Today’s Focus: Stalemate in US-China Closed-Door Negotiations, No Communication between Rubio and Wang Yi in Front of the Cameras; Chinese Hacker Arrested in Italy! FBI Rarely Rebukes “Ignoring Shame”; Is China’s Economy at Its Most Dangerous Moment? Nomura Report Inventories Multiple Crises.
As tensions escalate in US-China trade relations, US Secretary of State Rubio and Chinese Foreign Minister Wang Yi held their first face-to-face closed-door meeting on Friday. The meeting started around 3 p.m., and prior to the talks, the two did not shake hands in front of the cameras nor make any public comments.
During his trip, in addition to the East Asia Summit and ASEAN Regional Forum, Rubio also engaged in discussions with officials from Japan, China, South Korea, Australia, Russia, India, the EU, and Southeast Asian countries. He emphasized that the United States is the most reliable strategic partner and will not ignore the security in the Indo-Pacific region due to conflicts in the Middle East or Europe, positioning itself as a more reliable partner than China.
Meanwhile, Washington announced a new round of tariffs on multiple Asian countries. US President Trump announced tariffs of 25% on Japan, South Korea, and Malaysia; 30% on Sri Lanka, 32% on Indonesia, 36% on Thailand and Cambodia, and 40% on Myanmar and Laos. Only the Philippines and Vietnam have lower rates at 20%.
In response, Beijing warned that if the US reinstates high tariffs on Chinese goods next month, China will take countermeasures, even threatening to retaliate against countries cooperating with the US in trying to exclude China from the supply chain.
Regarding the closed-door meeting between Rubio and Wang Yi, sources revealed that the conversation lasted about an hour. So far, neither side has made any official statements. However, it is widely believed in the public that in addition to the issue of tariffs, Rubio may have also expressed concerns to China about its support for Russia.
On Thursday, the day before the talks, Rubio told the media that China has been covertly supporting Russia’s war actions, and he may raise this issue with Wang Yi during the meeting.
Recently, Italian authorities, at the request of the United States, arrested Xu Zewei, identified by the US as a “Chinese hacker.” On July 8, the FBI, in a rare move, criticized China’s Ministry of State Security in simplified Chinese, saying it “uses all means, disregarding shame.”
According to Italian media reports, on July 3, 33-year-old Xu Zewei from Shanghai flew to Italy for vacation. Upon his arrival at Milan Malpensa Airport, Italian police arrested him. He was accused of collaborating with a hacker group commissioned by China to launch cyber infiltration operations against US research institutions, particularly targeting US research data during the early stages of the COVID-19 outbreak.
On July 8, the FBI Houston Division posted a message on X platform in simplified Chinese, announcing the arrest of Chinese Ministry of State Security hacker Xu Zewei at an Italian airport. A severe statement was released, condemning China’s Ministry of State Security.
The statement pointed out, “The Chinese government spares no means to steal American technology and sensitive information, disregarding shame and ignoring the fundamental norms of international law. Their only ‘regret’ is that their illegal deeds have now been exposed and made public.”
The FBI warned China’s Ministry of State Security: “Your crimes have been exposed. The international community sees your true nature. You are a government that disregards all rules, laws, and morals, recklessly stealing American resources. If you persist in malicious cyber attacks, you will face severe consequences.”
According to the publicly available indictment from the US Department of Justice, from 2020 to 2021, Xu Zewei and his co-defendant Zhang Yu, 44, participated in large-scale cyber attacks coordinated by China’s Ministry of State Security, including attacks on multiple US universities and research institutions to steal research results on the novel coronavirus.
The indictment shows that Xu Zewei, under the direct command of officials from the Shanghai Ministry of State Security, used vulnerabilities in Microsoft’s email system to infiltrate thousands of targets globally, including a university in Texas and a globally renowned law firm. More so, they even stole a significant amount of confidential information, including US policy-makers’ data.
On November 2, 2023, the Southern District of Texas issued an arrest warrant, listing Xu Zewei as a globally wanted subject. His arrest in Italy indicates that the extradition process will soon commence. Currently, his co-defendant Zhang Yu remains at large.
A netizen on X platform posted that if Xu Zewei claims he is not a hacker, then he is definitely lying. On June 18, 2024, at a cybersecurity awards ceremony held in China, Xu Zewei and several cybersecurity professionals were publicly recognized for their technical contributions in 2023, particularly for their performance in the China National Vulnerability Database (CNNVD). During the ceremony, Xu Zewei, known as the security technical director of Chaitin Technology, which is famous for its “white hat hackers,” along with renowned white hat hacker Zheng Wenbin, founder of Cyberspace Kunlun Technology, and Lihon Kim, a security expert from Qui Anxin Code Security, were awarded the title of “Outstanding Special Technical Expert.”
