Welcome to Foreign Policy’s China Brief.
The highlights this week: A China-Japan feud escalates over comments about Taiwan, the Dutch takeover of Chinese chip manufacturer Nexperia leads to fallout, and China’s new economic data points to a bleak outlook for 2026.
Welcome to Foreign Policy’s China Brief.
The highlights this week: A China-Japan feud escalates over comments about Taiwan, the Dutch takeover of Chinese chip manufacturer Nexperia leads to fallout, and China’s new economic data points to a bleak outlook for 2026.
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China-Japan Feud Escalates
The China-Japan relationship soured further this week after controversial remarks from newly elected Japanese Prime Minister Sanae Takaichi, who said early this month that Japan would consider aiding the United States if China were to attack Taiwan.
Takaichi’s comments prompted fury from Beijing, which has gone on a media blitz, canceled diplomatic meetings, launched new patrols around disputed islands, and warned Chinese citizens against traveling to Japan, leading to around half a million canceled trips.
China and the United States regularly trade rhetorical blows, yet their bilateral relationship endures. So why has this dispute escalated so quickly?
When it comes to U.S.-China competition, there is a certain acceptance of the reality of geopolitics. China’s references to red lines might sound alarmist when, for instance, it criticizes U.S. arms sales to Taiwan, but such rhetoric has become so routine in the relationship that it no longer carries much weight.
With Japan, however, a deep well of historical resentment makes every interaction more sensitive. For centuries, Japan occupied a relatively peripheral position in Asia compared with China. But from the late 19th century onward, Japan’s rapid modernization and internal cohesion gave it a decisive edge over a sclerotic China.
In 1894, Japanese forces massacred thousands of Chinese soldiers and civilians after capturing the city of Port Arthur (now Lushunkou) in the First Sino-Japanese War. A quarter century later, Chinese students in Beijing rioted when Germany’s colonial holdings in China were transferred to Japan—an event that would become a foundation of modern Chinese nationalism.
Most traumatically, Japan’s invasion of China from 1931 to 1945 was responsible for an estimated 14 million Chinese deaths. That legacy is constantly reinforced in China, and most Chinese believe that Japan has never sincerely apologized for its World War II atrocities. Today, that false claim is echoed in Chinese media and amplified by real ultranationalism and wartime atrocity denialism in Japan.
As a result, China-Japan clashes have a habit of spiraling out of control, with consequences for ordinary people. In 2012, for example, a quarrel over the disputed Senkaku/Diaoyu Islands led to violent attacks in China against Japanese restaurants, schools, and businesses.
It’s hard to see a way out of the current spiral in the short term. China seems to hope that Takaichi will balk or that the Japanese public will turn against her, but Japanese are rallying behind the prime minister. Her government now enjoys a 69.9 percent approval rating—a sharp increase from her predecessor—despite the public remaining deeply divided over defending Taiwan.
Given her strong nationalist stance, Takaichi is unlikely to backtrack on what’s quickly becoming a signature issue.
Meanwhile, Japan has dispatched diplomats to try to smooth things over and has advised its citizens in China to stay vigilant. However, after meeting their Japanese counterparts in Beijing on Tuesday, Chinese officials only reiterated demands for Japan to back down.
Tokyo also has one eye on Washington, where U.S. President Donald Trump might lash out if he believes Japan is appeasing China at the expense of the United States. But if China tries to squeeze Japan by halting rare-earth exports, the United States might read it as a breach of the recent agreement between Trump and Chinese President Xi Jinping (though that deal is not yet finalized).
Such quarrels can have long-lasting effects on diplomacy, as seen in the Chinese boycott of South Korean companies after Seoul allowed a U.S. missile defense system to be stationed in its territory and the six-year freeze in China-Norway relations after the Nobel Peace Prize was awarded to Chinese dissident Liu Xiaobo.
But China and Japan have extensive trade ties, and neither can afford another blow to their already struggling economies. This may lead to a quiet de-escalation once the issue fades from the headlines.
What We’re Following
Nexperia quarrel. The dispute between China and the Netherlands over the Dutch takeover of Chinese-owned chip manufacturer Nexperia remains tense, with Dutch Economy Minister Vincent Karremans insisting recently that he would do it all over again.
Karremans says U.S. pressure played no role in the decision, arguing instead that it was prompted by the Chinese owners asset-stripping the firm and moving production from the Netherlands to China. Meanwhile, Nexperia’s Dutch headquarters and its China unit are swapping accusations, leaving many of the firm’s operations stalled.
China initially retaliated by blocking the export of critical automobile chips to Europe, though it later backed down as part of Xi’s agreement with Trump. The European Union continues to seek some form of reconciliation with China, fearful of being squeezed over rare earths.
India-China detente. As China quarrels with Japan, relations with another neighbor, India, have slowly improved. Deadly border clashes in the Galwan Valley in 2020 nearly sparked a wider conflict between the countries, but years of patient diplomacy have stabilized relations, especially following last year’s meeting between Xi and Indian Prime Minister Narendra Modi.
Chinese state media have called for better communications between the two countries, and China has allowed cross-border pilgrimages to resume. In return, India has lifted onerous visa requirements for Chinese visitors and, in the latest diplomatic peace offering, resumed Air India flights to China.
FP’s Most Read This Week
Tech and Business
Next year’s economic outlook. Disappointing economic indicators paint a troubling outlook for China as it heads into 2026. The government is grappling with the slow collapse of the real estate bubble while trying to curb overproduction without triggering widespread unemployment.
Investment has sharply declined, factory and retail growth have slowed, and unemployment, especially among young people, remains high.
The situation may be even worse than official numbers suggest. China’s economic data, never the most reliable, is becoming even more dubious. The government’s claims of 5 percent GDP growth in 2024 are particularly questionable.
Space drama. Three Chinese astronauts are stranded on the country’s main space station after their return vehicle was requisitioned by the crew they replaced. The Shenzhou-20 mission, which launched a three-person team to the Tiangong Space Station in April, was hit by space debris that cracked a window in the return vessel. The crew had to use the Shenzhou-21 spacecraft, which brought a new team up in October, to return to Earth last week.
The current crew is not scheduled to return for several months, but they currently lack any way to leave the station in the event of another collision or other problems. Though the government has kept plans quiet, it looks as if another vehicle may be launched as early as next week.
