Asia Communique
China’s Heatwave Strains Power Supply | India, China Ease Tensions with Visas | Business & Tech Roundup Highlights | China Meddling in Taiwan Recall Vote |
Good morning from Taipei!
This edition of Asia Communique distils the most important developments from across Asia during the past 24 hours.
Taiwan: Beijing accused of meddling in mass recall vote
Taiwan’s government has accused China of “clearly” trying to interfere in an unprecedented recall vote targeting 24 legislators from the opposition Kuomintang (KMT). Civic groups allied with the ruling Democratic Progressive Party organised the July 23 recall in protest against what they call the KMT’s obstruction of defence spending. Officials say Chinese state media amplified pro‑KMT talking points and Beijing denounced the recall as a DPP attempt to silence opposition. Another Reuters report notes that Chinese officials and media outlets rallied behind the KMT candidates.
Key points:
Twenty‑four KMT lawmakers, roughly one‑fifth of Taiwan’s parliament, will face recall on Saturday.
Taiwan’s Mainland Affairs Council rejected Chinese claims that the vote was undemocratic and said the recall is protected by Taiwan’s constitution.
Chinese officials and state media urged voters to oppose the recall, signalling Beijing’s desire to influence Taiwan’s political dynamics.
Context: Beijing has stepped up military and diplomatic pressure on the self‑ruled island since President Lai Ching‑te won January’s election without a legislative majority. Civic groups launched the recall to punish opposition lawmakers accused of cosying up to China. The episode underscores Taiwan’s vulnerability to external propaganda and the fragility of its political equilibrium.
China: Extreme heat strains power supply and accelerates hydro investment
A blistering heatwave across China is pushing electricity demand to record levels. The government warned of power supply disruptions as consumption topped 1.5 billion kilowatts for the third time this month and hydropower output sagged. Authorities issued their first nationwide heat‑related health alert and said the number of days with temperatures over 35 °C has been unprecedented.
Key points:
Power demand surpassed 1.5 billion kW, straining grids and raising blackout fears.
China is building the world’s largest hydropower dam on the Yarlung Zangbo (Brahmaputra) River in Tibet, costing at least $170 billion and expected to generate 300 billion kWh of electricity annually.
Some provinces recorded temperatures above 40 °C, with one site hitting 48.7 °C.
Context: The heatwave comes as China tries to transition away from coal while meeting surging electricity demand. Low water levels have cut hydropower output and high temperatures reduce solar efficiency. Beijing’s $170 billion dam project underscores its reliance on mega‑infrastructure to cope with climate volatility. The heat also amplifies public health concerns and may accentuate crop damage, adding inflationary pressure.
Markets: Trade optimism lifts Asian shares and the Aussie dollar
Asian equities rallied on Thursday after a Japan–U.S. trade pact and strong corporate earnings spurred risk appetite. The Topix index climbed to a record high, and the Australian dollar hit its strongest level in eight months. Optimism around further trade deals outweighed worries about slowing global growth.
Key points:
Japanese and Australian stocks jumped on hopes of more U.S. trade deals and upbeat earnings from major firms.
Analysts see the U.S.–Japan accord as a template for agreements with other Asian partners, boosting regional sentiment.
Major U.S. tech earnings were mixed – Alphabet beat forecasts while Tesla posted its worst sales drop in a decade.
Context: Washington’s flurry of trade agreements has eased immediate tariff risks but uncertainty persists. Talks with South Korea were abruptly cancelled due to a scheduling conflict for Treasury Secretary Scott Bessent, raising the stakes ahead of the Aug 1 deadline when higher tariffs could snap back. Investors remain attuned to shifting trade policies as they recalibrate portfolios.
South Korea: GDP accelerates as consumers and chips power rebound
South Korea’s economy grew 0.6 % in the second quarter, the fastest pace in over a year and sharply better than the prior quarter’s contraction. Strong consumer spending and a surge in semiconductor exports propelled the rebound, while government stimulus and delayed U.S. tariffs helped sustain momentum.
