分类： business

A widespread sell-off of semiconductor stocks pulled most major Asian equity markets lower on Thursday, while U.S. futures held steady following mild losses on Wall Street a day earlier. Oil benchmarks also dropped as traders priced in growing hopes for a diplomatic resolution to the Iran conflict that could unlock key global energy supplies.

South Korea’s Kospi index, one of the markets most heavily exposed to global semiconductor production, led the downturn with a sharp 5.1% drop to close at 7,877.45. Top memory chip manufacturer SK Hynix shed 7.7% of its value, while industry giant Samsung Electronics fell 6.4%. In Japan, the Nikkei 225 declined 1.5% to 69,443.16, with leading chip equipment producer Tokyo Electron losing 5.6% of its share value. Taiwan’s Taiex index slipped 1.1% as the world’s largest contract chipmaker TSMC (Taiwan Semiconductor Manufacturing Corp.) dropped 1.8%.

Outliers in the region included Hong Kong’s Hang Seng Index, which gained 0.8% to reach 23,060.63, lifted by an 8.7% jump in shares of Chinese electric vehicle manufacturer BYD. The surge came after BYD reported a second consecutive month of rising sales. Mainland China’s Shanghai Composite Index bucked the positive trend in Hong Kong, falling 0.9% to 4,075.58. Australia’s S&P/ASX 200 edged 0.1% lower to 8,710.30, while India’s Sensex closed 0.5% higher.

The chip stock sell-off was triggered by shifting investor sentiment around artificial intelligence, which had driven massive gains for tech and semiconductor stocks across East Asian markets over the first half of the year. Year-to-date, the Kospi has climbed roughly 85% and the Nikkei 225 has gained 34%, fueled by surging demand for AI-enabled chips and components. But growing concerns that massive investments from large U.S. and global tech firms will create a supply glut have started to dampen market enthusiasm.

The downturn began on Wednesday, when chip stocks fell across U.S. markets. Memory chip producer Micron Technology dropped 10.6%, Intel fell 9%, Advanced Micro Devices (AMD) declined 6.9%, Broadcom lost 2.2%, and sector leader Nvidia slipped 1.3%. On Wednesday, Wall Street’s benchmark S&P 500 fell 0.2% to 7,483.23, the Dow Jones Industrial Average dipped less than 0.1% to 52,305.24, and the technology-focused Nasdaq composite dropped 0.7% to 26,040.03.

Analysts at Capital Economics note that while AI demand is still growing, it may expand far more slowly than many investors and firms currently project. In a research note published Thursday, economists Megan Fisher and Vicky Redwood pointed out that many stakeholders are underestimating the practical barriers to widespread AI adoption across industries. Even though AI is a transformative technology that will see broad adoption over time, it may not deliver the rapid financial returns needed to justify the massive scale of current investment being poured into the sector, they added.

In energy markets, crude oil prices fell early Thursday, dipping below levels recorded before the outbreak of the Iran war in late February. The drop came after U.S. and Iranian negotiators held separate talks with Qatari and Pakistani mediators this week, spurring new hopes for a permanent ceasefire deal. A resolution would likely allow for a major increase in global oil supplies by reopening the Strait of Hormuz, the critical global oil chokepoint that has seen limited traffic since the war began. As of Thursday trading, Brent crude, the global benchmark, fell 1% to $70.89 per barrel, down from roughly $72 per barrel before the war started. U.S. benchmark crude also dropped 1% to $67.91 per barrel.

In currency markets, the U.S. dollar dipped slightly against the Japanese yen to 162.39 yen, down from 162.58 yen a day earlier, after the yen hit a four-decade low against the greenback on Wednesday. The euro edged higher to $1.1387, up from $1.1377 in prior trading.

ORDOS, China — When viewed from above, the 3 million-plus solar panels that stretch across the desert landscape at Inner Mongolia’s Dalad Banner solar farm form a striking image: the shape of a galloping horse, a timeless nod to the region’s centuries-old nomadic traditions. Just a short drive from this cutting-edge renewable energy site, a massive coal-fired power plant stands ready to send 700 kilometers of electricity east to Beijing, China’s bustling capital.

