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Top Chinese officials told Treasury Secretary Janet Yellen they are optimistic China can return to normal economic growth and avoid a crisis in its property sector, according to a Treasury official.

Why it matters: China’s economy is somewhat of a black box. The Biden administration — not to mention every investor with a Bloomberg Terminal — is eager to gain a better understanding.

Driving the news: This week, Beijing’s official GDP reading flashed 3% in 2022, down from 8.1% in 2021. The country’s housing market is flirting with disaster.

Wednesday's meeting between Yellen and China’s Vice Premier Liu He at the World Economic Forum in Zurich, Switzerland, gave Treasury officials a chance to hear Beijing's theory of its economy — as well as global growth — first-hand and in-person. 

Between the lines: The mood of the meeting, which was attended by officials from both delegations, was largely positive. When it was over, Treasury quickly announced that Yellen would visit China in the "near future." 

Yellen will also roll out the welcome mat to whoever replaces Liu in March, when President Xi Jinping unveils his new government. 

The intrigue: When the official agenda indicated it was time to raise any concerns, both sides said there was no need — as Yellen and Liu already discussed them one on one at a coffee break, according to the Treasury official.  

That kept any difficult conversation — or confrontations — between the two principals. 

The big picture: With Xi abandoning his zero-COVID approach, there’s some uncertainty about how China's business cycle will respond to COVID-19's own vicious waves.

The coming Lunar New Year, when many Chinese residents travel home for family gatherings, will test China’s health care system and its economy’s ability to remain productive if COVID cases surge. 

Liu tried to allay some of those concerns with a largely sunny speech on Tuesday in Davos.

What we're hearing: The Chinese delegation acknowledged the financial risks in the property sector but indicated they can bring it under control. 

They also explained their new efforts to provide a more level playing field for China’s private sector to compete with state-organized enterprises (SOEs).

The Chinese delegation didn’t define what it means by normal economic growth — only that it was confident that it can resume something close to it. In the decade before COVID, China’s annual GDP averaged above 7%.

The other side: The Chinese, in turn, had questions about the U.S. economy. 

Yellen told her counterpart that the U.S. can avoid a recession and still bring down inflation. That's in line with her public comments. 

Be smart: Yellen is just like any other economist in government, only more so. 

The former academic and Fed chair, the first to serve as Treasury secretary, thrives on data. 

She got a better understanding of China’s economy on Wednesday, but Beijing doesn’t provide nearly the same level of economic transparency as almost every other G-20 country. 

Inside Yellen's rare meeting with China's vice premier

China’s economy is somewhat of a black box.

Photo: Sebastien Bozon/AFP via Getty Images

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After a record economic expansion, the coronavirus pandemic sent the U.S. economy into a recession as unemployment soared to staggering heights. The country now faces urgent questions about how much stimulus is needed for reeling consumers and businesses, and what a recovery might look like.

Economy & Business

China is becoming the most formidable rival America has faced, and the risk of confrontation with Russia, North Korea or Iran still looms. Authoritarians are rising, the chaotic Afghanistan exit revealed the limits of U.S. power, and the pandemic, climate change and other critical challenges continue to pose grave threats.

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The newfound political fervor that sent protesters to the streets in China over Beijing's zero-COVID policy is helping Chinese activists worldwide grow their bases and forge stronger ties with other pro-democracy protesters, organizers based abroad told Axios.

The big picture: The COVID protests in China last November achieved their primary goal — the end of mass lockdowns, quarantines, and daily testing — even though police quashed the demonstrations within days.

While the end of zero-COVID slowed momentum for Chinese protesters abroad who are calling for democracy in China and the resignation of President Xi Jinping, it also proved protests can influence policy decisions in Beijing.

"Chinese people have definitely become more politically minded over the last few years, and the COVID-19 pandemic hastened that process," said Miho, 19, a student at the University of California, Irvine.

Background: Late last year, dozens of Chinese cities saw the country's largest political demonstrations in decades, as protesters demanded an end to zero-COVID policies. 

