U.S. Commerce Employee Barred from Leaving China Amid Trade Tensions and Leadership Talks

Economic

China–U.S. Trade War

Summary:

China has imposed an exit ban on a U.S. Commerce Department employee, complicating ongoing U.S.–China trade negotiations and raising concerns among American businesses....

Escalation Ahead of Trade Summit Negotiations

An American employee of the U.S. Commerce Department’s Patent and Trademark Office (USPTO), reportedly a military veteran, has been blocked from leaving China since April after traveling to Chengdu to visit family. According to reports by The Washington Post and South China Morning Post, the individual is subject to an “exit ban” for not disclosing his government position on a visa application a claim that some U.S. sources suspect may be politically motivated.

The case surfaces at a critical juncture: Washington and Beijing are attempting to organize a high-stakes leaders' summit between President Donald Trump and Chinese President Xi Jinping to negotiate tariffs, rare earths access, tech curbs, and Taiwan-related concerns. The Trump administration has recently softened its anti-China rhetoric in hopes of reviving trade dialogue, and both Secretary of State Marco Rubio and his Chinese counterpart have publicly endorsed the summit’s possibility.

Growing Risks for U.S. Businesses and Multinational Staff

The U.S. has escalated its response by issuing a “very high-level” diplomatic message to Beijing, demanding the employee be allowed to return home. However, the Chinese government has reportedly cited national security as the basis for the travel restriction. No official Chinese comment has been released, and the U.S. Embassy reiterated its deep concern over “arbitrary exit bans” and their strain on bilateral relations.

This incident comes on the heels of Wells Fargo’s decision to halt travel to China after one of its trade finance executives, Chenyue Mao, was also barred from leaving the country. These back-to-back cases have alarmed U.S. firms with ties to China. Jeremy Chan of Eurasia Group warned the developments “will have a chilling effect” on U.S. business travel to China, particularly as Trump’s team plans to bring CEOs to the upcoming summit. Executives may now hesitate to attend.

Exit Bans Reflect a Broader Pattern of Enforcement

China’s exit bans are not new but have become more visible amid geopolitical friction. A 2022 academic study documented 128 foreign cases, with over one-third tied to commercial disputes. The latest incident reinforces the perception of China as a high-risk jurisdiction, especially for foreign staff. In previous years, executives from UBS, Kroll, and other firms have been similarly detained.

Chinese law permits exit bans for individuals under criminal suspicion or accused of endangering national security. These powers were further expanded under the updated espionage law. While legal domestically, their arbitrary application often undermines business confidence and raises diplomatic tensions.

A Fragile Window for De-escalation

The blocked Commerce Department official may now represent more than a consular dispute. His continued detention could jeopardize the broader effort to stabilize U.S.–China relations and secure a face-to-face meeting between the two presidents. The outcome will signal how committed each side is to compromise amid increasingly nationalist policy agendas and growing distrust.

For American corporations with operations or staff in China, the takeaway is sobering. Despite the size of the Chinese market, rising legal unpredictability and geopolitical entanglements are making engagement riskier both for business and personnel. As Beijing doubles down on national security enforcement, the question is whether diplomatic or economic logic will ultimately prevail in shaping China's foreign posture.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

You understand and acknowledge that there is a high degree of risk involved in trading. Following any strategies or investment methods may lead to potential losses. The content on the site is provided by our contributors and analysts for information purposes only. You are solely responsible for determining whether any trading assets, securities, strategy, or any other product is suitable for investing based on your own investment objectives and financial situation.

Add to Favorites

Pepperstone

Economic

WHERE WE STAND – Even by the standards of recent Fridays, the end of last week was a pretty dull one.

Not, I must say, that you’ll find me complaining – these days, we should take full advantage of any calm we get, however brief!

Anyway, as for catalysts as the week came to an end, there really weren’t any notable ones. Trade, of course, remained in focus, even if the most notable news flow on that front was reporting that the Trump Admin. are pushing for a minimum tariff as high as 20% on goods from the EU. Once again, this feels like a threat which is firmly part of an ‘escalate to de-escalate’ strategy, especially as the 1st August tariff deadline looms ever larger.

