China This Week: Strategic Moves and Messaging
August 1-7, 2025
Each week, Xinanigans tracks Beijing’s most strategically significant moves across military, economic, technological, and narrative domains, revealing how China is shaping global power dynamics and impacting US decision space.
Bottom Line: Beijing is escalating AI-driven influence operations while exploiting trade loopholes and fiscal restraint to preserve strategic maneuver space, and balancing internal fragility with external positioning as it prepares leverage for future confrontation.
1. China Amplifies AI-Driven Foreign Influence Operations Across US and Asia
A new open-source analysis by cybersecurity researchers reveals that GoLaxy - a company linked to Chinese state-affiliated entities - has significantly expanded its use of AI-driven sentiment tracking and influence campaigns. These operations target US lawmakers, Taiwan’s elections, and Hong Kong public discourse through sophisticated scraping, generative text, and real-time deployment of tailored narratives.
Why it matters:
Beijing's influence playbook is entering a new phase: one that fuses AI analytics, narrative timing, and "cognitive domain operations," as articulated in People's Liberation Army (PLA) doctrine. This is not Russian-style chaos; it is calibrated, persistent manipulation designed to soften resistance and fragment alliances before kinetic escalation.
Implications for US National Security:
Cognitive Domain Escalation: AI-enhanced disinformation compresses US detection timelines and erodes information dominance during political or military crises.
Systemic Exposure of Institutions: Targeting of US lawmakers and democratic processes forces the US to shift from reactive defense to preemptive political cybersecurity.
Alliance Friction Risk: Narrative engineering in the Indo-Pacific, especially in Taiwan, could undermine partner trust or drive wedge narratives into alliance systems over time.
2. Beijing Deepens Middle East Engagement Amid Strategic Vacuum
China expanded its economic footprint across the Middle East this week, accelerating Belt and Road infrastructure projects and deepening trade ties with Saudi Arabia and Israel. Chinese entities are positioning themselves as post-conflict stabilizers, including in Gaza, while emphasizing energy security and "win-win development."
Why it matters:
This marks a shift from passive economic presence to strategic economic statecraft. Beijing is exploiting power vacuums to secure logistics corridors, expand dual-use infrastructure, and project soft influence in a region historically dominated by US security guarantees.
Implications for US National Security:
Strategic Corridor Encroachment: Chinese control over critical maritime and energy routes such as the Red Sea and Suez creates pressure points that could be activated in future crises.
Norms Competition: Chinese-led infrastructure frameworks and investment governance models may displace US-aligned standards, complicating regional interoperability and partner alignment.
Coalition Influence Test: As China markets itself as a "neutral mediator," its growing influence could dilute US messaging and reduce freedom of action within security partnerships.
3. Beijing Tolerates Export Surge Despite Self-Reliance Messaging
Despite official campaigns promoting "dual circulation" and economic self-reliance, Chinese exports surged 7.2% year-over-year in July, beating analyst expectations of 5.4% growth. Companies accelerated shipments ahead of new US tariffs, with Beijing tacitly permitting stockpiling, rerouting via Southeast Asia, and transshipment through intermediary states. Key transshipment corridors include Vietnam (handling an estimated 9.2% of its total exports as Chinese re-routes) and Thailand (6.5% of exports), while Chinese exports to Cambodia have risen to constitute 28.7% of that country's total goods exports to the US.
Why it matters:
Beijing's behavior reveals a pragmatic flexibility: dollar reserves and export throughput still trump narrative discipline, revealing a tactical override of strategic messaging. This gap between rhetoric and action gives China maneuver space while the US calibrates trade enforcement.
Implications for US National Security:
Export Control Undermining: China's use of proxy trade routes weakens the impact of US export restrictions on advanced and dual-use goods, complicating enforcement across regional networks.
Supply Chain Camouflage: Rerouted trade flows increase attribution ambiguity, frustrating efforts to isolate strategic technologies from Chinese military-industrial integration.
Policy Signal Mismatch: US planners must contend with a Chinese economic strategy that adapts tactically while maintaining a long-view narrative of self sufficiency, an asymmetry that blunts coercive leverage.
4. Beijing Prioritizes Fiscal Discipline Over Broad Stimulus
At the July 31 Politburo meeting, Chinese leaders rejected broad stimulus in favor of incremental support: targeted tax relief, limited infrastructure spending, and cautious consumer incentives. Despite 5.3% headline GDP growth, youth unemployment and local debt remain severe, prompting a restrained policy response.
Why it matters:
Beijing's refusal to deploy large-scale stimulus, despite rising domestic risk, reveals long-term prioritization of economic resilience, debt control, and technological security over short-term growth optics.
Implications for US National Security:
Low-Risk Posture Window: Beijing's internal focus and fiscal restraint may lower near-term appetite for external disruption, creating space for US shaping operations and economic pressure.
Localized Stress Points: Uneven stimulus may intensify regional instability in key dual-use industrial zones, especially Liaoning and Sichuan, where defense-linked manufacturers depend on consistent central support. These pressure points may offer insight into PLA supply chain vulnerabilities under financial strain.
Opportunity for Structural Leverage: Sluggish domestic momentum may give the US and allies a narrow window to press China on technology, capital access, and standards-setting without immediate backlash.
Strategic Outlook
This week, China showed high adaptability across multiple domains, escalating AI-enabled foreign influence, repositioning in strategic geographies like the Middle East, and exploiting trade loopholes while restraining domestic spending.
Each move - digital, diplomatic, or economic - serves Beijing’s broader aim of shaping the battle space before it is contested. As ever, China is preserving maneuver space while probing the limits of US and allied response.
The common thread is a leadership balancing internal fragility with external ambition. Beijing is operating flexibly to avoid direct confrontation while preparing leverage for future coercive opportunities.
For US national security professionals, this presents both opportunity and challenge:
China’s hybrid operations are growing more effective at operating below traditional thresholds of response.
Key allies and partners, especially in Southeast Asia and the Middle East, face competing narratives and incentives.
The US must act while space still exists: fortify coalition cohesion, reinforce enforcement mechanisms, and preempt cognitive-domain escalation before these behaviors become strategic norms.
In the immediate term, the US should accelerate implementation of transshipment enforcement mechanisms with Vietnam and Thailand, specifically targeting the 40% penalty tariffs for mislabeled goods while offering technical assistance for supply chain transparency. This narrow window before China adapts its routing strategies represents a critical leverage point that constrains US decision-making flexibility in future crises. Failing to act decisively now will allow Beijing to normalize these tactics, narrowing the US margin of advantage in the next crisis.