This juxtaposition of clean solar infrastructure and fossil fuel generation perfectly encapsulates the dual-track, “all-of-the-above” energy strategy that has positioned Inner Mongolia as China’s single largest production base for both renewable energy and coal. The region’s ongoing energy transition mirrors the trajectory of China as a whole: wind and solar generating capacity are expanding at a breakneck pace, even as coal remains an irreplaceable pillar of the national power supply.

China has outpaced every other country in the world for new wind and solar installations, but recent 2025 data from China’s National Energy Administration shows coal-fired plants still accounted for 51% of the country’s total electricity generation. This paradox is most pronounced in Inner Mongolia, where growth in renewable capacity has gone hand in hand with expansion of coal output, according to energy analysts.

“While China as a whole is transitioning away from coal, Inner Mongolia is most certainly the most paradoxical part of the story. In Inner Mongolia’s case, more renewables often means more coal capacity as well,” explained David Fishman, an energy consultant with The Lantau Group who has personally toured the region’s coal plants and utility-scale solar farms.

As a critical hub in China’s national West-to-East Power Transmission Project, Inner Mongolia supplies massive volumes of electricity from its resource-rich northern plains to the industrial and population centers of China’s wealthy eastern coast. In 2025, 40% of the region’s total electricity generation — approximately 350 billion kilowatt-hours, enough to power 120 million households for a full year — was transmitted to other Chinese provinces.

Over the past five years, Inner Mongolia’s combined installed wind and solar capacity has more than doubled. Even so, coal still dominates regional power generation: coal-fired facilities produced roughly 590 billion kilowatt-hours in 2025, while wind and solar together generated 277 billion kilowatt-hours. Coal production has also kept expanding: in recent years, Inner Mongolia has mined around 1.2 billion tons of coal annually, accounting for one quarter of China’s total national output, with over 60% of that coal shipped to other provinces. Ordos, the city that administers the Dalad Banner solar farm, is one of five national key coal production centers designated by China’s central government.

Regional energy officials frame the parallel growth of renewables and coal as a pragmatic solution to meeting China’s rising national power demand while gradually shifting away from fossil fuels. For the foreseeable future, coal will remain critical to offset the inherent intermittency of wind and solar generation, which drops off dramatically when the wind stops blowing or the sun is hidden by cloud cover.

“Many people see there is a conflict or a competitive relationship between traditional energy and renewable energy,” noted Gu Qing, an official with Inner Mongolia’s energy administration, during an interview on-site at the Dalad Banner solar farm. “As more renewable energy capacity is added, coal-fired power will also continue to grow, although the pace will gradually slow.”

The Dalad Banner farm, part of a large-scale clean energy initiative launched in 2018 across the Kubuqi Desert, currently produces around 2 billion kilowatt-hours of electricity annually. To adapt to the new role of coal as a backup resource for renewables, regional officials say all existing coal-fired power units have been refurbished to operate at as low as 15% of their full maximum capacity, allowing facilities to cut coal consumption when renewable output is high.

“What is changing is that coal power units are turning from supply-guarantee units to serving as a supporting and regulating role,” explained Huang Zhiqiang, vice governor of Inner Mongolia, during a recent official press briefing. “Because wind and solar are intermittent…we cannot do without the support of coal-fired power.”

Outside analysts, however, warn that this flexible operating model faces significant technical, financial, and systemic hurdles. Fishman notes that the ability to ramp down to 15% capacity is not a widespread capability across the entire regional coal fleet, only achievable with the most advanced, well-maintained units. Ramping output up and down regularly also creates technical stress on infrastructure and cuts into revenue for plant operators.

Similarly, Anika Patel, China section editor at climate research organization Carbon Brief, points out that structural economic and political incentives create barriers to repositioning coal as a backup resource. Long-term power purchase agreements reduce grid operators’ flexibility to prioritize renewable energy, and complex interprovincial trading rules make it harder to integrate variable wind and solar output into national supply chains.

“Just because a plant can operate flexibly doesn’t mean that it is operating flexibly,” Patel said.