We also had Fed Governor Waller reiterating his dovish stance, essentially confirming that he will dissent in favour of a 25bp cut at the July FOMC meeting. Waller’s argument for an immediate 25bp ‘insurance’ cut appears to centre around the ‘frozen’ nature of the labour market, where firms have slowed hiring, but simultaneously haven’t notably accelerated the pace of layoffs. The issue, here, is that the argument falls apart when one considers that the reason for that labour market inertia is trade uncertainty, and not the cost of credit. To be honest, not that I’d recommend it, but you could probably lower the fed funds rate by 100bp or so, and it wouldn’t really have much, if any, impact on the employment backdrop, unless and until we obtain some certainty on the tariff front.

In any case, there really isn’t any data that points to the need for rate cuts. Friday’s housing starts, building permits, and UMich consumer sentiment figures all came in above consensus expectations, while last week also showed initial jobless claims falling to a 4-month low in the week ending 12th July, as headline CPI accelerated to 2.7% YoY. All of this supports the consensus view among FOMC members, that a ‘wait and see’ approach remains appropriate for now, with the resilient nature of the economy giving policymakers space to stand pat, awaiting further data to ensure that any tariff-induced inflation does indeed prove temporary. My base case is that we get just one 25bp cut this year, probably in December.

As for markets, the price action as we cruised into the weekend was very much akin to watching paint dry. I promise I’m not complaining about that, but it does feel like ‘summer markets’ vibes are starting to set in, with conditions really beginning to thin out as participants swap the desk, for the beach. This sort of a market tends to create relatively tight ranges, and price action that becomes quite technically-driven – a macro strategist’s nightmare! Typically, ‘summer markets’ run until Labor Day, so I suppose we best get used to it.

In any case, the path of least resistance for equities continues to lead to the upside, despite stocks ending the week with modest losses, amid a bout of pre-weekend de-risking. A resilient underlying economy, solid earnings growth, and progress towards trade deals being made should be a strong enough combination to keep the bulls in the driving seat, even if seasonality at this time of year is a bit of a headwind.

Elsewhere, things were also pretty contained. Treasuries found some demand, led by the belly of the curve, though dip buyers were also present at the long-end, as benchmark 30-year yields retreated back under 5%, ending a 3-day run north of that figure, which had equalled the longest such stretch since before the GFC. I wonder if this week’s relatively barren data docket may encourage a few more of those dip buyers to enter the fray, locking in yield before we get to the July FOMC meet, which is the next obvious risk event on the horizon.

The FX space, meanwhile, was more akin to a random walk than anything else, with the greenback – and pretty much all G10s – ending the day near enough where they started it. My base case remains for a slow but steady decline in the greenback over the medium-term, as cash continues to find a home elsewhere amid continued threats towards Fed independence. The repeated failure of the DXY to crack the 50-day moving average to the upside support my bearish stance, and I remain a dollar rally seller here.

LOOK AHEAD – As alluded to, the week ahead really doesn’t bring the most exciting economic docket that one has ever seen. In fact, for the first three days of it, I struggle to find anything at all to get especially excited about.

The July ECB decision, on Thursday, is arguably set to be the highlight of the week, though policymakers are near-certain to stand pat, holding the deposit rate at 2.00%. Guidance should also be unchanged, as the Governing Council stick with a ‘data-dependent’ and ‘meeting-by-meeting’ approach, sticking with that age old European tradition of not wanting to rock the boat too much before disappearing on a 2-months long summer break!

On the data front, July’s ‘flash’ PMI surveys are the most notable release, and should show a modest improvement in output in both the manufacturing and services sectors across DM. Elsewhere, the latest UK borrowing and retail sales stats are due, as well as the July IFO sentiment surveys from Germany. Friday’s US durable goods orders figure, meanwhile, should be entirely ignored, with the data having been horrifically skewed by a surge in Boeing orders in May, thus providing little-to-nothing in terms of signal.

Finally, earnings season continues this week, with reports from Alphabet and Tesla the standout releases, both coming after the close on Wednesday. Thus far, 83% of S&P 500 firms to report, have surprised to the upside of consensus EPS expectations.

