China’s Chance to Rein in its Surplus — or Double Down

FILE PHOTO: Electric cars of Zeekr, a premium brand owned by Chinese automaker Geely, are on display at the Frank-Auto dealership in Moscow, Russia June 14, 2024. REUTERS/Yulia Morozova/File Photo
FILE PHOTO: Electric cars of Zeekr, a premium brand owned by Chinese automaker Geely, are on display at the Frank-Auto dealership in Moscow, Russia June 14, 2024. REUTERS/Yulia Morozova/File Photo
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China’s Chance to Rein in its Surplus — or Double Down

FILE PHOTO: Electric cars of Zeekr, a premium brand owned by Chinese automaker Geely, are on display at the Frank-Auto dealership in Moscow, Russia June 14, 2024. REUTERS/Yulia Morozova/File Photo
FILE PHOTO: Electric cars of Zeekr, a premium brand owned by Chinese automaker Geely, are on display at the Frank-Auto dealership in Moscow, Russia June 14, 2024. REUTERS/Yulia Morozova/File Photo

Two clashing narratives have emerged over China’s heady manufacturing expansion led by electric vehicles, renewable energy and high-tech goods. One says it’s benefiting from comparative advantages, including a giant workforce and domestic market. Another says Beijing’s surging exports are a byproduct of distorting policies that threaten the rest of the world.

Regardless of which is right, Chinese President Xi Jinping and his leadership team have an opportunity next week to either double down on their claim China’s manufacturing prowess is a reflection of normal competition, or tilt toward accommodating economic concerns in foreign capitals from Washington to Brussels, Bloomberg reported on Saturday.

The so-called Third Plenum gathering of the Chinese Communist Party, culminating with an expected readout after the confab concludes July 18, takes place against a backdrop of deepening angst over Chinese industrial growth that notably exceeds the nation’s domestic demand. The objections were on full display in a detailed speech this week by the US Treasury’s top international official, Undersecretary for International Affairs Jay Shambaugh.

Failure to embrace new steps to bolster domestic spending and reduce reliance on exports would put China at increasing risk of trade protectionism—regardless of whether US President Joe Biden wins in November, or if Donald Trump—who launched a trade war against China—prevails.

Data out on Friday offered a fresh reminder of the imbalance between China’s productive capacity and its domestic demand, with its monthly trade surplus hitting an all-time high of $99 billion in June.

China’s leadership and its supporters insist that this commercial prowess is thanks to pure economics. Premier Li Qiang last month put it down to the country’s skill in science and technology, and building “a broad stage for enterprises to pursue innovation and upgrade their products.”

Years of investment in STEM (science, technology, engineering and mathematics) subjects and churning out engineers has bolstered research and development, strengthening China’s advantage, says Zhao Zhongxiu, president of the University of International Business and Economics in Beijing.

The improved quality and reduced cost of Chinese-made goods appeal to consumers around the world, and it’s not a question of subsidies but the fruit of organic industrial development, he argued in a recent Bloomberg Television interview. “China’s industry has benefited from this comparative advantage.”

But that’s not how Shambaugh sees it. In a speech this week before the Council on Foreign Relations, he cited analysis from the Center for Strategic and International Studies showing that China spends 5% of its GDP on industrial subsidies—a share that’s ten times bigger than that of the US. It also dwarfs subsidies by Germany, Japan and fellow emerging market Brazil.

“In sectors like semiconductors, steel and aluminum, China alone accounts for between 80% and 90% of global subsidies provided to those industries,” Shambaugh said.

That’s contributed to China racking up a manufacturing-goods trade surplus that’s approaching 2% of world GDP, or roughly twice the share of the famous Japanese surplus in the early 1990s that roiled US-Japan relations, according to data cited by Shambaugh.

The Treasury undersecretary ran through figures illustrating falling rates of capacity utilization and rising numbers of unprofitable companies, all suggesting overcapacity. In areas including the solar energy sector, Chinese firms themselves have expressed concerns about a supply glut.

“Emerging patterns suggest the size of subsidies in China is only increasing, especially at local and provincial levels,” he also said.

That observation puts a premium on the policy signals that Xi and his lieutenants send out at the Third Plenum, which will chart the over-arching course for the next five years.



Saudi Arabia Allows Contracting Exceptions for Firms without Regional HQ

The King Abdullah Financial District in Riyadh (Asharq Al-Awsat)
The King Abdullah Financial District in Riyadh (Asharq Al-Awsat)
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Saudi Arabia Allows Contracting Exceptions for Firms without Regional HQ

The King Abdullah Financial District in Riyadh (Asharq Al-Awsat)
The King Abdullah Financial District in Riyadh (Asharq Al-Awsat)

Saudi Arabia has introduced greater flexibility into its investment environment, allowing government entities, under strict controls to safeguard spending efficiency and ensure the delivery of critical projects, to seek exceptions to contract with international companies that do not have regional headquarters in the kingdom.

The Local Content and Government Procurement Authority notified all government bodies of the mechanism to apply for exemptions through the Etimad digital platform.

The step is designed to balance enforcement of the “regional headquarters relocation” decision, in force since early 2024, with the needs of technically specialized projects or those driven by intense price competition.

Under a government decision that took effect at the start of 2024, state entities, including authorities, institutions and government-affiliated funds, are barred from contracting with any foreign commercial company whose regional headquarters in the region is located outside Saudi Arabia.

According to the information, the Local Content and Government Procurement Authority informed all entities of the rules governing contracts with companies that lack a regional headquarters in the kingdom and related parties.