Organizers abroad soon followed suit, with some solidarity rallies openly calling for Xi to step down. One of the largest rallies was held near the Chinese Consulate in New York City, where about 1,000 people gathered on Nov. 29. Many held blank sheets of paper, just like protesters in China.

Axios spoke with eight overseas organizers across the U.S. and in Canada, including one who coordinated the New York rally. Most of them asked that only their English names be used, fearing retaliation from the Chinese government against them and their families.

What they're saying: "I think it’s a short-term victory for the Chinese people, but it’s not enough," said Wang Han, a 25-year-old student at the University of Southern California who went on a hunger strike outside of Apple's headquarters last month to protest the company's human rights records in China.

"If you don’t have the right to choose your own destiny, if you do not have the freedom to express disagreement with your government, then another tragedy will happen in the future," he added.

Yes, but: "[F]or a lot of people, their basic interest has been fulfilled by the relieving of the zero-COVID policy," a Chinese activist based in California told Axios, noting this has decreased the momentum among Chinese people abroad who were most incensed by the travel barriers, quarantines and economic damage caused by zero-COVID policies.

And not everyone wants "democratization," said Jules, a 23-year-old student organizer from northern China who coordinated several solidarity rallies in Chicago late last year.

How it works: Young Chinese organizers overseas have sought support from other vulnerable groups targeted by the Chinese Communist Party, such as Uyghurs, Tibetans and Hong Kongers. They've also contacted longtime dissidents to learn hard lessons about confronting an authoritarian regime.

Miho, who uses they/them pronouns, said they formed a small group tentatively called "Freedom Solidarity" at UCI last October. They forged an informal alliance with Iranian students critical of their own government's repressive policies and started co-hosting events.

"Our goal is to fight against ethnic oppression everywhere, but China is a key area of focus," Miho said.

Jason, 29, a recent graduate who organized the NYC rally, said he's also seeking a global coalition by contacting similar groups in Canada and Europe. On the most recent Human Rights Day, they coordinated many local rallies together, he said.

The intrigue: Organizers who spoke with Axios stressed the importance of keeping some degree of anonymity in public to reduce the risk of being identified and threatened by Chinese government minders abroad.

"Protecting members' identity is our top priority. We know that some people might be recruited to spy on us, other people might be coerced because their parents were in jeopardy," said Yang Ruohui, president of the Assembly of Citizens, a grassroots organization of Chinese youth in Canada.

"We limit information collection to a certain extent. We also have specific rules and procedures to shield our identity, such as compartmentalizing and clarifying our organizational structure," Yang explained.

Still, no amount of precaution feels sufficient, said Shawn, a student at Columbia University, who co-founded the White Paper Society last month. 

"When you decide to come forward, you already tacitly acknowledged the risks associated with it, and organizers obviously take more risks than participants."

"It takes enormous courage for young people to protest against the CCP on the streets, and it's a really tough decision," said Zang Xihong, 60, a Toronto-based writer and dissident better known by her pen name Sheng Xue, who fled China after Tiananmen Square crackdown in 1989. 

What to watch: "The White Paper Movement is a leg of China's journey to freedom and democracy," Zang told Axios. 

"Although it looks fairly quiet now, every eruption adds to its momentum."

After zero-COVID ends, Chinese activists abroad dig in for long haul

Several overseas organizers told Axios about their experiences. They said the fight is far from over.

Protesters holding white papers and placards during a solidarity rally in Boston

Protesters held up blank sheets of paper and placards as part of the White Paper Movement in Boston on Dec. 2. Photo: Tang Ka Huen/SOPA Images/LightRocket via Getty Images

China's population falls for first time in over 60 years

This marks a clear inflection point that will slowly but dramatically change Chinese society and politics over the next few decades.

A woman holds a baby at Shijiazhuang Railway Station on the first day of 2023 China's Spring Festival travel rush on January 7, 2023 in Shijiazhuang, Hebei Province of China. 