Key points:
Quarter‑on‑quarter growth of 0.6 % beat expectations and ended a slump.
Exports, particularly semiconductors, surged despite global trade tensions.
The economy may lose some steam once U.S. tariffs on autos and steel snap back on Aug 1, which could weigh on manufacturing.
Context: South Korea is highly exposed to global demand for electronics and autos. An improving consumer mood and government measures to offset tariff headwinds have supported growth. However, scheduled U.S. tariffs remain a looming threat, and Beijing’s slowdown could hit exports in coming quarters.
ADB: Higher U.S. tariffs dim growth outlook for developing Asia
The Asian Development Bank cut its 2025 GDP forecast for developing Asia to 4.7 % and its 2026 projection to 4.6 %. The Manila‑based lender said higher U.S. tariffs and trade uncertainty, as well as geopolitical tensions, supply‑chain disruptions and China’s weak property market, are weighing on regional growth.
Key points:
The ADB trimmed its 2025 forecast from 4.9 % to 4.7 % and its 2026 forecast from 4.8 % to 4.6 %.
Growth in Southeast Asia is expected to slow to 4.2 % in 2025 and 4.3 % in 2026, down from previous projections.
The bank warned that political uncertainty and rising energy prices could further hinder investment and consumption.
Context: The forecasts underscore how trade wars and protectionism are spilling into regional macro‑economics. Slower growth could intensify competition for investment and development aid, particularly in Southeast Asia where infrastructure needs are enormous. Policymakers are navigating between U.S. and Chinese economic blocs while seeking to diversify export markets.
Southeast Asia: Aid flows set to fall as Western donors tighten budgets
An analysis by Australia’s Lowy Institute warns that development financing to Southeast Asia will fall to $26.5 billion in 2026, down from $29 billion in 2023. The report expects bilateral aid to shrink by 20 % as Western governments divert budgets toward defence and other priorities.
Key points:
Bilateral funding to the region could decline from $11 billion to $9 billion, hurting poorer economies.
The U.S. has slashed nearly $60 billion in foreign assistance after shutting down USAID, and European donors are trimming programmes.
China, Japan and South Korea are likely to fill some of the gap through new lending and investment, shifting the balance of influence.
Context: Reduced Western aid could leave Southeast Asian states more dependent on Beijing’s Belt & Road financing and Tokyo’s infrastructure funds, potentially amplifying geopolitical competition. It also raises questions about how countries like Cambodia, Laos and Myanmar will fund climate resilience and social services without external assistance.
India Resumes Tourist Visas for Chinese Nationals After Five-Year Freeze
In a move signaling a thaw in strained relations, India announced on Wednesday that it will resume issuing tourist visas to Chinese citizens starting July 24—the first time since the two countries clashed along their disputed Himalayan border in 2020.
The announcement from the Indian Embassy in Beijing marks a major step toward restoring people-to-people ties, which had been frozen due to both geopolitical tensions and the COVID-19 pandemic. China lifted most of its own visa restrictions for Indian nationals in 2022, but Indian tourist visas for Chinese citizens had remained suspended until now.
Tensions peaked after a deadly military clash in eastern Ladakh’s Galwan Valley in June 2020. In the aftermath, India banned over 200 Chinese apps, tightened investment rules, and curtailed direct travel links. China, for its part, halted visa issuance to Indian citizens during the pandemic and has only gradually reopened its borders for students and business travelers.
Chinese President Xi Jinping and Indian Prime Minister Narendra Modi held talks in Russia last October, and both sides have acknowledged the need to stabilize ties.
India’s business community has long pushed for a normalization of economic ties with China, emphasizing the need for greater mobility of talent. For the past five years, Chinese businesspeople and tourists have been barred from entering India. While China eased visa restrictions for Indian tourists in 2024, India continued to withhold tourist visas for Chinese nationals until now. With the latest policy shift, some analysts believe both sides may be preparing to resume direct flights between major Indian and Chinese cities, signaling a cautious thaw in bilateral relations.