To support rising power demand from fast-growing sectors including artificial intelligence data centers, electric vehicle manufacturing and charging, and heavy industry, Inner Mongolia is not only building more wind and solar capacity. It is also investing in grid modernization, energy storage infrastructure, and demand-side adjustments: officials are encouraging industrial facilities to align production schedules with peaks in wind and solar generation to make the most of clean output.
Beyond power generation, Inner Mongolia has also expanded its role as a national hub for coal chemical processing, which converts coal into liquid fuels, natural gas, and industrial chemicals. Regional officials argue this expansion helps reduce China’s reliance on imported oil and gas, a priority highlighted by supply chain disruptions stemming from the ongoing Iran conflict and risks to shipping through the Strait of Hormuz. To cut emissions from these carbon-intensive processes, the region plans to deploy large-scale carbon capture technology, Huang said.

BRUSSELS – Facing a rapidly widening trade imbalance with China that has hit a staggering 1 billion euros per day, the European Union has launched two targeted trade policy changes on Wednesday, designed to shore up its struggling domestic steel sector and curb the flood of unregulated low-value small e-commerce parcels entering the bloc. The announcement marks the most significant shift in Brussels’ trade approach to Beijing in recent years, as growing domestic political and industrial pressure forces policymakers to abandon the status quo of unbalanced trade.

The first measure ends the decades-old “de minimis” customs exemption that had allowed all parcels valued under 150 euros to enter the EU duty-free. In its place, a new fixed 3 euro ($3.42) customs duty will be applied to all low-value small parcels entering the bloc. European Commission President Ursula von der Leyen framed the change as a long-overdue correction to an unfair playing field, noting that the exponential growth of low-value online imports from Chinese firms has placed domestic European retailers at a crippling competitive disadvantage. She added that a large share of these unregulated imports also fail to meet the EU’s strict product safety and environmental standards, putting ordinary consumers at unnecessary risk.

EU data confirms the scale of the small parcel surge: the bloc received 5.9 billion small parcels from international sources in 2025, up from just 1.4 billion in 2022. At roughly 16 million parcels per day, these shipments account for 97% of all cross-border parcel traffic into the EU, though they make up only 2% of total import value. European officials estimate that Chinese e-commerce giants including Temu and Shein control around 90% of this low-value parcel trade, a concentration that has upended traditional brick-and-mortar retail across the bloc. The U.S. implemented an identical policy change last year, signaling a coordinated global shift toward restricting this trade model. The new rule also addresses widespread environmental concerns, as the majority of these small shipments come wrapped in excessive single-use plastic that adds to the EU’s waste management burden.

Bernd Lange, chair of the European Parliament’s trade committee, welcomed the move in an online statement, saying that “Europe finally shows teeth against flood of cheap package deals.” However, some trade analysts caution that the 3 euro duty may not deliver the transformative change policymakers are seeking. Gary Ng, a research fellow at the Central European Institute of Asian Studies, noted that the fee is negligible compared to the large price gap between Chinese manufactured e-commerce goods and equivalent European products. Ng added that while the duty may reduce casual impulse purchases, consumers and platforms can easily evade the measure by grouping multiple small orders into a single shipment to avoid or reduce fees.

The second, equally impactful measure targets the EU’s strategically critical steel sector, which has been reeling from years of global overcapacity driven largely by Chinese government production subsidies that have flooded global markets with artificially cheap steel. Under the new rules, the EU will set an annual tariff-free import quota of 18.3 million metric tons for 26 categories of steel products. Any imports that exceed this quota will face a 50% punitive tariff. The framework also introduces strict new transparency requirements for importers, mandating that they disclose where the core “melt and pour” production stage took place to prevent Chinese steel from being rerouted through third countries to skirt EU trade protections.

