Asia

China’s disinflation isn’t just about cautious consumers; it’s rooted in a deeper structural imbalance. The real driver is the persistent gap between policy-fuelled industrial output and actual market demand. From February to May, CPI dipped into deflation, rising just 0.1% in June. This reflects years of unchecked capacity growth in sectors like EVs, solar, steel, semiconductors, and shipping industries prioritized for their export potential, not market viability. For two decades, China’s economic model favoured investment over consumption, with policymakers pushing production in “strategic” sectors. But without global demand discipline, this overcapacity now weighs down prices, revealing the limits of a supply-heavy growth strategy in a cooling global economy. China’s industrial ...

China is grappling with the rise of US dollar-backed stablecoins, which it sees as deepening American monetary dominance, while experimenting with yuan-pegged alternatives to boost its currency’s global reach. The state is keeping the domestic focus on its centralised e-CNY while allowing Hong Kong to trial more flexible stablecoin regimes, aiming to balance innovation abroad with strict control at home. The expanding use of US dollar-backed stablecoins in international finance is prompting concern in Beijing about their potential role in reinforcing dollar dominance. While most stablecoins are privately issued, the overwhelming majority are backed by the US dollar or dollar-denominated assets, embedding American monetary power into the emerging infrastructure of global digital fin...

The latest data from China’s official Manufacturing Purchasing Managers’ Index (PMI) paints a grim picture of an economy in decline, with factory closures sweeping through the country’s most vital industrial regions.  In July, the PMI dropped further into contraction at 49.3, down from 49.7 the previous month and missing market expectations.  A PMI reading below 50 signals shrinking activity, and for China—a nation that once branded itself as the “world’s factory”—the numbers are a stark confirmation that the slowdown is deepening. The fall in the headline PMI coincided with declines in the new orders index, which slipped to 49.4 from 50.2, and in new export orders, which slid to 47.1 from 47.7.  The non-manufacturing PMI, covering services and construction,...

Sri Lanka’s renowned gem industry, famous for its top-tier gemstones, is facing rampant exploitation, primarily fueled by Chinese involvement. It is estimated that Chinese nationals have illegally exported gems worth around 30 billion rupees, creating a shadowy parallel gem market. Local authorities are increasingly alarmed, recognizing the severe threat this poses to legitimate businesses and the country’s economy. In a recent high-profile case, the Colombo High Court seized over SLR 201 million from the bank account of a Chinese businessman linked to a decade-long smuggling operation. This move followed charges of unlicensed gem trading and money laundering. Earlier this year, Sri Lanka Customs officers intercepted a Chinese father-daughter duo at Bandaranaike International Airpo...

China has embarked on very rapid and massive overseas lending since 2013, when it launched the Belt and Road Initiative (BRI). But it has now become the world’s largest debt collector for developing countries’ debt repayments. EAI senior research fellow Yu Hong assesses whether China’s shifting role in global lending will undercut the BRI. The Belt and Road Initiative (BRI), launched in 2013, has positioned China as a central player in global infrastructure financing and development. According to a 2022 report by the World Economic Forum, Chinese enterprises and banking institutions have announced their participation in about 3,800 overseas projects under the BRI since 2013, involving a total investment of US$4.3 trillion towards building roads, railroads, seaports, energy plants a...