SECTION I: Policy Watch
Beijing Signals Three Recalibrations in Economic Priorities Through High-Level Messaging
What Happened
In a series of high-level writings and official readouts amplified through the Party media system, Beijing is signaling a recalibration of economic priorities on three fronts. A Qiushi piece attributed to Xi Jinping calls for building a “strong financial nation” (金融强国), explicitly linking financial strength to deeper capital-market reform and a stronger currency. Separately, Qiushi and Economic Daily commentaries argue for “reasonable price recovery,” suggesting a tentative top-level shift toward treating deflation risks more seriously. Finally, a Politburo collective study session chaired by Xi stresses that future industries will be driven by enterprises, with the government playing a supportive, enabling role.
Why It Matters
Xi’s vision of a strong financial nation is one that supports the real economy and maintains financial stability. The emphasis on building an international financial center reinforces Shanghai’s positioning in this strategy. Language on developing multi-tier equity markets, improving the quality of listed companies, and strengthening delisting and market exit mechanisms suggests Beijing is modernizing its capital-market structure to better channel financing toward firms critical to industrial competitiveness and technology upgrading.
Xi states that a strong financial nation should have a strong currency that is widely used in international trade, investment, and foreign exchange markets, and that holds global reserve currency status. This is likely a long-term ambition. There is no realistic path for the RMB to displace the dollar globally yet. Beijing’s more practical goal is to build financial security by expanding RMB usage, especially in trade settlements where feasible and ensuring China’s financial system can operate under external disruption including sanctions risks.
The explicit call for “reasonable price recovery” signals a shift in leadership mindset. The commentaries push back against the instinct that low prices are inherently beneficial, warning instead of a deflationary spiral that weakens consumption, compresses profits, depresses incomes, and discourages investment. This is a notable adjustment in tone. As the Wall Street Journal reported in December 2024, Xi was described as relatively dismissive of deflation concerns even as internal advisers warned that prolonged price declines could trigger a deflationary spiral. The messaging also suggests recognition that today’s price weakness is tied to deeper structural pressures such as overcapacity, the real estate adjustment, and weak income expectations. But Beijing’s policy options remain constrained. China’s “involutionary” price competition is systemic, shaped by bureaucratic incentives, intense industry competitive dynamics, and state bank-dominated credit allocation dynamics. These forces are hard to reverse without broader structural reforms.
Xi’s emphasis that future industries emerge through firm-level breakthroughs and that innovation resources should primarily be channeled to enterprises is notable. Beijing is signaling a willingness to unlock enterprise dynamism without loosening political supervision, a balancing act that will be difficult to sustain in practice. Recent scrutiny over domestic firms’ H200 chips purchases and the regulatory clampback on the Meta-Manus deal highlight how a security-first lens, the push for indigenous substitution, and the imperative to maintain control over critical technologies remain paramount. Enterprises may be encouraged to innovate, but they will still need to navigate tight political boundaries and shifting compliance expectations.
Section II: Data Dashboard
Chinese AI giants rolled out massive “red packet” cash giveaways
What Happened
China’s tech giants are launching large-scale “red packet” campaigns, offering cash giveaways and discounts tied directly to their AI apps. Alibaba’s Qwen app announced a RMB 3 billion (USD 410 million) Lunar New Year campaign, with cash rewards distributed across Alibaba’s consumer ecosystem, including Taobao, Tmall, and Alipay. That exceeds Tencent’s RMB 1 billion push for its AI app Yuanbao, and Baidu’s RMB 500 million campaign, tied to its AI assistant embedded in the Baidu app. The goal is to drive mass downloads, engagement, and repeat usage during the peak holiday shopping period.
Why It Matters
ByteDance still leads China’s consumer AI market: its Doubao chatbot has about 163M monthly active users, boosted by integration into Douyin. Alibaba is catching up fast, with the revamped Qwen app now above 100M monthly active users since its November relaunch. Alibaba is also pushing Qwen beyond chat by linking it to e-commerce, travel, and Ant payments, aiming to integrate its full ecosystem into Qwen by 1H 2026.
Lunar New Year gives Chinese AI giants a rare chance to force scale adoption. Hundreds of millions of consumers are already primed to spend, send money, and coordinate travel. While new model releases (Kimi K2.5, Qwen 3 Max Thinking) and rumors of another DeepSeek update add to China’s AI momentum, the domestic competitive battlefield has shifted to the application and commercialization layer. AI giants are racing to become the “default AI entrance,” meaning the first AI interface consumers open for daily needs.