Europe’s steel industry has already slid into a deep crisis, with the European Steel Association reporting that crude steel output fell to a historic low in the first half of 2026. Axel Eggert, the trade group’s director-general, warned in March that “Europe’s steel production is shrinking while imports as a share of the EU market are rising.” He urged EU policymakers to quickly enact the full, unwatered-down measures, warning that further delay would put more European industrial capacity and jobs at permanent risk. Notably, while China produces more than half of the world’s total steel output, most of the EU’s steel imports currently come from allied and partner economies including the U.K., Ukraine, India, Turkey, Japan and South Korea. Ukraine has received full exemptions from the new tariffs to support its post-invasion economic recovery, though the rules could still trigger dispute mechanisms under existing free trade agreements with other partners including Japan. This new steel framework builds on emergency tariffs the bloc put in place last October to address diverted steel shipments stemming from new U.S. trade policy under the Trump administration.

A senior anonymous Commission official confirmed that Brussels intends to work with like-minded global partners to collectively address the systemic issue of global steel overcapacity, noting that “in an ideal world there is fair competition and level playing fields. Unfortunately, we don’t seem to live in an ideal world.”

The EU’s trade deficit with China ballooned to roughly 360 billion euros ($410 billion) in 2025, and projections show the gap continuing to widen through 2026. Against this backdrop, the new measures have already drawn a sharp rebuke from Beijing, which has repeatedly warned Brussels against adopting what it calls “discriminatory” trade policies. China’s Ministry of Commerce issued a formal warning in May, stating that it would “firmly respond” to any measures targeting Chinese companies. Alicia García-Herrero, chief economist for Asia Pacific and the Middle East at French bank Natixis, noted that even though the measures are not formally labeled as targeting China, Beijing is certain to oppose them, as it views the framework as a potential precedent for broader trade restrictions on Chinese exports across multiple sectors.

Chinese policy analysts have already warned of growing global backlash against China’s export-led manufacturing model. A recent report from Tsinghua University’s Center for International Security and Strategy identified what it calls “China Shock 2.0” — a massive surge of heavily subsidized advanced Chinese manufacturing exports flooding global markets — as one of the top 10 security risks facing China. The report warns that the EU’s new tariffs, combined with existing protectionist sentiment in the U.S., could trigger a “wolf pack effect” where dozens of other countries follow suit with steep tariff hikes and stricter investment screening targeting Chinese firms. The report notes that this coordinated response would not only cause direct economic losses but also damage China’s broader strategic and international business reputation globally. Beijing has pushed back against this framing, arguing that its export growth brings shared economic benefits and technological innovation to global markets.

HSBC economists Frederic Neumann and Justin Feng noted in a recent research note that while the EU has historically taken a less confrontational approach to trade with China than the U.S. under the Trump administration, the overall policy direction in Brussels is clearly shifting toward greater restriction. This shift aligns with a broader G7 push for greater supply chain independence for critical minerals and high-tech goods, with G7 leaders issuing a joint statement in June committing to diversify supply chains away from over-reliance on single sources.

Chinese officials have pushed back against the idea that China is to blame for the EU’s trade imbalances. “China and the EU are partners, not rivals,” Guo Jiakun, a spokesperson for the Chinese Ministry of Foreign Affairs, said this Tuesday. “The root cause of the EU’s problems does not lie with China.” Trade analysts note that China successfully weathered the Trump administration’s escalated tariff threats last year, in part by leveraging its control over global rare earth supply chains to negotiate a truce with Washington. This experience has left Beijing more confident in its ability to withstand external pressure, leading analysts to predict that China will be unwilling to make major concessions to the EU in upcoming trade talks.

“If China managed a U.S. tariff ramp-up and the global energy shock during the U.S.-Iran conflict, it may show less inclination to make concessions to the EU,” Neumann and Feng wrote. “The near-term outlook points to limited progress towards a comprehensive China-EU settlement.” García-Herrero added that even though the EU common market is critical to China — 90% of China’s battery exports and 60% of its electric vehicle exports go to the bloc — Beijing believes it can split EU member states through targeted lobbying to prevent unified action. “China thinks Europe has no leverage,” she said. “They do think they have the upper hand, by all means.”

