China’s 2026–2030 Economic Blueprint: Navigating Innovation and Domestic Demand Amid Global Pressures

Economic

China–U.S. Trade War

Summary:

China has announced a new five-year plan targeting 4–4.5% economic growth by 2030, emphasizing domestic consumption, technological innovation,...

Strategic Vision for Sustainable Growth

Beijing’s leadership has unveiled the 15th Five-Year Plan (2026–2030), outlining a roadmap designed to expand China’s GDP by 38 trillion yuan over the period. The focus lies on scientific innovation, modernization of the industrial system, and enhancing domestic resilience—marking a continued shift from export-led growth to internally driven development.

The plan builds on the long-term national objective proposed by President Xi Jinping in 2017: achieving socialist modernization by 2035. With the current 14th Five-Year Plan (2021–2025) nearing its conclusion, early assessments suggest that the national economy is on track to surpass its anticipated increase of 30 trillion yuan, reflecting effective economic management during a relatively favorable geopolitical window under the Biden administration.

Technology and Industry: The Twin Engines of Expansion

During an April 2025 symposium, Xi Jinping reiterated the importance of technological breakthroughs and the upgrading of traditional sectors. Analysts interpret this as a recalibration of growth priorities, emphasizing resilience in domestic production and consumption while reducing reliance on volatile global markets.

Economic strategists now advocate for a reorientation of the growth model. Wang Yiming, a key advisor to the People’s Bank of China, stresses the urgency of shifting from an investment- and export-led economy toward one centered on domestic consumption and innovation. This shift is interpreted as a response to mounting geopolitical frictions and decelerating global demand.

While past five-year plans prioritized infrastructure and trade surpluses, the new trajectory targets qualitative development—improving productivity and innovation capacity across sectors. The notion of fostering a “new quality productive force” captures this strategic pivot, positioning domestic consumption and scientific advancement as mutually reinforcing pillars of growth.

Navigating External Pressures and Internal Constraints

Unlike the relative stability of the previous plan period, the upcoming cycle unfolds against a backdrop of rising global tension. With U.S. policy under Donald Trump once again adopting a confrontational tone—exemplified by figures like Peter Navarro—China anticipates sustained trade and technological rivalry. These developments are expected to hinder export growth, making the pursuit of internal engines more critical.

Still, structural issues persist. China faces a demographic contraction, a persistent shortfall in core technology capabilities, and incomplete transitions away from traditional industries. These headwinds are not merely external shocks but embedded structural challenges that threaten to limit growth momentum if not addressed holistically.

Forecasts by economists such as Yang Weimin, a veteran planner of previous five-year frameworks, suggest that China can sustain a 4–5% growth rate through 2030. While such projections align with the country’s estimated potential growth, their realization will depend heavily on successfully mobilizing domestic resources and overcoming technological dependency.

Redefining Growth Through Internal Levers

The underlying logic of the new economic strategy rests on the rebalancing of growth inputs. Analysts observe that external shocks—including tariff threats and supply chain disruptions—have catalyzed a reassessment of priorities. Rather than reactive protectionism, China appears to be betting on structural transformation, fostering a model where consumption, innovation, and inclusive industrial policy play central roles.

This emphasis on domestic demand is not merely a tactical shift but a recalibration of the growth model’s structure. It implies that while past prosperity was closely aligned with global integration and manufacturing scale, future resilience will require adaptability, inclusive modernization, and a knowledge-based economy.

China’s 2026–2030 five-year plan represents a critical juncture in the country’s development trajectory. By seeking to grow its GDP by 38 trillion yuan through innovation-led, consumption-driven strategies, Beijing aims to insulate itself from volatile external dynamics and address internal vulnerabilities. The success of this vision will depend not only on policy execution but also on China’s capacity to rewire its growth engines without triggering social or structural dislocations.

Source: Reuters

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Blue River

Technical Analysis

USDCAD has surrendered much of its May gains after repeated attempts to break above the 1.4000 mark faltered, pushing the pair back into negative territory this week.

