Anyone hungry for lame Peking duck?
On November 3, U.S. President Donald Trump’s Republican Party suffered an electoral shellacking of historic proportions in the US midterms.
The Democrats handily won control of both the Senate and the House of Representatives.
China’s foreign ministry called the result an “internal affair” and pledged to “properly uphold and implement” the consensus reached by Xi and Trump during their recent summits.
But despite Beijing’s tight-lipped rhetoric, the blue wave has important implications for US-China ties.
Trump’s attention will shift to domestic issues as he tries to salvage the wreckage of his party and fend off a hostile congress; foreign policy, including U.S.-China relations, are likely to slip down the list of priorities.
As a result, the administration may be less likely to innovate new trade and economic restrictions targeting China until after the dust settles.
It also reduces the urgency of key aspects of recent U.S.-China understandings on trade.
In particular, Trump’s focus on agricultural purchases was aimed at easing economic pressure on his rural base before the midterms.
With the electoral damage already done, the pace of progress on other pending agreements will likely slow to crawl.
Despite their big wins, the Democrats’ influence on China policy will take time to manifest.
Most of Trump’s remaining tariffs and economic restrictions on Beijing flow from his executive powers and are not subject to congressional approval.
Like Trump himself, the Dems’ priority will be domestic political consolidation rather than foreign policy entrepreneurship.
Get smart: We think American China policy will go on autopilot in the short-term.
Trump is still likely to meet Xi Jinping twice more this year, but we’re not expecting much in terms of new deliverables.
The long view: With a post-Trump future now in sight, Beijing will be bracing for a less volatile, but not necessarily friendlier relationship with the next US administration.
Joe Mazur, Head of Geopolitical Research
What you missed
U.S.-China
China’s commerce ministry said Beijing was willing to expand purchases of US agricultural products, but: “Only on the condition that the two sides implement their agreed ‘$30 billion-for-$30 billion’ reciprocal tariff-reduction arrangement.”
Translation: The USD 17 billion in US agriculture purchases the White House announced in May are contingent on tariff reductions that haven’t been finalized.
Even if those tariff reductions were finalized today, the “pro-rated” target for 2026 would presumably be less than one sixth of the total – or under USD 2.7 billion.
Foreign affairs
German President Frank-Walter Steinmeier met Xi Jinping in Beijing during a five-day state visit to China and the tone was decidedly positive.
Steinmeier voiced confidence that trade disputes could be resolved through dialogue, though he also raised concerns about China’s growing trade surplus and Europe’s increasing dependence on Chinese products.
Beijing and Ottawa bought two more years for the trade detente that Xi Jinping and Canadian Prime Minister Mark Carney reached in January.
China’s suspension of 100% tariffs on canola meal and peas and 25% on lobster and crab, in force since March, now run to the end of 2028.
Canada will likewise continue to waive tariffs on certain Chinese steel and aluminum products across the same period.
Econ and finance
The stats bureau’s (NBS) October PMI print reported production, exports, and new orders all falling into contraction, while the three subindices expanded under the S&P RatingDog survey.
But on pricing, both PMIs point toward easing inflationary pressures, with the NBS producer price subindex falling sharply to 51.7 from 54.0, and the RatingDog equivalent recording an outright decline.
Chinese households are shifting their spending from goods to services – but not fast enough to prevent an overall consumption slowdown.
Year-to-date, households allocated 38.2% of consumption expenditure toward services, up from 37.5% over the same period last year.
But aggregate per capita consumption grew just 3.6% y/y year-to-date, down from 4.6% over the same period last year.
Tech
DeepSeek raised RMB 105.5 billion in its second fundraising round, giving it a valuation of RMB 615.5 billion (about USD 92 billion).
That makes it the largest venture round yet for a Chinese AI firm, topping DeepSeek’s first round, which closed in June at a valuation above USD 50 billion.
State-owned investors accounted for 27% of the funding, up from 2% in the first round.
Researchers from DeepSeek, Alibaba’s Qwen, and MiniMax discussed open-source AI on a panel at the World Internet Conference in Wuzhen.
Qwen lead Liu Dayiheng said open models have two safety weak spots – they can’t be recalled once released, and third-party developers can strip out their built-in guardrails.
DeepSeek researcher Gao Xi said open-sourcing could amplify AI safety risks and the company “has a responsibility to keep safety problems from getting bigger.”
Business environment
MofCom released draft measures setting out how it investigates and penalizes violations of dual-use export controls, pulling its 2020 Export Control Law and 2024 dual-use regulations into a single enforcement manual. According to the draft, investigators can:
Seal or seize premises, facilities, and property – not just the goods in question
Take up to a year or longer to decide the case, versus a 90-day default under China’s general penalty rules
Politics
Guo Ningning was appointed acting governor of Fujian and is expected to be formally elected governor soon – making her the youngest woman at full ministerial level in China.
A career banker, Guo has a solid background in international finance – an asset in an export-oriented province on the front line of Beijing’s Taiwan policy.
At 56, and as one of very few women in the Party’s top ranks, she’s one to watch for the 2032 Politburo.
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.