News of the week summary - 30/11/2025
India’s growth surges despite trade tensions
India’s economy accelerated more quickly than analysts had expected in the July to September quarter, underscoring the strength of domestic demand even as exports came under pressure from new US tariffs. Official data showed GDP rising 8.2 percent compared with the same period last year, a pace that reinforced India’s position as the fastest growing large economy. Economists had anticipated a slower 7.3 percent expansion, and the previous quarter grew at 7.8 percent.
The standout force behind this growth was consumer spending. Households increased their purchases by 7.9 percent year on year, helped in part by the start of India’s lengthy festival season, a period that typically boosts consumption of goods such as clothing, electronics and vehicles. Since consumption represents more than half of India’s total economic output (the rest being investment and exports), its strength is a crucial driver of growth. Manufacturing also showed strong gains, rising 9.1 percent, while services in areas such as finance, real estate and professional activities grew more than 10 percent. Government spending contracted, although this did not offset the surge in private demand.
These domestic gains contrast with difficulties on the trade front. President Donald Trump’s administration imposed tariffs of around 50 percent on a wide range of Indian products including textiles, gems and jewellery after criticizing India’s purchases of Russian oil. Tariffs raise the price of imported goods for US buyers, which typically lowers demand. India’s exports to the United States fell 9 percent in the latest month of available data, and the merchandise trade deficit widened to a record 41.68 billion dollars. A trade deficit represents the gap between the value of imports and exports, and a wider deficit can indicate that a country is selling less abroad while buying more from overseas.
While India’s near term performance remains strong, sustaining such rapid growth could become challenging if trade tensions persist. Prolonged tariffs would continue to weigh on export oriented industries, potentially offsetting domestic strength. Indian officials nevertheless expressed optimism that a trade agreement with the United States can be concluded before the end of 2025.
AI demand bolsters Taiwan’s economy
Taiwan sharply upgraded its growth outlook as surging global demand for artificial intelligence hardware continues to fuel the island’s export driven economy. The government now expects GDP to expand 7.37 percent in 2025, its fastest pace in fifteen years. That represents a remarkable acceleration for a mature, high income economy and would outpace China’s growth next year, an unusual reversal in regional trends.
The momentum is already visible in Taiwan’s latest data. GDP grew 8.21 percent in the third quarter from a year earlier, well above the estimate released only a month earlier. Exports jumped 32 percent, driven by booming shipments of semiconductors and other electronics used in AI systems and consumer devices. This is Taiwan’s strongest quarterly performance since the early phase of the pandemic, when remote work and home schooling triggered a rush for computers while a global chip shortage pushed demand even higher.
Taiwan’s central role in global chip supply helps explain the economy’s rapid expansion. Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest and most advanced chip producer, manufactures more than 90 percent of the most sophisticated chips used in AI applications, smartphones and high performance computing. Other Taiwanese manufacturers such as Foxconn supply essential components and server infrastructure. As AI technologies spread into government, business and consumer applications, demand for the high performance chips and data center hardware that support these systems has strengthened. Even though investors worldwide have grown more cautious about the possibility of an AI related market bubble, companies at the heart of the hardware supply chain continue to report rising orders.
The surge in electronics contrasts with weaker performance in parts of the domestic economy. Traditional industries are struggling with global overcapacity, which happens when producers worldwide can make more goods than consumers are willing to buy. That imbalance puts downward pressure on prices and limits export growth for sectors such as basic materials or older manufacturing categories. Household consumption remains subdued, rising just over 1 percent year on year in the latest quarter, which indicates that domestic demand is not contributing as strongly as exports.
Despite uncertainty related to US tariffs and a likely moderation in growth next year, officials raised their projection for 2026 as well. They argue that long term adoption of AI and the push by many governments to develop national AI capabilities are creating deep rooted demand for advanced hardware. This suggests that Taiwan’s export engines, particularly semiconductors, will remain central to its economic growth narrative in the years ahead.
