Dear Reader,

The economic agenda-setters were very clear about what the problems are: too few babies are being born and too much local government debt is piling up. The falling fertility rate is an ongoing source of national angst but for the first time in years, the annual gathering of the central economic work conference turned its attention last week to the parlous state of finances at the provincial and grass-roots levels. Lower-level authorities do most of the heavy lifting when it comes to realising national priorities, including giving families and companies the incentives to thrive and expand. Now they have to build confidence in the future on the broken finances of the past.

For a close look at China’s most advanced weapons, explore our multimedia project, The Red Arsenal. And dive into our series The New Narrative on how China is telling its own story.

We welcome feedback. You can email me at globalimpact@scmp.com and if you enjoy this issue, let us know. 

The Big Picture

Military flexercise 
China and Japan trade accusations over a mid-air stand-off during a training exercise by China’s Liaoning aircraft carrier.  

• Why it matters: Beijing is increasing its military presence near its neighbour as tensions persist over Japanese Prime Minister Sanae Takaichi’s comments on Taiwan
• Meanwhile, US bombers and fighter jets join drills with Japanese naval self-defence forces
• But, why has the Liaoning aircraft carrier charted an unusual course this time? 
• And, what does the US mean when it talks about “flexible realism” with China?

Unlike minds
German Foreign Minister Johann Wadephul finally visits China, taking a different tack on trade tariffs than French President Emmanuel Macron.

• Why it matters: Germany is not the titan it once was and is trying to revive its economy and global influence  
• Meanwhile, what are China’s major economic priorities for the next year? 
• And, how will the sale of Nvidia’s H200 chips in China play into Beijing’s push for tech self-reliance? 

Wins and Fails

Dutch Economy Minister Vincent Karremans admits he was blindsided by the Nexperia crisis 

RedNote is banned in Taiwan over security concerns 

Bai Tianhui is executed for taking more than a billion yuan in bribes

Bi Jingquan, former chief of the food and drug watchdog, is expelled from the Communist Party

Big Numbers

5-6% – economist Justin Li Yifu’s GDP estimate growth for China over the next decade 

0.7% – China’s CPI growth in November, the highest in nearly two years 

12 – the death toll from a residential building fire in southern China

Direct Quote 

“[The finding] seems to defy any hopes among political leaders and China-watchers, particularly in the West, that continuous economic development in China will lead to stronger support for political liberalisation among its population.”

The conclusion of Chinese and British researchers examining the political views of China’s post-90s generation.