China played hardball, and it worked. After months of escalation, Beijing's readiness to go toe-to-toe with Washington has forced American negotiators into concessions—and both sides are now closing in on a trade deal neither wanted to walk away empty-handed.
Senior economic and trade officials from China and the US wrapped up two days of negotiations in Kuala Lumpur, Malaysia on October 26. Both sides announced they'd reached a "framework consensus"—diplomatic speak for the hard part's done. Chen Bing, a commentator at Shenzhen TV's Zhi News, interpreted this to mean the framework and specifics are finalized, just awaiting formal approval from both capitals.
Washington Shows Its Hand
During the Kuala Lumpur talks, the American side telegraphed urgency. On day one, US officials called the meeting "very constructive." Trump, kicking off his Asian tour that same day, announced he'd meet China's leader in South Korea and said the US would make concessions—adding he hoped China would do the same. The subtext was clear: Trump needed a win in Seoul, and he needed it badly.
After the second day, US Treasury Secretary Bessent went further, describing a "very successful framework" that was both constructive and far-reaching. The negotiations, he said, had established a substantial framework to ensure the leaders' meeting this Thursday (October 30) would be succeeful.
What Bessent Let Slip
Bessent later sat down with US media and revealed details that tell you everything about who had leverage in that room.
First: The US will no longer impose 100% tariffs on China. Bessent said the past two days went really well and that slapping 100% tariffs on China was off the table.
Second: China's rare earth controls are temporarily suspended. According to Bessent, the threat of China immediately implementing global rare earth export controls has vanished. He believes Beijing will delay rare earth restriction measures for one year to reassess.
Third: China will resume purchasing US soybeans. Bessent hinted both sides might reach an agreement on soybean purchases, with China once again making large-scale buys. "Our soybean farmers will feel very good about what's going on both for this season and the coming seasons for several years," he said.
Fourth: China approves the TikTok equity transaction. Bessent said all TikTok transaction details are “ironed out”, with the final agreement to be completed by the two countries' leaders at the summit.
“I’m not part of the commercial side of the transaction,” Bessent added. “My remit was to get the Chinese to agree to approve the transaction, and I believe we successfully accomplished that over the past two days.
Bessent deliberately leaked news favorable to the US. But here's what he didn't say out loud: Without major American concessions, China wouldn't have agreed to any of this.
Reading between the lines: Beijing's Shopping List
Li Chenggang, China's International Trade Negotiation Representative and Vice Minister of Commerce, revealed what was actually discussed—and his list tells you the scope of American retreat.
According to Li, both sides explored solutions for handling relevant issues and formed preliminary consensus. The discussions covered export control issues of concern to both sides, further extending the suspension period for reciprocal tariffs, fentanyl tariffs and enforcement cooperation, further expanding trade, and US Section 301 shipping fee measures. China and the US held constructive discussions on all of it. The US stated its position firmly, Li said, and China defended its interests resolutely. Both sides reached preliminary consensus.
The topics Li mentioned are bilateral, which means you can reverse-engineer what Washington gave up.
First: US negative actions are temporarily suspended. China launched global rare earth export controls in October as a response to American negative actions, including the "Affiliates Rule" proposed in September—meaning Chinese companies sanctioned by the US and their subsidiaries with more than 50% shareholding would also face sanctions. Additionally, the US began imposing fees on ships entering Chinese ports. If China agreed to postpone global rare earth export controls for one year, the US penetrating controls or port fees are likely temporarily suspended as well.
Second: The US will reduce or cancel fentanyl tariffs. In March this year, China imposed 10 to 15% tariffs on a series of US energy and agricultural products to retaliate against the US imposing 20% so-called fentanyl tariffs on Chinese goods, including a 10% tariff on US soybeans. For China to purchase US soybeans, China's 10% tariff on US soybeans needs to be cancelled—and the prerequisite is the US reducing or canceling that 20% fentanyl tariff.
The Nuclear Option Works
In this China-US trade war, China activated the nuclear option of comprehensive rare earth trade control. Trump threatened vehemently to impose 100% tariffs on China, but this was just another chapter in Trump's TACO deal—an acronym standing for "Trump Always Chickens Out." After his bluster, he still had to sit down and negotiate with China. He still had to make concessions to get an outcome both sides could accept.
How the China-US trade war unfolded echoes the strategy China's leadership set early on: "Strike one punch to avoid a hundred punches." In plain terms, hit hard, hit first—and you won’t have to keep blocking blows forever.
Lo Wing-hung
Bastille Commentary
** The blog article is the sole responsibility of the author and does not represent the position of our company. **
At the arrival of 2026, the happiest thing is to see the "Hong Kong is dead" narrative—proclaimed so loudly by Western voices—die yet again.
