Thailand F-16 Jet Deployed Against Cambodian Forces As Border Clash Escalates

Political

Economic

Summary:

A Thai F-16 fighter jet bombed targets in Cambodia on Thursday, both sides said, as weeks of tension over a border dispute escalated into clashes that have killed at least two civilians.

Of the six F-16 fighter jets that Thailand readied to deploy along the disputed border, one of the aircraft fired into Cambodia and destroyed a military target, the Thai army said. Both countries accused each other of starting the clash early on Thursday."We have used air power against military targets as planned," Thai army deputy spokesperson Richa Suksuwanon told reporters. Thailand also closed its border with Cambodia.

Cambodia's defence ministry said the jets dropped two bombs on a road, and that it "strongly condemns the reckless and brutal military aggression of the Kingdom of Thailand against the sovereignty and territorial integrity of Cambodia".

The skirmishes came after Thailand recalled its ambassador to Cambodia late on Wednesday and said it would expel Cambodia's envoy in Bangkok, after a second Thai soldier in the space of a week lost a limb to a landmine that Bangkok alleged had been laid recently in the disputed area.

Thai residents in the Surin border province fled to shelters built of concrete and fortified with sandbags and car tires as the two countries exchanged fire."How many rounds have been fired? It's countless," an unidentified woman told the Thai Public Broadcasting Service (TPBS) while hiding in the shelter with gunfire and explosions heard intermittently in the background.

For more than a century, Thailand and Cambodia have contested sovereignty at various undemarcated points along their 817 km (508 miles) land border, which has led to skirmishes over several years and at least a dozen deaths, including during a weeklong exchange of artillery in 2011.Tensions were reignited in May following the killing of a Cambodian soldier during a brief exchange of gunfire, which escalated into a full-blown diplomatic crisis and now has triggered armed clashes.

LANDMINES

The clashes began early on Thursday near the disputed Ta Moan Thom temple along the eastern border between Cambodia and Thailand, around 360 km from the Thai capital Bangkok."Artillery shell fell on people's homes," Sutthirot Charoenthanasak, district chief of Kabcheing in Surin province, told Reuters, describing the firing by the Cambodian side.

"Two people have died," he said, adding that district authorities had evacuated 40,000 civilians from 86 villages near the border to safer locations.Thailand's military said Cambodia deployed a surveillance drone before sending troops with heavy weapons to an area near the temple.

Cambodian troops opened fire and two Thai soldiers were wounded, a Thai army spokesperson said, adding Cambodia had used multiple weapons, including rocket launchers.

A spokesperson for Cambodia's defence ministry, however, said there had been an unprovoked incursion by Thai troops and Cambodian forces had responded in self-defence.Thailand's acting Prime Minister Phumtham Wechayachai said the situation was delicate."We have to be careful," he told reporters. "We will follow international law."

An attempt by Thai premier Paetongtarn Shinawatra to resolve the recent tensions via a call with Cambodia's influential former Prime Minister Hun Sen, the contents of which were leaked, kicked off a political storm in Thailand, leading to her suspension by a court.Hun Sen said in a Facebook post that two Cambodian provinces had come under shelling from the Thai military.

Thailand this week accused Cambodia of placing landmines in a disputed area that injured three soldiers. Phnom Penh denied the claim and said the soldiers had veered off agreed routes and triggered a mine left behind from decades of war.

Cambodia has many landmines left over from its civil war decades ago, numbering in the millions according to de-mining groups.But Thailand maintains landmines have been placed at the border area recently, which Cambodia has described as baseless allegations.

Source: Reuters

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Winkelmann

Economic

The Chinese “cannot be allowed to export their way back to prosperity”, argues US Secretary of the Treasury Scott Bessent, who claims that China’s economy is the “most unbalanced in history”. Such remarks reflect the growing fear in Washington that China’s overcapacity, subsidies and dumping are distorting global trade.