Adding to the pressure, Trump’s narrowly passed tax-cut bill in the House on Thursday is expected to significantly increase the already ballooned federal debt. This development raises concerns about a potential default and threatens the dollar’s safe-haven feature.

From a technical perspective, the pair is now seeking support near the familiar trendline at 1.3827, drawn from the 2021 low, after failing to convincingly surpass the 23.6% Fibonacci retracement level of the February–May downtrend. If this support level also gives way, attention will shift to the April low of 1.3748, and then towards a more critical support zone between the tentative trendline at 1.3663 and the lower boundary of the descending channel at 1.3600. A break below this region could worsen the medium-term outlook, potentially driving the pair down to the September 2024 double-bottom area around 1.3420.

Technical indicators suggest continued downside potential. The RSI remains above the oversold threshold of 30, and the stochastic oscillator has yet to bottom out below 20, indicating that selling interest may persist.

For the outlook to improve, bulls would need to push decisively above 1.4000 and overcome both the 50- and 200-day exponential moving averages (EMAs), which have recently formed a death cross. The upper boundary of the descending channel lies nearby as well. A bullish breakout from this zone could open the door to test the 38.2% Fibonacci retracement level at 1.4150, followed by the 50% level at 1.4270.

In summary, USDCAD remains under bearish pressure and may continue to struggle unless the 1.3835 region can effectively stem halt the current selling momentum.

Source: ACTIONFOREX

Risk Warnings and Disclaimers

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Glendon

Economic

Forex

The dollar headed for its first weekly fall in five weeks against major currencies on Friday and long-dated Treasury yields stayed elevated, as U.S. debt concerns that have mounted for years started driving moves in currencies and global debt.

Investor attention has switched from tariff anxiety to U.S. fiscal concerns in a week where Moody's downgraded the U.S. credit rating and the Republican-controlled House of Representatives on Thursday passed a sweeping tax and spending bill.

Futures contracts tracking Wall Street's benchmark S&P 500 share index were steady in European morning trade as investors balanced the tax-cut boost to corporate earnings with longer-term concerns about the U.S. economy.

"It's good for corporates initially, and clearly you're seeing the flip side of that in Treasury markets," Netwealth CIO Iain Barnes said.

But with long-dated debt yields' tendency to impact valuations of other assets, from global currencies to stocks, he said investors were nervous that any further volatility in 30-year Treasuries could start rippling across global markets.

"Multi-asset investors' primary concern is thinking about how these different asset classes respond to each other," he said, adding that he was keeping his own portfolios broadly diversified and neutral on market risk for now, in line with much of the investment industry.

With the U.S debt pile already at $36 trillion, President Donald Trump's plans to slash taxes, cut federal budgets and boost military and border enforcement spending has sparked rollercoaster moves in the long-term debt yields that set the nation's borrowing costs.

The 30-year Treasury yield was 4 basis points lower but held just above 5% after hitting a 19-month high in the previous session.

"There is certainly nothing in this market move or the passage of this version of the bill that tells me there is going to be meaningful reduction in U.S. bond issuance or this broader concern about global bond supply," said Ken Crompton, senior interest rate strategist at the National Australia Bank.

Yields on 30-year Japanese bonds, which hit record highs earlier in the week as selling driven by domestic fiscal and inflation concerns was exacerbated by moves in U.S. debt, recovered slightly, declining by 5 bps to around 3.10% .

Data on Friday showed Japan's core consumer price inflation climbed 3.5% in April in its steepest annual increase for more than two years, raising pressure on the Bank of Japan to keep hiking interest rates.

In the euro area, German Bund yields dipped on but stayed on track for their fifth straight weekly rise, tracking U.S. Treasuries.

The benchmark European debt has sold off despite money markets showing that traders anticipate the European Central Bank cutting its main deposit rate to about 1.75% by year-end .

DOLLAR DECLINE

In currency markets, the euro firmed 0.5% to $1.1335 .

An index tracking the U.S. currency against a basket of peers including the euro and Japan's yen, was 0.2% lower and down 1.3% on the week in its first weekly drop since late April.

