16/07/2025

BIZ & FINANCE WEDNESDAY | JULY 16, 2025

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China economy up 5.2% in Q2, lifted by strong exports

US planes, cars, drinks on EU list for potential tariffs

BRUSSELS: Aircraft, machinery, cars, chemicals and medical devices are the leading big-ticket items on the latest list of US goods the European Commission has proposed to impose tariffs on if talks with Washington do not yield an agreement on trade. The package is the second put forward by the European Commission, which oversees trade policy for the 27-nation European Union (EU). It is designed to respond to US tariffs on cars and car parts and a baseline tariff, currently at 10%. US President Donald Trump, however, is now threatening a baseline tariff on imports from the EU of 30% from Aug 1, a level European officials say is unacceptable and would end normal trade between two of the world’s largest markets. The list, sent to EU member states and seen by Reuters yesterday, covers US goods imports worth €72 billion (RM357.6 billion). It also includes electrical and precision equipment as well as agriculture and food products – a range of fruits and vegetables, along with wine, beer and spirits – worth a total of €6.35 billion. A first package on €21 billion of US goods was approved in April but then immediately suspended to allow room for negotiations. That suspension has been extended to Aug 6. EU officials said on Monday that they were still seeking to strike a deal to avoid Trump’s heavy tariff blow, but EU trade chief Maros Sefcovic said member states had agreed the bloc would need to take countermeasures if talks with the U.S. fail. The commission initially put forward the second package in May for a public consultation. The proposal then related to €95 billion of US goods. It has since been whittled down, though most of the main items have remained. There is no specific date for EU members to approve the package. – Reuters June global EV sales jump 24%: Research GDANSK: Global sales of electric and plug-in hybrid vehicles jumped 24% in June from a year ago, as a switch to electric vehicles (EV) maintained momentum in China and Europe, market research firm Rho Motion said yesterday. Still, EV sales in the United States were down 1% in the month and will struggle to pick up this year, after President Donald Trump’s spending bill cut tax credits sooner than anticipated, Rho Motion’s data manager Charles Lester said. North America, also weighed by slowing sales in Canada, lagged for the first time behind the “rest of the world” countries, which include emerging markets in Southeast Asia and South and Central America, Lester said. Global automakers face a 25% import tariff in the United States, the world’s second-largest car market, causing many of them to withdraw their outlooks for 2025. Global sales of battery-electric vehicles and plug-in hybrids rose to 1.8 million units in June, Rho Motion data showed. Sales in China jumped 28% from the same month last year to 1.11 million vehicles. Europe posted a 23% increase to about 390,000 units, while North American sales fell 9% to over 140,000. Sales in the rest of the world surged 43% to exceed 140,000 vehicles. “There’s been reports over the last few months of a slowdown potentially in China” due to some cities running out of subsidies, Lester said. “But overall, we’d expect in (the second half) for more subsidy amounts to be available”, leading to a “big boost” in volumes towards the end of the year, he added. – Reuters

BEIJING: China’s economy expanded more than 5% in the second quarter, official data showed yesterday, buoyed by strong exports but analysts warned that more work was needed to address sluggish consumer demand. The figures offer a rare bit of good news for the country’s leadership as it fights a multifront battle to kickstart growth – a challenge made all the more difficult by US President Donald Trump’s tariff war. But the knock-on effects of the trade turmoil abroad and persistent sluggish consumption mean the economy could slump in the second half of year, analysts warned. Trump has imposed tolls on China and most other major trading partners since returning to office in January, threatening Beijing’s exports just as it becomes more reliant on them to stimulate economic activity. The two superpowers have sought to de escalate their row after reaching a framework for a deal at talks in London last month, but observers warn of lingering uncertainty. Yesterday, Beijing’s National Bureau of Statistics (NBS) said the Chinese economy grew 5.2% from April to June, matching a prediction by an AFP survey of analysts and topping an official growth goal for the year set by the government. But it marked a slowdown from the 5.4% seen in the first quarter, which was boosted by exporters rushing to shift goods ahead of swingeing US tariffs kicking in. “The national economy withstood pressure and made steady improvement despite challenges,” NBS deputy director Sheng Laiyun told a news conference. “Production and demand grew steadily, o June data show weaker retail sales growth, stronger factory output Prime Minister Shigeru Ishiba’s sliding popularity suggests even his modest goal of retaining a majority is out of reach, as a new opinion poll from national broadcaster NHK gave the ruling Liberal Democratic Party (LDP) the lowest score since its return to power in 2012. Defeat in Sunday’s vote could bring anything from a shift in the makeup of Ishiba’s coalition to his resignation, though even the least disruptive scenario is still expected to see more stimulus-minded political viewpoints gain sway. All three leading opposition parties back some form of consumption tax cuts, with the rapidly emerging populist, right-wing Sanseito proposing a phase-out of value-added tax altogether. And reflationist Sanae Takaichi is one of Ishiba’s main rivals to lead the LDP. The 30-year JGB yield jumped to a record 3.20% yesterday, while the 20-year yield soared to its highest since November 1999 at 2.65% and the 10-year yield scaled its highest since October 2008 at 1.595%. “As the noise towards yet more fiscal spending picks up, we have increased our underweight in Japan as a whole,” said Ales