Source:Pepperstone

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Commodity

Fed Uncertainty Boosts Gold Appeal

Gold’s latest gains reflect growing investor confidence that US interest rates may decline in the near future. The precious metal, which offers no yield, becomes more attractive when borrowing costs fall. This sentiment gained traction after Fed Governor Christopher Waller openly supported a rate cut last week, followed by Governor Michelle Bowman showing openness to such a move. However, other Fed members remain cautious, warning that Trump’s aggressive tariff policies could stoke inflation, forcing the central bank to stay on hold or even tighten again.

This policy split comes at a politically charged moment. President Trump is reportedly exerting mounting pressure on Fed Chair Jerome Powell, whose term ends in May 2026. While Trump denied recent claims that Treasury Secretary Scott Bessent advised against firing Powell, the president’s open search for a dovish successor is keeping markets on edge and strengthening gold’s safe-haven status.

Tariff Tensions and Geopolitical Risks Underpin Demand

Gold’s year-to-date rally now over 25% has been powered by more than just Fed expectations. Global trade anxieties are escalating as Trump’s August 1 tariff deadline looms. The European Union is scrambling to prepare for a potential “no-deal” scenario, while other US trade partners race to strike favorable terms. These growing frictions, paired with the dollar’s recent softening, have reinforced investor interest in gold and other tangible hedges.

Despite climbing to near-record levels, gold has largely remained within a relatively tight trading band in recent months. Investors are weighing opposing forces: the inflationary potential of global tariffs versus the deflationary drag of slowing demand and manufacturing activity. In such an ambiguous macroeconomic environment, gold’s appeal lies in its resilience across policy outcomes.

Gold to Stay Bid Amid Mixed Signals

As of early afternoon trading in Asia, spot gold stood at $3,368.35 an ounce, with silver, platinum, and palladium all recording similar gains. Meanwhile, the Bloomberg Dollar Spot Index dipped slightly, further supporting gold’s uptick.

Looking ahead, gold prices are likely to remain sensitive to developments on three major fronts: the Federal Reserve’s stance on rate cuts, clarity around Trump’s tariff execution, and ongoing geopolitical strains. Any firm commitments by the Fed to easing, or concrete tariff escalations, could trigger breakout moves for gold above its current range.

Until then, the metal’s steady climb reflects a market caught between policy divergence and political volatility a setup where gold remains a favored insurance policy.

Source: Bloomberg

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Japanese Markets Dark Amid Political Shake-up and Tariff Threats

Tokyo’s financial markets remained closed for a holiday, but political developments are already shaping investor outlook. The Liberal Democratic Party, led by Prime Minister Shigeru Ishiba, lost control of both parliamentary chambers for the first time since 1955, signaling a historic shift. Although Ishiba pledged to stay in power, the election reflected deep public dissatisfaction with inflation and governance, prompting expectations of increased fiscal stimulus. However, analysts warned that greater spending may worsen Japan’s already substantial national debt.

Compounding concerns, negotiations with the United States over looming 25% tariffs have shown little progress. With the Trump administration firm on its August 1 deadline, fears of prolonged trade friction could add pressure to Japan’s already unstable economic and political environment. Analysts at BMI predict that unless snap elections are called, policy inertia and leadership uncertainty may extend well into 2026.

China Gains as Leadership Maintains Policy Stability

In contrast, Chinese markets gained modest ground after the People’s Bank of China left its one-year and five-year loan prime rates unchanged. The Shanghai Composite edged up 0.4% to 3,549.89, and Hong Kong’s Hang Seng index added 0.3% to 24,895.20. The decision to hold rates reflects recent strength in economic data, which has reduced pressure on the government to inject fresh credit stimulus.

Investor optimism was also supported by signs of reduced tension with the U.S. on trade, as the Trump administration has tempered its recent criticism of Beijing. Market participants now hope this softer tone may open the door to a negotiated solution before new U.S. tariffs are enacted.

South Korea and Others Show Mixed Signals

South Korea’s KOSPI rose by 0.5% to 3,205.71 after government data showed a slight improvement in June exports, a critical measure for the trade-driven economy. Meanwhile, Australia’s S&P/ASX 200 fell 1.1% to 8,659.50, reflecting pressure from weaker global commodity demand. Taiwan’s Taiex dropped 0.3%, and Thailand’s SET lost 0.5%. India’s Sensex managed a 0.2% gain, driven by financials and consumer stocks.

