Welcome to Foreign Policy’s China Brief.

The highlights this week: Chinese President Xi Jinping sends a signal with a meeting of top CEOs from the private sector, Elon Musk’s U.S. federal government cuts bring some jubilation in Beijing, and foreign direct investment in China continues to drop.

Xi Holds Meeting With Private Sector CEOs

Chinese President Xi Jinping staged a highly publicized meeting with top CEOs from China’s private sector this week, attempting to signal a break with the government crackdowns that have destabilized sectors such as technology and education and contributed to the country’s economic doldrums.

Xi’s speech at the event promised that private sector challenges were “localized rather than widespread, temporary rather than long-term, and surmountable rather than unsolvable” and that the relationship between government and business should be “amicable and clean.” Under Xi, China had previously promoted state-run sectors at the cost of private enterprise.

However, the message of the meeting cut both ways. Even as Xi acknowledged the economic importance of the entrepreneurs, he also made them pay court to him. The attention remained focused on the leader: Xi was literally at the center of the meeting, with the entrepreneurs arranged in rings of relative importance around him.

One of the CEOs included in the inner ring was Alibaba’s Jack Ma, who barely appeared in public between 2020 and 2023 after his firm’s fintech spinoff became one of the main targets of the technology crackdown, killing a $34 billion initial public offering. Ma was once one of China’s most outspoken billionaires, but when he criticized regulators, it proved a step too far.

Ma was partly rehabilitated in 2023, after his Ant Group paid a massive fine. But this week’s meeting—as well as Xi’s handshake with him—represented his full reintegration as a figure approved by the Chinese Communist Party (CCP), albeit a more silent one. Still, Ma sat at the far end of the table from Xi, as did Liang Wenfeng, the founder of artificial intelligence firm DeepSeek.

As economist and FP contributor Lizzi C. Lee pointed out to me, the seating represented Xi’s priorities. The figures seated closest to the leader—including Liu Yonghao, the chairman of agricultural giant New Hope—suggested deprioritization of the platform economy and an emphasis on hardware, manufacturing, solar power, and agricultural technology.

Two of China’s biggest internet giants, Baidu and JD.com, weren’t included in the meeting at all. Pride of place—and the first speaking opportunity after Xi—went to Huawei CEO Ren Zhengfei, who has extensive state connections and has been targeted by the U.S. government.

The practical effect of a meeting such as this week’s will be reflected throughout the party-state, with local officials likely to follow Xi’s lead in their own handling of private enterprise. That will make entrepreneurs, from billionaires to the locally rich, less vulnerable to the extortive shakedowns that are a routine part of doing business in China; it also puts them at less of a disadvantage when bidding against state-owned enterprises.

That shift might be more effective than formal changes to tax and labor policies, since in practice Chinese private business exists in a gray zone of negotiated relationships with officialdom.

The number of new start-ups declined sharply during the crackdown, falling from more than 50,000 in 2018 to fewer than 1,000 last year. The policy stability signaled by Xi’s approval  could also reassure investors that their money won’t suddenly disappear. But this is illusory: Xi could easily reverse the more accommodating approach to private enterprise if he thinks that the CCP’s needs demand it.

The billionaires around Xi at the meeting this week know that, and they will keep signaling their loyalty by any means that they can.

It’s also unclear whether ordinary job seekers will also follow Xi’s lead. The insecurity of the Chinese private sector, and especially tech, in the last five years has reinforced the idea that the only safe jobs are linked to the state—the proverbial “iron rice bowl.” The number of applicants to the civil service soars every year despite a diminishing youth population.

Meanwhile, the appetite for creating new businesses—even on a small scale—has crumbled among the disillusioned post-COVID generation. Trying to revive China’s spirits will take a lot more than televised handshakes and speeches.

What We’re Following

Musk cuts bring jubilation in China. Elon Musk’s assault on U.S. federal government capabilities has been met with glee from Chinese nationalists and state media. Musk’s Department of Government Efficiency has targeted some of Beijing’s bugbears, such as the U.S. Agency for International Development (USAID) and the National Endowment for Democracy (NED).

Multiple groups monitoring Chinese influence or human rights abuses have also been forced to freeze activities after losing federal funding. Musk, who has extensive business ties to China, has echoed conspiracy theories about USAID and NED that are also promoted by Beijing and Moscow.

This approach marks a stark contrast with the first Trump administration, in which China hawks and aspiring cold warriors dominated. But longtime supporters of such work, such as U.S. Secretary of State Marco Rubio, have been strangely silent in the face of Musk’s flurry of cuts and accusations.

Taiwan provocations. While the Trump administration freezes Chinese monitoring programs, closes down key cybersecurity programs, and purges the FBI, it is also throwing out moves that target Beijing. Aside from fresh tariffs on Chinese goods and threats of more tariffs, U.S. intelligence is now promoting lab leak theories about the origins of COVID-19.

But the major provocation is the U.S. State Department dropping language on its Taiwan fact sheet saying that Washington doesn’t support Taiwanese independence, which has sparked a furious Chinese response. It is unclear why the language was dropped and whether it represents an actual policy change.

Trump has been surprisingly hostile to Taiwan since resuming office, threatening tariffs over its chip industry, which was previously seen as a mainstay of U.S. efforts to maintain a technological edge over China. That has prompted Taipei to reach out with offers of talks and arms deals.

A genuine change in policy on Taiwanese independence would seriously freeze U.S.-China relations—and risk speeding up China’s possible timetable for an invasion. Taiwan’s own political parties do not formally support independence declarations, largely due to China’s repeated and legally mandated threats of military action.

FP’s Most Read This Week

• DOGE Is Hacking America by Bruce Schneier and Davi Ottenheimer
• Vance Leaves Europe Gobsmacked by Rishi Iyengar and Keith Johnson
• America Is Its Own Worst Enemy by Stephen M. Walt

Tech and Business

Foreign investment drops. Amid geopolitical chaos, foreign firms are becoming less keen on China. Foreign investment has plunged by 99 percent in the last three years; $168 billion left the country last year. It’s not likely that investors are returning to the United States—where the business environment is also uncertain—but Southeast Asian countries may be big winners.

In China, the number of workers employed by foreign firms has also fallen, now at under 10 million people, its lowest figure in 14 years. Foreign firms have often acted as incubators for talented Chinese entrepreneurs to go on to develop their own businesses, so the knock-on effect may be to further shrink the appetite for such risk-taking.

DeepSeek boom. The low costs of DeepSeek-R1 are sparking widespread adoption of the AI model by other firms—and possibly inspiring a regional boom. Internet giants Tencent and Baidu have both launched new DeepSeek-powered search engines. (Baidu dominates Chinese search, holding roughly 68 percent of the market.)

Southeast Asian firms are following suit—as could much of the world, despite worries about DeepSeek’s censorship.

It’s not clear if DeepSeek is making money from this boom. OpenAI, the main Western competitor, operates at significant losses. However, just as OpenAI’s valuation doesn’t depend on revenue but on investor beliefs in an AI future, DeepSeek may be running at a loss to draw both investment and government backing that will pay off in the long term.