Investment pullbacks in China
China recorded a rare fall in fixed asset investment, a key measure of spending on infrastructure, factories and equipment that has long powered the country’s growth model. The decline suggests that President Xi Jinping’s push to curb excessive industrial competition is starting to influence business behaviour. Fixed asset investment fell 1.7 percent in the year to October after a smaller drop in the preceding month. Aside from the early months of the pandemic, such declines have not appeared in decades.
Fixed asset investment matters because it reflects how much companies and local governments are spending to expand productive capacity. For an economy like China’s, which for many years relied heavily on investment-led growth, a sustained slowdown can weaken future output and employment. The fall coincides with Xi’s warnings about price wars in sectors such as electric vehicles and high tech manufacturing. Chinese officials refer to this kind of relentless competition as involution, a term used to describe situations in which firms race to produce more even when demand is insufficient, leading to oversupply, falling prices and squeezed profits.
Beijing is increasingly concerned that overinvestment in strategic industries, from green technology to semiconductors, could create a bubble economy in which capacity expands faster than markets can absorb. These concerns have made both companies and public sector entities more cautious. Economists note that Chinese corporates have become hesitant about new projects, while government agencies may also be pulling back due to the political emphasis on avoiding excess.
China’s broader economic backdrop reinforces this caution. The country faces an ongoing property downturn, weak consumer confidence, deflationary pressures and friction with the United States. These conditions make it harder to maintain growth targets through investment alone. While Chinese authorities continue to pursue the creation of high end manufacturing capabilities, they must balance these ambitions with the risk of overbuilding and intensifying financial strains.
It is difficult to determine the full extent of the slowdown because Chinese economic statistics are often questioned. Analysts at Goldman Sachs estimate that roughly 60 percent of the reported drop in investment reflects a statistical correction to data that had previously been overstated. Even after adjusting for this, the trend still signals softer momentum. Regional figures show investment falling in more than a third of provinces, compared with only a handful earlier this year.
These developments point to a shifting economic strategy in China. The leadership wants to steer the economy away from quantity driven expansion and toward more efficient growth, yet it must do so while dealing with an already fragile domestic environment. The investment pullback illustrates the challenge of recalibrating an economy that has long depended on building more capacity, often faster than demand can realistically support.
EU moves to tighten investment rules
The European Union is preparing to toughen its foreign investment framework in response to rising concern over the expanding role of Chinese companies across the bloc. Policymakers want to ensure that foreign investors, particularly from China, contribute directly to Europe’s industrial strength rather than taking advantage of its open market without bringing meaningful benefits to local workers or sharing valuable technology.
The planned revisions form part of a broader effort to revive Europe’s weakened industrial base. European manufacturers have been under pressure from high energy costs, strict environmental regulations and an influx of cheap Chinese goods, a trend amplified by the diversion of Chinese exports away from the United States after Washington raised tariffs. Industries such as steel and chemicals, which already operate with thin margins, are finding it increasingly difficult to compete.
European officials are also worried about China’s strategic investments across the region. A wave of large Chinese industrial projects, ranging from battery factories to hydrogen technology initiatives, has raised fears that Beijing is trying to deepen Europe’s reliance on Chinese high end manufacturing. Such dependence could give China greater geopolitical leverage. Chinese firms’ expansion inside Europe may also offer a way to avoid potential new EU tariffs, since producing goods locally would allow them to access the market even when import restrictions increase.
Under the new rules being discussed, foreign investors may be required to hire local workers and in certain sectors such as battery production to share technological knowhow with European partners. The goal is to ensure that investment strengthens the continent’s entire industrial supply chain rather than limiting Europe to low value assembly work while the most advanced capabilities remain abroad.
The initiative reflects a shift in Europe’s industrial policy. Instead of relying primarily on tariffs as the United States has done, the EU aims to use investment conditions to encourage production and innovation within its borders. This approach seeks to protect the market while still attracting foreign capital. Although the legislation will not explicitly name China, the scale and rapid growth of Chinese investment in Europe suggest that the rules are designed with Chinese firms in mind. Chinese foreign direct investment into the EU rose 80 percent last year, reaching 9.4 billion euros, driven by major projects from companies such as CATL, the world’s largest electric vehicle battery maker.