China government advisers call for fix to two-speed economy
China’s economy is doing two very different things at once. Its AI and high-tech manufacturing sectors are surging, powered by government subsidies and surging global demand. Meanwhile, the consumer side of the ledger, the part where actual people spend money on actual things, is struggling to keep pace.
Government advisers are now publicly calling for measures to bridge this gap, marking an increasingly candid acknowledgment from Beijing’s policy circles that a booming semiconductor and EV sector doesn’t automatically translate into a healthy economy for everyone.
Fixed-asset investment, a broad measure of spending on infrastructure, real estate, and equipment, fell approximately 4.1 percent during the first five months of 2026. That’s a meaningful decline, and it reflects two forces pulling in the same direction: a still-deflating property market and persistently low consumer confidence.
On the other side of the ledger, exports remain resilient. Strong global demand for Chinese AI hardware has kept the trade engine humming.
The property downturn deserves special attention here. Real estate has historically been the backbone of Chinese household wealth. When that sector weakens, consumer psychology shifts in predictable ways: people save more, spend less, and delay big purchases.
Gerard DiPippo from RAND has pointed to the prioritization of hard-tech under Xi Jinping’s self-reliance vision as a structural driver of this divergence. The government has channeled enormous resources into semiconductors, clean energy, and electric vehicles. Those investments are paying off in terms of industrial output and export competitiveness. But they haven’t generated the kind of broad-based income growth that puts money in ordinary consumers’ pockets.
Iran war: impacts on India’s economy
The closure of the Strait of Hormuz has increased the cost of natural gas, disrupted supplies of key fertilizers, and increased cultivation costs around the world—ultimately affecting both farmers’ incomes and household food bills. For India, it is a reminder that the reliability of food systems depends not only on farm-level production, but also on the stability of energy supplies, shipping routes, and agri-input markets. This is because India’s fertilizer security is deeply tied to global supply chains. The country imports a significant share (~60 percent) of its diammonium phosphate (DAP) fertilizer, remains fully dependent on imported potash, and even domestic urea production relies heavily on imported liquefied natural gas (LNG). Nearly 50 percent of India’s LNG and about 85 percent of its crude oil requirements are also met through imports.
Global crude oil and fertilizer prices shot up by 58 percent and 66 percent, respectively, from February (pre-conflict) to April 2026, according to World Bank data. (More recently, those prices have fallen as Iran and the United States pursue negotiations, though shipping through the strait remains uncertain.)
Prices still face extreme upside risks if the geopolitical situation in the region worsens. On the assumption that the conflict ended in April 2026, the International Monetary Fund (IMF) forecasts the average price of crude oil to increase from $69 per barrel in 2025 to $82/bbl in 2026.
Indonesia’s economy remains resilient
Indonesia’s economic fundamentals remain resilient despite global uncertainty, supported by solid macroeconomic indicators and continued structural reforms, an official said.
“Indonesia’s macroeconomic indicators continue to show strong performance. We can address many challenges because our national economic fundamentals remain strong,” Coordinating Ministry for Economic Affairs Secretary Susiwijono Moegiarso said in a statement on Monday.
He said Indonesia’s economy grew 5.61 percent in the first quarter of 2026, while May inflation stood at 3.08 percent, remaining within the government’s target range. The consumer confidence index also remained at an optimistic level.
Susiwijono added that the manufacturing Purchasing Managers’ Index (PMI) returned to expansion territory at 50, while foreign exchange reserves reached US$144.9 billion, equivalent to 5.6 months of imports. Investment realization in the first quarter also nearly reached Rp500 trillion (around US$28 billion).
To sustain economic growth, the government will continue advancing strategic priorities, including improving the investment climate through deregulation, debottlenecking investment barriers, and streamlining business licensing.
By 2027 Malaysia, eu to finalise five chapters of free trade agreement
Malaysia and the European Union (EU) have completed negotiations on five chapters of the Malaysia-European Union Free Trade Agreement (MEUFTA), with both sides targeting to finalise the pact by 2027.
Investment, Trade and Industry Deputy Minister Sim Tze Tzin said the fourth round of negotiations, held in Kuala Lumpur from June 8 to 12, saw the conclusion of three chapters, namely Customs and Trade Facilitation, Trade Remedies and Good Regulatory Practices.
The transparency chapter was concluded during the second round of negotiations, followed by the small and medium enterprises chapter in the third round.
“We concluded the fourth round earlier this month. The next round of negotiations will be held on Sept 21-25 in Brussels, Belgium,” he told Bernama after delivering his opening remarks at the Italy-Malaysia Business Mission.
The business mission was organised following Prime Minister Datuk Seri Anwar Ibrahim’s working visit to Italy in July last year at the invitation of Italian Prime Minister Giorgia Meloni.
Earlier in his speech, Sim said the MEUFTA would be a ‘game-changer that integrates Malaysia more closely with the world’s largest single market while unlocking new opportunities in high-technology services, green energy and digital trade’.
He said the agreement would also strengthen industrial linkages and supply chains between Malaysia and Italy, creating new opportunities for businesses from both economies.