The more pressing concern, however, is not what China exports, but how. Global cost structures are indeed being reshaped but by a quieter and more complex force: relentless productivity improvements. China is not merely moving more goods; it is exporting a new production model powered by automation, artificial intelligence (AI) and state-guided industrial optimisation. This shift is disruptive, deflationary and still largely misunderstood.

China’s rise as the world’s factory in the late 20th century was driven by labour and scale. But now, China aims to achieve a new form of dominance through intelligent infrastructure. No longer confined to apps or chatbots, AI has been embedded across the physical economy — guiding everything from robotic arms and warehouse fleets to autonomous production lines. For example, Xiaomi’s “lights-out” factory in Beijing can assemble 10 million smartphones annually with minimal human intervention. AI conducts a symphony of sensors, machines and analytics that form a tightly woven industrial loop, driving efficiencies that traditional manufacturers can approach only incrementally.

Nor is this technology-driven ecosystem confined to a single factory. DeepSeek’s 671-billion-parameter open-source large language model is already being deployed not just for coding but also to optimise logistics and manufacturing. JD.com is revamping its supply networks through automation. Unitree is exporting bipedal warehouse robots. And Foxconn (Apple’s primary manufacturing partner) is developing modular, AI-led microfactories to reduce its dependence on static production lines.

These examples may not represent “prestige innovation” but they do attest to a broad culture of industrial optimisation. Under the banner of “new quality productive forces”, the Chinese government is rolling out AI pilot zones and subsidising factory retrofits, and cities like Hefei and Chengdu are offering local grants that rival the scale of national initiatives elsewhere.

The strategy echoes the one pursued by Japanese industry in the 1980s, when automation, lean production and industrial consolidation helped firms outcompete global rivals. But the Chinese approach goes further, blending AI with economies of scale, feedback loops and a unique cultural dynamic known as involution (neijuan): a self-perpetuating race to optimise and outcompete, often at the expense of profit margins. BYD, among the most vertically integrated automakers globally, recently cut prices across dozens of models, triggering a US$20 billion stock sell-off.

In sectors from e-commerce to electric vehicles, this practice has driven such relentless cost compression that the state has occasionally seen fit to intervene. In April 2025, the People’s Daily newspaper warned that extreme involution was distorting market stability, citing a destructive price war in food delivery between JD.com, Meituan and Ele.me. And the problem is even more acute in the electric vehicle (EV) industry. While more than 100 Chinese EV brands currently compete, more than 400 have gone out of business since 2018.

The arena of global competitiveness is unforgiving. Those who survive emerge leaner, more adaptive and better positioned than their legacy counterparts. That is how successful Chinese EV makers have managed to edge into Europe, offering models at price points that local firms struggle to match. Viewed from afar, the process looks chaotic. In practice, though, it resembles natural selection. China is deliberately promoting industrial evolution: The state fosters a wide field of contenders and then lets the market winnow the field.

This approach is rippling across industries. In solar panels, Chinese manufacturers now account for over 80% of global production capacity, driving prices down more than 70% over the past decade. And a similar trend is emerging in EV batteries, where Chinese firms dominate the cost-per-kilowatt curve. But make no mistake; this deflation does not stem from oversupply or dumping. It reflects redesigned cost structures, which are the result of AI, intense competition and relentless iteration.

Thus, Chinese industry has made efficiency a tradable asset — one that is reshaping global pricing dynamics. Once this shift really takes hold, businesses around the world will find themselves adjusting their own pricing strategies, labour deployment and supply chain configurations.

But this development presents new challenges for many economies. Consider the role of central banks, whose mission is to ensure price stability. What can they do if inflation is subdued not by weak demand but by superior supply-side efficiency coming from abroad? Most likely, monetary policy will lose traction in such a scenario. The march of software advances will not slow just because interest rates rise or fall. Instead, industrial policy will have to come to the fore — not as protectionism but as an adaptive necessity. The core divide will no longer be between capitalism and state planning but between static and dynamic systems.

