Finance

China’s artificial intelligence boom might help mitigate some tariff pain

Published

2 months ago

March 26, 2025

Business Finance News

Computer chip with Chinese flag, 3d conceptual illustration.

Steven Mcdowell/science Photo Library | Science Photo Library | Getty Images

BEIJING — For Chinese companies wary of U.S. tariffs, the big difference between President Donald Trump’s first and second terms is the emergence of generative artificial intelligence.

Chinese companies are hard at work. Nearly every day in the last two weeks, a Chinese firm has announced a new AI product — or how they’re making money with the tech.

To name a few:

Short-video company Kuaishou said Tuesday its AI tool for generating videos, Kling, has raked in more than 100 million yuan ($13.78 million) since its launch last summer.

Tencent last week updated its AI model for generating 3D visuals — which can be used in games or for 3D printing — and released the full version of its Hunyuan T1 reasoning model. A few weeks earlier, Tencent had integrated T1 with its Yuanbao chatbot app that also lets users tap DeepSeek’s R1.

Daily active Yuanbao users surged by 20 times in just a month, Tencent said last week. The company also shared how some farmers have used the AI app to analyze soil conditions for planting.

Apple's plan to roll out AI in China: It needs to 'revitalize,' IDC researcher says

Baidu on Monday launched tools for people to build websites and simple games with conversational prompts instead of having to write code. Kunlun Tech, parent of browser Opera, on Wednesday upgraded its Mureka app for using AI to generate music.

As a manufacturing hub, China has “great advantages in terms of ‘physical’ AI” since the country has lots of machines that can collect valuable data for training industry-specific models, Maxwell Zhou, CEO of autonomous-driving software company DeepRoute.ai, told CNBC on Friday in Mandarin, translated by CNBC.

DeepRoute.ai, launched in 2019, announced last week it was building a system for autonomous-delivery vehicles to send parcels with simple voice commands such as “pick up coffee from this store and send it to the apartment.”

Zhou said he hopes the system to be operational in China by early next year.

While it’s unclear which AI companies will ultimately succeed, analysts expect Chinese businesses stand a better chance at excelling with the help of AI applications. AI tools could cut costs for companies and offset some of the impact of an economic slowdown.

The combined impact of the tech is lifting expectations for Chinese corporate earnings growth in the year ahead, said Ding Wenjie, investment strategist for global capital investment at China Asset Management.

Earnings will signal whether the economy is really turning around, especially under the pressure of tariffs and other trade restrictions.

Goldman Sachs in early February estimated a 20% increase in U.S. tariffs on Chinese goods could shave off 5% in Chinese corporate earnings, in Hong Kong dollar terms.

The greater question for the U.S. and China, however, stretches beyond tariffs.

After a visit to China this week for a conference, New York Times columnist Thomas Friedman concluded that it was not tariffs or Taiwan that the U.S. and Chinese presidents needed to discuss immediately — but rather AI that’s as smart as humans and pervades the world.

The author of “The World is Flat” likened a possible U.S.-China collaboration on AI to the Soviet-U.S. nuclear arms control deal.

Finance

Stocks making the biggest moves midday: WOOF, TSLA, CRCL, LULU

Published

1 day ago

June 6, 2025

Business Finance News

Finance

Swiss government proposes tough new capital rules in major blow to UBS

Published

1 day ago

June 6, 2025

Business Finance News

A sign in German that reads “part of the UBS group” in Basel on May 5, 2025.

Fabrice Coffrini | AFP | Getty Images

The Swiss government on Friday proposed strict new capital rules that would require banking giant UBS to hold an additional $26 billion in core capital, following its 2023 takeover of stricken rival Credit Suisse.

The measures would also mean that UBS will need to fully capitalize its foreign units and carry out fewer share buybacks.

“The rise in the going-concern requirement needs to be met with up to USD 26 billion of CET1 capital, to allow the AT1 bond holdings to be reduced by around USD 8 billion,” the government said in a Friday statement, referring to UBS’ holding of Additional Tier 1 (AT1) bonds.

The Swiss National Bank said it supported the measures from the government as they will “significantly strengthen” UBS’ resilience.

“As well as reducing the likelihood of a large systemically important bank such as UBS getting into financial distress, this measure also increases a bank’s room for manoeuvre to stabilise itself in a crisis through its own efforts. This makes it less likely that UBS has to be bailed out by the government in the event of a crisis,” SNB said in a Friday statement.

‘Too big to fail’

UBS has been battling the specter of tighter capital rules since acquiring the country’s second-largest bank at a cut-price following years of strategic errors, mismanagement and scandals at Credit Suisse.

The shock demise of the banking giant also brought Swiss financial regulator FINMA under fire for its perceived scarce supervision of the bank and the ultimate timing of its intervention.

Swiss regulators argue that UBS must have stronger capital requirements to safeguard the national economy and financial system, given the bank’s balance topped $1.7 trillion in 2023, roughly double the projected Swiss economic output of last year. UBS insists it is not “too big to fail” and that the additional capital requirements — set to drain its cash liquidity — will impact the bank’s competitiveness.

At the heart of the standoff are pressing concerns over UBS’ ability to buffer any prospective losses at its foreign units, where it has, until now, had the duty to back 60% of capital with capital at the parent bank.

Higher capital requirements can whittle down a bank’s balance sheet and credit supply by bolstering a lender’s funding costs and choking off their willingness to lend — as well as waning their appetite for risk. For shareholders, of note will be the potential impact on discretionary funds available for distribution, including dividends, share buybacks and bonus payments.

“While winding down Credit Suisse’s legacy businesses should free up capital and reduce costs for UBS, much of these gains could be absorbed by stricter regulatory demands,” Johann Scholtz, senior equity analyst at Morningstar, said in a note preceding the FINMA announcement.

“Such measures may place UBS’s capital requirements well above those faced by rivals in the United States, putting pressure on returns and reducing prospects for narrowing its long-term valuation gap. Even its long-standing premium rating relative to the European banking sector has recently evaporated.”