U.S. stocks finished Friday mixed, but strong enough to lock in a third weekly advance. The S&P 500 barely moved after hitting a record high the previous session. The Dow Jones fell 0.3%, while the Nasdaq edged up slightly. Corporate news dominated: Norfolk Southern surged 2.5% on merger talks with Union Pacific, though the latter fell 1.2% amid antitrust concerns. In contrast, Netflix dropped 5.1% despite strong earnings, and ExxonMobil tumbled 3.5% following an arbitration ruling that allowed Chevron’s $53 billion acquisition of Hess to proceed.

Inflation Expectations Ease, but Tariff Effects Loom

Preliminary data from the University of Michigan showed U.S. consumers now expect 4.4% inflation in the coming year, down from 5%, a development that softened Treasury yields and relieved some pressure on the Federal Reserve. Still, the market is wary of rising costs driven by Trump’s broader tariff plans, which are set to begin on August 1. Many countries are scrambling to secure exemptions or make last-minute deals.

Oil prices rose slightly, with U.S. crude at $66.19 and Brent at $69.38 per barrel. In currency markets, the dollar strengthened to 148.50 yen, while the euro dipped to $1.1628.

While Wall Street’s continued resilience offered some support, Asian markets remain weighed down by regional uncertainties. Japan’s political transition and trade tensions, China’s delicate balance between stability and stimulus, and the ever-present threat of escalating tariffs are likely to keep risk appetite in check. As earnings season continues and trade talks intensify, market participants are bracing for increased volatility in the weeks ahead.

Source: AP

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

ACY

Forex

Economic

What happened last Friday?

Japan's Political Party Split Is Unprecedented in 70 Years!_1

US dollar: The strong rebound in the US market last Thursday continued in the early trading and European trading. When the US stock market weakened before the market, the US dollar was also under pressure, especially after the Federal Reserve Board member Waller said he would accept Trump's possible new appointment and support interest rate cuts, the US dollar once fell to the intraday low.

The turning point came when the University of Michigan consumer confidence report was released. The data showed that consumer confidence was higher than expected, and the one-year inflation expectation fell from 5% to 4.4%, ending the previous continuous rise. In theory, this data should be good for US stocks and bad for the US dollar, but the market reaction was completely opposite - US stocks maintained the decline at the opening, while the US dollar rebounded strongly and quickly recovered the early losses. The reason is that the decline in inflation expectations means that Trump will no longer face obvious inflationary pressure in implementing the tariff policy, and the possibility of the policy being implemented has increased significantly. The subsequent market also confirmed this.

During the U.S. trading session, Trump announced a minimum tariff of 15%-20% on all EU goods, which not only widened the decline of U.S. stocks but also pushed the U.S. dollar to further strengthen.

In the analysis on Tuesday last week, it was mentioned that the current market is fluctuating around tariffs, and the tariff news is divided into two directions, namely Trump's tough stance and Trump's retreat. The above two tough news just caused the stock market to fall and the dollar to strengthen .

The US dollar bottomed out and rebounded throughout the day last Friday, and finally remained flat. The performance of non-US currencies varied greatly.

Yen: Due to the Japanese Senate election on Sunday, the market was worried about the ruling party's defeat and bet on the depreciation of the yen. However, this expectation has been fully factored into the price. When the election results were announced this morning - the Liberal Democratic Party did lose the majority of seats, it triggered the "bad news is out" and the yen rebounded quickly in the early trading, getting rid of the previous position of "the weakest currency".

This election is particularly noteworthy: for the first time in 70 years, the Liberal Democratic Party failed to win half of the seats, while populist and xenophobic right-wing parties emerged as a new force, with seats increasing from 1 to 10 to 22. Polls show that populist sentiment among Japanese voters has significantly increased, with 79% of respondents supporting tighter restrictions on foreigners.

This trend has been around for a long time. As we analyzed when Trump came to power, populism and trade protectionism are highly contagious. Today, the support rate of populist right-wingers in the United States, the European Union, South Korea, Japan and other places has soared. For example, Italy is already ruled by the extreme right. The slowdown in global economic growth has led the world's population into an era of involution, and votes linked to unemployment will lean towards populist factions.

