1 What the US abduction of Maduro means for China
US captures Maduro
On Jan. 3, United States forces raided Caracas and abducted Venezuelan leader Nicolás Maduro and his wife Cilia Flores in a nighttime operation that lasted about 2 hours and 20 minutes. About 48 hours later, Maduro and Flores were brought to a court in New York where they pleaded not guilty to charges of “narco-terrorism” conspiracy, cocaine importation conspiracy, possession of machine guns and destructive devices, and conspiracy to possess machine guns and destructive devices against the US.
In a midday press conference on Jan. 3, U.S. President Donald Trump said, “We are going to run the country until such time as we can do a safe, proper, and judicious transition.” Trump also said, “We’re going to have our very large United States oil companies, the biggest anywhere in the world, go in, spend billions of dollars, fix the badly broken infrastructure, the oil infrastructure, and start making money for the country, and we are ready to stage a second and much larger attack if we need to do so.” Trump also suggested that China, Russia, and other countries would continue to have access to Venezuelan oil. “We’re going to get the oil flowing the way it should be,” he said.
Delcy Rodríguez, the Venezuelan vice president who was sworn in as acting president after Maduro’s capture, initially struck a defiant tone. She said in a televised address on Jan. 3 that Maduro was the “only president of Venezuela” and added that “what is being done to Venezuela is an atrocity that violates international law.” However, Rodríguez wrote in a statement the next day that “we consider it a priority to move toward a balanced and respectful relationship between the U.S. and Venezuela” and “we extend an invitation to the U.S. government to work together on an agenda for cooperation that is aimed toward shared development.” The Wall Street Journal reported on Jan. 5 that the Central Intelligence Agency had concluded that Rodríguez and top members of Maduro’s regime — including interior minister Diosdado Cabello and defense minister Vladimir Padrino — were best positioned to run Venezuela in the event that Maduro loses power.
In an interview with NBC on Jan. 4, U.S. Secretary of State Marco Rubio said in outlining his demands for Venezuela, “You can’t turn Venezuela into the operating hub for Iran, for Russia, for Hezbollah, for China, for the Cuban intelligence agents that control that country.” Rubio also said, “What we’re not going to allow is for the oil industry in Venezuela to be controlled by adversaries of the United States. You have to understand, why does China need their oil? Why does Russia need their oil? Why does Iran need their oil? They’re not even in this continent. This is the Western Hemisphere. This is where we live, and we’re not going to allow the Western Hemisphere to be a base of operation for adversaries, competitors and rivals of the United States.”
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Hours before the U.S. raid, Nicolás Maduro received PRC special representative for Latin American and Caribbean affairs Qiu Xiaoqi at the Miraflores Presidential Palace in Caracas. Maduro reaffirmed Venezuela’s strategic ties with the PRC and pledged to build a “multipolar world of development and peace.”
When asked about the meeting by Fox News, President Trump said, “I have a very good relationship with Xi, and there’s not going to be a problem. They’re going to get oil.”
PRC reacts to Venezuelan incident
Jan. 3
When asked about the U.S. action against Venezuela, a PRC foreign ministry spokesperson said, “China is deeply shocked by and strongly condemns the U.S.’s blatant use of force against a sovereign state and action against its president.” The spokesperson added that America’s “hegemonic acts” seriously violate international law and Venezuela’s sovereignty as well as threaten peace and security in Latin America and the Caribbean region, and that the PRC “firmly opposes it.”
Jan. 4
Speaking at the Seventh Round of China-Pakistan Foreign Ministers’ Strategic Dialogue, PRC foreign minister Wang Yi noted that the current international situation is more “volatile and intertwined,” with “unilateral bullying” becoming increasingly severe. “We never believe that any country can play the role of world policeman, nor do we agree that any country can claim itself to be an international judge,” Wang said, adding that “the sovereignty and security of all countries should be fully protected by international law.”
