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Gavekal Dragonomics
Rethinking Technology Funding
Tilly Zhang
3 Jul 2025
China’s government is rethinking how it will fund the next round of technological development. Tilly argues that policymakers want to move away from the decentralized model that relied heavily on local authorities, and toward a more centralized system in which financial institutions play a bigger role. The intended result of that shift is not a big increase in overall funding, but a more disciplined and controlled process.
Gavekal Research
The West’s Challenge In Rare Earths
Tom Miller
2 Jul 2025
The Chinese government has said it will resume approvals for exports of rare-earth elements as part of its trade truce with the United States. However, for Washington loosening China’s chokehold on rare-earth supply is a matter of national security. Yet Tom Miller argues that the US will struggle to build a supply chain for the full array of rare earths needed to make high-grade magnets.
Gavekal Research
Video: Where Is The US Jobs Market Going?
Tan Kai Xian
2 Jul 2025
So far in 2025, the US labor market has been a case of “not too hot, not too cold.” Although trade war uncertainties have muted some hiring plans, the job openings and employment data have given no reasons to expect a marked softening in the economy. KX assesses the how the labor market is likely to develop from here.
Gavekal-IS
The Nature Of Risk Is Changing
Didier Darcet
2 Jul 2025
Instability is increasingly rooted in geopolitical tensions and communication strategies, rather than in the macroeconomic dynamics of the global economy, says Didier. In President Donald Trump’s case, he deploys a brand of diplomacy defined more by unpredictability than openly stated objectives. Didier explains how all this is shifting the calculus for asset allocation decisions.
Gavekal Dragonomics
How Long Will The Auto Price War Last?
Ernan Cui
Next Steps For Stimulus
Wei He
Consumer Lending Is In Trouble
Xiaoxi Zhang
Negotiating From Strength
Thomas Gatley
Testing The Limits Of Industrial Policy
Thomas Gatley
Assessing The Consumption Push
Andrew Batson
Growth After The Trade Truce
Wei He, Dragonomics Team
When Deposit Rates Decline
Xiaoxi Zhang, Wei He
The New Technology Hubs
Tilly Zhang
The Fading Boost From Consumer Subsidies
Ernan Cui
More research
The Asian Bullwhip
Udith Sikand
An Ugly Quarter For The US Dollar
Louis-Vincent Gave
Fiscal Drag Before The Fun Starts
Will Denyer
Towards A Fragmented Yet Better Global Payments System
Charles Gave
Will The Real Bund Yield Please Stand Up?
Cedric Gemehl
Webinar: Pricing Another Middle Eastern War
Tom Holland, Udith Sikand, Cedric Gemehl
Video: Nato And European Integration
Cedric Gemehl
The Other Side Of The Fed
Tan Kai Xian
Trump’s Influence On The Fed
Will Denyer
Is Deflation Bad For The Stock Market?
Charles Gave
Gavekal Research
After London, What’s The Deal Space?
Arthur Kroeber
12 Jun 2025
The latest trade negotiations drama in London probably leaves us back where we were a month ago—though the precise terms of the agreement are not yet public. China’s hardball tactics have exposed some vulnerabilities among the US and its allies and marginally increased the chance that Washington will give some ground. But the deal space remains narrow.
Checking The Boxes
Our short take on the latest news
Fact
Surprise
Takeaway
US JOLTs job openings rose to 7.8mn in May, from 7.4mn in Apr
More than 7.3mn expected
The US labor market continues to chug along despite tariff uncertainty
US ISM manufacturing PMI rose to 49.0 in Jun, from 48.5 in May
Higher than 48.8 expected
There are still few signs of progress in Trump's reindustrialization plan
Eurozone CPI rose 2.0% YoY in Jun, versus 1.9% in May
As expected; core CPI was unchanged at 2.3% YoY in Jun
Services inflation remains stubbornly high; ECB likely to be cautious
German unemployment rate unchanged in Jun at 6.3%
Below 6.4% expected
Risk of near-term uptick, but jobless rate to stay low into 2026 as economy picks up
Test Your Knowledge
US lawmakers have cut remittance taxes in the One Big Beautiful Bill from 3.5% to 1%. Nevertheless, the effect could be heavy. In which country will gross national income take the biggest hit?
- Haiti
- Mexico
- El Salvador
- The Philippines
Chart of the Week
The Trump administration is putting pressure on US allies to boost defence spending to 5% of GDP. That “global standard” comprises core military spending of 3.5% of GDP along with 1.5% of GDP worth of spending on related logistics and infrastructure. Even so, the core military spending target alone is a significant jump from the current 2% aspirational threshold that most allies are already struggling to meet.
