China Champions Its Political Model as Global Alternative

Remarks of Officials

Political

Summary:

Following Venezuela's leader capture, China intensifies its campaign to promote its governance model as a global alternative to Western capitalism, challenging perceived US dominance.

In the wake of the US capture of Venezuela's leader, China is intensifying its campaign to promote its governance model as a superior alternative to Western capitalism, framing it as a new blueprint for developing nations.

An article in the People's Daily by Liu Haixing, who heads the Communist Party's International Department, laid out the case for why China’s political system and development path offer fresh solutions for the world. The department is responsible for the party's outreach to foreign political organizations.

China's Case Against Western Capitalism

Liu pointed to what he described as "frequent systemic crises within capitalism" to argue that the success of the Chinese model has boosted the global appeal of socialism.

"The historical evolution and the competition between the two ideologies and social systems—socialism and capitalism—are undergoing a major shift on a global scale that increasingly favors socialism," he wrote.

According to Liu, China’s rise has dismantled the "Western-centric" notion that modernization is synonymous with Westernization. He positioned the Chinese approach as a new standard for other countries.

"It sets a benchmark and provides a brand-new alternative for developing nations seeking to achieve modernization while maintaining their independence and autonomy," he stated.

Liu highlighted several advantages of the Chinese system over Western democracies, including:

• Strong party leadership and discipline

• Long-term economic planning

China is expected to release its 15th five-year plan during its annual political gathering in March.

Beijing Positions Itself as a Global Stabilizer

Without naming the United States directly, Liu criticized the world's leading superpower while presenting China as a source of global stability.

"Particularly in an era of intensifying geopolitical conflicts and the rise of protectionism and unilateralism, China remains steadfast as a force for peace, stability, and progress in the world," he wrote. He added that China continues to inject "certainty into a world defined by turbulence and transformation."

This messaging aligns with Beijing’s official response after Donald Trump announced the capture of Venezuelan leader Nicolas Maduro. China’s Foreign Ministry condemned the attack, while President Xi Jinping, in his first international appearance after the event, described China as a "peace-loving, open-minded, inclusive" nation.

US-Venezuela Tensions Fuel Ideological Divide

Since Maduro's capture, the Trump administration has emphasized the "Donroe Doctrine," a strategy aimed at asserting US dominance in the Americas and countering rivals in the Western Hemisphere. This campaign directly challenges China's significant economic investments and growing presence in the region.

In a Wednesday interview with the New York Times, Trump described a vision of American power limited only by his "own morality." He suggested that past presidents were too hesitant to use US power to achieve political supremacy or national gain.

"I don't need international law," he said. "I'm not looking to hurt people."

Beijing has long argued that the current global order is unfairly dominated by the United States and its allies. It continues to advocate for an alternative system where developing countries, with China at the forefront, can assume a more prominent role.

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Economic

Consumer Inflation Rebounds, But Annual CPI Misses Target

China’s headline consumer price index (CPI) rose 0.8% in December compared to a year earlier the fastest monthly pace in nearly three years driven mainly by a surge in fresh vegetable prices, which spiked 18.2% due to winter-related supply constraints. On a month-over-month basis, prices edged up 0.2%, exceeding expectations of a 0.1% rise.

However, this rebound failed to lift annual inflation meaningfully. For the full year 2025, CPI was essentially flat, falling well short of Beijing’s target of “around 2%,” signaling that stimulus measures, such as the consumer goods trade-in program, have not had a strong effect on overall demand.

Core inflation, which excludes volatile food and energy prices, remained unchanged at 1.2% in December, indicating underlying consumer demand remains subdued despite short-term seasonal factors influencing headline numbers.

Factory-Gate Deflation Extends Record Stretch

While consumer prices showed a modest pick-up, producer price index (PPI) data reflected the continued stress in industrial sectors. Factory-gate prices dropped 1.9% year-on-year in December a slightly softer fall than November’s 2.2% marking more than three years of consecutive monthly declines.

