Leans towards the meeting going forward as planned because it's a low-cost way for both sides to maintain stability, given headwinds at home and energy disruptions from the Iran war. However, China is not happy about the blockade affecting energy imports through Hormuz, US pressure on Iran, and hosting a summit during a US military campaign in the Middle East. They would rather it wasn't happening but see significant costs to canceling.

Xi Jinping often says 'we need to create the right conditions for the relationship' and this is not the right conditions. They like to stage-manage everything and don't like surprises, especially with Trump's unpredictability.

This has been seen before in Hong Kong after the national security law, where Chinese companies were told not to comply with US sanctions. However, even state-run banks complied with US sanctions to avoid being cut off from the dollar system. What's different now is China stood up to Trump last year by cutting off rare earths, showing leverage. They are in a stronger position to dare the US to sanction their banks, knowing Trump wants a summit and doesn't want things to blow up.

Rubio said 'we don't put sanctions on to be symbolic and we are going to enforce them,' but from China's perspective, it's an opportune time to call the US bluff.

The US has 301 investigations ongoing and vowed to rebuild the tariff wall. China's big concern is that it doesn't get rebuilt beyond what was there before. There is uncertainty about the tariff rate. Beyond the truce, there's limited scope for bigger things: selling more advanced chips (H200s are ready but not the most advanced Blackwells), Chinese investment in the US (BYD EVs unlikely due to national security restrictions), and Boeing airplane deals (which also give China leverage against Airbus). National security restrictions limit how far either side can go on trade and investment.

The US AI lead, particularly tools like Mythos, is something China would be very concerned about. China has been very quiet on this, suggesting concern. This gives China an incentive for the meeting to go forward to keep things stable. It has given the Trump administration a new appreciation of the need to maintain a lead on China in these areas, focusing the mind on keeping that advantage.

Even a two-month lead before China develops a similar tool creates an interest in preventing rogue actors from getting it and putting guard rails on it.

The Chinese have a pragmatic side focused on the bigger picture: being seen as a like-for-like superpower, treated with respect, with reciprocity. There is convergence on wanting the Strait of Hormuz open. China wants freedom of navigation and has benefited immensely from free trade. The tone of the summit matters: how China treats the optics, the language on Taiwan, whether they roll out the red carpet. China keeps its eye on the ball: keeping the Communist Party in charge, the economy stable, and handling domestic problems. There's a party congress next year (election year), and Xi has gotten rid of most of his top generals, indicating turbulence. He would like a stable world, so the incentive is to go forward even if not optimal.

Last time Trump was there, he got a private tour of the Forbidden City, a dinner with Xi, and a military display. There might not be huge breakthroughs, but the interpersonal dynamics will be interesting to watch.