This wave of anti-globalization, driven by public opinion and led by Western countries, will be contagious and irreversible.

Commodity currencies: Commodity currencies performed poorly during the US trading session, dragged down by US stocks. The New Zealand dollar fell sharply during the early trading session due to lower-than-expected inflation and ultimately performed the worst.

European currencies: Mainly driven by the US dollar. The decline in US stocks is good for the Swiss franc, which eventually rises. However, the pound, which has a poor economic performance, still lags behind.

RMB: Stable, with slight increase.

Japan's Political Party Split Is Unprecedented in 70 Years!_2

US stock market: The market remained volatile and fell throughout the day. The decline was most significant when the US stock market opened and Trump announced tariffs on the EU. Tesla and technology stocks supported the US stock market, causing the Dow to lag behind.

In terms of sector news, the UK and the EU announced a reduction in the upper limit of Russian crude oil export prices from $60 per barrel to $47.6. As a result, crude oil stocks plummeted, dragging down the energy sector. On the contrary, green energy stocks in public utilities performed very well and eventually closed higher. Tesla's stock price rose sharply at the opening, possibly driven by the Grok 4 news, but failed to drive the entire technology sector to strengthen.

China's AH stock market: continued to rise after opening, and the US stock market rose against the trend when it opened, once again reflecting the global risk aversion demand . The best performance of the day.

Other stock markets: Australian mining industry performed well driven by the Chinese stock market, but was still dragged down by the US stock market this morning. The 11 major sectors opened with a collective decline and eventually fell slightly. European stock markets faced a new round of tariff shocks and eventually fell sharply, performing the worst. The Japanese stock market opened with positive news from the Japanese Senate election results, but was subsequently suppressed by the rise of the yen and eventually continued to fall.

Japan's Political Party Split Is Unprecedented in 70 Years!_3

During the Asian and European trading sessions, driven by the dual positive factors of the strengthening of the Chinese stock market and the decline of the US dollar, the commodity market generally rose. Among them, industrial metals continued their upward trend last night, boosted by the expected demand from China, and continued to rise at the opening this morning, performing the best.

As for gold, the rise was restrained during the U.S. trading session due to the strengthening of the U.S. dollar, but the overall performance remained solid and maintained at a relatively high level.

There were frequent news in the crude oil market. The new round of EU sanctions triggered dual concerns of tightened supply and limited demand, and oil prices fluctuated upward. However, Brazil publicly expressed concerns about being sanctioned by the United States for purchasing Russian oil, which became the last straw that broke the camel's back for bulls. Demand concerns increased sharply, and oil prices immediately gave up all gains and eventually closed down.

Today's key events (AEST):

00:00 the next day US Conference Board Leading Index Monthly Rate in June: Expected -0.2% Previous value -0.1%

*Indicates a more influential leading indicator that deserves the most attention from day traders. 

Japan's Political Party Split Is Unprecedented in 70 Years!_4

Last week, I pointed out that although the yen has been weakening in the short term due to the dual pressure of tariff negotiations and Senate elections, these negative factors have been basically digested by the market. The depreciation of the yen has obviously exceeded the range that can be explained by the US-Japan interest rate differential, and there is a possibility of excessive decline in stages. Once the news is released and the negative news is exhausted, the yen will continue to rebound. This morning's market confirmed this judgment. Therefore, this week's short-term strategy is mainly based on oversold rebound. However, in terms of currency pair selection, the strong US dollar under the "Trump strong" market should be avoided. The Australian dollar, which is more sensitive to the negative news of US stocks, or the euro, which is directly affected by tariffs, can be considered as a trading object.

Although TSMC's financial report performance was stable, it failed to continue to push up the stock price, and the overall rise of US technology stocks was therefore limited. In contrast, the valuation of Hong Kong's technology sector is more attractive. Combined with the resonance of safe-haven demand and favorable fundamentals, the Hang Seng Index has the momentum to continue to rise, mainly following the trend.

Once the U.S. stock market starts a new round of tariff callbacks, the gold price will repeat the surge in April and may even test the 3,500 mark again. However, the recent strong dollar has made the direction of gold prices uncertain, and the trading strategy should be mainly to sell high and buy low.