Sectors such as durable consumer goods and automotives remain under pricing pressure. Durable goods prices fell 3.5% year-on-year, while gasoline-powered and new energy vehicle prices dropped by 2.4% and 2.2%, respectively. The ongoing deflation in PPI underscores structural overcapacity and intense competition, particularly in manufacturing and electric vehicles, where firms have reintroduced price cuts amid tepid demand.

Causal Factors Behind Diverging Inflation Trends

The divergence between modest consumer inflation and deepening producer price deflation suggests a complex dynamic: short-term food-related price increases are not reflective of broader economic strength. Instead, a weak labor market, fragile household confidence, and a protracted real estate downturn are acting as demand suppressors. These factors are causally linked to China’s inability to generate self-sustaining inflation, despite repeated pledges and interventions by policymakers.

Moreover, the persistence of producer deflation highlights chronic oversupply and margin compression across key industrial sectors. This condition correlates with falling industrial profits, which declined 13.1% in November the steepest drop in over a year.

Property Sector Weighs on Recovery Outlook

Beijing continues to grapple with the fallout from the real estate sector’s long slide. Despite repeated commitments to stabilize the sector reiterated in the December economic work conference housing sales and investment remain weak. A recent editorial in Qiushi Journal, the Communist Party’s ideological publication, called for comprehensive, rather than piecemeal, stabilization policies.

Nevertheless, analysts like Macquarie’s Larry Hu warn that anticipated policy easing such as further mortgage rate cuts and relaxation of purchase restrictions may not be sufficient to reverse the downward trajectory. He forecasts a 7% decline in new home sales by floor area in 2026, following an 8% fall in 2025.

Growth Momentum Likely to Weaken in Q4

China may still meet its full-year GDP growth target of around 5% in 2025, but momentum appears to be slowing. Bank of America Global Research expects Q4 growth to moderate to 4.5%, down from 4.8% in Q3. Fixed-asset investment likely contracted more deeply in December, and while industrial production may show a modest year-end lift, it is unlikely to compensate for weakness in real estate and consumer sectors.

Although the official PMI index in December rose above the expansion threshold to 50.1, snapping eight straight months of contraction, this appears more seasonal than structural. Without stronger consumption and investment cycles, the recovery remains fragile and uneven.

December’s inflation data offers mixed signals: a short-term lift in CPI driven by food prices masks deeper deflationary currents in the industrial and property sectors. While headline figures show temporary relief, the underlying trends point to persistent weakness in domestic demand and private investment. Policymakers face mounting pressure to deliver more forceful and targeted stimulus in 2026, or risk slipping into a prolonged low-growth, low-inflation environment.

Source: CNBC

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Economic

Markets Poised for Technical Bounce After Sustained Selloff

India's benchmark indices, the Nifty 50 and the BSE Sensex, are set for a modest recovery on Friday, with Gift Nifty futures trading at 25,998.50 above Thursday’s Nifty close of 25,876.85. The anticipated bounce comes after a four-day losing streak that erased nearly 1.8% from the indices, triggered primarily by renewed concerns over U.S. trade tariffs and sustained foreign investor selling.

The recent pullback has positioned domestic equities near key technical levels, where analysts expect opportunistic buying to emerge. However, the outlook remains fragile, as sentiment is tethered to geopolitical headlines and legal developments in the United States that may reshape bilateral trade policy.

U.S. Supreme Court Tariff Ruling Could Reshape Global Trade Dynamics

Investors are focused on the pending U.S. Supreme Court decision regarding the legality of tariffs imposed by President Donald Trump under emergency trade powers. If the Court deems these actions unlawful, the U.S. government could face up to $150 billion in refund liabilities to importers. Such a ruling could significantly alter the narrative on India-U.S. trade relations, which have been strained by duties as high as 50% on Indian goods, particularly in response to New Delhi's continued purchases of Russian oil.

Any favorable ruling could serve as a short-term catalyst for Indian equities by easing trade headwinds and improving the investment climate. Conversely, a verdict upholding Trump’s tariff powers may introduce further policy risk for Indian exporters and delay the finalization of a long-discussed trade pact with Washington.