The US Inflation Reduction Act and CHIPS and Science Act, as well as the EU Green Deal Industrial Plan, did represent early Western efforts to challenge China’s lead, but these packages were largely reactive, siloed or focused on upstream nodes like chips. While the US and its allies deploy tariffs, subsidies and export controls, the real competition is over the integration of AI into the real economy — not who builds the smartest chatbot but who builds the smartest factory and whose model can be sustainably replicated at scale.

Of course, the Chinese model has trade-offs. Labour conditions may worsen under relentless cost-cutting; oversupply remains a systemic risk; regulatory overreach can derail progress; and not all efficiency gains translate into shared prosperity. Consumers may benefit but workers and smaller firms will bear the brunt of the adjustment.But even if the Chinese model is not universally replicable, it raises important questions for policymakers everywhere. How will others compete with systems that produce more, faster and cheaper — not through wage suppression but ingenuity?

To dismiss China’s approach as merely distortive misses the point. The Chinese government is not just playing the old trade game harder: It is changing the rules and it is doing so not through tariffs but through an industrial transformation. If the last wave of globalisation chased cheaper labour, the next one will chase smarter systems. Intelligence will no longer live only in the cloud — but in machines, warehouses and 24/7 assembly lines.

China’s most important export today is not a product but a process. And it will redefine the nature of global competition.

Source: Theedgemarkets

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Gerik

Economic

Improved market outlook halts further restructuring

Goldman Sachs has opted not to proceed with a planned second round of job cuts this year, signaling a more optimistic internal outlook following a rebound in its core investment banking division. The report from the Financial Times suggests that stronger-than-expected business performance, particularly in deal-making and capital markets activity, has reduced the urgency to implement additional workforce reductions.

Earlier in the year, the bank had initiated performance-based layoffs in response to subdued earnings and a challenging macroeconomic environment. At the time, weakening M&A volumes, lower IPO activity, and cautious corporate sentiment weighed heavily on revenue streams, prompting banks like Goldman to tighten headcount as part of broader cost optimization strategies. A second round was anticipated if business conditions failed to improve.

However, recent indicators point to a modest recovery in global deal flows and capital raising, helping investment banks stabilize revenue. If confirmed, Goldman’s decision reflects a strategic recalibration in response to this upturn, suggesting confidence in near-term client activity and fee generation.

Caution remains despite optimism

While the move suggests positive momentum, it does not mark a complete departure from caution. The global financial sector remains under pressure from uneven economic growth, volatile interest rate environments, and regulatory scrutiny. Moreover, the report remains unconfirmed by Goldman Sachs or Reuters, leaving room for interpretation about the durability of the recovery and whether internal expectations will align with actual market performance in the second half of 2025.

Goldman Sachs’ reported decision to halt further layoffs indicates early signs of stabilization in its investment banking operations, following a period of aggressive cost containment. Though not yet officially confirmed, the development reflects how modest improvements in market conditions can influence employment decisions at top financial institutions. Nonetheless, ongoing volatility and economic risks suggest that the bank and the sector more broadly will continue to approach hiring and expenses with strategic discipline.

Source: Financial Times

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James Whitman

Political

Thailand's military deployed an F-16 fighter jet against Cambodia's armed forces on Thursday, the Thai army said, as weeks of tension over a border dispute escalated into clashes that have killed at least two civilians.

Of the six F-16 fighter jets that Thailand has readied to deploy along the disputed border, one of the aircraft fired into Cambodia and destroyed a military target, the Thai army said. Both countries accused each other of starting the clash early on Thursday.

"We have used air power against military targets as planned," Thai army deputy spokesperson Richa Suksuwanon told reporters.

Cambodia's defence ministry did not immediately respond to a request for confirmation on the air strike.

Tensions were reignited in May following the killing of a Cambodian soldier during a brief exchange of gunfire, which escalated into a full-blown diplomatic crisis and now has triggered armed clashes.