Value Divergence Strategy – EURJPY

Intraday or short-term trading strategy: (mean reversion) 173 small stop loss short (intraday), or short after breaking 172 (short-term)

Resistance reference: 173; 173.3 (stop loss)

Support reference: 172 (stop profit & breakout); 170.8; 169.2

Technical aspect: 100-day moving average is upward, bullish momentum is strong, short orders should set a stop loss. The trading strategy is mainly based on breakthrough and follow-up. Once it falls below the 172 mark, it will not only form a head reversal, but also break through the upward trend line, and the short momentum will be released. The short-term target position focuses on the Fibonacci retracement line.

Japan's Political Party Split Is Unprecedented in 70 Years!_5

News Breakout Strategy – Gold/US Dollar XAUUSD

Intraday trading strategy: (mean reversion) 3360 breakout, quick entry and exit, or wait for the price to fall back to 3325 and then go low

Resistance reference: 3360 (intraday breakthrough); 3375 (stop profit)

Support reference: 3325

Technical aspects: The 100-day moving average is horizontal, the direction is uncertain, and the gold price fluctuates greatly. There is a certain resistance near the current price of 3360. Once it breaks through, it can test the previous high of 3375. However, considering the unclear tariff policy, the short-term market is still dominated by volatile market, so you can patiently wait for the price to fall back to 3325 before entering the market to do more.

Japan's Political Party Split Is Unprecedented in 70 Years!_6

Strong and Weak Trend Strategy – Hong Kong Hang Seng Index HK50

Short-term trading strategy: (Trend following) bullish when it falls back to around 24800

Resistance reference: 25000; 25400

Support reference: 24800; 24500 (break stop loss)

Technical analysis: The 100-day moving average remains upward, and the bullish momentum is strong. 25,000 is a key historical level, and once it is broken, it will mean the resumption of the long-term bull market. In the short term, it is still necessary to maintain a cautious operation of stepping back and bullish, and buy more at low levels along the trend line.

Japan's Political Party Split Is Unprecedented in 70 Years!_7

Source:ACY

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

Gerik

Economic

Stock Surge Fueled by “Anti-Involution” Hopes

Markets in China are experiencing a burst of optimism after the government vowed to address “involution” a term now applied to excessive competition and overcapacity that has suppressed industrial profits and escalated global trade friction. Investors responded quickly: shares in solar glass, steel, and EV companies rallied sharply, with some stocks rising 50–70% since late June, well ahead of the broader market’s 3.2% gain.

This surge comes on the back of Beijing’s unusually strong rhetoric. The People’s Daily declared cut-throat competition “disorderly,” while President Xi Jinping emphasized the need for better competition regulation. These moves signal a shift in tone from mere observation to potential intervention.

Government Interventions and Corporate Reactions

Concrete steps have followed the rhetoric. Ten major producers of solar panel glass agreed to cut output by 30%. The government also launched auto safety inspections, an indirect way to curb cost-cutting in the highly competitive EV sector. Despite continued uncertainty, these measures have boosted investor confidence that long-standing industrial inefficiencies are finally being addressed.

For instance, steelmaker Liuzhou Iron & Steel rose 10% in a day and over 70% in three weeks. Changzhou Almaden, a solar glass manufacturer, also rallied by about 50%. Sector-specific ETFs have outperformed the general index, signaling broad investor buy-in.

EV sector reactions are mixed: while Li Auto and Nio saw strong gains, BYD shares slipped as it doubled down on price cuts in late May an action seen by some as undermining the truce.

Overcapacity, Weak Demand, and Global Tensions

China’s producer price index has been falling for nearly three years a sign of ongoing deflationary pressures at the factory level. With sluggish domestic demand and external headwinds such as rising tariffs from the U.S. and Europe, firms have resorted to deep price cuts to maintain market share. This, in turn, has fueled trade tensions globally, especially in sectors like EVs, steel, and solar where China exports aggressively.

The recent “anti-involution” campaign has sparked comparisons with past efforts to curb overcapacity particularly in steel and cement which largely failed due to local government interference. Despite national directives, local officials have often prioritized jobs and GDP over consolidation, allowing zombie firms to linger.

