import more American beef and similarly American poultry, and that the Chinese will help the US address its concerns with regards to critical minerals and rare earth supply shortages. So some of these rare earths, like scandium and neodymium, which do have relevance for defense-related applications from the Chinese side. And I think this is interesting. There is an acknowledgement of the US purchases, the purchases of US Boeing aircraft. There is an acknowledgement in terms of a resumption of some level of beef imports as well as poultry imports, but no specification as to the size and the scale. And then I thought this was interesting. The Chinese readout suggested that the two sides had agreed that they would expand two-way trade, including in agricultural products, and that they would cut tariffs in mutually sensitive areas. It suggests to me, as is often the case, that the two sides have very different interpretations or takeaways from the meeting. The American side is very keen to help American business, in particular American aviation companies in the form of Boeing, and to help plug the holes in the supply chains when it comes to critical minerals. On the Chinese side, I feel that they're more interested in the two boards, the Board of Investment and the Board of Trade, and in renewing and expanding those two dialogues in terms of reducing tariffs, which obviously didn't come out of the summit, and expanding the opportunity set for Chinese companies to set up shop and invest in American manufacturing. What is also interesting is what is missing from the two readouts. So there's no discussion about chip export bans being wound down, and similarly no discussion about the tariff levels. Right? So that's what's happened in the last few days. Keen to get your take on it. But I think we can, at least from my vantage point, Trump got some of the business deals that he wanted. The Chinese got further summitry and an expansion of discussion around some of the more strategic areas like tariffs, like investment, and maybe in the future chips.
I completely agree, Alice. I think, you know, after these summits, it's always really rewarding to look at the contrast of the two communiques, and these two communiques contrast quite a bit, as you've just mentioned. I think the key contrast is something that you've already mentioned a little bit, and that is the rare earths. The Chinese did not mention rare earths or critical minerals at all, and yet the US put this pretty much, you know, at the top of one of the leading sections in the White House fact sheet. This to me means that, first of all, as we mentioned, the US really wants these rare earths. They are essential for the production of American weapons. But it also means, I think, that the Chinese are holding back. They are, I'm not saying the Chinese will not supply these rare earths, but they're going to use them as leverage. They're going to use them as bargaining chips to ensure that the US does more on China's big ask, which Xi was very clear about right at the beginning of the summit, and that is Taiwan. Exactly what China wants from the US on Taiwan, we don't really know. But if past is prologue, then certainly China will be hoping that the US either reduces sharply or scraps or postpones some of the big US arms sales to Taiwan, or maybe in the future the US works towards coming up with a form of words that more closely reflects China's view of its disagreements with Taiwan, particularly on the issue of sovereignty. So I think that China is using the rare earth chokehold to try to put pressure on the US to get something on its most important topic. Now, on the issue, as you've mentioned, on the trade and investment councils, I do think that this is quite key. As I said at the top, there is this Chinese phrase of putting the relationship onto a new footing, that of a constructive relationship of strategic stability. And I think these two councils, as China called them, or as the US is calling them, the US-China Board of Trade and the US-China Board of Investment, I think these are crucial to this initiative of trying to reduce some of the differences, reduce some of the tension that we see between the US and China on trade and investment issues. And some people are poo-pooing this. Some people are saying this is not important. It's just a form of words. There's no sincerity behind it. I completely disagree. I think this is important, and I think both sides want to do this because both sides need something from the other. In the case of the US, it's rare earths to make weapons, and in the case of China, it's some movement from the US on Taiwan, aside from other issues, of course. So I think that there is impetus for the two to try to work together to reduce their differences.
Really interesting. And just to add one final word on some of these geopolitical issues, Taiwan and Iran. There wasn't, apart from the Chinese statement about their red line when it comes to Taiwan, there wasn't any major readout about the Taiwan issue. Similarly, there has been no indication as of yet as to whether or not Trump and the American administration will go ahead with the $11 billion arms sales agreed to last December to Taiwan. And similarly on the Iran issue, we heard a China that was very mum and reluctant to say anything about Iran. But the US was keen to document the fact that China and the US agree that peace in the Middle East and a resolution to the Strait of Hormuz is in each other's best interests. But I come away from this summit feeling like a nothingburger on the geopolitical issues. Right.