Jan. 5
Xi Jinping made a veiled swipe at the U.S. over its capture of Maduro in a meeting with Irish prime minister Micheal Martin in Beijing. Xi said that “the world today is undergoing changes and turbulence not seen in a century, with unilateral acts of hegemony severely undermining the international order.” He added that “all countries should respect the development paths independently chosen by the peoples of other nations, abide by international law and the purposes and principles of the UN Charter, and major powers, in particular, should take the lead in doing so.”
PRC-Venezuela relations
The PRC and Venezuela have traditionally had strong ties. In 2023, the PRC upgraded its relationship with Venezuela to an “all-weather strategic partnership,” the second-highest tier that Beijing uses to describe bilateral relationships. Meanwhile, Venezuela has consistently stood by the PRC’s positions on Taiwan and Hong Kong, and China is Venezuela’s second-largest trading partner after the United States.
The PRC is one of Venezuela’s biggest buyers of crude. China accounted for over half of Venezuela’s crude exports of 768,000 bpd in 2025, according to analytics firm Kpler. Those barrels make up about 4 percent of China’s oil imports for that year. About two-thirds of PRC oil imports from Venezuela go to independent refineries (“teapots”), while the remaining third goes toward repayment of Venezuela’s substantial debts to Beijing (about $10 billion, according to AidData). The PRC was a key lender to Venezuela during the Hugo Chavez regime, lending upwards of $60 billion in oil-backed loans through state-run banks between 2007 to 2015. Reuters estimated that the U.S. could see its imports of Venezuelan crude increase by more than 200,000 bpd within months of Maduro’s capture if the majority of current Venezuelan exports to PRC “teapots” is redirected to the United States.
Venezuela is the top destination of PRC arms exports to the Americas, purchasing $495 million of arms (85.8 percent of total imports) in the decade ending 2020, according to the Center for Strategic and International Studies using data from the Stockholm International Peace Research Institute. In September 2025, Venezuela installed an estimated seven units of the PRC-made JY-27A radar systems, which are supposed to have the capability of detecting U.S. stealth jets. However, those radar systems did not appear to make any difference in interfering with the U.S. raid on Caracas.
Our take
1. Beijing’s early reaction to Washington’s capture of Nicolás Maduro — including declaring “deep shock” at the action and its sending of diplomats to meet with Maduro just hours before the Venezuelan leader was abducted — indicates that Xi Jinping and the CCP were genuinely caught off guard by the move. This suggests that Beijing either lacked any intelligence about the Trump administration’s action, or had some intelligence but suffered from analytical and judgment failure, particularly in allowing the meeting between Qiu Xiaoqi and Maduro to go ahead. The Venezuelan incident could prompt the Xi leadership to quietly review its foreign affairs and external intelligence apparatuses to assess whether purges and reforms are required to avoid future failures on those fronts.
Xi and the CCP wasted no time in cranking up the propaganda machine and taking potshots at the U.S. on the Venezuela issue while bemoaning the “turbulent” state of global affairs. Subsequent CCP propaganda is likely to denounce the U.S. for engaging in “imperialism,” “hegemonism,” “bullying,” and “destabilizing” the international order, as well as promote Beijing’s narratives concerning “multilateralism,” “the Global South,” “sovereignty and security,” and “development path.”
But aside from propaganda and making complaints at international bodies, there is little that the PRC can do to actually support Maduro and Venezuela. The U.S. has demonstrated with its lightning capture of Maduro with limited losses and incidents that its force projection capabilities are in a completely different league compared to its major rivals like China and Russia. Countries and leaders who ally themselves with the PRC cannot expect Beijing to provide them with political security, particularly when they are an ocean away from China. Xi and the CCP are also reminded that the “law of the jungle” reigns in international relations and that the PRC still has some ways to go before it can exert itself with impunity on global matters like the United States.