Open Chart
Gavekal Research
Essential Reading: A Book For Every Week Of The Year
Gavekal is often asked for a recommended reading list. So, here it is: a book a week that everyone interested in the world of macro investing—whether hoary veteran or eager apprentice—can benefit from reading.
Gavekal Research
Webinar: Pricing Another Middle Eastern War
Tom Holland, Udith Sikand, Cedric Gemehl
26 Jun 2025
Investors last week seemed to be betting that the United States would hold off on directly attacking Iran. Now, after the weekend’s US airstrikes and Trump's push for a ceasefire, are all parties really ready to cease hostilities? Or is this just the start of a regional war in the Middle East that could severely disrupt oil supplies and spark a surge in the crude price? Our team assesses the latest developments on the ground and consider the vulnerabilities of the major economic regions should the worst occur and the price of oil skyrocket.
Tariff Troubles
Negotiating From Strength
Nearly three months after US President Donald Trump dramatically escalated tariffs on China, it is clear that the administration overestimated its leverage against Beijing. Thomas argues that the latest trade data underscore that China is negotiating from a position of strength resting on two foundations: rare-earth export controls and a remarkably resilient export sector.
Webinar: China's Economic Strategy Amid Trade Conflict
China and the US are talking again, after the first phone call between Presidents Trump and Xi since Trump took office. But the path toward a substantive trade agreement is strewn with boulders. Arthur Kroeber and Andrew Batson discussed how China will handle the trade talks, what it will do to support its economy, and how seriously we should take its policy pivot towards more consumption-led growth.
After London, What’s The Deal Space?
The latest trade negotiations drama in London probably leaves us back where we were a month ago—though the precise terms of the agreement are not yet public. China’s hardball tactics have exposed some vulnerabilities among the US and its allies and marginally increased the chance that Washington will give some ground. But the deal space remains narrow.
Asia’s Plan To Keep America Sweet
On Tuesday, the US and China agreed to extend their trade war truce pending a check in with both sides’ leadership. In the meantime, other Asian nations are attempting to tread a path that placates Donald Trump without picking sides in this great power standoff. It means that as the July 9 deadline approaches for the potential imposition of Trump’s “reciprocal tariffs”, Asian economies are adopting survival strategies. In this piece, Tom and Udith explore how those are breaking down across a heterogeneous region.
US economy & markets
Fiscal Drag Before The Fun Starts
When Donald Trump took office in January, the budget deficit as a share of GDP was set to contract in the following few years. This was largely due to expiring tax cuts. Since then, Trump has raised import tariffs, and the Senate is on the apparent final run this week to try and pass
tax cuts in his “big, beautiful bill”. How will all this shake out in the near, medium, and long term—and what does it mean for markets?
The Other Side Of The Fed
Compared to the launch of trade wars, bunker-busting missions, or even a big tax-cutting budget, Wednesday’s announcement of new capital rules for US banks felt decidedly prosaic. The Federal Reserve, Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency will loosen up around US$220bn in capital held within their subsidiaries. The impact of all this will really matter for investors.
Trump’s Influence On The Fed
The Federal Open Market Committee voted unanimously last week to hold interest rates steady. But then a few days after, three members curiously floated the possibility of a rate cut as soon as their next meeting, before Chair Jay Powell poured cold water on the idea. What should we make of this divergence of views at the FOMC? And what does it mean for the future trajectory of Fed policy?
A Devil’s Advocate For Dollar Bears
The consensus in the market, and in our firm, is increasingly dollar bearish. There are good reasons for this, and one does not want to be contrarian for the sake of it. Still, it makes sense to step back and ask what could cause the US dollar to rebound, if only in a counter-trend rally.
China chartbook
Gavekal Dragonomics
Testing The Limits Of Industrial Policy
Thomas Gatley
20 Jun 2025
China’s lavishly subsidized industrial policy has delivered some substantial achievements in key technology sectors. But the costs of that strategy started to become more apparent in 2024, Thomas argues in his annual chartbook on the state of the corporate sector. A strategy that relentlessly expands supply while leaving domestic demand weak results in steady erosion of margins and profitability, which will make it harder for firms to continue to push the technological pace.