Foreign Investor Outflows Add to Downward Pressure

The equity market’s vulnerability is exacerbated by persistent foreign portfolio outflows. In January alone, foreign investors have sold approximately $900 million worth of Indian shares, following a staggering $19 billion in outflows throughout 2025. These redemptions have largely been attributed to global macro tightening, geopolitical tensions, and valuation concerns.

While some domestic institutional buying has helped cushion the fall, analysts caution that continued outflows could weigh on any upward momentum unless earnings data or policy clarity injects fresh confidence into the market.

Key Stocks in Focus

Markets are also expected to react to company-specific developments:

Reliance Industries: India’s largest private-sector firm and operator of the world’s largest refining complex has signaled interest in purchasing Venezuelan crude if U.S. sanctions allow broader access. This move aligns with ongoing geopolitical shifts following the U.S. seizure of Maduro’s government and reorientation of Venezuelan oil flows.
Bajaj Finserv: The Bajaj Group has acquired a 23% stake in its insurance subsidiaries from German partner Allianz SE for ₹213.9 billion ($2.38 billion), consolidating its position in the fast-growing Indian insurance market. This deal may boost sentiment around the broader Bajaj Group stocks.
BHEL (Bharat Heavy Electricals Limited): The state-owned engineering giant secured a ₹54 billion order from a joint venture company involved in coal gasification. This development signals continued momentum in public-sector project execution and may lift sentiment in the capital goods space.

While Friday’s early cues point to a tentative rebound in Indian equities, sustainability will depend on clarity around U.S. trade policy, foreign investor behavior, and the domestic earnings season. Until then, sentiment remains delicately balanced between technical bargain hunting and broader macroeconomic uncertainty.

Source: Reuters

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Stocks

Asian Indices Mixed After China Inflation Matches Expectations

Asian equities opened the final trading day of the week with a fragmented performance, shaped by China’s latest inflation figures and ongoing macro-political uncertainty. The CSI 300 dipped 0.25% after China’s consumer price index (CPI) rose 0.8% in December from a year earlier, in line with forecasts and a slight acceleration from November’s 0.7% rise. Factory-gate prices fell 1.9%, showing persistent deflationary pressures in the producer economy, though less than expected.

The muted reaction in Chinese equities underscores investor caution amid ongoing concerns about domestic demand recovery and policy support. While the data avoided surprises, the sluggish pace of price growth signals a fragile consumption rebound, which continues to weigh on sentiment across Asia.

Japan’s Equities Outperform on Strong Corporate Earnings

Japan’s markets stood out, with the Nikkei 225 rising 0.54% and the Topix up 0.46%, supported by corporate earnings. Shares of Fast Retailing, parent of Uniqlo, jumped more than 7% after the company reported a nearly 33% surge in quarterly operating profit and raised its full-year guidance. Strong global sales, particularly in China, North America, and Europe, helped offset the impact of U.S. tariffs. The company remains on track for its fifth consecutive year of profit growth, boosting confidence in Japanese retail resilience and international brand strategy.

Geopolitical risk continued to support defense-related shares in the region. Following the U.S. military operation that resulted in the capture of Venezuelan President Nicolás Maduro and Trump’s renewed rhetoric around Greenland acquisition, defense firms saw renewed investor interest. In Japan, Kawasaki Heavy Industries rose 1.46%, while IHI gained nearly 2%. In South Korea, Hanwha Aerospace soared 5.87%, Poongsan climbed over 4%, and Korea Aerospace rose 1.33%. This defensive rotation highlights market sensitivity to global security developments and regional defense realignment.

Australia Flat, Mining Stocks React to M&A News

Australia’s S&P/ASX 200 traded just below flat, dragged by weakness in mining. Shares of Rio Tinto fell over 5% following confirmation of early-stage merger talks with Glencore. A potential merger between these two global mining giants, estimated to be worth $207 billion, introduces uncertainty in the short term despite long-term consolidation synergies. The announcement triggered cautious investor response, weighing on the broader materials sector.