Despite the euro's gain, which tends to knock exporters' shares, Europe's Stoxx 600 share index (.STOXX), opens new tab gained 0.3% in early dealings and Germany's Xetra Dax added 0.4%, as traders stayed cautious towards U.S. assets.

Japan's Nikkei (.N225), opens new tab also gained 0.5% on Friday, with MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab rising by the same amount.

Bitcoin prices dipped from its record high but it was still set for a weekly gain of 6.4% to $110,796.

Oil prices dropped for a fourth consecutive session and were set for their first weekly decline in three weeks, weighed down by renewed supply pressure from another possible OPEC+ output hike in July.

Brent futures fell 0.85% to $63.89 a barrel and U.S. West Texas Intermediate crude futures fell 0.9% to $60.65.

In precious metals, gold prices rose just over 1% to $3,321 an ounce.

Source: Reuters

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Gerik

Economic

Market Snapshot: Stability Masks Structural Concerns

On Thursday, the S&P 500 and Dow Jones Industrial Average closed mostly flat following the House passage of Trump’s tax legislation, while the Nasdaq gained 0.28%. This muted response belied deeper unease in bond markets, where long-term Treasury yields had surged before modestly pulling back. The 30-year yield, which briefly hit 5.161% — its highest level since October 2023 — eased to 5.044%, while the 10-year fell to 4.535%.

Despite the yield retreat, fixed-income strategists remain cautious. Elevated yields indicate rising investor demands for term premium — the additional compensation required to hold long-dated U.S. debt — reflecting skepticism about America’s deteriorating fiscal trajectory.

Trump’s Bill: Short-Term Stimulus, Long-Term Strain

Dubbed the “big, beautiful bill” by Trump, the proposed legislation includes significant tax cuts and expanded defense spending, fulfilling many of his populist pledges. According to Jed Ellerbroek of Argent Capital Management, the bill may stimulate near-term economic activity. However, with the Congressional Budget Office estimating a $3.8 trillion addition to the national debt over a decade, the structural deficit is poised to deepen.

This fiscal arithmetic — reduced revenues and elevated expenditures — comes as the U.S. debt burden nears 124% of GDP. The timing of the bill’s progression, following Moody’s credit rating downgrade of U.S. sovereign debt, has only added to global investors’ concern.

Global Bond Market Reaction: From Confidence to Caution

Bondholders’ faith in U.S. government obligations is being tested. Recent weak auction outcomes in both the U.S. and Japan underscore that even in highly liquid markets, investor appetite is no longer unconditional. The move toward higher yields across the U.S., UK, and Japanese long-end curves signals that governments must now pay more to borrow — not due to growth optimism, but fiscal mistrust.

This erosion of safe-haven confidence is visible in the growing reluctance of foreign investors — Japan and China included — to absorb long-dated U.S. bonds, adding to upward pressure on yields.

Fed Independence and the Supreme Court Signal

One notable positive development: the U.S. Supreme Court on Thursday indicated that Federal Reserve board members may enjoy protections from unilateral presidential dismissal. This was seen as a reassuring signal for markets, suggesting Fed Chair Jerome Powell and his colleagues would not be at immediate risk of removal, despite Trump's history of confrontational rhetoric toward central bank leadership.

Such independence is viewed as critical for maintaining monetary policy credibility, particularly amid volatile fiscal policymaking.

Asia’s Reaction and Inflationary Tensions

Asian markets reflected a cautious rebound. Japan’s Nikkei 225 rose 0.6% after data showed April core inflation hit 3.5% — the highest since January 2023 — raising expectations that the Bank of Japan may consider another rate hike later this year. Yet, Japan’s growth headwinds and exposure to U.S. tariffs continue to complicate policy decisions.

Meanwhile, China and the U.S. resumed official communications following a call between deputy foreign ministers — a step that, while modest, was welcomed by investors seeking signs of trade stabilization.

Tech and Geopolitics: Claude 4 Debuts, India’s Manufacturing Dilemma

Tech innovation continued to generate headlines as Anthropic — backed by Amazon — launched Claude 4, a new line of AI agents positioned as rivals to OpenAI’s GPT-4. The company claims Claude Opus 4 is the world’s most capable coding model, able to function autonomously through a simulated seven-hour workday.

