Finance

China doubles down on AI and tech as Trump ratchets up trade pressure

Published

3 months ago

March 5, 2025

A security guard watches during the opening session of the National People’s Congress (NPC) in the Great Hall of the People in Beijing on March 5, 2025.

Wang Zhao | Afp | Getty Images

BEIJING — The undercurrent of China’s annual parliamentary meetings this week is U.S. trade tensions — and how Chinese technology is offsetting that pressure.

The largely ceremonial gathering of delegates in Beijing this year came just as U.S. President Donald Trump addressed Congress and imposed new tariffs on Chinese goods. It’s a clear drag on exports, while Chinese companies have only faced tougher restrictions on accessing high-end semiconductors and other advanced tech.

“Internationally … an increasingly complex and severe external environment may exert a greater impact on China in areas such as trade, science and technology,” Chinese Premier Li Qiang said in his annual report on government work at the opening ceremony of the National People’s Congress on Wednesday, according to an official English translation of the Chinese.

It was an unusually grim assessment at least among the seven parliamentary meetings I have attended. But I also sensed a greater willingness to support the private sector than in the past — especially as it relates to tech innovation, such as with Chinese AI company DeepSeek.

“We will promote the healthy and well-regulated development of the platform economy and give better play to its role in inspiring innovation, expanding consumption and stabilizing employment,” Li said in the work report.

That marked the latest signal that Beijing now wants to support the private sector after previously taking a far more restrictive stance and imposing large fines on tech giants Alibaba and Tencent, often called “platform“ companies in China. Many companies and industries in China have historically been dominated by the state.

China is likely to double down on transformative tech and winning global south amid trade war

DeepSeek’s recent rise demonstrated to many international investors — who had grown cautious on the slowing economy — how a Chinese company could compete with the U.S. on AI, regardless of White House sanctions.

Beijing was quick to affirm the startup’s success. DeepSeek’s Liang Wenfeng attended a meeting with Premier Li in January, and a symposium with Chinese President Xi Jinping in February.

AI to counter protectionism?

While DeepSeek didn’t get a specific mention in the government work report, a member of the team that drafted the report named it — and applications such as Kuaishou’s Kling AI for video generation — while talking to the press on Wednesday about China’s rapid AI development.

“Historically, technological progress is often an important force for breaking through barriers and protectionism,” Chen Changsheng, who is also deputy director of the State Council Research Office, said in Mandarin translated by CNBC.

“We look forward to how under the current international backdrop, AI will become a positive energy to promote cooperation and multilateralism,” he said.

HONG KONG, CHINA – JANUARY 28: In this photo illustration, the DeepSeek apps is seen on a phone in front of a flag of China on January 28, 2025 in Hong Kong, China.

Anthony Kwan | Getty Images News | Getty Images

“Tech” got one more mention in this year’s report versus last year, and “reform” got 10 more mentions, according to the Chinese-language versions. Tech self-reliance also got its own sub-section in China’s latest annual work report, in contrast to a passing mention in 2024.

A new law

China’s legislature has been discussing a new law to support the private sector. Beijing has said it would be enacted as soon as possible after further discussions and revisions.

This year, policy will likely be driven more from the bottom up, rather than the top down, said Ding Wenjie, investment strategist for global capital investment at China Asset Management Co., according to a CNBC translation of her Mandarin-language remarks.

She expects growth in AI and leading tech to spur development of other industries, but cautioned that it will likely take companies more than just one or two quarters to see results.

China’s parliamentary meetings officially wrap up early next week. More official comments on tech and the private sector law are expected to trickle out in coming days.

Among the top priorities for the year ahead, Premier Li said, is supporting “the extensive application of large-scale AI models.” Beijing plans to increase funding for biomanufacturing, quantum technology, AI-linked robotics and 6G technology.

Oxford Economics shares its take on whether China will achieve its GDP growth target this year

The industry-specific goals come as China is trying to boost consumer spending, minimize the drag from real estate and navigate trade tensions with the U.S.

China’s “policy focus is to accelerate AI adoption and autonomous driving, while make gradual progress in restructuring housing and [local government financing vehicle] debt,” Morgan Stanley’s chief China Economist Robin Xing and a team said in a note Wednesday. They noted that the “fiscal package came as expected: a [2 trillion yuan ($280 billion)] expansion with mild support on consumption.”

Chinese official comments during this week’s meetings hint at a preference for open-source models.

Chen on the work report drafting team warned against “excessive” use of private AI projects that could fragment the market, and instead called for “large-scale applications.”

China will also work to increase computing capacity and develop “a system of open-source models,” the economic planning agency, called the National Development and Reform Commission, said in its plan for the year ahead.

Finance

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

Published

2 days ago

June 6, 2025

Business Finance News

Finance

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

Published

2 days 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.”