China’s security and military strategy made headlines this week for several reasons. First came the annual report on the country from the US Department of Defense, stating that China considers Arunachal Pradesh among its “core interests”. China rejected the report. We detailed its highlights here.
Then, China imposed sanctions on several US defence firms, including a branch of the US’s Boeing and Northrop Grumman Systems Corporation, over their sale of weapons worth over $11 billion to Taiwan. Notably, on Sunday (December 28), the Taiwanese Parliament saw a plan to push through a $37 billion special military spending package face hurdles over political disagreements, the South China Morning Post reported.
On the economic front, Reuters cited official data to report that profits at China’s industrial firms in November fell at their fastest pace in over a year, “as weak domestic demand offset resilience in exports in another sign of a stuttering economic recovery that backs calls for additional policy stimulus.”
Reuters also reported that a Korean pop (K-pop) concert will be held in Hong Kong in February and “aired across mainland China by a state-run broadcaster,” after years of limited cultural exchanges between South Korea and China. Incidentally, the history behind this chill also concerns military sales.
1. China’s sanctions on Boeing and others
State media organisation Xinhua reported that the sanctions were imposed because the sale “seriously violated the one-China principle and the three China-U.S. joint communiques, interfered in China’s internal affairs, and undermined China’s sovereignty and territorial integrity.”
UPSHOT: As Reuters reported, the move is more symbolic than practically consequential, given the fact that China has limited dealings with American defence companies (though it does deal with Boeing for civilian aircraft).
The principles and communiques that the Chinese government referred to concern China’s claims over Taiwan, which the US officially “acknowledges”, but it still maintains a policy of strategic ambiguity on the subject. It maintains ties with Taiwan without giving it diplomatic recognition, and these ties have historically included military sales. China has always underlined the significance of Taiwan to the US, and under President Xi Jinping, adopted an increasingly aggressive posture on its claims.
Taiwan has also come to see itself as independent, particularly in the last decade, with the Democratic Progressive Party (DPP) in power, resulting in strong reactions from Beijing. But domestically, not all parties have the same attitude towards China. That, coupled with the substantial space that the Opposition occupies in the Parliament, has given rise to the ongoing political tussle over dealing with China.
2. Continued economic woes in the second half of 2025
Reuters reported that “profits fell 13.1% year-on-year in November, accelerating from a 5.5% drop in October, according to the National Bureau of Statistics (NBS) data released on Saturday.”
UPSHOT: The data reflect concerns about declining investment (which is a more recent phenomenon) and internal consumption within China. A part of this may be desirable, given that the low demand has pushed companies to constantly lower the prices of goods to appeal to consumers. One key example is the beleaguered real estate sector, where a crisis partly of its own making struck during the pandemic, and prices are yet to stop falling.
Eventually, companies may reach a level where their profits dwindle to unsustainable levels. Thus, the government has sought to encourage companies to stop engaging in a race to the bottom and scale back production. While that approach will undoubtedly impact China’s manufacturing-heavy growth model that powered its economy until now, it could ultimately help address issues like profitability.
A K-pop music label, without providing specifics, has claimed that a concert would be held and streamed in February 2026. This follows similar reports from a few months ago, when a K-pop group’s performance in mainland China was announced but cancelled days before the event.
UPSHOT: The rapid rise of K-pop music as a genre has attracted global attention for years now, such that concerts in countries like India or parts of Europe are no longer seen as surprising one-off events. In its early years, however, Asian and Southeast Asian countries helped fuel the genre’s growth before it broke into the Western market. China was no stranger to it, but by 2017 or so, there was a palpable chill. Despite the lack of an official ban, it seemed there was little scope for K-pop-related events in the country.
The reason? North Korea conducted missile tests in 2016, which prompted South Korea to purchase the US Terminal High Altitude Area Defense (THAAD) system. China raised concerns that it came under its range, and in response, made its displeasure known by unofficially blocking Korean cultural exports and limiting some trade.
Almost a decade later, there are signs of a softening of that posture, with both countries likely expecting benefits from the economic and cultural exchanges. Bloomberg reported earlier this year that Hybe, the Korean company that owns the labels of groups such as BTS, opened an office in Beijing last month, and other companies have also increased their business activities in China this year.
An opinion article in the Chinese official news website, China Daily, spoke of the subject close to the Asia-Pacific Economic Cooperation (APEC) summit in South Korea this year. “Today, the Korean wave and the Chinese style compete and collaborate in equal measure. ROK [Republic of Korea] television dramas once dominated Chinese screens, while Chinese historical series now have loyal audiences in the ROK. It’s a healthy cultural competition that drives both sides to improve,” it said.