Beijing welcomed India’s latest move. Chinese Foreign Ministry spokesperson Guo Jiakun said on Wednesday:
“China is ready to maintain communication and consultation with India and constantly improve the level of personal exchanges between the two countries.”
While diplomatic channels are warming, the core issues remain unresolved. The 3,800-km border has been a flashpoint since the 1950s, and negotiations have dragged on for decades. In July, Indian External Affairs Minister S. Jaishankar told his Chinese counterpart that restoring peace would require a troop pullback and the removal of "restrictive trade measures."
The reopening of tourist access could help create political space for further normalization, even as strategic trust between the two Asian giants remains fragile.
Additional business and technology updates
Japan manufacturing slowdown: A private survey showed Japan’s manufacturing purchasing managers’ index fell to 48.8 in July, slipping into contraction as uncertainties over U.S. tariffs weighed on orders. Meanwhile, Japan’s service sector recorded its fastest growth in five months.
South Korean tech surge: SK Hynix, a key supplier to Nvidia, reported a 69 % jump in quarterly operating profit to 9.2 trillion won and said it will increase investment to meet booming AI chip demand. The company aims to double sales of high‑bandwidth memory chips this year.
India’s power market coupling: India’s power regulator will start market coupling of electricity exchanges from January, creating a single clearing price to improve efficiency and reduce price volatility.
PayPal World and UPI: PayPal announced a new global payments platform that will connect to India’s Unified Payments Interface (UPI), Brazil’s Mercado Pago and China’s Tenpay, expanding UPI’s international reach.
Looking ahead
August 1 tariff deadline: The 90‑day tariff reprieve offered by Washington expires in just over a week. Negotiations with South Korea and India have stalled, while talks with Japan and Indonesia have concluded. Traders will be watching for last‑minute deals and potential market volatility.
EU–China summit: European Commission President Ursula von der Leyen and Council President Antonio Costa will meet Chinese leaders in Beijing for the 50th anniversary of EU–China diplomatic relations. Diplomats expect a joint declaration on climate change, but no significant breakthroughs on trade. Xinhua, China’s state news agency, has called Europe a “critical partner” and urged the EU to focus on cooperation rather than disputes.
Regional climate and energy: Record heat in China and floods in South Korea highlight the growing urgency of climate adaptation. Expect more government investment in energy security and infrastructure resilience across Asia.
Taiwan Denies Involvement in South Korea’s Failed Martial Law Bid
Taiwan’s Presidential Office has strongly denied a Hankyoreh newspaper report alleging that a South Korean military intelligence official sought Taipei’s backing for a failed martial law attempt by former president Yoon Suk-yeol last December. The report has ignited controversy in both countries amid Seoul’s ongoing investigation into Yoon’s dramatic ouster.
The Seoul-based daily claimed that Moon Sang-ho, then-head of South Korean military intelligence and now under arrest, visited Taiwan in late November to meet with local officials. An anonymous military source cited by Hankyoreh alleged the visit aimed to solicit Taiwan’s support for Yoon’s martial law plan, declared on Dec. 3 and quickly overturned by the South Korean parliament. The move triggered a political crisis and ultimately led to Yoon’s downfall.
Taiwan immediately rejected the allegations. In a statement on Wednesday, Presidential Office spokeswoman Karen Kuo (郭雅慧) denounced the report as a “fabrication with obvious malicious intent.”
“Routine security exchanges between Taiwan and its democratic partners have been ongoing for years,” Kuo said, emphasizing that such exchanges “focus primarily on regional security rather than the internal affairs of any country.”
She added: “Taiwan does not interfere in or comment on the internal affairs of other countries,” and confirmed that the government has demanded a prompt correction of the report.
While Hankyoreh quoted its anonymous source linking Moon to the martial law scheme, it also noted that Moon himself denied seeking Taiwan’s support.
The report emerges as South Korea’s special prosecution team continues probing alleged foreign exchange crimes and covert military operations tied to the failed martial law effort. No confirmation has been issued by South Korean authorities on the newspaper’s claims.
Thank you for reading!