01/01/2026

BIZ & FINANCE THURSDAY | JAN 1, 2026

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China’s factory activity edges up in December

Beijing approves major projects, investment plan totalling 295b yuan BEIJING: China’s state planner yesterday approved major projects and an investment plan for the central government’s budget for 2026 that amounts to about 295 billion yuan (RM171 billion), its latest move in an effort to expand investment and support economic growth. Li Chao, a spokesperson for the National Development and Reform Commission, said around 220 billion yuan was set aside for 281 projects that are part of major national and security-related strategies like underground pipelines. In addition, China’s central government has allocated more than 75 billion yuan to fund 673 projects covering areas like ecological protection and carbon reduction. The projects “will further improve China’s modern infrastructure system and provide strong support for a smooth start to the 15th Five-Year Plan (2026-2030),“ Li said here. The world’s second-largest economy allocated 800 billion yuan in 2025 for its “Two Major” programmes which focus on major national projects and key security-related capacity building as the Chinese government works to stabilise growth amid economic headwinds while strengthening infrastructure, energy and resource security. – Reuters

last month focused on economic planning. Authorities announced on Tuesday that 62.5 billion yuan (RM36.2 billion) in new funds would be directed towards an existing consumer goods trade-in scheme in the new year. The subsidies designed to encourage spending will apply to certain big-ticket items including refrigerators, televisions, washing machines, automobiles and computers. Yesterday’s PMI expansions “point to a partial reversal of the recent weakness in investment spending and construction activity”, wrote Julian Evans-Pritchard of Capital Economics in a note following the data release. Momentum in the country’s service sector “remains weak”, while growth in manufacturing is heavily dependent on exports, he warned. “The big picture is that the structural headwinds from the property downturn and industrial overcapacity are set to persist in 2026,” he added. – AFP

Additionally, the non-manufacturing PMI rose to 50.2 in December, NBS data showed, returning to positive territory after an unexpected dip to 49.5 the previous month. NBS statistician Huo Lihui hailed “an overall improvement in the country’s economic activity”, according to a statement offering official interpretations of the data. The indicators are encouraging signs for policymakers in Beijing battling persistent headwinds in the domestic economy. Entrenched consumer caution fuelled by a years-long debt crisis in the property sector has weighed on China’s growth outlook, spurring calls for leaders to step up support measures. In a stark indication of China’s consumer woes, retail sales grew in November at their slowest pace in nearly three years, official data showed last month. Reversing the decline has become a top priority for leaders and was a key theme at a closely watched political meeting in Beijing

o Snaps eight-month slide in surprising end to otherwise lacklustre year BEIJING: China’s factory activity ticked up slightly in December, official data showed yesterday, an unexpected silver lining to cap an otherwise lacklustre end to the year for the world’s second-largest economy. A key measure of industrial health, the manufacturing purchasing managers’ index came in at 50.1 last month, according to the National Bureau of Statistics (NBS). That sits just above the 50-point mark separating contractions from expansions. The figure had not been positive since March. December’s reading was significantly higher than a Bloomberg forecast based on a survey of economists, which had predicted the figure to hold steady at 49.2. MUMBAI: Indian government bonds head into 2026 with a question mark over how much appetite there is for a ramp-up in debt supply, even after a year in which the central bank levelled the field with record purchases and 125 basis points of rate cuts. The measures taken by the Reserve Bank of India (RBI) have helped restrain yields, but bonds are still looking at a disappointing finish to a year that included the steepest cuts to interest rates since 2019 as supply worries dilute their impact. The benchmark 10-year yield was at 6.59% yesterday, down 17 basis points in 2025, marking a third consecutive yearly decline. A change in the central bank’s policy stance to “neutral”, weakening demand from institutional investors amid large bond sales by the federal and state governments and a persistent decline in the rupee kept the selling pressure on in 2025. “After the first half, demand-supply dynamics stayed in focus,” said Vijay Sharma, senior executive vice-presi dent at PNB Gilts. “With rate cuts behind us, this year will also face challenges in terms of supply pressure.” Bond markets reversed course mid way through the year. The 10-year yield dropped 45 basis points in the first six months of 2025 as the RBI added liquidity and began cutting interest rates, before giving up 28 bps of that in the second half of the year. The central bank infused 11.7 trillion rupees (RM528 billion) into the banking system through 7 trillion rupees of debt purchases, 2.2 trillion rupees of foreign exchange swaps and a 2.50 trillion rupee reduction in banks’ cash reserve ratio. That scale of infusion is the biggest ever for any single year. “Open market operation purchase

