China should pivot its economic growth model from investment and export reliance to innovation and driving domestic consumption if it is to achieve its 5% annual growth target outlined in this year’s Government Work Report, a leading economic expert has said.

Liu Shijin, vice-chairman of the China Development Research Foundation and deputy director of the Committee on Economic Affairs of the CPPCC National Committee, said successful reforms would support the growth of China’s economy.

Liu said: “In the past two years, the economic recovery process after the pandemic has shown an overall upward trend in China, but still faces the pressure of insufficient demand, which is not a lack of investment, but a lack of consumption.

“From an international perspective, there is currently a gap of nearly 20 percentage points between China’s consumption-to-GDP ratio and the global average level. In terms of purchasing power parity, compared with OECD countries at roughly the same stage of development as China, the household consumption, service consumption and final consumption in China are about one-quarter to one-third different from the former. These reflect a structural deviation in China’s consumption patterns, influenced by several factors.”

He said China’s basic public services were facing problems such as low overall quality and large internal disparities. At present, the monthly pension of retirees from urban government departments and institutions versus other urban retired workers stands at about 6,000 yuan ($826) and about 3,000 yuan respectively.

“However, the gap between urban and rural areas is significant. Unlike urban residents, rural residents — who make up 95% of participants in the urban and rural residents’ pension insurance system — receive a monthly pension of just 220 yuan, which is just one-fifteenth of that received by urban retirees,” Liu said.

“On the other hand, the level of urbanization is low. In the services consumption sector, demand for goods has largely reached saturation. Services consumption – closely linked to urbanization – such as medical care, education, social security, culture and entertainment, remains difficult to access in traditional rural areas or underdeveloped counties.

“Even if residents are willing to consume certain goods or services, they often cannot due to a lack of services or high costs. As urban areas provide a high-quality services consumption environment, China’s population has increasingly migrated to urban centres, especially large first-tier cities in recent years. Therefore, enhancing urbanization is crucial for expanding services consumption.”

He said that a major reason for China’s consumption challenge is its wide income gap. Currently, China’s middle-income group consists of about 400 million people, but there are still about 900 million relatively low-income individuals. “International experience shows that, if the middle-income group does not account for the majority of population, it is prone to confront insufficient demand in the second half of the medium-speed growth period,” Liu said.

To solve the problem of insufficient demand and achieve the growth target, this year’s Government Work Report attaches great importance to consumption and prioritizes stimulus of it as its primary policy focus. It is required to address structural deviations so that the low-income segment with the greatest consumption potential can increase their spending power.

He added: “China should take efforts to steadily expand domestic demand. Accelerating urbanization and narrowing the income gap – with a particular focus on social security – are crucial steps. One approach could involve reallocating part of the government’s stimulus funds into the basic pension insurance fund for urban and rural residents, effectively doubling the monthly pension for 170 million rural participants, from about 200 yuan to 400 yuan.

“Moving forward, State-owned capital should be transferred to the pension fund on a large scale, with priority given to the basic pension insurance fund for urban and rural residents. In cities with large numbers of migrant workers, it is essential to gradually enhance social security and pension payment mechanisms, where some progress has already been made. Furthermore, the government should liberate the social productive forces in the integrated development of urban and rural areas, promote the two-way smooth flow of production factors such as people, land and capital between the two areas, and drive the second wave of urbanization in China.”

India’s government has said that it is examining the implications of the ‘reciprocal tariffs’ announced by the United States, which has imposed a baseline duty of 10%, effective from 5 April 2025. A remaining country-specific ad valorem duty of 27% became effective on 9 April 2025.

The Ministry of Commerce and Industry said it is engaging with all stakeholders, including Indian industry and exporters, collecting feedback on their assessment of the tariffs and assessing the situation.

“The Department is also studying the opportunities that may arise due to this new development in the US trade policy,” it said in a press statement.

Referring to Prime Minister Narendra Modi and US president Donald Trump’s February announcement on ‘Mission 500’ – aiming to more than double the bilateral trade to $500 billion by 2030 – the commerce ministry said discussions are ongoing between Indian and US trade teams for the conclusion of a mutually beneficial, multi-sectoral Bilateral Trade Agreement.

“These cover a wide range of issues of mutual interest including deepening supply chain integration. The ongoing talks are focused on enabling both nations to grow trade, investments and technology transfers. We remain in touch with the Trump Administration on these issues and expect to take them forward in the coming days,” it said.