John Lin, a member of the US Committee on Dealing with the China Crisis, stated in an interview with New Tang Dynasty that the Chinese Ministry of State Security and the Chinese military system have a vast hacker force, with Xu Zewei being just one of them. He believes that China’s current behavior is in a state of war, and the US government should not only deal with China from a conventional diplomatic or economic perspective, as China is attacking the US with Unrestricted Warfare, the US must also counter back in various ways.
Eisenberg, Assistant Deputy Minister of National Security at the US Department of Justice, stated that Xu Zewei’s arrest once again exemplifies the US’s patience in pursuing Chinese hackers and its unwavering commitment.
Since the pandemic, the mainland Chinese economy has not recovered, becoming increasingly bleak, with scarce pedestrian traffic and weakened consumer spending. Recently, Nomura Securities warned that China will face a severe situation of “cliff-like decline in demand in multiple areas” in the second half of this year, with the economic fundamentals likely deteriorating significantly.
On July 9, Nomura Securities Chief China Economist Lu Ting and the team released a report, stating that this year, the mainland economy may hit a turning point mid-year, particularly with a “cliff-like decline” on the demand side. This decline is not a short-term fluctuation but a systemic weakness caused by structural adjustments and policy uncertainties.
The report cited various reasons for this “cliff-like decline in demand,” including reduced infrastructure demand, decreased export demand, sluggish house loans, weak consumption, and a sharp drop in consumption in the mid-to-high-end and catering sectors.
The report pointed out that the real estate industry in mainland China is still in a quagmire, with recent sharp declines in sales volume and prices. Official data shows that in the first five months of this year, national real estate development investment dropped by nearly 11%, and new housing construction area plummeted by nearly 23%. The slump in the real estate market has severely impacted related industries such as cement, steel, and machinery. Despite multiple stimulus plans from the central government, local governments are heavily burdened with debt and unable to undertake large-scale projects. An expert stated that relying on railways and bridge construction to drive GDP growth has reached its limit.
In addition to real estate, China’s export industry is also suffering a blow. As European and American countries continue to levy tariffs, pushing for industry chain shifts, the trend of “de-Chinafication” is becoming more apparent. In the second quarter of this year, China’s exports to the United States dropped by nearly 10% compared to the same period last year, including in electric cars, clothing, and machinery. Many factories have started limited production or even layoffs. A Shanghai-based auto parts manufacturer confessed that previously, 60% of their orders came from North America, but now they are turning towards Vietnam and Mexico.
Furthermore, house loans are a serious issue. Despite a slight drop in the interest rate for existing house loans, it generally remains higher than the level for new loans, with a spread of up to 1 percentage point. Many families still struggle with heavy house loan burdens.
Recently, a 30-year-old executive at the Shanghai branch of Zhongjin Company died from falling off a building due to pressure from salary cuts and heavy house loan burdens. Similar situations are not uncommon in mainland China. Some families have house loan expenses accounting for up to 45% or more, in addition to paying for children’s tutoring, living expenses, among others, pushing their stress levels to the limit.
An IT engineer in Beijing stated, “Who dares to consume anymore? Now, it’s just about surviving, not living.”
Starting early this year, the Chinese Communist Party has intensified control measures, banning official banquets and alcohol consumption, leading to a comprehensive downturn in high-end liquor sales, catering, and exhibition economies. Baijiu sales have dropped by 17%, and many high-end restaurants have been forced to close down, some resorting to selling snacks roadside for survival. Last week, the news of the closure of the high-end dining brand “Taoranxuan” in Guangzhou and the outside stall setup of the “Xiaoshan Baosheng Hotel” in Hangzhou since April this year circulated.
In response to weak consumer spending, the Chinese government has promoted favorable policies such as “trade-in for new” to stimulate the consumption of appliances, automobiles, and others. However, the effects of these measures are brief and limited. The Nomura report states that these one-time subsidies only bring temporary consumption rebounds and do not solve structural issues. This is because ordinary people lack confidence in the future and are reluctant to spend.
The Nomura report also highlights that China currently has as many as 171 million elderly rural residents, with an average monthly pension of only 223 yuan, significantly lower than urban retirees. Due to the extremely low protection, people tend to save more and consume less, making it challenging to establish long-term stable consumption dynamics, while expenses on education, medical care, among others, are the main pressures for low- to middle-income families.
Moreover, today’s young Chinese population has shown drastically reduced interest in marriage and childbearing. Data indicates that in the first quarter of 2025, the number of marriage registrations in China hit the lowest point since 1979. The wedding industry has been severely impacted, with closure rates of wedding companies exceeding 40% in many cities.
“Nikkei Asia” points out that the biggest concern for the Chinese economy is the loss of confidence among young people, hesitancy in investments by the middle class, and the government’s deepening debt crisis from which it cannot break free.