Hong Kong’s Hang Seng Index gained 0.12%, with futures suggesting a higher open. Investors are closely watching Hang Seng Bank following shareholder approval of a privatization plan proposed by majority owner HSBC. The move, part of HSBC’s broader regional restructuring, could shift capital flows and affect banking sector valuations in the short term.

Wall Street Rotation Reflects Pre-Data Repositioning

U.S. equity futures remained muted in early Asian trade as global investors awaited the December non-farm payrolls report and a critical Supreme Court ruling on Trump’s use of emergency tariff powers. Overnight, the Dow rose 270.03 points (0.55%), the S&P 500 added a modest 0.01%, while the Nasdaq lagged with a 0.44% decline. The rotation out of tech, led by a 1% drop in the information technology sector, indicates investor caution ahead of potentially market-moving legal and labor market developments.

Asia’s markets reflected a mix of localized corporate catalysts, macroeconomic data digestion, and broader geopolitical undercurrents. While China’s inflation data remained in line with expectations, uncertainty over global trade policy, mergers in the mining sector, and defense spending trends drove sector-specific movements. Market participants now shift focus to U.S. payroll data and the Supreme Court’s pending tariff decision, both of which could redefine risk sentiment going into next week.

Source: CNBC

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Forex

Rupee Opens Firmer on RBI Support, but Gains Remain Fragile

The Indian rupee is expected to inch up in Friday’s session, opening in the 89.90–89.94 range against the U.S. dollar, after closing weaker at 90.0175 on Thursday. While the Reserve Bank of India (RBI) continues to intervene by selling dollars in the spot market, its efforts are yielding diminishing returns as market participants hedge aggressively and external headwinds persist.

On Thursday, the rupee briefly strengthened to 89.75 in response to central bank support, echoing a similar rebound seen on Wednesday. However, in both cases, the currency failed to sustain its gains, underscoring a pattern of fragile recoveries and persistent structural pressure. Traders attribute the lack of follow-through to continued foreign portfolio outflows and muted optimism over trade negotiations, especially amid concerns of new tariffs from the United States.

Structural Pressures from Trade and Capital Flows

The rupee’s weakness is not merely a reflection of short-term volatility but is causally linked to sustained capital outflows and deteriorating investor sentiment. Importers, anticipating further depreciation, are locking in forward contracts aggressively during any momentary dips in the dollar/rupee rate, adding to dollar demand in the forward market and curbing the effectiveness of RBI’s interventions.

Moreover, portfolio flows have yet to recover meaningfully. Risk appetite has waned across Asia as regional currencies trend lower, with sentiment clouded by expectations of soft U.S. labor data and broader concerns around global monetary tightening. While President Trump has signaled the possibility of new tariffs on India over Russian oil imports, this is not yet seen as an immediate risk. However, the political tone adds to the broader uncertainty surrounding India’s trade and investment climate, which further discourages inflows.

RBI’s Backstop Seen as Defensive, Not Proactive

The central bank’s actions though preventing a disorderly decline in the rupee are largely reactive. They serve more as a backstop than a directional policy force. Market participants note that without a strong catalyst from trade, portfolio rebalancing, or external macro data, the rupee lacks the momentum to break sustainably below the 89.90 threshold.

The one-month non-deliverable forward rates, used as a proxy for opening expectations, reflected the post-market dip in the dollar/rupee to below 89.90, setting the tone for today’s session. Yet traders remain skeptical that this move will extend without a shift in underlying flows.

Focus Shifts to U.S. Labor Data and Fed Policy Signals

The upcoming U.S. non-farm payrolls report remains a key focus, with economists expecting an increase of 60,000 jobs and an unemployment rate holding steady at 4.5% a slight improvement from November’s 4.6%. ING Bank analysts suggest that unless the data diverges significantly from expectations, the unemployment rate will be the more influential metric for markets.

A stable jobless rate, particularly if accompanied by soft hiring, could reinforce expectations of a January rate cut by the Federal Reserve. Morgan Stanley analysts maintain that such an outcome would align with a modest easing trajectory, which could eventually ease pressure on emerging-market currencies like the rupee. However, in the near term, the Fed’s stance and the dollar’s resilience continue to tilt the balance against the rupee.