On bilateral trade with Italy, Sim said Malaysia’s total trade with the country increased by 14.2 percent year-on-year (y-o-y) to about RM17 billion (US$3.2 billion) in 2025, making Italy Malaysia’s fifth-largest trading partner in Europe.
Malaysia’s exports to Italy rose 12.7 percent y-o-y to RM7.6 billion in 2025, driven mainly by palm oil and palm oil-based manufactured and agricultural products, iron and steel products, electrical and electronics (E&E) products, as well as machinery, equipment and parts.
Malaysia’s imports from Italy mainly comprised machinery, equipment and parts, optical and scientific equipment, chemicals and chemical products, jewellery, as well as E&E products.
“These are all high-value goods. We have a very robust bilateral trade in both goods and services,” he said.
To date, over 80 Italian manufacturing projects worth US$442 million have been implemented in Malaysia across sectors, including food processing, chemicals, machinery and equipment, as well as aerospace.
Japan blueprint aims for economic growth
The BOJ passage is the most market-sensitive element of this document. The draft’s explicit call for the central bank to align monetary policy decisions with the government’s growth agenda, citing legal coordination provisions, sets up a direct tension with a BOJ that has been gradually normalising rates and whose independence the market has been pricing as intact. Any signal that Takaichi’s administration intends to lean on the BOJ through the policy framework rather than through informal pressure will be read as a constraint on the hiking path, and is yen-negative at the margin.
The nominal growth target of above 3 percent is itself inflationary in framing, which creates an internal contradiction: achieving it likely requires the BOJ to allow inflation to run, yet the draft simultaneously wants rates kept low. The $2.29 trillion combined public and private investment target through fiscal 2040 is the structural demand signal for Japanese industrials, infrastructure and strategic sector capex. Private capex alone is targeted at 230 trillion yen annually, a figure that, if approached, would represent a fundamental break from Japan’s decades-long underinvestment pattern and carry material implications for domestic construction, energy and technology supply chains.
Japan’s draft economic blueprint targets real growth above 1 percent and nominal growth above 3 percent, with $2.29 trillion in investment through 2040, while urging the BOJ to keep policy aligned with the government’s growth drive. Japan’s government draft economic blueprint targets annual real GDP growth of more than 1 percent, more than double the 0.4 percent average of the past five years, to be achieved “as early as possible”. Nominal growth is targeted above 3 percent, reflecting Prime Minister Sanae Takaichi’s reflation agenda. Combined public and private investment is projected to exceed 370 trillion yen ($2.29 trillion) through fiscal 2040, with annual private-sector capital expenditure targeted at around 230 trillion yen
Solvent on paper, short on dollars: the Maldives economy in mid-2026
The IMF praised the “improved resilience” of the Maldives economy. Fitch lifted the “junk” credit rating off the floor. The government repaid a dreaded US$ 500 million Islamic bond, averting a disastrous sovereign default.
That is the good news. The bad news is the same news: the black market rate for US dollars hit MVR 20.50, well above the MVR 15.42 peg and the worst since the pandemic. It has now sat above MVR 20 longer than at any time on record. Facing demand it could not meet, the Bank of Maldives capped foreign card spending and limited customers to 30 overseas e-commerce transactions a month. Many Maldivians spent the past three weeks unable to pay for streaming services, app stores and online subscriptions, despite the bank insisting that such payments “do not fall under the daily foreign spend budget.”
But the government hears only the good news. “President [Dr Mohamed] Muizzu’s administration has handled the debt situation of Maldives in a disciplined and responsible manner,” ruling party lawmaker Ahmed Azaan wrote on Thursday, alongside an infographic showing the administration repaying US$ 1.29 billion in external debt over two and a half years, bringing it down from 51.3 percent of GDP in December 2023 to 44.5 percent by May 2026.
“These are signs of a government facing a difficult debt situation with seriousness and responsibility.”
Most of the debt was borrowed under previous governments, he noted. But critics countered with the Muizzu administration’s accumulation of US$ 2.4 billion worth of debt with no major infrastructure development to show for it.
Singapore sets 8 economic growth guides, to solve startup funding gap
Singapore has set concrete targets to support 10,000 small and medium enterprises (SMEs) and upskill 100,000 workers in artificial intelligence (AI) over the next three years, as part of the country’s Economic Strategy Review (ESR) blueprint released last week.
The ESR aims to reposition the country’s economy for a changing global landscape. The targets anchor the second out of eight strategic thrusts set out in the review.
Its eight thrusts respond to several structural shifts, including the rising geopolitical tension reshaping global trade, the rapid growth of AI, the transition to a low-carbon economy, and a domestic population ageing faster than its workforce is growing.
“The global environment that enabled Singapore’s growth over the past decades has changed fundamentally,” the ESR showed, noting that technological advances will keep driving productivity gains but “may not translate into the same level of job creation as before.”
Three imperatives guide the recommendations: sharpen Singapore’s value proposition in a world where it cannot compete on raw scale; build greater agility and adaptability into firms, institutions and workers; and embed resilience alongside efficiency, given more frequent economic shocks.
These imperatives translate into eight thrusts spanning two broad areas, namely securing growth, and creating good jobs while strengthening resilience.