The clashes began early on Thursday near the disputed Ta Moan Thom temple along the eastern border between Cambodia and Thailand, around 360 km from the Thai capital Bangkok.

"Artillery shell fell on people's homes," Sutthirot Charoenthanasak, district chief of Kabcheing in Thailand's Surin province, told Reuters, describing the firing by the Cambodian side.

"Two people have died," he said, adding that district authorities had evacuated 40,000 civilians from 86 villages near the border to safer locations.

Cambodia's influential former premier Hun Sen in a Facebook post said two Cambodian provinces had come under shelling from the Thai military.

Cambodia has many landmines left over from its civil war decades ago, numbering in the millions according to de-mining groups.

But Thailand maintains landmines have been placed at the border area recently, which Cambodia has described as baseless allegations.

Source: Reuters

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Gerik

Economic

Tariffs may curb inflation through shifting trade flows

Reserve Bank of New Zealand (RBNZ) Chief Economist Paul Conway stated on Thursday that the global reallocation of trade, triggered by US tariff policies, may have a disinflationary effect on New Zealand. As exporters worldwide redirect goods away from the US, import prices in other regions could fall. For New Zealand, this may translate into lower input and consumer goods prices, potentially easing inflationary pressures over the medium term.

While this forecast relies on an indirect and time-lagged relationship, the potential impact is logically connected. If global suppliers divert excess inventory into non-US markets, increased supply could reduce price levels elsewhere, benefiting import-dependent economies like New Zealand. However, this effect would be contingent on the scale of redirection and the responsiveness of domestic prices to global supply dynamics.

Central bank holds policy steady but signals flexibility

The RBNZ recently kept its benchmark rate unchanged at 3.25% its first pause since initiating a rate-cutting cycle in August 2024. The decision reflects the bank’s current assessment that short-term inflation risks remain present. However, Conway emphasized that should medium-term inflation soften as expected, there is scope for further monetary easing. This flexibility aligns with the central bank’s dual objective of price stability and sustainable economic support.

The potential easing reflects a cautious but proactive stance in response to evolving international conditions. Conway noted the “wait and see” sentiment prevailing among businesses and investors, illustrating how uncertainty surrounding US policy shifts is already influencing behavior in New Zealand’s open economy.

Economic headwinds mount as global slowdown threatens recovery

Despite high export prices and relatively low interest rates offering short-term support, the broader economic picture remains fragile. Conway acknowledged that global disruptions particularly the ripple effects of US protectionist policies are likely to undermine New Zealand’s growth trajectory through reduced global demand and declining confidence.

The US introduced a 10% baseline tariff on several countries, including New Zealand, in April. This has introduced a potential drag on export performance and heightened the risk of weaker investment returns in trade-exposed industries. Conway highlighted early indications of a slowdown in New Zealand’s GDP growth during the June quarter, reinforcing concerns that the external environment may dampen the country’s economic rebound heading into mid-2026.

Moreover, if tariffs fuel inflation in the United States, global financial conditions could tighten, leading to spillover effects on investment sentiment, funding costs, and consumption in smaller economies. This may further delay New Zealand’s recovery from recent economic shocks.

New Zealand faces a complex outlook in which the disinflationary benefits of global trade redirection must be weighed against the broader risks of a slowdown in export demand and investment activity. While tariffs may relieve inflation pressures in the short to medium term, they also introduce structural vulnerabilities that could dampen growth. The RBNZ appears prepared to adjust interest rates if inflation continues to cool, but policymakers remain cautious in the face of mounting global uncertainty. As a small, open economy, New Zealand’s trajectory will largely depend on how the global trading system adjusts to the new era of tariff-driven realignment.