The new measures come just one day after a high-profile meeting between China’s Commerce Minister Wang Wentao and EU Trade Representative Maroš Šefčovič in Brussels. After the talks, Šefčovič reaffirmed the EU’s commitment to open trade but stressed that the bloc must defend its own industrial base. “The EU remains open for business but we need to defend our industrial base and keep pushing for a level playing field globally, so our industries get a fair shot at competing,” he said. “That is why today’s talks – and the ones to follow – matter.” Šefčovič has set an October deadline for reaching meaningful progress on rebalancing bilateral trade, adding bluntly that “the status quo is not an option.”

As Southeast Asian leaders gear up to sign a groundbreaking regional digital agreement at the November 2026 ASEAN summit in Manila, industry analysts and policy experts are emphasizing that the initiative’s long-term success will depend less on its projected economic windfalls and more on how effectively member states address the uncharted risks posed by fast-growing emerging technologies like artificial intelligence.

Negotiations for the Digital Economy Framework Agreement (DEFA), the most ambitious digital cooperation initiative ASEAN has ever undertaken, concluded in May 2026 at the bloc’s 57th Senior Economic Officials Meeting, nearly three years after discussions launched in September 2023. Once signed, DEFA will make history as the world’s first region-wide framework for digital economy governance, covering core priority areas from digital trade and cross-border e-commerce to data governance and privacy, AI regulation, and digital talent mobility. Projections show the landmark deal could unlock a $2 trillion digital economy across ASEAN by 2030, double the $1 trillion forecast under current growth trajectories.

Current industry data already points to explosive growth in the region’s digital sector: a 2026 joint report from Google, Temasek and Bain & Company put ASEAN’s 2025 digital economy gross merchandise value at more than $300 billion, up from less than $200 billion just five years prior. Josua Pardede, chief economist at Jakarta-based Permata Bank, estimates DEFA will boost regional digital penetration from the current 14-15 percent to 26-28 percent, opening new markets and connecting millions of unbanked and under served consumers to digital services.

Beyond raw growth, experts say DEFA will deliver lasting structural benefits for the region. Catherine Setiawan, an Indonesia-based coordinator and researcher for The Global Index on Responsible AI, notes that the framework’s consistent regional rules will promote greater economic integration and regulatory certainty, two key factors that will draw more global investment to Southeast Asia’s fast-growing digital ecosystem. When implemented thoughtfully, a robust, inclusive digital economy can do more than boost corporate profits and investment flows—it can also advance equitable, broad-based growth across the bloc’s diverse member states. For example, AI-powered governance tools can help national governments track policy and program implementation even in the most remote, hard-to-reach regions of member countries, explained Luhut Tampubolon, senior sales director at India-based global IT services firm HCLTech.

But for all its transformative promise, the agreement brings significant implementation challenges that ASEAN members cannot afford to ignore. Setiawan stresses that to deliver on DEFA’s goals, Southeast Asian governments must build digital governance frameworks that are inclusive, rooted in fundamental rights, and proactively address emerging risks. Key steps she outlines include enacting strong data protection and cybersecurity regulations, establishing clear accountability mechanisms for large digital platforms, and strengthening safeguards for consumers across the region.

One of the most pressing unaddressed challenges centers on the environmental footprint of rapid AI expansion. As AI adoption surges across the region, the exponential growth of AI-powered data centers has created soaring demand for energy and water resources, putting new strain on local power grids and environmental ecosystems. Michael Gryseels, founder and managing partner of Singapore-based venture capital firm Antares Ventures, says he remains optimistic about ASEAN’s digital long-term potential, thanks to the region’s large, digitally native young population that has driven high consumer adoption of mobile and internet services. Even so, Gryseels points out that the region must scale up renewable energy production rapidly to meet the massive electricity requirements of AI systems and data centers, without increasing carbon emissions.

Deepraj Emmanuel Datt, senior director at HCLTech, echoes that concern, noting that ASEAN governments must prioritize reducing the carbon footprint of data centers as they roll out DEFA. “Otherwise, the same AI that will benefit all of us will actually be disastrous to the environment,” Datt told China Daily in comments ahead of the November summit.