A woman holding a baby at Shijiazhuang Railway Station in Shijiazhuang, in the Hebei Province of China, on Jan. 7. Photo: VCG/VCG via Getty Images

President Biden has made the COVID-19 crisis and a post-Trump return to national unity and traditional democratic ideals his top priorities. From vaccinations to stimulus to schools, Biden is seeking bipartisan compromise while showing a willingness to use executive authority and bare Democratic majorities in the U.S. House and Senate to implement his policies. Republican leaders are navigating deep party divisions over if and how to move beyond former President Trump.

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The U.S. faces a range of health care flashpoints — unaffordable drugs, opioids, vaping — as we debate whether to adopt universal care. For now, the Affordable Care Act is the law of the land, but Republicans want to issue it a final death blow.

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Axios Communicators

Economic fear is creating record levels of polarization around the globe, particularly in developed nations with slow-growth economies, like Spain and Japan, according to Edelman's latest annual Trust Barometer survey.

Why it matters: Polarization leads to instability, creating uncertainty for business. That puts more pressure on companies and corporate leaders to establish the trust among consumers that governments have failed to win.

The big picture: For the third year in a row, business is the only institution globally that is seen as both ethical and competent. Media and government are seen as particularly unethical and incompetent in addressing societal problems, while NGOs are perceived as ethical, but less competent.

Details: Around the world, economic optimism has cratered thanks to rising inflation in the wake of the pandemic.

In 24 of the 28 countries surveyed, confidence in the economy has plummeted to all-time lows, per the study. Only respondents in China believe that they and their families will be better off in five years.

None of the 14 developed nations surveyed had more than 35% of its respondents saying they were confident that their family will be better off in five years.

Be smart: Developing nations with slow-growth economies, such as Argentina, South Africa, Brazil and Mexico, are experiencing some of the largest trust gaps between business and government, while fast-expanding economies such as Indonesia, Saudi Arabia, and Singapore are experiencing the smallest.

Between the lines: In places that have long been considered stable democracies, like the U.S. and Argentina, economic and political distrust is driving more polarization.

Six countries globally — U.S., Colombia, South Africa, Argentina, Spain and Sweden — are considered severely polarized, according to the data.

Brazil, Mexico, France, the U.K., Japan, Italy, Germany and the Netherlands are in danger of severe polarization.

Levels of polarization and economic distrust are lower in authoritarian regimes like UAE and Saudi Arabia, in part due to more economic optimism in those countries.

Be smart: Polarization, by Edelman's definition, occurs as a result of several factors, including economic pessimism, distrust in media and government, systemic inequality and a lack of shared identity.

Across nearly every country surveyed, trust in business is stronger than trust in government. And in democracies, trust in government is particularly low.

In authoritarian regimes like UAE, Saudi Arabia and China, the trust gap between business and government is relatively small.

The intrigue: Across countries with high GDPs, like the U.S., China, India, France, and the U.K., trust in foreign businesses is declining.

What to watch: In polarized nations, businesses face more risk for speaking out on societal issues, according to the data.

Businesses can protect themselves from becoming mired in politics by issuing trustworthy information that is backed by data or science and by taking stands that consistently align with corporate values.

Yes, but: Stakeholders still expect CEOs to take a stand on issues like employee inequity, climate change and discrimination.

Polarization eats the developed world

Around the world, economic optimism has cratered thanks to rising inflation in the wake of the pandemic.

Illustrated collage of a globe in pieces with lightening bolts coming out of the edges. 

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China officially updated its COVID death toll numbers Saturday, linking nearly 60,000 deaths to COVID-19  since early December, the Associated Press reports, citing the country's top health leaders.

Why it matters: These official numbers — which are likely smaller than the actual tally — doubles China's official COVID death toll since the disease was first discovered there in 2019, per AP.

Driving the news: China's National Health Commission released a new COVID-19 death count from this winter when a surge of cases slashed through the country.

By the numbers: China reported 5,503 deaths from respiratory failure caused by COVID-19 and 54,435 fatalities from underlying medical conditions combined with the virus since early December, AP reports. 