An indoor shopping street in Shanghai, China. Retail sales growth slowed down to 4.8%, from 6.4% in May and hitting the lowest since January-February. – REUTERSPIC

consumers. While industrial output rose 6.8% year-on-year last month – the fastest pace since March – retail sales growth slowed down to 4.8%, from 6.4% in May and hitting the lowest since January-February. “The economy posted a solid first half, supported by resilient exports, though this momentum is contributing to deepening deflationary trends,’ Louise Loo, Head of Asia Economics at Oxford Economics, said in a note. “The cost of strong exports is more deflation,” she said. “Q3 growth is at risk without stronger fiscal stimulus,” said Dan Wang, China director at Eurasia Group in Singapore. “Both consumers and businesses have turned more cautious, while exporters are increasingly looking overseas for growth.” – AFP, Reuters Barclays calculates the rise in 30-year yields now factors in about a three percentage-point cut to Japan’s consumption tax rate of 10%. “Even if the ruling parties retain their majority in the upper house, they would still be unable to pass budget bills, including the upcoming supplementary budget, without the cooperation of the opposition parties,” the bank’s Japan-based analysts wrote in a research note. “In this context, we believe there will likely be a convergence toward an expansionary budget proposal.” Consumption tax cuts have been gaining sway with the public, as a recent poll by the Asahi newspaper showed 68% of voters thought a sales tax cut was the best way to cushion against rising costs of living. Fiscally hawkish Ishiba has steered clear of that option in favour of cash handouts. A poor election result for the ruling coalition will trigger a sell-off in super-long JGBs by so called real money investors, including life insurers and institutional investors, predicts Toshinobu Chiba, a fund manager at Simplex Asset Management. “If the opposition parties win, the government deficit will see a huge expansion,” Chiba said. “The JGB yield curve will steepen by a lot.” – Reuters

employment was generally stable, household income continued to increase, new growth drivers witnessed robust development and high-quality development made new strides,” he said. Markets were mixed in response – after a strong start to the day, Hong Kong pared an early rally while Shanghai dipped into negative territory. “The figures probably still overstate the strength of growth,” Zichun Huang, China Economist at Capital Economics, said in a note. “With exports set to slow and the tailwind from fiscal support on course to fade, growth is likely to slow further during the second half of this year,” Huang added. Separate June activity data also released yesterday underlined the pressure on

Japan bond market blows out amid election angst TOKYO: Investors in Japanese government bonds are bracing for a potential power shift in upper house elections this weekend that could strain the country’s already frail finances, with long-dated yields soaring to all-time highs as the vote nears. Koutny, head of international rates at Vanguard. “Japan is going down a similar path as the United Kingdom did a couple of years ago. If no fiscal restraint, then the bond market will start to put pressure on the economy.” manager at Asset Management One. Hatono said he was taking a “wait-and-see” stance due to the risks of the yield curve steepening after the election.

Japan’s debt burden is the highest in the developed world at about 250% of gross domestic product. Concerns about promises of fiscal largesse by opposition parties helped fuel a sell-off in so-called super-long JGB yields in late May. That sent 30-year yields to then-record peaks at 3.185% and 40-year yields to an unprecedented 3.675%. The 40-year yield rose to a seven-week high of 3.51% yesterday. The Finance Ministry was able to restore some calm with plans to reduce issuance of 20- , 30- and 40-year bonds to tackle a supply demand imbalance for those tenors, after traditional demand from life insurers dropped sharply this year. Yesterday, Finance Minister Katsunobu Kato said he was monitoring the market situation closely and would continue to work on appropriate debt management to maintain investor confidence. Investors have also hugged the sidelines because of the Bank of Japan’s reticence to raise interest rates further against an uncertain global economic backdrop. “If such a demand-less market continues and investors foresee no rate hikes within this fiscal year, JGB volatility will go up, especially in the long end,” said Kentaro Hatono, a fund