Yeah. I think on Iran it was the dog that didn't bark. The US was pretty clear. Trump even said in front of Xi in televised remarks that the US was determined that Iran would not develop a nuclear weapon. The Chinese side was completely silent about that, both in that meeting between Xi and Trump, but also in the following statements after the summit. So I think we can take that as a point of disagreement, or at least China is not willing to say anything about Iran and nuclear weapons at this point. So it doesn't sound to me like there was a great meeting of minds on Iran. It could also be the case that China is holding this in reserve to use it again as leverage in the future.
Yeah. So it seems like they've agreed to disagree but put those two issues on the back burner. If you missed it, we did our first Substack live stream last week, breaking down all things Trump Summit, joined by Kevin Shu, author of the Interconnected Substack. To check out all the insights on the meeting, robotics, Taiwan, and more, watch the replay on Substack now. And we're going to be doing more of these exclusive live streams for our subscribers. So make sure you get signed up to ProfG Plus at chinadecode.profg.com. We'll be back with more on the CEO presence at the summit after a quick break. Stay with us.
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Welcome back. We haven't touched much yet on the economic and commercial aspects of the Trump-Xi summit, but it was notable that over a dozen US executives were part of the delegation to China, including Tesla CEO Elon Musk and Nvidia CEO Jensen Huang, who both traveled with the US president on Air Force One. The CEOs became a bit of the main story themselves. Here's Jensen Huang enjoying himself around town in Beijing after the official meeting concluded. James, I actually have to say that I've been doomscrolling a lot of the videos of Jensen Huang going on his little foodie journey throughout Beijing. He's eating a lot of things like miancha, which is a type of, you know, bubble iced tea. He's also eating zhajiangmian, which is a type of Chinese noodle. And I see him eating some squid tentacles, having some fermented soybean milk. And what was actually interesting to me is to see just the level of affection that he has amongst everyday Chinese on the street. You can see that in the way they interact with him, and even in the way that the stores immediately after he's come, almost as if to bless each store, they have a photo of him or some new drink or some product that is named after him. That, I think, suggests to me that Jensen Huang's charm offensive has worked out. He's probably been the most effective CEO in the delegation in terms of charming the Chinese. And, you know, some netizens have been commenting on the fact that he's been the hardest working of the delegation because he's been here the longest and doing his homework on China, which I thought was pretty apropos. But it speaks to, I think, a broader insight, which is that Jensen really needs to get the Chinese on board. They're the holdup when it comes to the import of H200s. The US has just announced that 10 Chinese suppliers can get access to H200s from Nvidia, including Alibaba and ByteDance, Lenovo. But the real bottleneck is Beijing, right? So I wanted to ask you a broader question as to who were the winners and losers, but in particular the winners that you think at the CEO delegation, and what does that say about American business interest in China?
I really like your descriptions of Jensen Huang going around Beijing eating all kinds of Chinese food. I think he looked like he was enjoying himself. And did you see that clip of him when he was walking around Shichahai in central Beijing, which is a beautiful scenic lake area? I was there about a month and a half ago myself. And a Chinese reporter rushed up to him and said, 'How do you like China?' And he said, 'I love China.' I thought, I mean, it was just a one-liner, but it really said a lot to me. He is the $5 trillion man. I'm talking, of course, about the market capitalization of Nvidia shares hovering around $5 trillion right now. So he is the US's biggest businessman, and he actually runs the world's most valuable company. So it is a big barometer of US-China relations as to what's happening with Nvidia chip sales to China. And I thought, you know, he came out with a phrase in an interview recently. He said, you know, Nvidia had a 90-some-odd percent of the world's market share, but today in China we have dropped to zero. And this is obviously because of the US bans on Nvidia selling advanced chips to China. You've just mentioned the fact that, as we understand it, about 10 Chinese companies have received US Commerce Department authorization to buy Nvidia's H200 artificial intelligence chips. But so far we haven't seen any shipments to China, and it's not clear whether or not the Chinese are allowing their companies to buy these chips. It's possible that China will hold out on this and just not allow Chinese companies to buy Nvidia chips. Or maybe China's holding out for the even more advanced Blackwell chips, also made by Nvidia, holding out for them to be exported to China. So we just don't know the situation at the moment. But one thing is very clear, and that is that Nvidia, the world's most valuable company, is having a really rough time trying to sell its advanced chips to China. And that's why Jensen Huang was on such a charm offensive, and as you said, certainly an effective charm offensive when it comes to popular opinions of him in China. I would say it seems to me vitally important for Nvidia's prospects as a company as to whether or not it can actually start selling its Nvidia chips again to China.
