TOKYO — The billionaire CEOs who accompanied US President Donald Trump to Beijing last month are probably feeling some whiplash.
Some of that disorientation comes from Trump himself — a president who built two campaigns on confronting China and has since recast himself as an open admirer of Xi Jinping, lurching between hard and soft postures with little warning.
But the sharper sting is how quickly Xi’s promises have curdled. His assurances to Trump’s business entourage — that China would “open wider” and offer American firms “broader prospects” — already sound like dispatches from a different era. What was meant to inspire Apple’s Tim Cook, Tesla’s Elon Musk, Nvidia’s Jensen Huang and the other US corporate titans now looks like a head fake.
The reality is China is now imposing tighter controls on cross-border capital, a walled-off AI sector and shrinking transparency. That is, less openness, not more, as Xi promised his American guests.
No wonder China’s markets are being left in the dust. The CSI 300 is up just 7% this year, compared with a 108% surge in South Korea, 57% in Taiwan and 33% in Japan — even amid energy disruptions from the war in Iran.
It’s far from clear that Xi’s decision to restrict the overseas travel of China’s AI experts will help the country tap into the global tech rally now underway. The optics are especially poor: Beijing is effectively putting its AI talent on a leash, echoing the Soviet‑era practice of keeping academics, athletes and artists from straying abroad.
For the billionaire cohort that accompanied US President Donald Trump to Beijing, it’s a deflating turn. Many returned hoping that AI cooperation might be one tangible economic win from the Xi–Trump summit.
As longtime China watcher Bill Bishop notes, the “burst of positive energy among analysts following May’s Xi–Trump summit cooled somewhat towards the end of the month.”
Coming out of Beijing, Bishop writes, Chinese Consul General in New York Huang Ping cast the moment as “a narrow strategic window for China to engage different US interest groups and secure a place in global AI governance and high‑value industrial ecosystems.”
Team Xi now appears intent on building a new Great Wall around China’s AI sector. At the same time, Beijing is making it harder for retail investors to buy US stocks — accelerating a broader shift toward tighter controls on where domestic capital can and cannot go. As Vey‑Sern Ling of Union Bancaire Privée notes, this “may potentially reduce funds to ADRs listed in the US.”
The deeper issue is the message these moves send. The crackdown is “far tougher and more systematic” than previous efforts, argues Dan Wang, head of China analysis at Eurasia Group.
Henry Gao of Singapore Management University adds that it’s becoming “increasingly difficult for Chinese investors to invest abroad independently of state oversight,” a sign of rising concern in Beijing over capital outflows and pressure on foreign‑exchange reserves.
It all reads more like anxiety than confidence. China saw a record US$1 trillion in capital outflows in 2025 — double the levels since 2021 and the largest annual outflow since data began in 2006. To stem even larger losses, Xi has tolerated a much stronger yuan than currency traders expected. The yuan is already up more than 3% in 2026.
It’s part of a broader, multi‑pronged strategy. A stable or rising yuan serves three purposes. First, it reduces the risk that heavily indebted property developers default on offshore obligations.
Second, it supports Xi’s ambition to position the yuan as a credible reserve currency. Third, it lowers the temperature with the Trump White House, which remains highly sensitive to any sign that Beijing might be weakening the currency to help exporters.
Also, there are fundamental arguments in favor of a stronger yuan. “If China’s domestic demand strengthens on the back of forceful stimulus, the yuan carry trade will start to unwind as business confidence improves and the US-China yield gap narrows,” notes economist Larry Hu at Macquarie Group. “This would allow the yuan to appreciate more forcefully against the dollar.”
Add in the fiscal mess in Washington, including a national debt hurtling toward $40 trillion, twice China’s annual gross domestic product. Trust in US policies, in other words, is surging in the wrong direction.
“Since Donald Trump took office again in early 2025, his administration’s economic policies in such areas as trade, energy security, climate change, financial/monetary stability and international aid have together constituted a dramatic break with the post-war economic consensus,” notes economist Creon Butler at Chatham House. The “Trump shock,” he adds, has China plotting “longer-term resistance to some critical international economic norms” changing at an accelerating rate.
Many, of course, will counter that China, too, has made some dramatic breaks with global economic norms, including not fully committing to World Trade Organization rules since 2001. But, as Butler concludes, “China is far from the only country to behave this way, but as the second largest national economy after the US, it has become a highly disruptive influence.”
Hence, news this week that gold has overtaken US Treasury securities as the main reserve asset held by central banks around the globe. In a report this week, the European Central Bank said gold’s share in official foreign reserves reached 27%, up from 22% for US Treasuries.
As European Central Bank President Christine Lagarde noted in the report: “Forces of fragmentation are becoming more pronounced. Geopolitical tensions continue to drive strong central bank demand for gold.”
Global inflation fears are supporting gold in the short term. As HSBC analysts write in a report, Trump’s war in the Middle East is fueling a commodities “super-squeeze” that will only intensify if the Strait of Hormuz remains shut. “The longer the strait is closed, the more inventories are run down, the more likely it is that we reach ‘tipping points’ in the markets for some commodities,” HSBC notes.
Yet Xi’s recent policy shifts suggest that the slow pace of major reform isn’t speeding up — despite the impression he gave Trump’s parade of CEOs last month.
When Xi formally took power in 2013, he pledged to let market forces play a “decisive” role in economic decision‑making. Thirteen years on, he’s produced one of the most striking economic split‑screens in modern history.
On one side, the Made in China 2025 agenda is delivering genuine tech wins: electric‑vehicle champion BYD overtaking Tesla in global sales and AI upstart DeepSeek jolting Silicon Valley. On the other side, Xi’s ambitions for global tech leadership are being undercut by a fragile financial system that can’t support the weight of those aspirations.
“China manifests a striking paradox,” says economist Keyu Jin at Hong Kong University of Science and Technology. “It’s among the world’s most dynamic technological powers, producing breakthroughs in AI, electric vehicles, and advanced manufacturing at an accelerating pace, yet economic growth continues to slow. The reason is no mystery. As the government’s latest Five-Year Plan recognizes, China is experiencing a structural transition, not a cyclical slowdown. The old model is giving way to a new one, which has yet to take hold.”
China’s growth engine is being weakened by powerful domestic headwinds — most of all a still deeply troubled property sector. With roughly 70% of household wealth tied to real estate, stabilizing the market is essential to reviving consumer spending and sustaining 5% growth.
Without bold, credible measures to put a floor under housing and give 1.4 billion people reasons for optimism, the “deflationary mind” dragging on the economy will continue to fester.
Beijing also faces a long list of urgent structural tasks: building more dynamic capital markets, reducing youth unemployment, tackling runaway local‑government debt, curbing the dominance of state‑owned enterprises and improving transparency.
Team Xi must expand social safety nets to shift households from saving to spending. It must also grant the People’s Bank of China greater independence and move toward a fully convertible yuan — steps long seen as prerequisites for a modern, resilient economy.
Yet Xi’s moves over the past month suggest a focus on symptoms rather than causes. If the sweeping crackdown on offshore trading platforms is truly necessary, regulators need to explain why — and reassure global investors that the Communist Party has absorbed the lessons of the past five years.
For many global funds, the late‑2020 assault on internet platforms — beginning with Alibaba co‑founder Jack Ma — still lacks a coherent justification. Those unresolved questions now hang over Xi’s new limits on cross‑border capital flows and AI engineers’ freedom of movement.
More control and less openness are hard to square with what Xi promised Trump’s assembled CEO posse in Beijing.
Follow William Pesek on X at @WilliamPesek