That's up from the 37 fatalities reported between Dec. 7 and Jan. 8, according to the Washington Post.

These numbers double China's official COVID-19 death toll to 10,775, per AP. 

The country previously reported only 5,272 deaths from COVID since the pandemic began, the Washington Post reports.

Yes, but: The NHC said the “deaths related to COVID” happened in hospitals, leaving open the possibility that more people died at home, AP reports.

What they're saying: The country said that the peak of the recent outbreak has likely passed.

"The number of fever clinic visitors is generally in a declining trend after peaking, both in cities and rural areas," said Jiao Yahui, an official from the National Health Commission, per Reuters.

The big picture: China has been shy about releasing its full COVID-19 data and the actual death and case numbers might be higher. The country stopped reporting COVID-19 death data after lifting its COVID-19 rules and restrictions in December.

Soon after the rules lifted, China saw a COVID "tsunami" as more deaths occurred. But at the time, China's official health authority did not report new official COVID deaths. The last fatality had been reported on Nov. 23.

Local media shared stories on the COVID-related deaths after the restrictions were lifted and several funeral attendees told reporters their thoughts on their loved ones who had passed away. Funeral homes said they were struggling to keep up with demand, too.

Governments and the World Health Organization then called on China to share more information about their COVID deaths and case numbers.

China to stop reporting asymptomatic COVID cases

China battles rising COVID-19 cases after easing precautions

China travel: More countries impose COVID requirements

China officially doubles its COVID death toll

The country previously reported only 5,272 deaths from COVID since the pandemic began.

A patient receives treatment at Peking University Third Hospital on January 3, 2023 in Beijing, China.

A patient receives treatment at Peking University Third Hospital on January 3, 2023 in Beijing, China. Photo: VCG/VCG via Getty Images

COVID-19

India is set to surpass China as the world's most populous country sometime this year, the UN projects.

Why it matters: The milestone could have major economic and societal implications for both countries — and may eventually influence trade flows and upend the global balance of power.

By the numbers: India was home to 1.417 billion people as of last year, compared to China's 1.426 billion, per UN figures.

But as India's population continues to grow, China's population is expected to decline — to 1.313 billion by 2050, per the UN's most recent "medium variant" projection. 

The big picture: Population is a key driver of economic productivity and growth. 

For years, India has been one of the fastest-growing economies in the world, averaging 5.5% growth over the past decade, per Morgan Stanley.

The South Asian nation overtook the United Kingdom to become the fifth-largest economy last year. It's expected to become the third-largest — topping the economies of Japan and Germany —  by 2028, according to IMF.

But China, where population growth has slowed considerably in recent years, faces a grim economic outlook, as it emerges from three years of zero-COVID policies that dampened market activities and consumer confidence.  

A declining and aging population will lead to further economic stagnation, some economists say. "China’s demographic decline is the single biggest factor driving down China’s economic growth," said Robert Blohm, a Toronto-based economist and managing director of the investment firm Keen Resources Asia.

That, combined with India's growing population and a shift away from China due to geopolitical reasons, may help the South Asian country chip away at China's dominance as the world's factory. "A lot of production capacity will be moved to India,"  Yi Fuxian, a scientist in obstetrics and gynecology at the University of Wisconsin-Madison, told Axios.

"There will be more and more made-in-India goods on the U.S. market," Yi said. 

Apple is already moving some production capacity from China to India amid geopolitical tensions between Washington and Beijing, as well as recent supply chain disruptions in China, the New York Times reported in September. 

Yes, but: Some experts have cautioned that it will take decades for India to compete with China's manufacturing power, citing bureaucracy, protectionism and a weak value chain.

"India certainly has advantages in terms of demographics, in terms of geography, in terms of the infrastructure that exists, much of which has been built in the last few years," Ashutosh Sharma, a research director at advisory firm Forrester, told Insider.

"It can obviously increase the scale, but what it does not have is all the pieces of the puzzle," Sharma said. 

This includes infrastructure like adequate ports that would allow the country to be better integrated into the global supply chain. Bloomberg noted this week that the world's biggest container ship, Ever Alot, has so far skipped docking in India, highlighting the country's inadequate port infrastructure. 