Source: Reuters

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Gerik

Economic

GDP rebound driven by exports and public spending

South Korea avoided a technical recession in the second quarter of 2025 as its economy expanded by 0.6% quarter-over-quarter, reversing a 0.2% contraction in Q1. This growth exceeded the 0.5% forecast by economists and marked a year-over-year GDP increase of 0.5%, up from 0% in the previous quarter. The stronger-than-expected performance was primarily driven by robust net exports and a modest recovery in domestic demand.

Data from the Bank of Korea showed that exports of goods and services grew 4.2% from the previous quarter, with shipments of semiconductors, petroleum products, and chemicals leading the expansion. Louise Loo, Head of Asia Economics at Oxford Economics, noted that export volumes recorded their strongest growth since Q3 2020 as firms accelerated outbound shipments ahead of anticipated US tariff adjustments. This implies a causal relationship between expected US trade policy shifts and South Korea’s export behavior, as firms sought to mitigate potential trade costs.

Trade risks threaten sustainability of external demand

Despite the rebound, downside risks remain prominent. Shivaan Tandon of Capital Economics cautioned that South Korea’s export sectors may struggle in the months ahead as global trade momentum softens under the growing weight of protectionist policies. Although AI-related hardware demand may continue supporting semiconductor exports, the broader export mix is exposed to weakening demand and geopolitical uncertainties.

Tensions surrounding the US-South Korea trade relationship have intensified. The failure to finalize a deal before the US-imposed 25% tariff deadline on August 1 risks a significant blow to South Korea’s export performance. While Seoul remains engaged in negotiations, recent talks were postponed due to scheduling conflicts on the US side, casting uncertainty over the outcome. With exports accounting for roughly 44% of South Korea’s GDP in 2023, the risk of elevated tariffs could substantially hinder growth in the second half of the year.

Domestic recovery supported by stimulus, but fragility persists

On the domestic side, South Korea recorded a 0.7% increase in total consumption, recovering from a 0.1% decline in Q1. Government expenditure rose 1.2% due to increased healthcare outlays, while private consumption climbed 0.5%, supported by higher spending on vehicles and recreational activities. This turnaround is partially attributed to the early effects of the government's supplementary budget.

Nevertheless, the revival in consumption was offset by continued weaknesses in investment. Both construction and equipment investment showed signs of strain, weighing on the overall pace of recovery. According to Loo, although fiscal support has helped stabilize demand, structural weaknesses and investment drag continue to limit the economy’s upward trajectory.

Outlook remains subdued despite near-term support

Given the fragility of the current growth path, Oxford Economics forecasts a full-year GDP growth of only 0.8% in 2025, the slowest since the pandemic year of 2020. This outlook reflects a combination of external pressures from trade disruptions and internal softness in capital formation.

Inflation remains stable at 2.2% as of June, marginally above the Bank of Korea’s 2% target. The central bank opted to hold interest rates steady at its July 10 meeting, prioritizing financial stability over stimulus, despite acknowledging subdued growth prospects. Should economic momentum falter further, particularly if trade negotiations with the US fail to avert tariffs, the BOK may be compelled to adopt a more accommodative stance in the second half of the year.

South Korea’s second-quarter growth offers relief from a technical recession but does not signal sustained recovery. While net exports and government support fueled the rebound, looming risks from unresolved trade negotiations, fragile investment trends, and global economic headwinds could limit further expansion. Unless a resolution is reached on tariffs and domestic investment gains traction, the economy may face renewed pressures, potentially prompting a policy response from the central bank in the coming months.

Source: CNBC

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Gerik

Economic

Cash circulation remains high despite narrowing share in money supply

As of May 2025, cash circulating outside Vietnam’s banking system amounted to approximately VND 1.8 quadrillion, representing 9.5% of the country’s total money supply (M2), according to data released by the State Bank of Vietnam (SBV). Although the absolute value of cash outside the system increased by 15.2% year-on-year from VND 1.56 quadrillion in May 2024 its share in M2 declined by 0.2 percentage points compared to the same period last year and dropped 1.4 points from the January peak of 10.9%, which reflected seasonal cash demand during Lunar New Year.