On the global manufacturing front, India’s bid to absorb production displaced by U.S.-China trade friction faces hurdles. Despite favorable demographics and low labor costs, experts caution that infrastructure, logistical gaps, and scale remain limiting factors — lessons learned from Vietnam’s gradual industrial rise.

Wait-and-See Mode, But Risk Premiums Rising

Financial markets appear to be in a holding pattern, with equities steady and bond yields elevated but off their peaks. Yet beneath this surface calm, key dynamics are shifting. With Trump’s fiscal plans likely to exacerbate structural deficits and geopolitical uncertainty lingering, global investors are demanding more compensation to fund government debt.

In short, while the U.S. economy may see a temporary lift, the cost of borrowing — both in dollars and in trust — is rising.

Source: CNBC

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James Whitman

Forex

Technical Analysis

The EURUSD rate continues to rise, breaking above the 1.1300 level amid ongoing US dollar weakness. The outlook for further gains remains uncertain for now. Discover more in our analysis for 23 May 2025.

EURUSD forecast: key trading points

● Market focus: Germany’s final Q1 GDP growth rate came in at 0.4%

● Current trend: moving upwards

● EURUSD forecast for 23 May 2025: 1.1255 and 1.1360

Fundamental analysis

The EURUSD pair is on the rise due to growing concerns over US fiscal policy. President Trump’s new budget proposal, which includes tax cuts and increased defence spending, has sparked fears of further ballooning the US national debt.

Federal Reserve Governor Christopher Waller recently stated that there’s still room for rate cuts this year, depending on how Trump’s tariff policy unfolds. Market anticipation of a Fed rate cut continues to weigh on the US dollar.

EURUSD technical analysis

On the H4 chart, the EURUSD pair shows strong upward momentum, climbing above the 1.1300 level. The Alligator indicator is moving upwards, supporting the bullish trend. The key support level for continued growth now lies at 1.1255.

The short-term EURUSD forecast suggests further growth towards 1.1360 in the near term if bulls hold the price above 1.1300. Conversely, if bears push the price below 1.1300, the pair could correct towards the 1.1255 support level.

Summary

The EURUSD pair has risen above the 1.1300 level as US budget concerns weigh on the dollar. The Fed is waiting for Trump’s tariff policy to be settled before proceeding with further monetary easing.

Source: RoboForex

Risk Warnings and Disclaimers

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Gerik

Economic

Core CPI and Inflation Dynamics

April’s core Consumer Price Index (CPI), which excludes fresh food but includes energy, rose 3.5% year-on-year, exceeding economists’ expectations and the March figure of 3.2%. This marked the highest level since January 2023 and extended the CPI’s stretch above the BOJ’s 2% target to more than three years. Prices excluding both fresh food and energy—a gauge closely monitored by the BOJ—also increased by 3.0%, up from 2.9% in March.

The largest contributors to this inflation surge were food prices, which rose 7% year-on-year. Notably, rice prices spiked 98.6%, and chocolate prices surged 31%, reflecting widespread price hikes by companies at the start of Japan’s fiscal year in April.

BOJ’s Monetary Tightrope

The inflation data has put pressure on the BOJ to act. Having exited its ultra-loose monetary stance in 2024 and lifted short-term rates to 0.5% in January 2025, the central bank had signaled more rate hikes could follow—if inflation stayed persistently high.

Analysts, including those at Capital Economics and Moody’s Analytics, are split on the timeline. Some anticipate a hike as early as October 2025, while others expect BOJ to wait until early 2026, depending on how the inflation outlook evolves under the shadow of U.S. tariff policies.

BOJ Governor Kazuo Ueda has noted that uncertainties—especially those triggered by global trade disruptions and sluggish domestic demand—have delayed the convergence of inflation with the central bank’s target conditions.

Tariffs and Wage Growth Risks

A key challenge for the BOJ is whether Japan’s inflation is being driven by sustainable domestic demand or imported cost pressures. Service-sector inflation decelerated slightly to 1.3%, hinting at sluggish wage-pass-through. Although the “Shunto” spring wage negotiations led to notable wage hikes in 2025, real income gains are being eroded by still-elevated inflation levels.