Between the lines: There are also concerns that India's growing population will bring on new challenges or exacerbate existing ones. 

While India has slashed its poverty rate over the years, its wealth gap has widened significantly over the last three decades, according to Oxfam. 

Indian Prime Minister Narendra Modi has described the country's population growth as an "explosion" that "will cause many problems for our future generations." In an Independence Day Speech in 2019, Modi linked smaller families to patriotism.  

Experts, however, point to UN figures showing that India's population growth appears to be stabilizing. More than 30 states and territories, where nearly 70% of Indians live, have already achieved fertility rates below the replacement level of 2.1, the UN Population Fund said last year. 

What to watch: "With India surpassing China in population, its economy would not only surpass China's but could even surpass that of the U.S. by the second half of the century and come on top in a new world order," Yi said.

Other experts offer a more nuanced view. "Whether India ‘s economy ever exceeds the U.S.’s, it’s too soon to tell because a lot of institutional reform is still required in India, and the U.S. economy depends also on what happens in the rest of the world," Blohm said.

India to become most populous nation — bringing opportunities and challenges

The milestone could have major economic and societal implications for both countries.

India is set to become the most populous nation this year. Photo: Nasir Kachroo/NurPhoto via Getty Images

Population

Axios World

New announcements on deeper military cooperation between the U.S. and Japan — paired with Tokyo's drive to strengthen its own defense capabilities — confirm that the officially pacifist nation is a growing military power in East Asia. The moves could also give the U.S. new tools to defend against a potential invasion of Taiwan.

Why it matters: Japan was already arguably America's most powerful ally in Asia. Now spurred on by Russia's invasion of Ukraine, unprecedented missile launches from North Korea, and Chinese aggression toward Taiwan, Japan is doubling down on the U.S. alliance and plans to double its own defense spending by 2027.

Prime Minister Fumio Kishida arrived in Washington on Thursday, a month after unveiling landmark new national security documents that push the boundaries of Japan's pacifist constitution.

After a long and contentious domestic debate, Japan plans to seek "counterstrike" capabilities — longer-range missiles like the American-made Tomahawk that could take out launch sites in China or North Korea in the event of war.

Plans to hike spending to 2% of GDP by 2027 would make Japan's defense budget the third highest in the world behind the U.S. and China. However, the government could struggle to find the money. A recent poll found that 65% of the public opposes tax hikes to increase defense spending.

Kishida's visit is part of a tour of the G7 club, which Japan will chair this year. Earlier this week, Kishida and U.K. Prime Minister Rishi Sunak signed a defense pact that will make it easier to conduct joint exercises and deploy troops to each other's territories.

Driving the news: Ahead of Kishida's stop in Washington, which will include meetings with President Biden on Friday at the White House, the U.S. and Japanese foreign and defense ministers made a series of joint announcements.

The allies will extend their security treaty to include attacks in space, such as on satellites linked to air defense systems. They also plan to develop a new joint com­mand and con­trol structure.

They also announced a reorganization of the U.S. Marines' presence in Okinawa. A new littoral regiment will be armed with anti-ship missiles, and it'll be able to quickly mobilize across Japan's southwestern islands.

The reorganization will allow the regiment to "quickly respond to an imminent threat," Foreign Ministry spokesperson Yukiko Okano told reporters in a briefing this week. 

Japan's southwestern islands reach within 100 miles of Taiwan. Screenshot via Apple Maps

Between the lines: Okano didn't specify which threat, but some of Japan's southwestern islands lie just 100 miles from Taiwan.

China's exercises around the self-governing island last year following then-House Speaker Nancy Pelosi's visit — during which Chinese missiles landed in Japan's exclusive economic zone for the first time — were a source of deep concern in Tokyo.

The Taiwanese government is keeping quiet about the news, but officials are privately thrilled, Axios' Bethany Allen-Ebrahimian reports from Taipei.

