Asia
China faces deflationary pressures as consumer prices grow at a record-low pace
Consumer prices in China rose marginally in December, highlighting persistent deflationary pressures in the world’s second-largest economy, which have driven bond yields to record lows.
Consumer prices increased by 0.1 percent last month compared to a year earlier, aligning with Reuters’ average analyst forecast. This marks the slowest growth in nine months and is lower than November’s 0.2 percent rise, as reported on Thursday.
The producer price index, a measure of ex-factory prices, declined by 2.3 percent. This was slightly better than analysts’ forecasts of a 2.4 percent drop and an improvement from November’s 2.5 percent contraction. December’s data indicates that the index has been in the deflationary zone for 28 consecutive months.
The Chinese economy has been grappling with deflation for months, exacerbated by a three-year property crisis that has dampened consumer demand and led to industrial oversupply.
Beijing is expected to achieve its 5 percent economic growth target for 2024 through a combination of price competitiveness in global markets, domestic deflation, and strengthening exports supported by government stimulus measures.
However, analysts caution that this strategy is being undermined by U.S. President Donald Trump’s threat of significant tariffs, which could sharply slow China’s export growth.
Additionally, Beijing has faced challenges in boosting domestic demand, even after a September monetary policy shift aimed at stimulating the stock market and enhancing household wealth through higher stock prices.
The yield on China’s benchmark 10-year government bond has remained at record lows since the start of the year, reflecting investor expectations of slow economic growth and a deflationary outlook.
On Thursday, Chinese stocks displayed mixed performance. The benchmark CSI 300 index was unchanged, while Hong Kong’s Hang Seng index rose by 0.4 percent. Yields on 10- and 30-year government bonds remained stable.
In currency markets, the renminbi was steady at Rmb7.33 against the dollar after the People’s Bank of China set the daily trading rate at Rmb7.19. The renminbi is permitted to trade within a 2 percent range of the central bank’s daily rate.
Asia
India intel push on China risks dangerous miscalculation, study says
A Chinese scholar has warned that Indian intelligence agencies increasingly treating China’s routine activities as threats raises the risk that New Delhi could miscalculate and adopt “unilateral countermeasures” against Beijing.
According to Zhao Ruoxi, a researcher at the Macau University of Science and Technology, India stepped up its intelligence-gathering operations following the deterioration of relations with neighbouring China in recent years.
Zhao made the assessment in an article analysing Indian intelligence operations targeting China across the 2020–2026 period. The study was published in the 31 July issue of the Chinese-language Journal of Intelligence, issued by the Shaanxi Information Institute of Science and Technology, and reported by the South China Morning Post.
According to Zhao, China’s political and economic presence in South Asia, its emphasis on emerging technologies, and its naval activities in the Indian Ocean have been monitored more closely by India since a 2020 border clash.
In that clash in the Galwan Valley, 20 Indian and four Chinese soldiers were killed, dragging relations between the two countries to one of their lowest points in history.
Zhao noted that India has expanded its intelligence collection tools in recent years, drawing on space-based reconnaissance systems, drone surveillance, and cyber intelligence to establish a multi-agency network targeting China.
According to the article, India has also cooperated with the US and Middle Eastern nations to enhance its capacity to track Chinese naval operations in distant waters and exert informational pressure along Beijing’s maritime energy supply routes.
However, Zhao described India’s heavy reliance on foreign-sourced data as a “structural weakness”, arguing that it leaves New Delhi’s assessments of China vulnerable to the strategic agendas of third parties.
Zhao observed that while relations between Beijing and New Delhi began to improve in late 2024, India’s expanded intelligence activities directed at China have persisted.
The two countries took steps to mend ties after reaching an agreement in 2024 on resuming border patrols. Direct flights resumed after a five-year hiatus, Beijing once again permitted Indian pilgrims to visit the Tibet Autonomous Region, and India resumed issuing visas to Chinese tourists.
Last year, in another sign of easing tensions, Indian Prime Minister Narendra Modi visited China for the first time in seven years. In his meeting with Modi in Tianjin, Chinese President Xi Jinping said border issues should not define bilateral relations.
Following the reopening of the Lipulekh Pass in June, which Beijing viewed as a goodwill gesture, the two countries also resumed cross-border trade in August through the Himalayan passes of Nathu La and Shipki La.
In the article, Zhao stated that India is expected to ramp up technical surveillance in border areas, which will compel China to bolster its information security.
Zhao also warned that New Delhi could “systematically disrupt” Beijing’s diplomatic engagements with its South Asian neighbours, particularly its efforts to build regional trust and advance projects under the Belt and Road Initiative.
According to Zhao, the expansion of India’s intelligence operations against China heightens the risk of miscalculation, as routine Chinese activities are increasingly perceived as threats.
“As a result, the likelihood of triggering unilateral countermeasures increases,” Zhao assessed.
Zhao said China must make its strategic messaging more effective and reinforce communication with South Asian states and Indian Ocean littoral nations to counter this pressure.
Asia
China and Arab states launch 5-year anti-desertification plan
China and Arab nations have launched a five-year action plan to combat drought, desertification, and land degradation. According to information provided by China’s National Forestry and Grassland Administration (NFGA) to the Global Times on Sunday, the plan will extend bilateral cooperation beyond traditional anti-desertification efforts to encompass technological innovation in areas including grassland conservation, watershed management, and wetland protection.