This strategy matters because whoever controls the default interface also controls downstream monetization and, critically, the user-behavior data feedback loops that improve models over time. But this is also a stress test of AI monetization economics. If acquisition costs remain high and retention collapses once subsidies end, these campaigns will be expensive traffic-buying.
China’s advantage lies in diffusion capacity. Its leading AI firms are also platform owners. Their ecosystems function as deployment infrastructure, enabling rapid mass adoption through a handful of super-apps. The U.S. ecosystem, by contrast, is more fragmented across sectors and platforms.
This diffusion advantage matters even more as AI shifts from chatbots to agentic AI that executes tasks. Agents improve when tested in real-world scenarios. China’s consumer ecosystem offers an unusually strong proving ground, thanks to its massive base of digitally native users.
That dynamic is already visible in how quickly Chinese platforms absorb global breakthroughs. When the open-source AI agent Clawdbot went viral in late January, Alibaba Cloud launched a full cloud service stack within days, Tencent Cloud published Enterprise WeChat integration guides, and ByteDance’s Volcano Engine and others quickly followed suit to reduce adoption friction. As they push forward on their own agentic AIs, China’s tech giants are also building the infrastructure to deploy AI agents at scale.
Section Three: Corporate Closeup
Market Leaders
Alibaba has reportedly shipped over 100,000 units of its top in-house AI chip, the Zhenwu 810E — a milestone that signals rapid scale-up in China’s domestic AI hardware push. Shipments have already surpassed local rival Cambricon, with performance claimed to be comparable to Nvidia’s H20. The update comes amid continued uncertainty over U.S. export controls and reports that Alibaba is considering a potential listing of its chip arm T-Head.
ByteDance and Alibaba plan to launch new flagship models during the Lunar New Year holiday. ByteDance is expected to release three models, including Doubao 2.0, while Alibaba is preparing Qwen 3.5 focused on complex reasoning. DeepSeek is planning to release its next major model around the same time.
BYD’s lackluster sales data triggered a selloff in Chinese EV stocks in Hong Kong after weak January sales signaled cooling demand in China’s auto market. BYD shares fell as much as 5.1%, its biggest intraday drop in three months, after reporting January sales were down 30% year-on-year. Smaller rivals Xpeng and Nio also slid more than 6% following disappointing monthly sales figures.
UK-based global asset manager Schroders signed an MoU with CATL and Hong Kong-based Lochpine Capital to develop battery energy storage projects in Europe, where more than 3,000 BESS projects are already underway in over 30 countries, with the UK currently leading the market. The partnership aims to build an investment platform for European battery storage systems and was announced during UK Prime Minister Keir Starmer’s visit to Beijing. The announcement comes as CATL faces heightened scrutiny in the U.S.
JD.com is deepening its U.K. push while positioning itself as a bridge for bilateral commerce with China. JD and the China-Britain Business Council signed a long-term partnership to help more U.K. brands sell into JD’s platform and reach its roughly 700 million customers, with JD offering market insights, operations support, and logistics. JD also reaffirmed plans to officially launch Joybuy in the U.K. in March, alongside continued investment in local warehousing and delivery via JoyExpress.
Movers and Shakers | Enflame (燧原科技): The Final Domestic GPU “Little Dragon” Heads for IPO
What Happened
Enflame, one of China’s best-known GPU/AI accelerator startups, has had its STAR Market (科创板) IPO application formally accepted by the Shanghai Stock Exchange. The company is seeking to raise RMB 6 billion, a sizable target that underscores both the capital intensity of advanced AI compute and Beijing’s continued willingness to backstop strategic “hard tech.”
Founded in 2018, Enflame is the earliest established member of China’s so-called domestic GPU “Four Little Dragons.” Its founder, Zhao Lidong (赵立东), is a Tsinghua University EE graduate (清华无线电85系, often referred to as the influential “EE85” cohort) and spent more than two decades in Silicon Valley, including at AMD, where he helped build AMD’s China R&D presence. The company’s name, drawn from the revolutionary era phrase “芯火可以燎原” (“a spark can start a prairie fire”), reflects its ambition to ignite China’s indigenous compute ecosystem from the ground up.
Why It Matters
Enflame’s positioning differs from its peers. While some domestic chipmakers initially pursued inference chips, Enflame leaned early into data center-grade AI compute, developing multiple generations of AI chips and related offerings spanning both training and inference. Its portfolio includes the DTU(邃思) chip series, CloudBlazer (云燧) POD, and full-stack compute cluster solutions.
Enflame’s relationship with Tencent is particularly notable. Tencent is its largest shareholder, having invested across multiple rounds since 2018. It is also Enflame’s dominant customer: in the first three quarters of 2025, direct sales to Tencent accounted for more than half of total revenue, and the share is substantially higher when including Enflame chips sold to server manufacturers building systems specifically for Tencent.