The monthly fluctuation in this ratio ranging from 9.0% to 10.9% over the past 13 months shows a generally decreasing reliance on cash in transactions. In May alone, the cash/M2 ratio declined to 9.48%, compared to 9.68% in April, even as the overall M2 supply continued expanding.

M2 growth outpaces last year, but money velocity remains low

Vietnam’s M2 money supply stood at VND 18.97 quadrillion by the end of May 2025, rising by VND 1.6 quadrillion or 5.91% since the end of 2024. Year-on-year, M2 grew by 17.6%, significantly higher than the 12.8% growth rate recorded in December 2024 and the 11.9% pace of May 2024. However, this expansion contrasts sharply with the low money velocity.

According to economist Dr. Cấn Văn Lực, money turnover in the first half of 2025 was only 0.67 times similar to the sluggish levels of 2022 and far below the usual 1.0+ seen during high-growth periods. Economist Dr. Trần Đình Thiên also highlighted that Vietnam’s current money velocity, estimated at 0.55–0.65 times annually, is significantly below the typical 2-turn rate, suggesting weak economic circulation and underutilized liquidity.

Deposits increase steadily, with strong growth from households

Total customer deposits in the banking system reached VND 15.34 quadrillion by May 2025, a VND 500 trillion increase from the end of 2024, translating to a 3.4% rise. Household deposits grew by 7.61% year-on-year to VND 7.60 quadrillion, while deposits from economic organizations rose by just 0.97% to VND 7.74 quadrillion, indicating a cautious liquidity stance among businesses despite a low inflation environment.

Vietnam’s credit growth surged by 9.9% in the first half of 2025 the fastest pace in ten years bringing total outstanding loans to VND 16.67 quadrillion. Compared to M2, this figure is about VND 2.33 quadrillion lower, placing the credit-to-M2 ratio at 87.74%, a relatively high level that underscores the dominant role of bank lending in Vietnam’s capital allocation.

On the flip side, credit volume exceeds total deposits by VND 1.33 quadrillion, resulting in a loan-to-deposit ratio (LDR) of approximately 108.75%. This suggests that banks are leveraging a significant portion of their mobilized funds to support credit, possibly supplemented by central bank liquidity tools.

Sectoral credit distribution further illustrates Vietnam’s economic priorities:

Agriculture, forestry, and fisheries: VND 1.06 quadrillion (+3.38%)

Industry and construction: VND 4.07 quadrillion (+5.06%)

Trade, transport, and telecommunications: VND 4.67 quadrillion (+5.94%)

Other services: VND 6.87 quadrillion (+8.82%), now the largest lending segment

Credit expansion outpaces liquidity accumulation

In absolute terms, credit has expanded by VND 1.51 quadrillion so far in 2025, nearly matching the VND 1.53 quadrillion increase in M2. Meanwhile, deposits grew more slowly, rising by just VND 1.21 quadrillion. Consequently, credit growth (9.96%) is outpacing M2 growth (8.75%) and deposit growth (8.56%). This divergence highlights a structural dynamic: the financial system is increasingly relying on credit as a stimulus tool, while deposit inflows remain moderate.

The gap in growth rates 6.72% for credit versus 5.91% for M2 and 3.16% for deposits in the first five months also implies that monetary authorities may have injected liquidity through policy tools to accommodate loan expansion without creating excessive strain on banks’ funding base.

Vietnam’s monetary landscape as of mid-2025 is defined by strong credit expansion, relatively sluggish deposit accumulation, and persistent low money velocity. While M2 growth is healthy, a substantial volume of cash nearly VND 2 quadrillion continues to circulate outside the banking system. The imbalance between credit and deposits, along with the elevated LDR, suggests that the banking sector is under pressure to maintain liquidity, even as credit demand remains strong. Policymakers may need to balance monetary easing with careful monitoring of capital efficiency to sustain growth without triggering financial instability.

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