The ministry statement added that “India values its Comprehensive Global Strategic Partnership with the United States”, and is committed to implement the India-US ‘Catalysing Opportunities for Military Partnership, Accelerated Commerce & Technology’ (COMPACT) agreement, to ensure that trade ties remain a pillar of mutual prosperity and drive change for the benefit of the people of India and the US.

New Income Tax Bill gets approval

India’s Union Cabinet has approved the New Income Tax Bill, which is set to replace the six-decade-old Income Tax Act, news agency PTI has reported.

The new legislation aims to make direct tax laws simpler and easier to understand, while ensuring that no additional tax burden is imposed on taxpayers. According to sources, the bill seeks to eliminate complex provisos, explanations and lengthy sentences, making the tax structure more transparent and accessible. The proposal was approved during a Cabinet meeting chaired by Prime Minister Narendra Modi, the news agency reported.

The New Income Tax Bill is expected to be introduced in the Parliament later this month and would be sent to Parliament’s Standing Committee on Finance.

Finance Minister Nirmala Sitharaman had announced in Budget 2025-26 that the new tax bill will be introduced in the ongoing session of Parliament. Sitharaman had first announced a comprehensive review of the Income-tax Act, 1961 in July 2024 Budget.

India’s Central Board of Direct Taxes (CBDT) had set up an internal committee to oversee the review and make the Act concise, clear, and easy to understand, which will reduce disputes, litigations, and provide greater tax certainty to taxpayers.

Also, 22 specialised sub-committees have been established to review the various aspects of the Income Tax Act. Public inputs and suggestions were invited in four categories – simplification of language, litigation reduction, compliance reduction, and redundant/obsolete provisions. The income tax department has received 6,500 suggestions from stakeholders on the review of the Income Tax Act.

PTI reported that the new law is expected to be leaner and more reader-friendly. It said the intention of the government is to halve the volume and make the language simpler, so that taxpayers can know their exact tax liability. It said it “would also help in reducing litigation and thereby cut down on disputed tax demands. Income tax law was enacted about 60 years ago in 1961 and since then a lot of changes have taken place in the society, in the way people earn money and companies do business.”

Speed and transactional efficiency are driving the fast adoption of cryptocurrencies in the UAE and wider Middle East region, according to new research.

And many people in the Middle East are opting for digital currencies because of the privacy it affords while making transactions, reflecting the region’s preference for financial security and discretion, according to a global study by Bitget Wallet, an arm of leading crypto exchange Bitget.

A sizeable number of cryptocurrency users in the region, however, are concerned about security risks amidst the surge in phishing scams, exchange breaches and Ponzi schemes, making security a top priority

“Whether for personal savings, business dealings or investment purposes, [Middle Eastern users] are increasingly preferring crypto as it offers a way to transact without excessive scrutiny or third-party oversight,” the study said.

“This also aligns with the growing demand for decentralized financial solutions in the region that put users in control of their wealth,” it said.

Bitget Wallet, however, said while crypto presents exciting financial opportunities, strengthening security education and implementing more user-friendly protections will be key to boosting confidence in crypto payments. Many new users remain vulnerable to cyber threats, it said.

High transaction fees are another barrier for wide-spread use of crypto transactions in the Middle East, as unpredictable costs reduce its appeal for users relying on crypto for remittances, business transactions, or daily payments, the study said.

“Many individuals and businesses face barriers in transferring funds across borders due to banking regulations or limited access to international financial networks.

“Crypto eliminates these restrictions, allowing users to send and receive money effortlessly, regardless of location. This has made digital assets particularly attractive for expanding business opportunities and enabling financial inclusion,” Bitget Wallet said.

It, however, pointed out that clearer regulations and enhanced legal protections will be essential for building trust, ensuring that crypto can evolve into a more secure and widely accepted financial tool in the region.

The global study of crypto users across regions also revealed that privacy concerns drive adoption in the Middle East (38%) and Western Europe (35%).

The study, however, said across regions, limited merchant acceptance – estimated at 31% – continues to be a major barrier, preventing crypto from being a widely used everyday payment method.

Lack of legal protection is another major obstacle for wider crypto adoption, with as much as 30% of Middle Eastern users highlighting it as a key concern.

“Unlike traditional finance, crypto transactions often lack consumer safeguards, leaving users exposed to fraud, disputes or lost funds with no recourse,” Bitget Wallet said.

The study also revealed that some regions see crypto as an alternative financial system rather than just a payment method.

Generational differences in crypto usage revealed that Gen X (49%) prioritises speed, while Millennials (42%) and Gen Z (39%) favour borderless transactions.

The study also showed that security concerns are highest among Gen X (42%), while Gen Z (36%) is more sensitive to transaction fees.