Moreover, U.S. President Donald Trump’s renewed tariff campaign has cast a pall over Japan’s growth outlook, prompting firms to reconsider planned investment and wage increases. The BOJ already trimmed its growth forecasts in response to these global pressures, underscoring a fragile domestic economy.

Economic Outlook and Policy Implications

Despite robust inflation figures, the Japanese economy contracted in Q1 2025 due to stagnant consumption and weak export momentum. Analysts anticipate inflation to moderate toward 2% by the end of the year as the yen’s recent appreciation helps ease import costs. That could further delay BOJ’s next rate move unless there is clear evidence of wage-driven inflation.

The central bank is thus caught between the imperative to normalize policy and the need to shield growth from external shocks. The decision in the coming months may hinge not only on domestic price dynamics but also on geopolitical and trade developments.

April’s CPI data underscores the BOJ’s complex balancing act: inflation remains sticky, but real consumption is weak and the global backdrop is increasingly volatile. While a 2025 rate hike remains on the table, the BOJ’s next move will likely be cautious, data-driven, and contingent on how Japan’s economy weathers Trump-era trade tensions and the evolving domestic wage landscape.

Source: Reuters

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Gerik

Economic

Treasury Stabilization and Asian Equity Uptick

After several days of bond market turbulence, long-dated U.S. Treasuries saw a mild recovery, easing pressure on global financial markets. The 30-year Treasury yield dipped to 5.048%, down from its 19-month high of 5.161%, reflecting investor demand at more attractive yield levels. This stabilization coincided with a 0.5% gain in the MSCI Asia-Pacific index (excluding Japan), helping the region reverse its earlier weekly losses.

Japan’s 30-year bond yield also retreated from record highs, falling 5 basis points to 3.115%. The Bank of Japan continues to monitor the sharp movements amid broader fiscal tightening expectations.

Political Uncertainty and U.S. Fiscal Concerns Loom

Markets remain on edge after the U.S. House narrowly approved Trump’s tax bill, which may add $3.8 trillion to the national debt over the next decade. Although the bill aims to deliver on several campaign promises, including tax relief and increased defense spending, it has intensified fiscal anxiety.

Moody’s recent downgrade of the U.S. credit rating added to market concerns about long-term debt sustainability, triggering increased demand for clarity on future issuance and policy direction. Strategists, including NAB’s Ken Crompton, warned that there’s little in the current bill to suggest U.S. bond issuance will meaningfully decline anytime soon.

Asia Mixed as Inflation and Currencies Shift

Across Asia, market performance was uneven. Japan’s Nikkei rose 0.5% after data showed core inflation accelerated to its fastest pace in over two years, raising the likelihood of further policy shifts by year-end. Meanwhile, Hong Kong’s Hang Seng gained 0.6%, but Chinese blue chips remained flat, weighed down by lingering trade concerns.

Currency markets mirrored risk sentiment. The dollar remained under pressure, on track for a 1.3% weekly decline. The euro advanced to $1.1309—its first weekly gain in over a month—while the yen and Swiss franc were similarly buoyed by safe-haven demand.

Outlook Hinges on Tariffs and Fed Independence

Federal Reserve Governor Christopher Waller noted that rate cuts remain possible later in 2025, contingent on inflation trends and future tariff actions. This provided some optimism, but analysts cautioned that volatility could return if the Trump administration escalates trade measures or signals further institutional reshuffling.

Adding to the mix, a U.S. Supreme Court ruling on Thursday suggested limits on executive power to remove key federal officials, including potentially Fed Chair Jerome Powell. While not definitive, the line in the ruling provided temporary reassurance to markets wary of executive overreach.

Friday’s gains in Asia reflect modest relief rather than renewed optimism. As global markets digest the consequences of Trump’s fiscal agenda, bond market volatility and uncertainty over trade and central bank independence will continue to shape sentiment. Investors remain on edge, balancing technical rebounds with deeper structural concerns.