Record central bank intervention buys Indian bonds limited relief

Tourists walking past a souvenir shop in Times Square, New York City, on Tuesday. The Fed’s minutes showed that officials expect inflation to be ‘somewhat elevated in the near term’ before moving gradually to their 2% target. – REUTERSPIC

announcements supported the bond market, but continued pressure on the rupee kept short-term yields volatile,” said Akhil Mittal, senior fund manager - fixed income, Tata Asset Management. The Indian rupee is down 5% in 2025, set for its worst decline in three years amid record equity outflows and the absence of a trade deal between India and the US. While the central bank’s aggressive support to the bond markets helped, it didn’t fully make up for weak demand across major investor segments such as insurance companies that received smaller flows and pension funds, which diverted investments towards equity markets after regulatory changes. Banks that were major participants in offering their bond holdings up in the RBI’s open-market operations also did not completely replenish their positions, widening the demand supply gap. While the initial move in bond yields will be dictated by the quantum of borrowing from states, major shifts are likely to hinge on India’s federal budget and central bank monetary policy decision, both due in February. “RBI is likely to remain on a long pause in 2026 as inflation remains benign. Rate markets are likely to remain rangebound in the near-term ahead of the Union Budget,” Avnish Jain, chief investment officer - fixed income, Canara Robeco Asset Management said. Traders will also remain focused on liquidity and currency management from the RBI, which will set the tone for the year. “Going into 2026 with a possibility of a trade deal, return of FPIs, and continued RBI liquidity support, the 10-year bond yield will pivot around 6.30% with a range of 6.10%- 6.60%.” said Alok Singh, head of treasury at CSB Bank. – Reuters

Fed minutes show most officials see likelihood of further interest rate cuts

WASHINGTON: Most US Federal Reserve (Fed) policymakers view further interest rate cuts as appropriate if inflation cools over time, minutes of their latest gathering showed. But some officials also suggested that it would probably be appropriate to keep rates “unchanged for some time”after the latest reduction in December. Officials voted 9-3 to lower rates by a quarter percentage point this month, bringing levels to a range between 3.50% and 3.75%t. But a few who supported this third consecutive cut indicated that their decision was “finely balanced” or that they could have instead backed keeping rates unchanged. The Fed’s meeting minutes released on Tuesday highlight the tightrope that officials walk as they balance the need to shore up a weakening labor market against risks of inflation becoming entrenched. Policymakers have been split

passed through to final goods prices.” Some flagged risks that elevated inflation might prove more stubborn than expected. Meanwhile, most policymakers gauged that recent indicators signaled a continued cooldown in employment. But their outlook remained uncertain amid delays in government data releases after a record-long shutdown. Policymakers also noted that lower-income households were especially worried about their employment prospects. They saw stronger spending growth among higher-income households, while those who made less money have adjusted their spending due to an “outsized cumulative increase in the prices of basic goods and services over the past several years.” The Fed’s rate-setting committee has 12 voting members who take a majority vote in deciding on rates. – AFP

over the pace of rate cuts, with lower rates serving to boost the economy while higher levels are aimed at tamping down inflation as President Donald Trump’s tariffs bite. In December, Chicago Fed president Austan Goolsbee joined Kansas City Fed president Jeffrey Schmid to support keeping rates unchanged. Fed governor Stephen Miran also dissented – favouring a bigger, half-point reduction. While officials also penciled in one more cut in 2026, Fed chair Jerome Powell hinted that the central bank could hold off on doing so in the coming months. For now, the Fed’s minutes showed that officials expect inflation to be “somewhat elevated in the near term” before moving gradually to their 2% target. But even as many anticipate that the effects of tariffs on underlying goods inflation would wane, some were wary about “when these effects would diminish or the extent to which tariffs would ultimately be