first of their kind to be implemented on a national scale. Under them, providing virtual “companion services” for minors will be banned outright. Companies can still offer such services to adults, but they will need to prevent users becoming infatuated and harming their real-life relationships. Displaying pornography is a no-no. Providers must also regularly remind users that they are talking to AI, not a human, and tell them to take breaks. Around the world, growing numbers of people are turning general-purpose chatbots into companions by prompting them to adopt particular personalities, including those of lovers. Others prefer dedicated AI- companion apps which offer more human-like features, such as virtual boyfriends that send presents in the real world (at the user’s expense, of course). Maoxiang (also known as Catbox), a companion app made by ByteDance, has around 3.9m monthly active users in China. Xingye (whose international version is known as Talkie) has 2.8m; it is made by MiniMax, a leading Chinese AI lab. Tech firms are making a tidy sum selling emotional connection: AI companions accounted for 35% of MiniMax’s revenue last year, its single largest contributor, according to a filing to the Hong Kong Stock Exchange in January. AI companionship can create sticky relationships and encourage users to part with their money. Ms Yu sometimes chats to her agent for eight or nine hours a day. Some bespoke apps charge a simple subscription fee. Users of Xingye’s standard package pay just $1.70 a month. Others induce users to spend more money to unlock additional features, such as virtual dates. The end to such relationships is motivated by both pragmatic and ideological concerns, says Zilan Qian of the Oxford China Policy Lab, a think-tank. Regulators want to protect users, particularly minors, from becoming addicted and from being driven to extreme acts of financial recklessness or self-harm. (Suicides linked to chatbots are the subject of lawsuits in America.) China’s plummeting fertility and marriage rates are also unsettling the country’s leaders. And romantic relationships with AI will do very little to spur more babymaking. China’s leaders are not the only ones concerned. Several American states have recently passed laws targeting AI services that sustain emotional
relationships. Some of these set up provisions for people to launch civil lawsuits against offending platforms. In China the government will impose the penalties, such as cash fines and removing apps altogether. China’s new rules hint at how officials think about balancing AI progress and safety more broadly. Regulators are “demonstrating they are willing to pay some cost in development and profits in order to achieve social goals”, says Matt Sheehan of the Carnegie Endowment for International Peace, an American think-tank. Yet the rules that take effect this week are narrower than an earlier draft, says Ms Qian. They exclude work-assistant and customer-service chatbots on the understanding that they are emotionally unavailable. Alibaba and ByteDance indicated that they would suspend features that allow Chinese users to create personalised AI characters before the rules took effect. Yet Chinese labs can continue to sell AI companions to foreign customers without change. Talkie already has some 10.3m monthly users outside China, which is nearly four times its domestic-user count. Chinese “maiden” games—generally non-AI, story-driven romance games which are played mostly by women—are already a booming export. Still, Ms Yu has not given up hope that ByteDance will eventually bring her agent back, even if she doubts it will resemble the current version. She says she would be willing to pay half her monthly salary just to keep the service as it is. In any case, she now says she realises that it is not a good idea to leave herself vulnerable to such platforms and their policies. ■ Subscribers can sign up to Drum Tower, our new weekly newsletter, to understand what the world makes of China—and what China makes of the world. This article was downloaded by zlibrary from https://www.economist.com//china/2026/07/16/china-wants-to-end-ai-romances
A squeezed China is trying to wring more from its state assets Its latest campaign won’t solve its debt woes, but inches in the right direction July 16th 2026 YUEYANG, A CITY in Hunan province, is famous for its tower, an elegant three-storey pavilion immortalised in millennium-old prose still memorised by schoolchildren. But these days it is the streets around the tower that matter more, at least for those concerned with Chinese governance. They feature an ambitious project to revitalise the city. More than that, they represent a new turn in China’s economic management, as officials try to ease fiscal straits by squeezing more out of state assets. The physical transformation is stunning. The area covers three square kilometres—roughly the size of New York’s Central Park—and until
