CNBC’s The China Connection newsletter: Watch this at Trump-Xi summit

Hi, this is Evelyn, writing to you from Beijing. Welcome to the latest edition of The China Connection — a snapshot of what I’m seeing and hearing from local businesses.

I’m joined again by my Singapore-based colleague Anniek Bao, as we unpack expectations inside and outside China for a closely watched summit in Washington, D.C., later this week. Fanfare aside, what will this meeting achieve?

As Chinese President Xi Jinping heads to the U.S. for his first state visit since the Obama administration, here’s what businesses are watching:

At a meeting last fall in South Korea, U.S. President Donald Trump and Xi agreed to suspend rare earth export controls and retaliatory tariff measures for a year.

Then when the two leaders met in May, Beijing agreed to ramp up purchases of U.S. agricultural products and Boeing jets, while both sides planned new trade and investment-related cooperation mechanisms.

The two sides also decided to jointly pursue “constructive strategic stability.”

That May summit started “a U-turn in China-U.S. relations,” said Zhou Bo, a retired senior colonel, China Forum expert and a senior fellow at Tsinghua University’s Center for International Security and Strategy.

It was a rare recognition of Beijing as a peer power, he said. “Stability can only be found between countries of similar strength.”

So far, China has increased purchases of American soybeans in recent weeks, completing nearly half of the committed annual sum of 25 million tons this year, according to Reuters.

But Boeing CEO Kelly Ortberg last week, in an event with Morgan Stanley, downplayed expectations that Beijing would follow through on the 200-jetliner order commitment in a single blockbuster deal, expecting incremental orders by individual carriers instead.

“The best the U.S. can hope for is probably just maintaining the status quo,” Chad Brown, senior fellow at the U.S.-based Peterson Institute for International Economics, told reporters on Monday. “That’s really because of the leverage China holds at the moment over rare earths, permanent magnets.”

“Until that problem is solved, China is really going to continue to have that kind of leverage and push back on any major demands that a U.S. administration might have,” he said.

Beijing on Monday confirmed that Xi will visit the U.S. from Wednesday to Friday. The trip is expected to mirror Trump’s one-and-a-half-day visit to Beijing in May.

However, it’s unclear what cooperation on the tech would look like. Zhou said general dialogue similar to prior AI talks in Geneva was possible.

Over the weekend, in New York, senior negotiators from both countries discussed setting up a “U.S.-China AI Dialogue,” said U.S. Treasury Secretary Scott Bessent. He noted the U.S. proposed the establishment of a notification system for AI incidents.

His counterpart Chinese Vice Premier He Lifeng is in the U.S. for talks through Wednesday in preparation for the summit.

U.S. worries about AI have accelerated since early last week and it will be a part of the discussions between Trump and Xi, according to someone familiar with the thinking in recent days in Washington. The source requested anonymity due to the sensitivity of the trade talks.

A key aspect will likely cover how to get China not to empower nefarious actors with its AI, the source said, affirming that efforts to get China to buy Nvidia H200 chips were not a significant part of discussions.

Amazon’s Jeff Bezos, Elon Musk, Google’s Sundar Pichai, Michael Dell, Nvidia’s Jensen Huang, OpenAI’s Sam Altman, Citigroup’s Jane Fraser and Apple’s Tim Cook are among the U.S. business executives set to attend Trump’s state dinner for Xi, according to senior U.S. officials.

But as of Friday, the source said the U.S. has not received any visa applications for Chinese business attendees.

There’s also been little detail on the “Board of Investment” despite its formal proposal in May.

Chinese and U.S. businesses both need assurances that the geopolitical environment will remain stable enough for them to see returns on investments in each others’ countries, said Orville Schell, Arthur Ross Director of the Center on U.S.-China Relations and Vice President at the Asia Society.

And that’s a tough ask in the current environment.

Iranian Foreign Minister Abbas Araghchi met China’s top diplomat Wang Yi in Beijing last week, as Tehran sought to shore up support from its top oil buyer. On the U.S. side, Trump told Fox News he is “open” to meeting Iranian President Masoud Pezeshkian on the sidelines of the UN General Assembly in New York this week.

“Given how difficult and urgent this issue has become and how disruptive the war has been to the global economy and energy markets, I would think Iran would feature significantly in the conversation,” said Daniel Kritenbrink, a partner at The Asia Group and former U.S. Assistant Secretary of State for East Asian and Pacific Affairs.

Washington will be looking for Beijing to avoid assisting Tehran militarily or otherwise, and possibly to use its ties with Iran to encourage a resolution, he said.

During the upcoming summit, while Xi is likely to reiterate Beijing’s longstanding positions including opposition to U.S. arms sales to the island, Kritenbrink expects Taiwan to not feature as prominently as it did in Beijing.

In May, Xi emphasized to Trump the consequences of mishandling Taiwan. Beijing considers the independently, self-ruled island as part of its territory.

“People are even beginning to wonder could we get summited to death,” Asia Society’s Schell said. Something has to happen, where both sides become more flexible, he said, noting growing global suspicion of China’s exports, such as the impact to German auto sector jobs.

“When China has achieved so much with such a credible miracle of an economic boom, manufacturing exports, it’s become the supplier to the world,” he said. “Why can’t it relax a little and enjoy this success? What makes it so aggressive making so many countries on its borders [and] maritime borders feel uncomfortable?”

He added, “You could ask the same question of Donald Trump, too.”

—CNBC’s Garrett Downs and Ashlee Trujillo contributed to this report.

While frontier U.S. labs have sounded the alarm on artificial intelligence in recent high-profile speeches, Chinese companies have largely kept quiet. All of China’s AI models combined generate only about 10% of the revenue reported for OpenAI and Anthropic, U.S.-based research firm Rhodium Group said.

China’s August retail sales miss forecast while investment slump deepens

Retail sales grew 0.4% in August from a year earlier, missing economists’ forecast for a 0.8% growth in a Reuters poll. Industrial output expanded 5.2%, accelerating from 4.5% growth in July and outperforming economists expectations for a 4.8% rise. For the first eight months of the year, urban fixed-asset investment dropped by 7.2% from a year earlier.

Chinese biopharma stocks jump as U.S. weighs keeping door open to drug deals

Chinese biopharma stocks jumped in Hong Kong on Monday after a report that the U.S. is considering rules that would allow American pharmaceutical companies to continue licensing most drugs from Chinese firms.