Beijing would be very concerned about how the current Venezuelan regime under Delcy Rodríguez or a new one would handle the PRC-Venezuelan relationship. Venezuelan oil is likely to be the least of Beijing’s worries given that Trump has said that China can still access the resource and Venezuelan oil accounts for just a single digit percentage of China’s oil imports. Rather, Xi and the CCP would be more troubled by whether the Rodríguez administration or subsequent Venezuelan leaders decide to become avowedly pro-U.S. and proceed to take tangible action to unwind PRC influence in the country, including cutting China off access to satellite tracking stations and other sensitive technology infrastructure in Venezuela, and forcing Venezuela to shift away from PRC telecommunications networks (Huawei and ZTE have long helped Venezuela to build up its digital and telecommunications infrastructure). This development would unwind the CCP’s long-term efforts to bring Venezuela closer into its orbit, and erode Beijing’s strategic efforts at influencing Latin America and advancing its agenda for global domination more broadly.
The U.S. capture of Maduro will likely spur Beijing to reassess its military capabilities. There are many reasons why Venezuela’s PRC-made JY-27A radar systems appeared to be a nonfactor in stopping the U.S. raid, including straight up U.S. military and technological superiority, inexperienced or bought off local radar operators, and equipment failures. Regardless, the People’s Liberation Army may find it prudent to reexamine its JY-27A radar system and closely study the U.S. raid to avoid a future debacle. The PLA could also recognize that it currently lacks the means to pull off a similar “decapitation” tactic to achieve “reunification” with Taiwan, and could be inspired by the U.S. action to expand effort and resources into developing such means.
Finally, U.S. action in Venezuela is unlikely to affect Beijing’s calculus regarding Taiwan. Xi and the CCP would prefer “peaceful reunification” over aggression given the greater benefits of the former. Also, Beijing would think twice about challenging the U.S. after the latter’s striking feat of arms in capturing Maduro.
2. The CCP has almost certainly been negatively impacted by the Trump administration’s effort at regime change in Venezuela. The immediate aftermath of Maduro’s capture exposed the PRC’s inability to provide political protection for its allies and partners, while refocusing the world’s attention on the possibility of similar PLA action against Taiwan (therefore deterring Beijing if it has any such intentions). Beijing has scrambled to roll out propaganda to denounce the U.S. and promote itself as the upholder of international law and order, but the impact of the propaganda is likely to be limited in the short term as countries acknowledge the realities of U.S. power projection capabilities.
The CCP’s troubles could be compounded if Washington successfully installs a pro-U.S. regime in Caracas and proceeds to methodically dismantle PRC networks and influence in Venezuela and the rest of Latin America by asserting and enforcing a “Trump Corollary” to the Monroe Doctrine, as stated in President Trump’s new National Security Strategy. This would see decades of the PRC’s effort and billions of yuan invested in swaying Venezuela and Latin America wasted, dealing a serious blow to the CCP’s hegemonic ambitions in the Western Hemisphere. Being driven out of Latin America also greatly diminishes the CCP’s ability to influence the U.S. and North America, reducing the CCP threat in that part of the world. Over time, the U.S. would be able to gradually free up resources and military assets used to secure the Western Hemisphere and shift them to the Indo-Pacific to better deter a conflict over Taiwan.
However, the CCP could yet recover from the blow that it was dealt with from Maduro’s capture if the Trump administration fails to take follow up steps to tangibly unwind PRC networks and influence in Venezuela and other Latin American countries (particularly Cuba) that it conducts regime change operations in, or if Washington’s efforts at regime change in Venezuela ultimately fail (including a failure to install a pro-U.S. regime, a failure to successfully prosecute Maduro due to political factors, Congress reining in Trump, etc.). As long as the PRC remains largely unimpeded, it will relentlessly advance its various influence operations in Venezuela and Latin America, deepen its “foothold” into the Western Hemisphere, and press on with its agenda of displacing the U.S. as the global hegemon. Increased U.S. focus on countering and rolling back threats in the Western Hemisphere will also tie up military assets and resources there, giving the CCP freer rein to dominate the Indo-Pacific and contemplate bolder action in taking Taiwan.
2 Beijing to double down on propaganda to maintain positive narrative on the economy in 2026
2025 Central Economic Work Conference
Dec. 10 to Dec. 11, 2025
The CCP convened its annual Central Economic Work Conference in Beijing. All members of the Politburo Standing Committee were in attendance.