The plan was inaugurated during a meeting convened on the sidelines of the 17th session of the Conference of the Parties (COP17) to the United Nations Convention to Combat Desertification, which is currently taking place in Ulaanbaatar, the capital of Mongolia.
According to an NFGA press release sent to the Global Times, China and Arab countries will, under the action plan, deepen practical cooperation over the next five years across key areas such as the restoration of desertified and degraded land, sand and dust storm monitoring and early warning systems, grassland management, biodiversity conservation, as well as wetland protection and restoration.
The two sides will also accelerate technological innovation and the practical application of research findings by establishing platforms to share technology, data, and research outcomes, conducting interdisciplinary studies, and developing technologies such as remote sensing and intelligent assessment of land degradation. The plan further envisages the establishment of demonstration bases to support the implementation of the UN Convention to Combat Desertification.
Under the plan, the sides also aim to strengthen China-Arab cooperation networks in combating desertification, enhance mechanisms for sharing policies, technologies, and research findings, and expand partnerships within the framework of China’s proposed Belt and Road Initiative. The participation of governments, research institutions, enterprises, social organisations, and local communities will be encouraged throughout the process.
Cooperation in capacity building will also be expanded through exchange programmes for young professionals, joint research, field demonstrations, and technical training sessions.
The meeting was jointly organised by China’s National Forestry and Grassland Administration and the General Secretariat of the Arab League, while the Chinese Academy of Forestry and the China-Arab International Research Centre for Drought, Desertification and Land Degradation undertook the event’s organisation.
Cui Lijuan, vice president of the Chinese Academy of Forestry, stated that several initiatives have already begun to materialise. For example, China and Egypt are exploring the possibility of conducting a comparative study examining the Yellow River and Nile River basins to share expertise in ecological conservation and integrated watershed management.
According to Cui, the initiative in question has secured the backing of the Chinese Academy of Forestry and attracted interest from international non-governmental organisations.
Future cooperation between China and Arab countries will also focus on desertification monitoring and early warning systems, ecological technologies, as well as exchange and training programmes for young specialists.
Cui noted that the two sides also aim to broaden participation by integrating businesses, social organisations, and international institutions into the cooperation framework, which is currently led primarily by state bodies.
According to Xinhua, the China-Arab International Research Centre for Drought, Desertification and Land Degradation was inaugurated in 2023 during an international forum on combating desertification. The establishment of the centre was viewed as a demonstration of China’s commitment to sharing the expertise gained from its anti-desertification efforts in the Kubuqi Desert.
According to the NFGA, the centre has steadily strengthened regular cooperation mechanisms between China and Arab countries over the past three years. While the two sides have jointly developed Earth observation systems and intelligent decision-support tools for land degradation, China has compiled 30 practical anti-desertification technologies across six categories suitable for application in Arab countries.
The centre has also established regular communication and exchange channels with several countries, including Saudi Arabia and Egypt. In addition, it has set up an initial China-Arab anti-desertification network and expert pool to support sustainable technical cooperation and professional training in Arab nations.
Asia
China outpaces India in race for Russian crude oil supplies
China has accelerated its crude oil purchases from Russia to replace oil shipments originating from the Middle East.
According to a Reuters report based on data from energy analytics firm Kpler, China is outpacing India in the Russian oil market.
India’s crude imports from Russia’s European ports fell by approximately 30% in August.
Beijing’s increased purchases could curb India’s exports of refined petroleum products and consequently trigger a diesel and gasoline shortage across Asia.
While China previously favoured ESPO blend crude shipped from Russia’s Asian ports, the share of its purchases from Russia’s European ports, consisting primarily of the Urals grade, has climbed to 31%.
Russian crude imports by India, the world’s third-largest oil importer, dropped to 1.87 million barrels per day in August. This volume remained well below the 2.79 million barrels per day recorded in July.
Under this scenario, which poses a risk to the Asian region, India stands as the region’s largest exporter of diesel and gasoline.
However, the country’s total crude imports in August were recorded at 4.17 million barrels per day. This figure marked the lowest level since the outbreak of conflict in the Middle East.
If the tightening raw material supply prevents Indian refineries from maintaining processing throughput, a severe deficit in refined products could emerge across the Asian market starting in September.
The Times of India previously reported that India’s Russian crude imports reached their highest share since 2022 in July.
During that period, Russia supplied more than half of India’s total crude imports of just over 5 million barrels per day, delivering 2.8 million barrels per day.
At the end of July, the Russian government extended its temporary export ban on gasoline, diesel, and other fuel types until 31 January 2027.
Under the restrictions that took effect on 1 August, direct exports of diesel, marine fuel, and gas oils by refiners will be exempted starting 1 September.
Bloomberg reported in June that Russian Urals crude was being sold in India at a $3.90 discount per barrel against international benchmarks after a hiatus of more than two months.
Urals crude traded at a discount again on 29 May for the first time since mid-March.
According to The Times of India, however, this discount on Russian Urals crude had almost entirely evaporated by early August.
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