Structural Reform or Temporary Relief?

Analysts warn that short-term production cuts or inspection campaigns may not be enough. Economists like Alicia García-Herrero of Natixis suggest that only sustained mergers, bankruptcies, and genuine market discipline can resolve overcapacity issues. However, political will at the provincial level remains uncertain.

UBS analysts cautiously welcomed the developments, saying a short-term “ceasefire” in EV price wars is possible but a full-scale industry turnaround would be slow. Furthermore, past promises to rein in overproduction have been undermined by subsidies and policy incentives that inadvertently encourage expansion.

A Market Rebound Shadowed by Long-Term Uncertainty

While investor sentiment has clearly improved, with capital flowing into some of the most beleaguered sectors, the structural challenges that created China’s involution crisis remain deeply embedded. The long-awaited correction may have finally begun, but without stronger institutional reforms and coordination between central and local governments, the rally risks becoming a speculative bubble riding on political language rather than real economic change.

The coming quarters will reveal whether the government’s renewed campaign against overcapacity represents a turning point or another false dawn in China’s ongoing struggle to rebalance its industrial economy.

Source: AP

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

Add to Favorites

James Whitman

Political

Japanese Prime Minister Shigeru Ishiba sought to buy time for his premiership following a second election setback in less than a year that leaves him in a weaker position to stave off opposition tax cut demands or secure a last-minute trade deal with the US.

“As we are the biggest party in parliament, I believe I must fulfill my responsibility to the nation and its people,” Ishiba said at a press conference held Monday after an election that left the ruling bloc three seats short of maintaining a majority in the upper house. Ishiba raised the US trade talks, inflation and an increasingly tense security environment as pressing issues that must not be left to stagnate due to political instability.

While Ishiba’s comments at the press conference showed his intention for now to soldier on with a minority in both houses, the prime minister remains in a vulnerable position and will likely need to find ways to shore up his leadership within the party. Ishiba is the first LDP leader running an administration without a coalition majority in either of the chambers since the party was established in 1955.

He acknowledged that debate would likely continue within the party about how to proceed moving forward and that he would respond to each development as it occurred.

Historical precedence is not on Ishiba’s side. The last three LDP premiers who lost a majority in the upper house all stepped down within two months of the result. Still, there is little immediate sign of clear appetite within the party to oust him for now, given the lack of an obvious candidate waiting in the wings that might give the LDP an immediate boost.

Ishiba said he had no plans to change around personnel in the administration, implying that there would be no cabinet reshuffle to try and turn around his fortunes.

Instead, Ishiba indicated he would be looking for talks with Donald Trump and tangible results on trade soon, as he continued to emphasize that negotiations should center on investment not tariffs. The deadline for higher across-the-board tariffs looms less than two weeks away. His top negotiator Ryosei Akazawa is set to depart on Monday for Washington to continue discussions with his US counterparts.

The visit appears to be a continuation of an existing tactic to secure as much face-time with US negotiators as possible. Akazawa has clocked up over 90,000 miles over seven visits to the US so far, with little to show in terms of progress.

“I do think that in terms of how the LDP thinks, the best way for Ishiba to go would have been to reach some sort of trade terms with the US tariff talks, but if Ishiba really has no intention to stand down, then that sort of deadline doesn’t matter,” said Yuri Kono, a professor of law at Hosei University who writes frequently on politics.

The election defeat will likely hamper Ishiba’s efforts to pursue domestic policy. With many of the key opposition parties running on a platform to cut the sales tax, Ishiba may well have to make concessions over tax cuts to push any of his policies through.

The main opposition Constitutional Democratic Party, which wants to exempt food from the sales tax for as many as two years, came in second place with 22 seats in the election. The populist Democratic Party for the People finished third with 17 seats, up from four earlier, after seeking a sales tax cut and more take-home pay.

Sanseito, a right-wing party that tapped anti-foreigner sentiment with a “Japanese First” message and wants to phase out the tax in stages, managed to secure 14 seats from just a single seat, winning the third most seats among opposition parties.

Ishiba will need to find ways to cooperate with the opposition and likely have to give some ground. Whether that extends to a temporary tax cut remains a key focus for market players concerned about Japan loosening its control of fiscal policy.