Gavekal Technologies

In May, presidents Donald Trump and Xi Jinping promised a new era of “constructive strategic stability.” What we have seen since then is a simmering tension, as the US has tried to restrict Chinese tech imports through a series of measures by a new actor, the Federal Communications Commission. China finally responded in early August with a calibrated set of its own restrictions, designed to respond to the US but not to escalate.

Europe’s desire to limit imports of carbon-intensive goods is leading to changes in industrial China. Beijing has launched a set of zero-carbon industrial parks that will tightly link factories with renewable energy sources, helping them cut their carbon footprint and comply with new EU regulations that will tax carbon-intensive steel and aluminum imports and bar entry to batteries that fail to meet carbon limits.