China Policy Monitor No. 1657

A COAST GUARD STANDOFF NEAR DISPUTED ISLANDS
Chinese and Japanese coast guard vessels had a standoff in the East China Sea near the disputed Senkaku Islands (known as the Diaoyutai Islands in China), which are administered by Japan. Japan's Coast Guard reported that two Chinese ships entered Japanese territorial waters near the islands and left hours later. A Japanese vessel demanded the Chinese ships leave after they sailed toward a Japanese fishing boat. Tokyo claimed that the actions of the Chinese vessels "fundamentally violate international law." For its part, China's Coast Guard claimed the Japanese fishing vessel had "illegally entered China's territorial waters" and vowed to "continue to conduct rights protection and law enforcement activities... resolutely safeguarding national territorial sovereignty." This follows a similar incident that occurred around the islands on November 16th. (Taipei Times, December 3, 2025)

AMID DEMOGRAPHIC CRISIS, CHINA STARTS TAXING BIRTH CONTROL
For the first time in more than three decades, condoms will no longer enjoy tax-exempt status in China, effective January 1st. The new law, approved in late December 2024, revises the list of tax-exempt goods and services, notably omitting all birth control products, which will now be subject to a 13% levy. The government is taxing these products to boost birth rates after years of strict family planning laws, but critics fear the measure could also lead to the spread of sexually transmitted diseases. The legislation also introduces tax cuts for childcare providers, elder-care institutions, and marriage-related services. (Euronews, December 2, 2025)

[EDITOR'S NOTE: China is facing a worsening demographic crisis. Hastened by the one-child policy, which lasted from 1979 to 2015, the birth rate has steadily declined for decades, falling to an average of 6.77 births per 1,000 people in 2024. Furthermore, according to the World Bank, the 2023 fertility rate was 1.0 — roughly half the 2.1 level required to maintain the current population size.]

CHINA DELAYS PUBLISHING HOME SALES DATA
At Beijing's behest, two of China's largest private property data providers — China Real Estate Information Corp. and China Index Academy — did not disclose monthly home sales figures for November. The firms, which typically release the data monthly, were told by the Ministry of Housing and Urban-Rural Development to withhold the figures until further notice, though paying financial institutions still have confidential access to the information. The October data showed new home sales for the top 100 builders slumped 41.9% year-over-year. Withholding the November data, which was also expected to show steep declines, is likely an attempt to minimize its negative impact on the market. Used home values have also dropped by more than a third from peak levels in major cities, and Fitch Ratings has warned that the volume of new home sales could fall another 15%–20% before the struggling sector stabilizes. (Bloomberg, November 30, 2025)

[EDITOR'S NOTE: The delayed data disclosure came after China Vanke Co. — long considered one of the sector's healthier firms — sought to postpone repayment on a local bond for the first time last week. Vanke's surprise move added to the industry's woes after years of falling sales and massive defaults by China Evergrande Group, Country Garden Holdings Co., and others.]

CHINA CANCELS JAPANESE MUSIC ACTS AMID FROSTY TIES
China has begun cracking down on Japanese musical performances, canceling more than 20 Japanese cultural events scheduled between late November and early December. Last week, Japan's "Empress of Pop," Ayumi Hamasaki, was notified just hours before her Shanghai concert that it was canceled for "an inevitable reason," leaving her to perform for 14,000 empty seats. In another incident, Japanese singer Maki Otsuki's microphone was cut during her set at the Bandai Namco Festival in Shanghai. Organizers stopped the entire day's programming due to "inevitable reasons." The first cancellation involved 80-year-old jazz musician Yoshio Suzuki, whose Beijing show was halted when police informed the venue that all future performances by Japanese musicians were canceled. (Australian Broadcasting Company, December 3, 2025)

RUSSIA SELLS YUAN-DEMONINATED BONDS
For the first time, Russia is selling yuan-denominated sovereign bonds, known as Dim Sum bonds. The scheme is intended to provide Moscow with a vehicle to invest its excess yuan while supporting China's effort to internationalize its currency. Russia's Finance Ministry is taking orders on a 3.2-year tranche of domestically traded notes with a targeted coupon rate of 6.25%−6.5%. Moscow is incentivized to raise yuan debt because its trade surplus with China climbed to $19 billion in the first ten months of this year, leaving Russian exporters with a large surplus of the Chinese currency. This imbalance is driven by steady Chinese energy purchases against a slump in auto imports from China due to higher tariffs. The resulting surplus of yuan notes has few domestic investment options for Russian firms. So far this year, sales of offshore yuan denominated notes have totaled 855 billion yuan, already surpassing the annual record set last year. (Bloomberg, November 30, 2025)