To tackle this challenge, Setiawan proposes integrating sustainability principles directly into ASEAN’s broader digital transformation agenda. Key solutions she highlights include mobilizing targeted green investment for digital infrastructure, incentivizing the development of low-carbon AI systems, and harmonizing regional sustainability standards to align digital growth with the bloc’s climate commitments. As leaders prepare to sign the historic pact this fall, the focus is now shifting from finalizing negotiations to building the regulatory and infrastructure frameworks that will turn DEFA’s ambitious potential into shared, sustainable growth for all of Southeast Asia.

TOKYO – The Bank of Japan (BOJ) has released its latest quarterly Tankan business sentiment survey, revealing that confidence among Japan’s largest manufacturing firms has extended its positive streak to five consecutive quarters, according to data published Wednesday.

The closely watched diffusion index, a key metric that calculates the gap between businesses reporting favorable operating conditions and those experiencing negative outlooks, climbed five points to 22, up from a reading of 17 in the previous quarter. Sentiment also ticked upward among large non-manufacturing businesses, which span service sector industries, with the sector’s index edging up one point to 37 from the prior quarter’s 36.

Despite the broad improvement in short-term sentiment, growing macroeconomic headwinds are casting uncertainty over Japan’s economic trajectory, with energy prices and currency weakness emerging as top concerns. Japan relies on imports for nearly 100% of its oil and natural gas supplies, and the yen has plummeted to near 40-year lows against the U.S. dollar, with the greenback trading at roughly 162 yen in Wednesday dealings. While a weak yen boosts the value of export earnings when converted back to yen – a major benefit for Japan’s world-leading export manufacturers – rising energy costs have started to offset this upside.

Inflationary pressures had already mounted amid spiking fuel prices driven by the Iran war, though crude costs have pulled back following the interim ceasefire deal reached between the U.S. and Iran to end the conflict.

In response to persistent price gains and yen weakness, the BOJ raised its benchmark interest rate to 1% last month, marking a three-decade high for the policy rate. The move represents the central bank’s latest step to normalize monetary policy after decades of holding interest rates at or near zero to combat persistent deflation.

Market analysts note that while near-term economic indicators including corporate investment remain solid, Japan still faces deep long-term structural challenges, most notably a persistent and growing labor shortage driven by the country’s aging and shrinking population.

Naomi Fink, chief global strategist and chief economist at Amova Asset Management, noted that the survey confirms a two-track trend across Japanese business. “Sales remain firm, especially for large enterprises, but profits are expected to weaken,” Fink explained. “Fixed investment plans are strong for large and mid-size firms but less so for small firms.”

Growing frictions between China and major global economies have increasingly centered on China’s swelling trade surplus, with European political leaders ramping up pressure that has sparked sharp pushback from Chinese officials. The debate has escalated to questions of currency policy, with German Chancellor Friedrich Merz reviving calls for a Plaza Accord-style agreement to force a revaluation of the Chinese renminbi, which he claims is undervalued by as much as 30% to gain unfair trade advantage. This proposal comes as the European Union weighs new trade defense tools to address its widening trade deficit with China, growing industrial competition, and overreliance on Chinese supply chains, with some hardline politicians framing bilateral economic ties as a systemic threat to Europe.

Chinese state outlet the Global Times has rejected these claims, arguing that the competitive edge of Chinese firms stems from China’s complete industrial ecosystem, consistent investment in technological advancement, a massive domestic consumer market, and robust domestic market competition—not from artificially suppressed exchange rates. The editorial adds that targeting the RMB will not resolve Germany’s struggling manufacturing sector or fix gaps in Europe’s innovation chain, pointing out that Europe’s own industrial challenges stem from a mix of long-term structural issues, including chronically high energy prices, underinvestment in innovation, and ineffective industrial policy, compounded by near-term shocks such as spillover from the Ukraine war and the outflow of investment attracted by U.S. industrial subsidies.

However, financial analyst Michael Pettis points out a critical flaw in China’s core argument: it rests on the assumption that the RMB exchange rate is solely China’s sovereign domain, and any external intervention amounts to a neocolonial overreach. This framing opens up three unresolved logical tensions that risk derailing future trade negotiations with major import partners, unless addressed through a broader, consensus-based framework.