While RBI’s interventions have helped to contain volatility, they are proving insufficient to reverse the rupee’s broader depreciation trend. Persistent capital outflows, geopolitical uncertainty, and tepid regional cues weigh heavily on sentiment. Unless global risk appetite improves or India sees a meaningful pickup in inflows, the rupee is likely to remain under pressure, testing the limits of central bank support in the face of structural headwinds.

Source: Reuters

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Daily News

[Quick Facts]

1. U.S. Treasury Secretary: Some sanctions against Venezuelan entities will be lifted.

2. Trump has decided on the next Fed chair.

3. The Trump administration considers funding to promote Greenland's joining the U.S.

4. Government funding running out again, House approves three appropriations bills.

5. Short-term inflation expectations rise in the U.S.; employment outlook worsens.

6. Investors' bearish sentiment toward oil reaches its highest level in nearly a decade.

[News Details]

U.S. Treasury Secretary: Some sanctions against Venezuelan entities will be lifted

On January 8th, U.S. Treasury Secretary Bessent announced that some sanctions targeting Venezuelan entities would be removed. Regarding future U.S. involvement in Venezuela's governance, Bessent expressed hope for stabilizing Venezuela's existing structure. On Venezuelan assets, he stated that the Treasury Department would oversee asset sales and return proceeds to Venezuela under instructions from Secretary of State Rubio. Bessent also noted that independent oil companies are interested in investing in Venezuela soon, while major oil firms may act more cautiously there.

Trump has decided on the next Fed chair

According to reports, Trump said during an interview on Wednesday evening that he had finalized his nomination for the next Fed chair. When asked if it was his chief economic advisor, Kevin Hassett, Trump replied he won't name the pick but acknowledged Hassett is among those he respects.

Whoever Trump ultimately nominates will take over an institution at a critical juncture, currently under intense pressure from the president, who wants borrowing costs lowered significantly. Fed Chair Jerome Powell's term expires in May, and he has become a frequent target of Trump's criticism, signaling that the next chair risks facing public backlash if unable to meet presidential demands.

The Trump administration considers funding to promote Greenland's joining the U.S.

Sources revealed that U.S. officials have discussed plans to offer each Greenland resident between $10,000 and $100,000 in exchange for support to leave Denmark and consider establishing an affiliation with the United States. This proposal is part of a series of White House discussions exploring military options and Compacts of Free Association. Polls show most Greenlanders favor independence but overwhelmingly oppose joining the U.S., and details of potential financial aid remain undefined.

Government funding running out again, House approves three appropriations bills

On January 8th, local time, the U.S. House of Representatives passed three government funding bills, moving closer to avoiding a shutdown before the January 30th deadline. The package, called a "minibus" spending bill, provides funds for the Energy Department, Commerce Department, Justice Department, water projects, Environmental Protection Agency (EPA), and federal research programs through the end of the fiscal year. The legislation is expected to go to the Senate next week. Senate Majority Leader John Thune said the combined spending package could be reviewed as early as next week.

Short-term inflation expectations rise in the U.S.; employment outlook worsens

The latest New York Fed survey showed that consumers' one-year inflation expectations rose to 3.42% in December from 3.2%. Medium-term expectations for three and five years remained unchanged at 3%.

Consumers believe the probability of finding a new job if they lose their current one dropped by 4.2 percentage points to 43.1%, the lowest since the NY Fed began its consumer expectations survey in mid-2013. The average predicted probability of falling behind on debt payments over the next three months rose by 1.6 percentage points to 15.3%, the highest since April 2020, when the pandemic began.

Investors' bearish sentiment toward oil reaches its highest level in nearly a decade

A Goldman Sachs survey found that geopolitical factors have driven institutional investors' views on oil to their most pessimistic level in nearly ten years, with global markets facing oversupply. Among over 1,100 clients surveyed across asset classes, more than 59% were bearish or slightly bearish on crude oil, marginally higher than the lowest monthly figure recorded since January 2016.