One official, who requested anonymity because they were not authorized to speak to the press, told her it was a "welcome development that will support deterrence and stability in the region."

Chinese Foreign Ministry spokesperson Wang Wenbin on Thursday said that "military cooperation between the U.S. and Japan must not harm the interests of third parties or undermine the peace and stability in the region."

Okano said Beijing's reaction to Japan's recent defense announcements had been relatively measured and that Japanese officials would continue to communicate with their Chinese counterparts as to why they were necessary.

She noted that Japan and China are neighbors with very deep economic links. "We need to say what we need to say, but we need to think about ways to cooperate as well."

Some analysts have warned of a potential cycle whereby the U.S. and its allies continue to build up their capabilities to respond to a perceived threat from China, which in turn will do exactly the same thing.

Zoom out: China is not the only reason for Japan's increased attention to its national defense.

North Korea launched a missile over Japan in October and is testing missiles capable of reaching Japan with unprecedented regularity.

For residents of Japan who've been woken up by sirens warning of a potential attack, Pyongyang likely feels like the more immediate threat, Okano said.

That's certainly the case for the other close U.S. ally in East Asia.

Breaking a long-standing taboo, South Korea President Yoon Suk-yeol said Wednesday for the first time that South Korea would consider developing nuclear weapons, or asking the U.S. to position them on the peninsula if the threat from the north continues to escalate.

Japan doubles down on defense and U.S. alliance with an eye on China

Japan plans to double defense spending and deepen cooperation with the U.S.

From L-R: Japanese Defense Minister Yasukazu Hamada and Foreign Minister Yoshimasa Hayashi; U.S. Secretary of State Tony Blinken and Defense Secretary Lloyd Austin. Photo: Ting Shen/Bloomberg via Getty

Japan

The FBI is using ads on Facebook to seek out Chinese language speakers in the U.S. who have been harassed or digitally stalked by malicious Chinese government actors, Axios has learned.

Why it matters: It's the latest step in a months-long effort to root out what law enforcement calls "transnational repression" by Beijing. Over the last year, the FBI has arrested or charged a host of U.S. residents and Chinese intelligence officials as part of a nationwide crackdown.

What's happening: In a pair of Mandarin-language ads targeted at Philadelphia-area Facebook users, the FBI is asking anyone who's been targeted by cyberstalking, physical or digital harassment, assault or extortion to contact the bureau's Philadelphia field office.

The ads specifically seek anyone who's experienced that sort of harassment on the Chinese social media platform WeChat.

"You may be a victim of transnational repression by the Chinese government," the ads warn.

The intrigue: It's not clear why the ads targeted the Philadelphia area specifically.

In an emailed statement, the FBI told Axios it "addresses transnational threat issues in many ways, to include social media ads, threat intimidation guides in multiple different languages, and on our website at fbi.gov."

"Many victims are not aware transnational repression is illegal. As a result, the FBI strives to educate communities about TNR, the methods used, and how to report to the FBI."

The big picture: The Chinese government exerts influence abroad in part by targeting expat dissidents among the country's large global diaspora.

Recent efforts in the U.S. have targeted pro-democracy and human rights activists and members of ethnic and religious minorities persecuted in China.

Between the lines: The U.S. has stepped up efforts to combat those Chinese government efforts since last year.

The Justice Department last month charged a Boston student with felony stalking over his alleged campaign of harassment against a fellow Chinese student who posted pro-democracy flyers on campus.

In October, DOJ charged 13 individuals, including a number of U.S. residents allegedly acting at the behest of Chinese security officials, over a widespread scheme of illicit influence and harassment aimed at repatriating ostensible Chinese fugitives in the U.S.

Earlier last year, DOJ charged five individuals with running a campaign of intimidation and harassment aimed at Chinese dissidents in the U.S., including a congressional candidate.

The State Department has imposed visa restrictions on Chinese officials aiding transnational repression efforts in the U.S.

FBI seeks victims of China's overseas pressure campaign

Illustration of a person behind a laptop screen with numerous cursors surrounding them and pointed towards their head.

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