CX Weekly Briefing: China Bets Big on Fusion

Summary:

Over the past week, China has witnessed significant developments across business, technology, finance, and policy sectors, reflecting both domestic trends and international dynamics. [para. 1]

In business and technology, Shanghai-based startup NovaFusionX made headlines by raising 500 million yuan in angel funding shortly after its founding, marking a record in the industry. The company focuses on small, modular fusion power plants tailored for AI data centers, with backing from both state and private investors. This move aligns with China’s ambitious climate goals and comes after the government launched a national fusion energy company in July—seen as a key step toward commercializing fusion power, a technology not yet achieved globally but regarded as the ultimate clean energy solution due to its limitless fuel and zero emissions. The company’s legal representative, Guo Houyang, is a veteran in the field and previously worked on Sino-U.S. fusion research. [para. 2]

A major tech controversy arose when Nvidia denied Chinese regulators’ allegations that its H20 chip contains security vulnerabilities such as “backdoors” and remote “kill switches.” Nvidia issued a denial in Chinese, stressing that such features would undermine customer trust and violate its security commitment. The issue emerged as the U.S. reauthorized sales of the H20 to China, spurring Chinese tech companies to form alliances to compete with Nvidia. [para. 3]

In the airline sector, Cathay Pacific’s HK Express reported a pre-tax loss exceeding half a billion Hong Kong dollars in the first half of 2025, mainly due to diminished travel demand from Hong Kong to Japan. The driver was a viral prediction by a Japanese manga artist about a major earthquake supposedly striking Japan in July, deterring travelers until the date passed without incident. Japan makes up about 50% of HK Express’s business, but demand is recovering post-rumor. [para. 4]

Li Auto Inc. and a state-backed testing agency apologized to a state-owned truck manufacturer after a crash test video promoting Li Auto’s new i8 model was found to be misleading and damaging to the truck company’s brand. The video showed the i8 surviving a head-on crash better than a truck made by Chenglong, sparking public criticism and accusations of unfair competition. [para. 5]

In a major industrial move, state-owned shipbuilding giants China State Shipbuilding Corp. (CSSC) and China Shipbuilding Industry Co. (CSIC) are finalizing a merger. Dissenting shareholders will be cashed out, and CSIC will delist, transferring assets to CSSC. The merger, valued above 250 billion yuan, aims to consolidate a combined market share of over 30%, creating a global shipbuilding powerhouse. [para. 6]

Turning to finance and economics, China’s exports in July exceeded expectations, rising 7.2% year-on-year in dollar terms, despite a 21.6% drop in shipments to the U.S. Growth was buoyed by a 9.3% increase in exports to the EU. Imports also rose by 4.1%, and the monthly trade surplus hit $98.2 billion. [para. 7] Value-added tax (VAT) will now apply to interest income from newly issued sovereign, local government, and financial bonds effective August 8, though individuals will remain exempt. The tax aims to discourage excessive investment in low-risk bonds and boost fiscal revenue. [para. 8]

Regulatory actions have led to the revocation of Huaxia Life Insurance's license due to misconduct, including falsified customer information and illegal transactions. 23 individuals have been penalized, and related Tomorrow Holding companies have faced similar crackdowns. [para. 9]

The Chinese yuan strengthened to 7.1395 against the U.S. dollar, the highest since November, influenced by a stable Fed interest rate and weak U.S. payroll data. [para. 10]

In social policy, China’s State Council has begun implementing free preschool education, starting with fee waivers for the final year of public kindergarten this fall. This is complemented by a new national childcare subsidy for families with children under three, addressing falling birthrates and an aging population. [para. 11]

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