India chartbook
Gavekal Research
India Macro Update: Hold The Confetti
Udith Sikand, Tom Miller
5 Jun 2025
India’s economy is in the early stage of a cyclical recovery enabled by supportive policy settings. Sustaining the positive momentum will, however, be tricky, say Udith and Tom. A continued recovery in domestic consumption is encouraging, but external uncertainty could dampen sentiment and weigh on investment.
Latest video
Gavekal Research
Video: Where Is The US Jobs Market Going?
Tan Kai Xian
2 Jul 2025
So far in 2025, the US labor market has been a case of “not too hot, not too cold.” Although trade war uncertainties have muted some hiring plans, the job openings and employment data have given no reasons to expect a marked softening in the economy. KX assesses the how the labor market is likely to develop from here.
Strategy Chartbook
Gavekal Research
Global Strategy: Investing After Exceptionalism
Will Denyer, Tan Kai Xian, Udith Sikand, Thomas Gatley, Cedric Gemehl
30 Apr 2025
The first four months of 2025 have seen a succession of shocks severely damage the narrative of US exceptionalism that has prevailed in global financial markets for the last few years. In this strategy chartbook, Gavekal analysts examine what this diminution of belief in the US means for US markets, and look at which assets and markets outside the US stand to benefit and which to avoid.
Emerging markets
Video: Are EMs Back?
It’s been a good quarter for the broad emerging markets complex. The MSCI EM index has returned almost 7% in US dollar terms, while US equities are down by some -3.5%. So should investors jump on the EM train? Udith points out that there is a wide divergence in the performance of individual emerging markets, and the threat of tariffs hangs heavy over EM corporate earnings. Investors need to be selective.
Video: Southeast Asia Under Trump 2.0
Global investors are rightly focused on the potential losers from the United States pursuing an aggressively protectionist trade policy agenda, but there may be winners as well. Tom went in search of such economies last week. Today he explains how such “swing states” are likely to perform in an intensified period of great power rivalry between the US and China.
China Turbocharges EM Investment
As the rich world pulls up the protectionist drawbridge, investors risk missing a bigger story
in emerging markets. Here, Chinese outbound investment is rebounding after the fallow Covid years, and is driving a new wave of industrialization that promises to lower the cost of the green-energy transition.
Why This Time Has Been Different
During past episodes of risk-off volatility, the correlation between emerging market risk assets has shot up. But early August’s bout of market volatility saw a bifurcation in EMs, and no broader macroeconomic spillover effects—which speaks well of the growing maturity of emerging markets as an asset class.
Europe's economy
Will The Real Bund Yield Please Stand Up?
On a couple of occasions this week, the return on 10-year German bunds has dipped to 2.5%, which was the level seen the day before Germany’s government announced a historic loosening of its debt brake on March 5. That is not exactly the movement you would expect when a country known for fiscal restraint embarks on a multi-year spending splurge. Cedric examines what's been driving yields back down, and if they're likely to stay in their current range.
Eurozone Consumers Versus The Oil Market
Oil accounts for 37% of Europe’s primary consumption and most of it is imported. That makes Europe especially vulnerable to an oil shock should the Israel-Iran conflict widen to create huge disruption to oil shipments and a potential spike in the crude price. Yet despite oil prices rising 15% in the last five days, Cedric and August argue that the situation looks manageable, at least for eurozone consumers.
The ECB Beyond 2025
On Thursday, the European Central Bank duly delivered the 25bp interest rate cut expected by most investors, leaving monetary policy in an apparent sweet spot. ECB President Christine Lagarde offered no guidance on whether policymakers will do more in the coming months, but the key variable influencing their reaction function seems to be the state of EU-US trade relations.
Ending US Exceptionalism: Regime Change Or Cyclical Blip?
Usually, the short-term economic outlook—where unemployment will be next month, or growth next quarter—is quite certain. And long-term trends are nicely predictable. It is the mid-term that confounds forecasters. Donald Trump has turned all this on its head. No one has clue about the short term. And the long run is any one’s guess. But paradoxically, argues Anatole, the medium-term outlook is unusually clear—it’s just that financial markets have not yet priced in this clarity.
Currencies
An Ugly Quarter For The US Dollar
Towards A Fragmented Yet Better Global Payments System
Where Will The Excess Dollars Go?
Good News To Make You Happy From The JGB Market
Carefully Controlling Appreciation
Asia’s Potential Repatriation Flows
Oil & commodities
Webinar: Pricing Another Middle Eastern War
Asia’s Oil Vulnerability
The Fog Of War
The Economy Is Nothing But Energy Transformed: Iran-Israel Edition
Trading The Israel-Iran Conflict
The Implications Of Israel’s Action