Government entities may request an exemption from the committee for specific projects, multiple projects or a defined time period, provided the application is submitted before launching a tender or initiating direct contracting procedures.

Submission mechanism

In two circulars, the authority detailed how to submit exemption requests and clarified the cases in which contracting is permitted under the controls. It said the exemption service was launched on the Etimad platform in November 2025.

The service is available to entities that float tenders through Etimad. Requests for tenders launched before the service went live, as well as those issued outside the platform, will continue to follow the previously adopted process.

Etimad is the kingdom’s official financial services portal run by the Ministry of Finance, aimed at driving digital transformation of government procedures and boosting transparency and efficiency in managing budgets, contracts, payments, tenders and procurement. The platform streamlines transactions between state entities and the private sector.

Technical criteria

When issuing the contracting controls, the government made clear that companies without a regional headquarters in Saudi Arabia, or related parties, are not barred from bidding for public tenders.

However, their offers can only be accepted in two cases: if there is no more than one technically compliant bid, or if the offer ranks among the best technically and is at least 25% lower in price than the second-best bid after overall evaluation.

Contracts with an estimated value of no more than 1 million riyals ($266,000) are also exempt. The minister may, in the public interest, amend the threshold, cancel the exemption or suspend it temporarily.

More than 700 headquarters

More than 700 multinational companies had relocated their regional headquarters to Riyadh by early 2026, exceeding the initial target of attracting 500 companies by 2030. The program seeks to cement the kingdom’s position as a regional business hub and to localize global expertise.

When announcing the contracting ban, Saudi Arabia said the move was intended to incentivize foreign firms dealing with the government and its affiliated entities to adjust their operations.

It aims to create jobs, curb economic leakage, raise spending efficiency and ensure that key goods and services procured by government entities are delivered inside the kingdom with appropriate local content.

The government said the policy aligns with the objectives of the Riyadh 2030 strategy unveiled during the recent Future Investment Initiative forum, where 24 multinational companies announced plans to move their regional headquarters to the Saudi capital.

It stressed that the decision does not affect any investor’s ability to enter the Saudi economy or continue working with the private sector.

 


IMF Board to Review Staff-level $8.1 Bln Agreement for Ukraine

The city's downtown on a frosty winter day, amid Russia's attack on Ukraine, in Kyiv, Ukraine February 19, 2026. REUTERS/Alina Smutko
The city's downtown on a frosty winter day, amid Russia's attack on Ukraine, in Kyiv, Ukraine February 19, 2026. REUTERS/Alina Smutko
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IMF Board to Review Staff-level $8.1 Bln Agreement for Ukraine

The city's downtown on a frosty winter day, amid Russia's attack on Ukraine, in Kyiv, Ukraine February 19, 2026. REUTERS/Alina Smutko
The city's downtown on a frosty winter day, amid Russia's attack on Ukraine, in Kyiv, Ukraine February 19, 2026. REUTERS/Alina Smutko

The International Monetary Fund on Thursday said its board ​would review a staff-level agreement for a new $8.1 billion lending program for Ukraine in coming days.

IMF spokeswoman Jule Kozack told reporters that Ukrainian authorities had completed the prior actions needed to move forward with the request ⁠of a new ⁠IMF program, including submission of a draft law on the labor code and adoption of a budget.

She said Ukraine's economic growth in 2025 ⁠was likely under 2%. After four years of war, the country's economy had settled into a slower growth path with larger fiscal and current account balances, she said, noting that the IMF continues to monitor the situation closely.

"Russia's invasion continues to take a ⁠heavy ⁠toll on Ukraine's people and its economy," Kozack said. Intensified aerial attacks by Russia had damaged critical energy and logistics infrastructure, causing disruptions to economic activity, Reuters quoted her as saying.

As of January, she said, 5 million Ukrainian refugees remained in Europe and 3.7 million Ukrainians were displaced inside the country.


US Stocks Fall as Iran Angst Lifts Oil Prices

A screen displays a stock chart at a work station on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 6, 2022. REUTERS/Brendan McDermid
A screen displays a stock chart at a work station on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 6, 2022. REUTERS/Brendan McDermid
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US Stocks Fall as Iran Angst Lifts Oil Prices

A screen displays a stock chart at a work station on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 6, 2022. REUTERS/Brendan McDermid
A screen displays a stock chart at a work station on the floor of the New York Stock Exchange (NYSE) in New York City, US, April 6, 2022. REUTERS/Brendan McDermid

Wall Street stocks retreated early Thursday as worries over US-Iran tensions lifted oil prices while markets digested mixed results from Walmart.

US oil futures rose to a six-month high as Iran's atomic energy chief Mohammad Eslami said no country can deprive the Islamic republic of its right to nuclear enrichment, after US President Donald Trump again hinted at military action following talks in Geneva.

"We'd call this an undercurrent of concern that is bubbling up in oil prices," Briefing.com analyst Patrick O'Hare said of the "geopolitical angst."

About 10 minutes into trading, the Dow Jones Industrial Average was down 0.6 percent at 49,379.46, AFP reported.

The broad-based S&P 500 fell 0.5 percent to 6,849.35, while the tech-rich Nasdaq Composite Index declined 0.6 percent to 22,621.38.

Among individual companies, Walmart rose 1.7 percent after reporting solid results but offering forecasts that missed analyst expectations.

Shares of the retail giant initially fell, but pushed higher after Walmart executives talked up artificial intelligence investments on a conference call with analysts.

The US trade deficit in goods expanded to a new record in 2025, government data showed, despite sweeping tariffs that Trump imposed during his first year back in the White House.