recently featured dilapidated buildings, messy markets and a run-down harbour. Crucially, these properties were almost all owned by local authorities and many lay unused. The city has converted streets into attractive pedestrian spaces, renovated the buildings and spruced up the waterfront. Restaurants, shops and hotels have opened up in the new digs, generating rent for municipal coffers. On a recent summer evening, tourists and locals flocked to outdoor tables. A local official who has helped oversee the project told Chaguan that his mission was far from accomplished: “The next big challenge is to make money.” Cities throughout China need cash as the country’s property market remains in a tailspin. Land sales accounted for about 40% of total revenues for Chinese local governments in 2021, the high-water mark for home prices nationally. Since then the value of those sales has fallen by more than half. That has blown a hole in local budgets, with some debt-saddled cities cutting wages for teachers, doctors and other public-sector workers. Everywhere, officials have been looking for new ways to raise cash. Some efforts have been almost comical. Several municipal governments engaged in “deep-sea fishing” expeditions in which local police reached across provincial lines to seize assets from entrepreneurs in wealthier provinces. Many have also become more zealous in slapping fines on restaurants for hygiene violations or doling out parking tickets. Other efforts to deleverage have been more in line with textbook economics: local governments have swapped the high-interest, short-term debt of their subsidiary entities for lower-rate, longer-term official bonds. Yueyang points to another angle of attack. Officials there are trying to get more from what they already have in their hands, especially by putting under-used assets to work. As one manager for state-owned companies explains, the tighter fiscal environment has changed calculations. “It’s like looking through your closet and seeing a shirt that you only wore a couple of times in the past year,” he tells Chaguan. “You can sell it second-hand or give it to someone who needs it, but either way you try to make use of it.” This closet-rummaging exercise was formally launched by the central government in 2022 when it declared that provinces and cities should “revitalise existing state assets”. As is often the case in China, the top-down
directive was general, leaving it to lower levels to work out the implementation. One thing was clear: it was not about selling off state assets, a style of reform far out of step with Xi Jinping’s preferences for economic management. The goal instead was to breathe more life into them. Before long, people started talking of the “Yueyang model”. Yueyang was not doing anything particularly radical, but it had a few projects under way that fitted the central government’s bill. In one, it reclaimed operating rights to a series of lakes in the Junshan district—previously divided up and poorly managed—and consolidated them in one new state entity. That had the effect of raising the value of the fishing rights. In another, it took a failed development, a group of low-lying buildings planned as a tourist destination, and converted them into a human-resources complex. It has attracted about 80 tenants, including recruiters, trainers and back-office companies. Instead of just collecting rent, the municipal company managing the complex sometimes takes stakes in the businesses, hoping to share in their future growth. What all these deals and projects have in common is a break with the past expansion binge of cities across China. Local officials know that they cannot simply parcel together new land blocks for developers. Instead, they are reviewing what the state already owns, establishing a title to these assets and then figuring out how to make them more lucrative. Can this move the needle on the economy? Dinny McMahon of Trivium, a China-focused consultancy, sees it as a rare area where public finances may be improving. “Charges on usage of state assets”—a budget category that captures these efforts—have increased as a source of local revenues. For the ten most aggressive provinces, such charges accounted for 10% of their expenditures in 2025, up from 5% in 2021. Even so, a bit of monetisation will not solve China’s long-standing debt problems. In some cases officials may be playing shell games, using state- owned entities to pay rent to state-owned peers. But if the progress in Yueyang and elsewhere is sustained, it would support local budgets. Mr McMahon reckons that soon enough, the revitalisation campaign could boost Chinese growth.
The greater significance, however, may lie beyond economics. It is a reckoning with the “extensive” model of development seen in the past decade, as one Yueyang official puts it. That led to endless sprawl as cities swallowed up ever more land for development. Now, the turn is inwards, towards an “intensive” model, with cities examining how they can make better use of what they already have. It is a more “refined” form of governance, the official says. Others might put it in less grandiose terms: a financially chastened China is trying to get more from less. ■ Subscribers to The Economist can sign up to our Opinion newsletter, which brings together the best of our leaders, columns, guest essays and reader correspondence. This article was downloaded by zlibrary from https://www.economist.com//china/2026/07/13/a-squeezed-china-is-trying-to-wring- more-from-its-state-assets
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