Enflame’s IPO carries symbolic weight. With Moore Threads (摩尔线程) and MetaX (沐曦) already on the STAR Market, Biren (壁仞) listed in Hong Kong, and now Enflame moving toward listing, the entire cohort of China’s domestic GPU “Four Little Dragons” completes the capital market roll call within a short window.
China’s old “BAT” (Baidu, Alibaba, Tencent) era may also be returning in a new form: not just as consumer tech platform giants, but as anchor investors and ecosystem patrons of China’s AI compute stack. Baidu has Kunlunxin, Alibaba has T-Head, and Tencent has effectively “adopted” Enflame.
Tencent’s patronage model accelerates Enflame’s pathway to commercialization. But post-IPO, Enflame will need to prove it is more than Tencent’s in-house supplier by diversifying demand, sustaining competitiveness, and surviving the brutal economics of AI hardware.
Frontline of China’s Health Economy | China Updates Drug Administration Law Implementation Regulations to Modernize Governance and Support Innovative Research
On January 27, Premier Li Qiang signed a State Council order to announce a revision of the Regulations for the Implementation of the Drug Administration Law of the People’s Republic of China (“2026 Implementation Regulations”). Set to take effect on May 15 this year, the 2026 Implementation Regulations introduce significant alterations across 89 articles designed to expand innovation incentives, enhance quality controls, and modernize China’s drug registration governance through a “clinical value-oriented” (临床价值为导) approach.
What Happened
The Drug Administration Law (DAL) was first introduced in 2002 to overhaul China’s pharmaceutical registration system, with minor amendments issued in 2016, 2019, and 2024. However, the 2026 Implementation Regulations, administered by the National Medical Products Administration (NMPA), represent the first comprehensive revision of the DAL since its imposition, with reforms suggested via a draft law and public comment solicitation in 2022. The 2026 Implementation Regulations contain the following notable provisions:
Acceptance of overseas clinical and research data. Article 10 allows overseas-generated research and clinical data to be used in China drug registration submissions if they meet NMPA technical and quality requirements, supporting global simultaneous development strategies — a policy dial CCA has proudly helped to move forward.
Accelerate review pathways for clinically-needed medicines and “breakthrough therapies”. In Article 15, the NMPA mandates the creation of “conditional, priority, and special approval procedures” for drugs that demonstrate significant clinical value, breakthrough potential, or meet urgent patient needs.
Codify market exclusivity for rare disease and pediatric drugs. Article 21 of the regulations grants up to two years of market exclusivity for qualifying pediatric medicines. For qualifying rare disease treatments, the regulations provide up to seven years of market exclusivity, conditional on the market authorization holder’s (MAH) commitment to ensuring continued supply.
Enhance regulatory data protection. According to Article 22, the NMPA will provide up to six years of protection for undisclosed clinical trial data and independently generated data submitted by MAHs for new chemical entity drugs and other qualifying products, meaning that other applicants cannot rely on the same data for their pharmaceutical registration without original MAH consent.
Heighten drug manufacturers’ quality lifecycle responsibility. Article 32 stipulates that MAH can outsource “segmented drug production” to qualified manufacturers for urgently-needed therapies and innovate drugs with special requirements, but must maintain lifecycle quality responsibility through supplier audits, process change documentation, and management of release decisions.
Why It Matters
The 2026 Implementation Regulations reflect Beijing’s efforts to build a full incentive stack for drugmakers. The orphan and pediatric drug exclusivity regimes — China’s first — coupled with confidential data protection create a layered commercial protection system that reduces investment risk for innovative drug developers entering the market.
Data protection regulations signal a structural shift toward IP-driven pharmaceutical growth in China. By providing up to six years of protection for undisclosed trial data, the NMPA is moving closer toward OECD-style regulatory data protection regimes, incentivizing domestic R&D investments while creating a blueprint for launching globally competitive therapies in China.
Allowing qualified overseas research data for registration reduces duplicative clinical trial requirements and lowers barriers for multinational sponsors, paving a path for China’s participation in simultaneous global therapy launches.
The regulations highlight regulatory speed, clinical need, and quality control as explicit industrial policy tools. Priority review and accelerated approval pathways as well as select segmented manufacturing schemes allow regulators to channel resources toward drugs aligned with national health and industrial priorities — including rare diseases, pediatric illnesses, and therapies meeting serious clinical needs — supporting China’s emerging “clinical-value oriented” drug approval model.
This reform reflects a meaningful step toward regulatory harmonization and global integration —an area where CCA’s sustained advocacy and convening have helped catalyze progress and advance practical policy change.