The first core tension revolves around the nature of global exchange rate governance. A country’s exchange rate does not exist in a vacuum; it only functions relative to the currencies of other trading nations, operating within a shared global system rather than as an exclusively domestic asset. In an open global trading system, exchange rate arrangements rely on agreed multilateral rules rather than unilateral national control. If every nation asserted exclusive sovereign right to set its own exchange rate independent of global consensus, the entire system of international trade would break down, leaving only power politics where major powers dominate bilateral arrangements. History, from ancient Chinese hegemonic cycles to modern global order, shows that unregulated competition over currency rules either leads to competing coalitions against dominant powers or, eventually, catastrophic conflict to unify the system. The current U.S.-led global order, for all its flaws, rests on a broad global consensus rather than brute force alone, and any power seeking to replace it must build that same broad consensus, which requires an open, inclusive global approach.

The second tension comes from China’s widely held interpretation of the 1985 Plaza Accord, which is often framed as a deliberate U.S. plot that pushed Japan into its decades-long economic stagnation after forcing yen appreciation. This narrative is misleading and overlooks deep structural problems that predated the agreement: by the 1980s, Japan’s asset bubble was already extreme, with the total value of Japanese land reaching two-thirds of America’s despite Japan being 26 times smaller geographically. Japan also relied excessively on export-led growth while suppressing domestic consumption, and made a losing bet on supercomputer development rather than the networked computing that spawned the internet and modern AI revolution. At its core, the Plaza Accord was rooted in the principle that global trade requires broad structural equilibrium—it cannot rely on one-sided dynamics that serve a single nation’s interests, a point that has been well-documented by Chinese scholars such as Yu Jie, author of *Managing the US Dollar: The Plaza Agreement and the Fate of the RMB*.

The third tension draws from lessons China drew from the 1970s OPEC oil crisis, which shaped Beijing’s long-term strategic approach to economic statecraft. After watching Henry Kissinger negotiate with both China (to counter the Soviet Union) and the Soviet Union (to secure alternative oil supplies to bypass OPEC’s production cuts), Chinese leaders concluded that U.S. foreign policy prioritizes commercial interests over ideological or strategic alliances. This inspired Deng Xiaoping’s famous 1992 observation that while the Middle East holds oil, China holds rare earths, leading Beijing to conclude that economic leverage must be backed by credible military strength to avoid being coerced by outside powers, just as OPEC and Japan were forced to bend to U.S. pressure.

Today, this strategic outlook informs China’s approach to global trade: it holds a near-monopoly on rare earth processing, dominates many primary industrial sectors, and boasts unrivaled cost-quality competitiveness across most global manufacturing supply chains, all backed by a military that provides effective deterrence against external coercion, allowing it to defend its commercial interests without fear of forced concessions.

More recently, China’s strategic outlook has also been shaped by lessons drawn from Russia’s political and economic trajectory. The dominant narrative in Beijing holds that Russia’s collapse after the Soviet Union stemmed from excessive political reform, while Vladimir Putin’s two decades of rule proved that strong military power and geopolitical maneuvering could overcome global pressure. But Russia’s protracted and costly war in Ukraine has upended this narrative: a much smaller Ukraine has shown far greater capacity for innovation and has successfully resisted and pushed back against Russian invasion, while Russia has become increasingly dependent on Chinese support, exposing the deep weaknesses of the Putin model. The article argues that Putin’s rule has set Russia back centuries, demonstrating that the authoritarian model of tightly binding political control to economic activity fails over the long term. While state intervention can be useful during temporary crises, ignoring market rules in normal times eventually grinds the entire system to a halt, a dynamic that is also visible in global misunderstandings over exchange rates and the Plaza Accord.

