SwedCham China Insights for the week of July 28 - August 1, 2025

Weekly China Insight

Beijing, 8 August 2025

China launches phased rollout of free preschool education, benefiting 12 million families

On 5 August, the State Council general office issued a formal directive to gradually implement free preschool education, beginning with the 2025 fall semester. Under the new policy, all children in the final year of kindergarten at public institutions will be exempt from care and education fees, while eligible children at private kindergartens will receive equivalent subsidies based on local public kindergarten standards. The initiative is expected to benefit approximately 12 million children and reduce household spending by RMB 20 billion (USD 2.8 billion) in the upcoming semester alone.

The program is structured around a tiered fiscal sharing mechanism. The central government will shoulder 80% of subsidy costs for western provinces, 60% for central regions, and 50% for eastern regions, with local governments covering the remainder. The finance and education ministries will review regional subsidy caps every three years, adjusting them based on enrollment data and fiscal capacity.

China’s free preschool initiative marks a major shift in early childhood education policy, aligning with Beijing’s broader pro-birth agenda. While immediate demographic impacts may be limited, the policy reduces education costs for families and signals a long-term state commitment to supporting population growth and human capital development.

EU Commission finds Temu in breach of Digital Services Act over illegal product risks

On 28 July, the European Commission released preliminary findings stating that Chinese e-commerce platform Temu, owned by Pinduoduo, failed to meet its obligations under the Digital Services Act (DSA), particularly by not adequately assessing or mitigating the risk of illegal products on its marketplace. A "mystery shopping" investigation revealed that EU consumers are highly likely to encounter non-compliant goods on Temu, such as baby toys and small electronics that lack safety certifications. The Commission criticized Temu's October 2024 risk assessment as overly generic and not tailored to its own operations, potentially weakening its response to illegal product dissemination.

Temu, which has nearly 94 million monthly active users in the EU and is classified as a "Very Large Online Platform" under the DSA, now faces a possible fine of up to 6% of its global annual revenue if a final decision confirms the violation. Additional areas under scrutiny include Temu’s use of addictive design features, transparency in product recommendations, and compliance with data access obligations for researchers.

The EU Commission’s case against Temu marks a significant escalation in regulatory pressure on Chinese e-commerce platforms in Europe. If confirmed, the decision could result in not only steep financial penalties for Temu, but also stricter enforcement measures that may reshape how Chinese e-commerce platforms operate in the EU online marketplace.

Nvidia rebuts Chinese cybersecurity concerns, denying chip backdoors

On 6 August, chip designer Nvidia issued a late-night statement on its Chinese-language website, firmly denying allegations that its AI chips contain government backdoors, remote kill switches, or surveillance software. The company asserted that such mechanisms "are absolutely not the way to build trustworthy systems." Nvidia was responding to recent scrutiny from China's Cyberspace Administration, which on 31 July formally summoned the company to demand an explanation for alleged vulnerabilities in its H20 chip sold in China. Chinese state media and officials had expressed doubts over the chip's safety, especially amid claims by US lawmakers and AI experts that Nvidia’s chips are capable of remote shutdown and tracking functions. The H20 chip, uniquely developed to comply with US export controls, is widely adopted in China due to its superior performance over domestic alternatives and compatibility with Nvidia’s software ecosystem.

Nvidia’s public denial underscores the geopolitical sensitivity surrounding AI chip exports. The escalating pressure by Chinese authorities to develop a self-reliant AI chip ecosystem signals intensifying long-term competition with the US and an uncertain operating environment for foreign tech suppliers.

‘Dead to Rights’ becomes first post-Spring Festival film to surpass RMB 1 billion

On 4 August, Chinese motion picture Dead to Rights became the first film since the 2025 Spring Festival to exceed RMB 1 billion in box office revenue, reaching RMB 1.53 billion within just 10 days of release. Set during the 1937 Nanjing Massacre, the film follows a family sheltering in a photo studio forcibly used by Japanese forces to process images of their occupation, weaving a story of hidden resistance and historical reckoning. The movie is the fastest-growing summer box office hit and holds an 8.6 rating on Douban – the highest for a domestic live-action film this season. It topped the weekly charts with RMB 1.1 billion, contributing 63% of total national earnings and becoming China’s third-highest grossing film of the year so far.

The success of Dead to Rights exemplifies how emotionally charged, historically rooted narratives can drive commercial success in China’s film market, particularly when timed with national commemorations of tragic historical events.