More bark than bite, more rattle than snake, more smoke than fire – pick your idiom of choice, but what’s clear is that Washington has spent the past month making a great deal of noise about China while doing very little about it.
This week’s US sanctions are the perfect example: On August 20, President Donald Trump’s warned of “TREMENDOUS Economic Consequences” for any country that provides “any type of lifeline to Iran.”
Days later, Treasury Secretary Scott Bessent unveiled “Operation Economic Outcast,” Washington’s plan to cut Iran off from external economic support.
· Bessent announced sanctions on more than 60 entities – including several in mainland China and Hong Kong – accused of supporting Iran’s nuclear and missile programs, cyber operations, and oil-revenue generation.
· He also warned that entities failing to cut ties with Iran risked being frozen out of the dollar-based financial system entirely.
Notably absent from the list, however, were any Chinese oil refineries or banks.
· That’s a telling gap, given these are the institutions facilitating the vast majority of Iran’s oil exports.
Hardly the TREMENDOUS consequences we were expecting.
Washington is concerned that sanctioning major Chinese refineries or banks would lead Beijing to retaliate, reigniting the trade war the two countries have spent considerable political capital trying to wind down.
· Instead, the administration has sanctioned a collection of smaller, more peripheral entities – disguised behind a barrage of aggressive rhetoric – while leaving the institutions that really matter untouched.
The Iran sanctions aren’t an isolated case: Washington’s approach to China in recent months has followed the same script of all bluster, no substance.
· In mid-July, Trump made a televised address accusing China of interfering in the 2020 election. There was no substantive policy follow-up.
· Earlier this month, the White House released a report accusing China of exploiting differential tariff rates to evade US import duties, titled “The Great Transshipment Scam.” But the report’s own proposed remedies amount to little more than AI-assisted customs monitoring.
Beijing appears to have clocked the difference between what’s real and what’s theatre, and is responding with studied indifference.
· China arguably needs less from this relationship right now than the US does. Washington wants Chinese purchases of American agricultural goods and Beijing’s help nudging Iran toward a peace deal, while also pushing China to rein in the alleged industrial overcapacity fuelling its export machine.
· Beijing, for its part, mostly wants the relationship to hold steady long enough for Xi’s visit to the US, now less than four weeks away, to go smoothly and, beyond that, for Washington to stay out of its face.
That asymmetry is shaping Beijing’s entire posture. Rather than responding tit-for-tat to every fresh round of tariffs or provocative rhetoric, Chinese officials appear willing to absorb the noise and wait Washington out – confident that the threats which would actually hurt are precisely the ones Washington has so far declined to make.
The danger is that this equilibrium is more fragile than it looks.
· Strategic patience only works for as long as Beijing judges the costs of waiting to be lower than the costs of acting – and Washington’s next move, on Iran or anything else, could easily tip that calculation.
A relationship held together by one side’s forbearance and the other side’s bluster is not built to last.
· But for now, that is precisely the foundation the world’s most important bilateral relationship is resting on.
Joe Mazur, Head of Geopolitical Research, Trivium China
What you missed
US-China
A “broad understanding” that the Busan trade truce will be extended is taking shape ahead of Xi Jinping’s September visit to the US.
· The Chinese side has reportedly pushed for an extension through the end of Trump’s term, while the US wants another one-year extension.
The US is preparing to impose a 7.5% tariff on Chinese imports due to Beijing’s alleged industrial overcapacity.
· On top of the forced labor tariff imposed in June, the excess capacity tariffs would restore Trump’s duties on China to around 20% – consistent with the trade truce terms agreed in Busan.
Foreign affairs
Xi Jinping met with King Abdullah of Jordan in Beijing on the final day of the king’s week-long state visit.
· Like other powers in the region, Jordan wants deeper ties with China to diversify its sources of investment and trade, while preserving the US security relationship that remains essential to the kingdom’s stability.
Econ and finance
The macro planner’s (NDRC) vice chair Yue Xiuhu convened ministries and companies to work out how to finance the “six networks” infrastructure push.
· The shift from discussing what to build to how to finance it signals that investment in the six networks is set to pick up in the coming months – providing Beijing with a lever to shore up slowing growth.
Corporates
CATL is now the largest shareholder of battery swapping (BS) unicorn Qiyuan Green Power, having acquired an additional 24.9% stake in the company.
· With Beijing offering generous policy support for heavy-duty truck (HDT) electrification, buying into the BS industry leader is a shrewd move for CATL, giving it a sizable customer base and countrywide battery swapping network which would otherwise need to be built from scratch.
Tech
eVTOL (aka “flying cars”) maker EHang withdrew its full-year revenue guidance of RMB 600 million, citing uncertainty around manned commercial flight approvals following a fatal crash in late June.
· Beijing has been aggressively promoting the low-altitude economy as a growth driver, but a single fatal crash has shown how quickly safety concerns can override industrial policy ambitions.
The cyberspace regulator’s (CAC) new plan to support digital enterprises, released August 21, outlined the agency’s regulatory priorities over the next several years.
· In a bid to rebuild trust with digital enterprises in the post-tech crackdown era, the plan commits to standardizing administrative inspections of these firms to reduce disruption to normal operations.
Net zero
The Party Central Committee and State Council general offices jointly released a set of measures governing how local cadres will be punished for causing ecological and environmental damage.
· Notably, officials will remain accountable for misconduct that occurred on their watch even after they retire or move on to other roles – much like the Party’s approach to corruption.
Politics
A massive mudslide on August 26 at Tibet’s Jilong port has left at least three dead and 558 missing in China, with Xi directing the response from Beijing.
· During his nearly 14 years in power, Xi has rarely appeared at the frontline of a disaster, in stark contrast to his predecessors Jiang Zemin and Hu Jintao.
The Party’s anti-corruption watchdog (CCDI) convened an unusual special plenum to appoint two new deputy secretaries, Zhao Shiyong and Zhang Zhong.
· The August meeting was the first stand-alone mid-year CCDI plenum of its kind in at least two decades.
As always, it was a busy week in China.
● Thank goodness Trivium China is here to make sure you don’t miss any of the developments that matter.