The author argues that Russia’s decline should prompt Beijing to undertake a fundamental reevaluation of its approach to global trade and domestic economic governance. Without full currency convertibility for the RMB and further opening of China’s domestic market, internal economic pressures including rising underemployment in urban and rural areas will continue to build, potentially creating cascading domestic problems over the next one to two decades. The author warns that if China continues to avoid addressing its trade and exchange rate imbalances through market-oriented reform, rather than political expediency, it risks losing decades of economic progress, just as it did under Mao Zedong’s mid-20th century rule. If China continues to suppress domestic demand and cling to unfair trade practices, the U.S. and other major economies will gradually decouple from Chinese supply chains, leaving Chinese households poorer even amid technological progress. Russia’s current crisis, the author concludes, is a clear warning that ignoring market rules and global consensus ultimately carries catastrophic costs.

Global financial markets entered a new trading session Tuesday with broad upward momentum across most Asian equity benchmarks, driven by a positive close on Wall Street and a sharp rebound for South Korean technology and chip stocks that pulled back sharply in prior sessions amid a sector-wide sell-off.

The recovery in Asian tech stocks comes against a months-long backdrop of soaring investor enthusiasm for artificial intelligence-linked assets, which has lifted shares of top chipmakers across the region even as growing fears over a potential bubble in overvalued AI stocks have injected widespread volatility into global markets. South Korea’s benchmark Kospi index, which has emerged as a major beneficiary of the global AI boom due to the outsized role of domestic chip manufacturing giants like SK Hynix and Samsung Electronics, advanced 1.3% on Tuesday to close at 8,504.43. The gain reversed much of the index’s recent losses: it fell 0.2% in the previous trading session and tumbled 5.8% the session before that, dragged down by the broad tech sell-off. On Monday, both Samsung Electronics and SK Hynix had unveiled aggressive long-term investment plans totaling more than $500 billion to expand South Korea’s domestic chip manufacturing and AI infrastructure. On Tuesday, Samsung shares rose 3.6% while SK Hynix gained 1% as investor confidence returned to the sector.

Other major Asian indexes also posted solid gains on Tuesday. Japan’s Nikkei 225, another index that has seen strong tailwinds from the global AI boom, climbed 0.9% to 70,116.82. Leading Japanese chip equipment manufacturer Tokyo Electron jumped 4.3%, while SoftBank Group, the major investment holding firm with a stake in AI startup OpenAI, added 0.6%. Taiwan’s Taiex index surged 3.2% in Tuesday trading, while Australia’s S&P/ASX 200 recorded a modest uptick of less than 0.1% to settle at 8,825.80. Mainland China’s Shanghai Composite Index edged 0.2% higher to 4,080.42, though Hong Kong’s Hang Seng Index bucked the regional upward trend to fall 0.8% to 22,836.39. India’s Sensex also posted a small loss of 0.1% for the session.

In energy markets, oil prices stabilized near pre-conflict levels as geopolitical developments emerged around the four-month standoff between the U.S. and Iran. Both countries announced separately this week that they would send delegations to Qatar, though Iranian officials clarified that no formal bilateral talks with the U.S. had been finalized. Brent crude, the global benchmark for oil pricing, traded 0.2% lower at $73.73 per barrel on Tuesday, a level that remains close to the $72 per barrel price recorded before the outbreak of hostilities in late February. U.S. benchmark crude fell 0.4% to $70.49 per barrel, as traders continue to monitor diplomatic progress that could lead to a permanent end to the conflict and ease geopolitical risks to global energy supplies.

U.S. stock futures edged higher in early trading, pointing to a potential continuation of gains from the prior session. On Monday, all three major Wall Street benchmarks recovered from earlier losses to close solidly higher, recouping some losses from a rare down week for U.S. equities. The broad benchmark S&P 500 gained 1.2% to end at 7,440.43, the Dow Jones Industrial Average climbed 0.6% to 52,182.74, and the technology-heavy Nasdaq Composite jumped 2.1% to 25,820.14. Major U.S. chip and AI stocks led the gains: Intel rose 2.7%, Micron Technology gained 1.1%, Nvidia added 1.3%, and Advanced Micro Devices climbed 3.4%.

In currency markets, the U.S. dollar strengthened slightly against the Japanese yen, rising to 162.18 yen from 161.94 yen as the yen continued its recent weakening trend. The euro edged lower against the dollar, trading at $1.1399, down from $1.1422 in the prior session.