Xi Jinping delivered a speech at the meeting where he summarized the PRC’s economic performance in 2025, assessed the current economic situation, and set out priorities for economic work in 2026. Later, PRC premier Li Qiang delivered concluding remarks and outlined requirements for implementing Xi’s key instructions and properly carrying out economic work in 2026.
Noteworthy content from the meeting included:
Review of China’s economic performance in 2025
- The meeting described 2025 as an “extraordinary year” and credited the Xi leadership for pushing the economy ahead under heavy pressure while “successfully completing” the main targets for economic and social development.
Assessment of current challenges
- The meeting acknowledged that long-standing structural problems and new challenges persist in the Chinese economy. Also, changes in the external environment are having a deeper impact; domestic imbalances — specifically strong supply and weak demand — remain pronounced; and risks and hidden dangers in key sectors are significant. Regardless, the meeting reiterated that the fundamentals of China’s long-term economic growth remain unchanged and called for maintaining confidence.
Overall requirements for economic work in 2026
- Economic policy is to be guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, adhere to the principle of “seeking progress while maintaining stability” (穩中求進), better coordinate domestic economic work with international economic and trade struggles, expand domestic demand, optimize supply, develop “new quality productive forces,” advance the unified national market, mitigate risks, stabilize employment, support enterprises, and stabilize market expectations.
Macroeconomic policy stance for 2026
- Continue the principle of seeking progress while maintaining stability, with stronger counter-cyclical and cross-cyclical adjustments, and a more proactive fiscal policy.
- Maintain necessary levels of fiscal deficits, overall debt, and total expenditures.
- Address local government fiscal difficulties, and require Party and government organs to tighten their belts (“live frugally”).
- Implement a moderately accommodative monetary policy to promote a reasonable rebound in prices, ensure ample liquidity, and keep the renminbi exchange rate basically stable.
- Enhance policy coordination and effectiveness to boost confidence.
Eight priority areas for economic work in 2026
- Demand-led growth: Boost consumption, implement income growth plans, stabilize investment (increase central government investment and stimulate private investment), and advance urban renewal.
- Innovation-driven development: Implement education, scientific, and talent initiatives, build innovation hubs, and strengthen enterprise-led innovation.
- Deepening reform: Formulate regulations for building a unified national market, address excessive “involution-style” competition, deepen reforms of state-owned and private enterprises, clear arrears owed to businesses, promote “win-win” development of digital platforms, and improve the local tax system.
- Opening up: Advance institutional opening up, expand opening in services, accelerate the development of the Hainan Free Trade Port, promote Belt and Road cooperation, and develop digital and green trade.
- Coordinated development: Promote urban–rural integration, develop county-level economies, ensure food security, consolidate poverty alleviation achievements, and support major economic provinces in playing a leading role.
- Dual-carbon strategy: Promote carbon reduction across industries and build a new energy system.
- People-centered development: Stabilize employment (with a focus on new graduates and migrant workers), advance reforms in education and healthcare, promote long-term care systems, support marriage and childbirth, and strengthen workplace safety.
- Risk mitigation: Stabilize the property sector (reduce inventory, purchase affordable housing, and build a new model for real estate development) and optimize local government debt management (including resolving hidden debt risks).
Qiushi articles on domestic demand, real estate market
Dec. 16
Qiushi, the CCP Central Committee’s ideological journal, published an article with Xi Jinping’s name in the byline titled “Expanding Domestic Demand is a Strategic Move” (擴大內需是戰略之舉). The article, which is a compilation of Xi’s remarks made between October 2015 and October 2025, argues that expanding domestic demand is not a short-term expedient move, but rather a strategic cornerstone tied to economic stability, national security, and long-term development.
Jan. 1
Qiushi published a commentary titled, “Improving and Stabilizing Expectations in the Real Estate Market” (改善和穩定房地產市場預期) by the deputy director and associate research fellow of the real estate division at the PRC Ministry of Housing and Urban-Rural Development’s policy research center.