Last year, crude prices posted their worst performance since 2020 due to increased output from OPEC+, record U.S. production, and supply growth from Brazil and Guyana. This year, oversupply is expected to widen further. If the Russia-Ukraine conflict ends, it could remove supply disruptions and sanctions on Russian crude. Meanwhile, the U.S. plans to control future Venezuelan oil sales, bringing more of the South American country's crude to market.

[Today's Focus]

UTC+8 18:00 Eurozone November retail sales month-on-month rate

UTC+8 20:45 ECB Chief Economist Philip Lane speech

UTC+8 21:30 U.S. December nonfarm payrolls

UTC+8 23:00 U.S. January University of Michigan consumer sentiment index (preliminary reading)

UTC+8 23:00 Minneapolis Fed President Kashkari speech

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Economic

Traders' Opinions

Remarks of Officials

Central Bank

Data Interpretation

China's consumer inflation hit a 34-month high in December, but this surge masks a more troubling trend: full-year inflation for 2025 was the lowest in 16 years, and producer prices remain stuck in deflation. This mixed data points to persistent weakness in domestic demand, reinforcing market expectations that Beijing will need to roll out more stimulus measures to stabilize the economy.

While China’s $19 trillion economy is on track to meet the government's "around 5%" growth target for 2025, economic imbalances have deepened. Stubbornly soft consumer demand, amplified by a prolonged property crisis and global trade tensions, continues to weigh on business confidence and overall growth.

Food Costs Drive December CPI Higher

The consumer price index (CPI) rose 0.8% year-on-year in December, accelerating from November's 0.7% increase and matching analyst expectations. On a monthly basis, CPI climbed 0.2%, reversing the previous month's 0.1% dip.

According to National Bureau of Statistics (NBS) statistician Dong Lijuan, the primary drivers were:

• Rising food prices: Fresh vegetable costs expanded by 18.2% and beef by 6.9%.

• Seasonal demand: Pre-New Year holiday shopping provided a temporary boost.

• Supportive policies: Government measures also contributed to the uptick in consumer prices.

However, the data reveals significant divergence. While gold jewelry prices surged 68.5% year-on-year, pork prices—a staple in the Chinese diet—fell by 14.6%. Core inflation, which strips out volatile food and energy prices, remained steady at 1.2%, unchanged from November.

Weak Demand Undercuts Full-Year Inflation

Despite the December spike, the broader trend remains concerning. For the full year of 2025, consumer price growth was flat, falling far short of the official "around 2%" target. This indicates that stimulus policies, like a major consumer goods trade-in program, have only had a modest impact on lifting sentiment and fighting deflationary pressures.

The underlying weakness stems from a fragile job market and the ongoing property crisis, which have dampened household spending. Lynn Song, chief economist for Greater China at ING, noted that the low inflation environment leaves room for further policy action. "Despite expectations of a recovery, inflation remains relatively low and should not preclude further monetary easing this year," Song said.

Factory-Gate Prices Remain Stuck in Deflation

On the industrial side, the producer price index (PPI) fell 1.9% year-on-year in December. While this was a slight moderation from the 2.2% drop in November, it marks more than three consecutive years of factory-gate deflation. For the full year, PPI declined by 2.6%.

The NBS attributed the modest improvement to rising global commodity prices and government policies aimed at controlling capacity in key industries. However, some analysts remain skeptical.

Zichun Huang, China economist at Capital Economics, argued that there has been "any fundamental improvement in overcapacity." Huang noted that deflationary pressures will likely persist without stronger demand-side policies, highlighting that "prices of consumer durables continued to fall at a faster pace than during the depths of the global financial crisis."

All Eyes on Beijing for More Economic Stimulus

With economic momentum slowing in the latter half of 2025, markets are anticipating more robust government support in 2026. Top leaders have already committed to a more proactive macroeconomic policy framework to shore up growth.

To this end, the central government has allocated 62.5 billion yuan ($8.95 billion) from special treasury bonds to continue funding the consumer goods trade-in scheme. Policymakers have also pledged to flexibly use monetary tools, such as cuts to interest rates and banks' reserve requirement ratio (RRR), to ensure ample liquidity and stimulate economic activity.

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