Asia Pacific News
LAST UPDATE: June 5, 2025
China May services activity grows despite US tariff concerns, Caixin PMI shows
China’s services sector grew modestly in May 2025, with the Caixin/S&P Global Services PMI rising to 51.1 from April’s 50.7, indicating expansion driven by domestic demand despite declining export orders amid U.S. tariff concerns.
Insight
The modest growth in China’s services sector suggests resilience in domestic consumption, even as external pressures from U.S. tariffs weigh on export-oriented businesses. The divergence between domestic and export orders highlights the challenges China faces in balancing internal economic stability with external trade uncertainties. Policymakers may need to implement targeted measures to bolster domestic demand further and mitigate the impact of declining exports. The mixed employment trends and rising input costs also point to underlying vulnerabilities that could affect the sector’s sustainability.
China’s Global Income Tax Crackdown Expands Beyond Ultra Rich
China is intensifying efforts to collect taxes on citizens’ overseas income, expanding scrutiny beyond the ultra-rich to include a broader range of offshore earnings such as investment returns, dividends, and employee stock options.
Insight
The expansion of China’s global income tax enforcement reflects the government’s commitment to closing tax loopholes and increasing revenue. By targeting a wider demographic, including middle-income earners with overseas assets, authorities aim to promote tax compliance and equity. This move may lead to increased financial transparency but could also discourage offshore investments and complicate financial planning for individuals. The policy shift underscores China’s broader efforts to regulate capital flows and assert greater control over its citizens’ global financial activities.
Taiwan Inflation Cools in Positive Sign for Central Bank
Taiwan’s inflation rate eased in May 2025, providing a positive signal for the central bank’s monetary policy stance amid ongoing economic uncertainties.
Insight
The cooling of inflation in Taiwan suggests that price pressures are stabilizing, offering the central bank greater flexibility in managing interest rates. This development may alleviate concerns about overheating in the economy and support consumer purchasing power. However, policymakers must remain vigilant to ensure that inflation remains within target ranges, especially in the face of external shocks such as global supply chain disruptions or shifts in commodity prices. The central bank’s response will be crucial in maintaining economic stability and fostering sustainable growth.
Japan to propose cooperation on rare earths in US tariff talks, Nikkei reports
Japan plans to propose enhanced cooperation with the United States on rare earth supply chains during upcoming tariff negotiations, aiming to strengthen strategic partnerships and address concerns over China’s export restrictions.
Insight
Japan’s initiative to collaborate with the U.S. on rare earths underscores the strategic importance of securing critical materials essential for various industries, including technology and defense. By reducing dependence on China, both countries aim to enhance supply chain resilience and economic security. This proposal also serves as a diplomatic lever in ongoing tariff negotiations, potentially facilitating more favorable trade terms. The success of this cooperation will depend on mutual commitments and the development of alternative supply sources.
South Korea’s new President Lee begins moves to tackle economic ‘crisis’
Newly inaugurated President Lee Jae-myung convened his first cabinet meeting to address South Korea’s economic challenges, prioritizing an emergency package aimed at boosting growth and supporting households amid a projected GDP growth slowdown to 0.8% for 2025.
Insight
President Lee’s swift action to implement a fiscal stimulus package reflects the urgency of addressing South Korea’s economic downturn. The proposed measures aim to revitalize growth and provide relief to households affected by stagnating wages and rising living costs. Lee’s administration faces the dual challenge of restoring public trust after political turmoil and navigating external pressures such as U.S. protectionist trade policies. The effectiveness of the stimulus will hinge on targeted investments and structural reforms that promote long-term economic resilience.
South Korea’s economy failed to grow in first quarter: central bank
South Korea’s economy showed zero year-on-year growth in Q1 2025, with a 0.2% contraction from the previous quarter, marking the first time in over a decade that the economy has posted four consecutive quarters of growth below 0.1%.
Insight
The stagnation reflects the combined impact of political instability, including the impeachment of former President Yoon Suk Yeol, and external pressures such as U.S. tariffs. The Bank of Korea’s decision to cut interest rates to 2.5% aims to stimulate the economy, but challenges remain due to high household debt and a fragile real estate market. The government’s efforts to rebuild trust and implement effective fiscal policies will be crucial in reversing the economic downturn.
Vietnam, US to speed up trade talks: Hanoi
Vietnam and the United States have agreed to expedite trade negotiations, with a third round of talks scheduled by mid-June, aiming to address trade imbalances and avoid the imposition of a 46% tariff on Vietnamese exports to the U.S.
Insight
The urgency in accelerating trade talks underscores the high stakes for Vietnam, which holds the third-largest trade surplus with the U.S. The country’s commitment to purchasing over $2 billion in U.S. agricultural products and reducing reliance on Chinese imports demonstrates a strategic pivot to appease U.S. concerns. Successful negotiations could strengthen bilateral ties and provide Vietnam with greater economic security amid global trade tensions.
Indonesia rolls out $1.5bn stimulus as economic fears mount
Indonesia has launched a $1.5 billion stimulus package to counter slowing economic growth, which fell to 4.9% in Q1 2025, the lowest in over three years, amid falling commodity prices and global trade tensions.
Insight
The stimulus aims to boost consumer spending through transportation fare discounts, wage subsidies, and increased social aid. However, the effectiveness of these measures may be limited due to reduced government infrastructure spending and the prioritization of a costly free meals program. The central bank’s interest rate cuts to 5.5% may provide some relief, but economists suggest that more aggressive fiscal and monetary interventions may be necessary to stabilize the economy.
Philippine inflation eases further in May, central bank signals easing
The Philippines’ annual inflation rate decreased to 1.3% in May 2025, the lowest in five and a half years, driven by slower increases in housing-related costs and food prices, along with a sharper drop in transport costs.
Insight
The continued decline in inflation provides the Bangko Sentral ng Pilipinas (BSP) with room to adopt a more accommodative monetary policy. Following a 25 basis point rate cut in April, further reductions are anticipated in June. However, the recent approval of a bill increasing the daily minimum wage by 200 pesos may exert upward pressure on inflation, necessitating careful monitoring by the BSP to balance growth and price stability.
Australia’s Spending Stays Soft as Consumers Wait for Sales
Australian household spending remained subdued in April 2025, with a minimal 0.1% increase, as consumers held back on purchases, particularly in goods, awaiting sales and discounts.
Insight
The tepid spending reflects persistent consumer caution amid economic uncertainty, despite improvements in inflation and upcoming tax cuts. The Reserve Bank of Australia’s interest rate reductions to 3.85% aim to stimulate spending, but the impact has been limited. The per capita recession, with a 0.2% decline per person, highlights the challenges in reviving consumer confidence. Targeted fiscal policies and further monetary easing may be required to boost household consumption and support economic growth.