The article acknowledges that China’s real estate market is undergoing a deep adjustment phase, noting that “sharp declines in property sales and prices have had a significant impact on the demand side of the real economy, the asset side of balance sheets, and the liability side of financial institutions.” Concurrently, the article emphasizes that real estate remains a “foundational industry” of the national economy, and that stabilizing market expectations is crucial to overall economic stability.
The article argues that in response to the aforementioned pressures, macroeconomic regulation must be strengthened to “shorten the adjustment period as much as possible and smooth market volatility.” In terms of policy signaling, it stresses that “policy support must be delivered in one decisive move, rather than through piecemeal or incremental measures.” The article contends that a combination of measures — including stronger policy support, optimized supply-side management, and enhanced information and public-opinion guidance — can effectively improve market expectations and promote the stable and healthy development of the real estate market.
Some mainland Chinese financial analysts interpret this Qiushi piece as the central government signaling strongly that it plans to more forcefully intervene in the property sector and could subsequently roll out more aggressive measures.
National propaganda head meeting
Jan. 5
The CCP held the National Conference of Propaganda Department Heads in Beijing. Propaganda minister Li Shulei presided over the meeting and laid out specific work arrangements.
Cai Qi, the member of the Politburo Standing Committee overseeing propaganda and secretary of the CCP Central Secretariat, attended the meeting and delivered a speech. He stressed the need to uphold Xi Jinping Thought as the guiding principle, and to focus on thoroughly studying and implementing Xi’s other key political concepts as well as the decisions and deployments of the Fourth Plenum of the 20th Central Committee.
Cai also requested that news and public-opinion work should place economic communication in a prominent position, strengthen responses to public sentiment and guidance of public opinion, rigorously enforce the responsibility system for ideological work, and consolidate and expand the mainstream narrative of “confidence, self-reliance, unity, and determined progress” (大自信自強、團結奮進).
Our take
1. The policies advocated at the 2025 Central Economic Work Conference, the recent Qiushi articles on domestic demand and the real estate market, and the National Propaganda Department Head Conference suggest that the CCP authorities are lacking novel ideas to fix Chinese economic difficulties and address the problems expected in 2026. In lieu of policies and fixes, Beijing is doubling down on propaganda and consolidating Xi Jinping’s “quan wei” to tide things over.
The CCP authorities acknowledged the existence of economic challenges at the 2025 Central Economic Work Conference, as well as other key central meetings on the economy. Yet the authorities concurrently promote the idea that the Chinese economy is fundamentally sound, has withstood risks and pressures, and has “successfully” met its growth targets “under the leadership of Xi Jinping.” The narrative of the economy doing well, however, has been undercut throughout 2025 with China experiencing persistent deflationary pressures, weak demand, sluggish manufacturing, and slowing exports. While the PRC did hit its growth targets, this is almost certainly due to data manipulation rather than actual results.
Beijing is looking to repeat the same formula in addressing its economic challenges in the new year. The official line is for economic work in 2026 to be guided by “Xi Jinping Thought,” which entails that China’s economy will remain on a fundamentally misguided policy trajectory. Meanwhile, the CCP authorities are looking to more tightly control how economic information is released to the public and “guide” the public to become more optimistic about China’s economic prospects, as seen in Cai Qi’s call for propaganda departments to “place economic communication in a prominent position,” “strengthen responses to public sentiment and guidance of public opinion,” and “consolidate and expand the mainstream narrative of ‘confidence, self-reliance, unity, and determined progress.’”
2. The macro policy stance and key economic work tasks for 2026 laid out at the 2025 Central Economic Work Conference are uninspiring and offer little in the way of new initiatives. Instead, the CCP’s economic work for 2026 mostly extends the tepid measures from prior years.
i) The Central Economic Work Conference proposed adopting a more “proactive” fiscal policy in 2026 as part of stimulus measures. In practice, this entails the continued expansion of fiscal deficits and government debt, likely with limited stimulus impact.