Foreign Money Returns Home
The West has written Hong Kong's obituary more times than you can count. They believed the city's return to China should have been its death sentence. American magazine Fortune declared "The Death of Hong Kong" on its 1995 cover—two years before the handover even happened. Hong Kong survived the Asian financial turmoil in the early post-handover years. It survived SARS. Then came 2019's Black Riots, followed by US sanctions on Hong Kong officials in 2020 and the pandemic's hammer blow. Foreign capital fled in an American-orchestrated exodus, with much of it landing in Singapore.
Last February, Stephen Roach—Yale University senior fellow—wrote in the UK's Financial Times with a headline that said it all: "It pains me to say Hong Kong is over." Foreign investors don't just track economic growth when they assess Hong Kong. They watch the stock market. And over the past year, Hong Kong's miraculous stock market comeback has bankrupted the "Hong Kong is dead" theory.
Hong Kong's economy grew an estimated 3.2% in 2025—ranking it among the developed world's top performers. But the stock market performance was getting really interesting. Average daily turnover in the first 11 months hit HK$230.7 billion—a massive 43% jump compared to 2024's same period.
Record-Breaking Fundraising Wins
The Hong Kong Stock Exchange crushed it in 2025. A total of 119 new listings raised HK$285.8 billion—a staggering 220% year-on-year increase and the highest since 2021. According to KPMG's report, HKEX ranked first globally in fundraising. The New York Stock Exchange and Nasdaq tied for second place. Looking ahead, HKEX's fundraising is estimated to reach HK$300-350 billion in 2026, keeping it among the world's top exchanges.
Sure, Mainland capital is investing in Hong Kong. But foreign capital's return has been the real game-changer behind the stock market's strong performance. According to fund industry insiders, what we're seeing now is only wave one—primarily hedge funds and other medium-to-short-term players. As Hong Kong's trading volumes swell and quality Mainland companies list here, the long-term foreign funds will gradually return. The outlook for Hong Kong stocks continues to look favorable.
America's narrative said Hong Kong's National Security Law would scare capital away. Reality proved exactly the opposite. Hong Kong's stable environment gave Chinese companies the confidence to list here. America's targeting of Chinese concept stocks listed on its exchanges was self-destruction—forcing quality Chinese companies to turn to Hong Kong for listing instead. This made Hong Kong's stock market bigger and stronger, compelling even bearish foreign capital to come back.
Beijing's Seal of Approval
President Xi's remarks when meeting Chief Executive John Lee during his duty visit to Beijing in mid-December reveal what work the central government values in Hong Kong. President Xi opened with praise for the Chief Executive's courage and initiative in leading the SAR government. He highlighted four key achievements: steadfast maintenance of national security, successful Legislative Council elections, proactive integration into national development, and achieving steady economic growth.
President Xi's assessment underscores Beijing's high recognition of Hong Kong's ability to do both—safeguard national security and develop the economy simultaneously. Some Hong Kong people believed that having transitioned "from chaos to governance and then to prosperity," the city should set aside national security to focus on economic development. Reality proved this view wrong. Hong Kong must strike a balance between these seemingly contradictory goals and advance on both fronts at once.
Look at Hong Kong's development over the past five years. The city emerged from Black Riots and the pandemic in 2021, achieving a strong rebound from the bottom in 2023. The return to normalcy brought revenge spending that temporarily elevated market sentiment.
But entering 2024, local consumption patterns underwent structural changes. Hong Kong people shopping across the border diverted local retail spending. The strong Hong Kong dollar—tracking the US dollar—and high interest rates suppressed economic activity, leading to structural adjustment.
By the second half of 2025, Hong Kong entered a phase of moderate recovery. The property market began stabilizing after its decline. With the US starting rate cuts in September, capital supply loosened. Hong Kong can continue along this recovery path in 2026—that's the estimate anyway.
Despite the optimism, Hong Kong people must keep working hard. The many vacant shops you see on the streets tell the story—retail economy pressure remains real. In 2024, Hong Kong's total retail sales value of HK$376.8 billion represented a 7.3% year-on-year decline. That's painful for the retail sector.
Retail's Reversal Ahead
Through October 2025, retail sales values remained comparable to the previous year. But consumption began recovering in the second half—retail sales value rose 3.8% in August, 6% in September, and 6.9% in October. 2025 showed an early decline followed by growth, with accelerating consumption momentum. Retail consumption is expected to reverse its decline in 2026.
During this retail transformation, we Hong Kong people must continue their efforts. Old businesses will still be eliminated—that's inevitable. Strategic adjustments are required. New opportunities must be pursued.
Bottom line: Hong Kong's economic performance in 2025 proves once again that the "Hong Kong is dead" theory dies—one more time. Hong Kong has weathered different shocks repeatedly in the past, emerging reborn each time like a phoenix from the ashes.
Lo Wing Hung