Fiscal data for the first eleven months of 2025 show that China’s fiscal imbalance has continued to deteriorate from an already elevated base. Broad-based fiscal revenue recorded virtually zero growth, while expenditure remained rigidly on an upward trajectory. Official data indicate that the all-inclusive fiscal deficit for the first eleven months of 2025 reached 1.514 trillion yuan (up 17.9 percent), almost identical in absolute terms to the same period in 2024 (1.511 trillion yuan, or up 21.7 percent). The apparent slowdown in the growth rate of the deficit is largely a “mathematical effect” (數學效應), not a genuine easing of fiscal stress.
Central bank financial data for the same period show that government borrowing accounted for nearly 40 percent of the increase in total social financing, while credit to households and firms actually declined. New household lending contracted sharply (down 77.5 percent), with short-term loans having swung from a net increase (up 414.4 billion yuan) to a net decline (down 732.8 billion yuan), while medium- and long-term loans (a proxy for mortgages) fell steeply (down 34.9 percent). Corporate lending rose only marginally (up 4.1 percent), with a sharp increase in short-term financing (up 68.8 percent) but a significant drop in medium- and long-term investment loans (down 15.4 percent). This suggests firms are relying on short-term market funding while lacking appetite for fixed-asset investment.
Furthermore, our previous analysis of China’s fiscal data indicates that the current growth in tax revenue is not a signal of economic expansion. Instead, it reflects the taxation authorities’ intensified collection efforts from enterprises and individuals amidst an increasingly deteriorating economic environment. This “killing the goose that lays the golden eggs” approach is likely to become unsustainable in 2026.
ii) The Qiushi article on “improving and stabilizing expectations in the real estate market” emphasizes that property remains a foundational industry of the national economy and that stabilizing market expectations is critical to economic stability. To date, however, the property sector continues to decline with no clear signs of bottoming out. According to nationwide real estate market data for January to November 2025 released by the National Bureau of Statistics, average home prices across China have broadly fallen back to levels seen around 2019 to 2020. In some regions that have experienced deeper corrections, second-hand home prices have even declined to lows last seen around 2017. Barring unexpected developments, housing prices are likely to continue falling in 2026.
The CCP authorities appear to be resigned to the fact of the chronic nature of the sector’s slump, as seen from the 2025 Central Economic Work Conference offering no policy measures capable of reversing the downturn and the 15th Five-Year Plan proposed at the Fourth Plenum of the 20th Central Committee noticeably reducing the level of focus on real estate. The analysts in mainland China who believe that the Qiushi piece suggests that Beijing is preparing to take drastic measures to revive the property sector are either being overly optimistic, or are part of the CCP authorities’ effort to “maintain stability” through narrative and messaging control.
iii) Xi Jinping’s Qiushi article on expanding domestic demand indicates that the CCP authorities are fully aware that the core of China’s economic malaise lies in weak domestic demand and severe overcapacity, compounded by increasing external pressure on Chinese exports.
The Qiushi piece on domestic demand is more rhetorical positioning rather than substantive policy. China’s deficit in domestic demand stems mainly from the CCP’s focus on investing in the production side rather than the consumption side. Meanwhile, spending on public welfare remains limited even as the authorities seek to extract more resources from the populace. For instance, the CCP authorities have pushed through healthcare reforms, made social security contributions mandatory, and significantly hiked utility fees over the past two to three years. They have also delayed payments to private enterprises and civil servant salaries, while some provinces and cities have even rescinded childbirth subsidies. All of these measures are drastically increasing the cost of living for residents and severely stifling consumption power.
Therefore, the 2025 Central Economic Work Conference’s call to “put people’s livelihoods first” offers nothing new and is yet more empty sloganeering on Beijing’s part. This is especially true given that local governments lack the necessary fiscal resources to improve public welfare; even if they had the will to implement such policies, they would lack the power to do so.
In sum, all signs indicate that the CCP will continue to struggle to resolve China’s economic predicaments in 2026. In the absence of effective measures, the CCP will rely more heavily on propaganda and narrative control to “maintain stability” and keep up the level of “optimism” in the Chinese economy.