While younger users are more willing to integrate crypto into their daily financial activities, usability challenges and a lack of financial infrastructure remain key hurdles for broader adoption, Bitget Wallet said. “Across generations, the top reasons for using crypto payments remain consistent, but key differences emerge in priorities,” it said.

The study said privacy and cost savings resonate across all age groups, with 37-40% citing privacy as a major factor and 37% appreciating lower transaction fees.

While all generations recognize the convenience of spending crypto without converting to fiat, Gen X and Millennials (39%) lead in this preference.

“These insights suggest that while Gen Z is more experimental, Millennials and Gen X see crypto as both a practical tool and a financial alternative, with speed, accessibility, and privacy driving adoption,” Bitget Wallet said.

Gen Z is also slightly more inclined toward crypto’s ability to bypass traditional financial systems, it said.

The study is expected to enable industry stakeholders to anticipate trends, refine user experiences, and develop solutions that enhance trust, usability, and global acceptance of crypto as a viable payment method.

A leading ratings agency has cut India’s GDP growth projections to 6.5% for the next financial year, predicting that economies in Asia will feel the strain of rising US tariffs and pushback on globalisation.

In its Economic Outlook for Asia-Pacific (APAC), S&P Global Ratings said that despite these external strains, it expects domestic demand to remain solid in most emerging-market economies.

“India’s GDP will grow 6.5% in the fiscal year ending March 31, 2026, we expect. Our forecast is the same as the outcome for the previous fiscal year, but less than our earlier forecast of 6.7%,” S&P said.

Slowing food inflation, tax benefits announced in the country’s budget for the fiscal year ending March 2026, and lower borrowing costs will support discretionary consumption in India, S&P said.

The global credit rating agency expects central banks in the Asia-Pacific region to continue cutting benchmark interest rates through this year.

The S&P Economic Outlook said Asia-Pacific economies will feel the strain of rising US tariffs specifically and a pushback on globalisation more generally.

It said: “However, we see domestic demand momentum broadly holding up, especially in the region’s emerging-market economies.

“Given the volume of policy measures and external pressures hitting Asia-Pacific, the robustness of our forecasts underscores the resilience of the regional economies.’

Domestically, immigration reduction, deregulation and cuts to taxes and government spending are in focus.

Externally, US import tariffs are rising across the board. So far the new US government has imposed an additional 20% tariff on imports from China; 25% levies on some imports from Canada and Mexico, with levies on other products postponed for a month; and a global 25% tariff on steel and aluminium.

“The heightened uncertainty about US economic policy and its impact, notably around tariffs, is weighing on investment in the US and elsewhere,” S&P said.

India expected to remove 6% ‘Google tax’ from 1 April

India is set to remove the 6% Equalisation Levy, known as the ‘Google tax’, on online advertising services provided by foreign tech companies including Google and Meta. The tax will be scrapped from 1 April 2025, as part of amendments to the Finance Bill, news agency Reuters has reported.

This move comes amid efforts to improve trade relations with the US, which had previously criticised the levy and threatened retaliatory tariffs. The removal of the tax is expected to benefit tech companies, advertisers and India’s digital economy.

The Equalisation Levy was introduced in 2016 to tax payments made by Indian businesses to foreign companies for digital advertising services. It was aimed at ensuring that global tech firms, which earn significant revenue from Indian users but do not have a physical presence in the country, contribute to India’s tax system.

Initially set at 6% for online advertising services, the levy was later expanded in 2020 to include a 2% tax on all e-commerce companies with annual business exceeding Rs 2 crore (about £180,000) in India.

The 2% levy was withdrawn last year following an agreement between India and the US. Now the government plans to remove the original 6% tax as well, Reuters said.

The decision to remove the tax is part of India’s negotiations with the US to avoid trade conflicts. In the past, the US had threatened to impose tariffs of up to 25% on Indian some products in response to the Equalisation Levy.

Some experts believe the tax removal will help improve India-US relations and prevent any future trade disputes. Some countries, including the UK, are also considering withdrawing similar digital taxes to avoid tensions with the US.

“Removal of the equalisation levy is a smart move by the government, as collections weren’t very high, and it was a concern for the US administration,” Sudhir Kapadia, senior advisor at EY told Reuters.

The removal of the Google tax is expected to provide multiple advantages to global tech firms operating in India. With the 6% tax gone, advertising on platforms like Google and Meta will become cheaper for Indian businesses, encouraging more digital ad spending.

And lower costs could attract more advertisers, boosting revenues for digital platforms.

China is expected to achieve its annual growth target of around 5% this year, offering more business opportunities for both domestic and foreign companies through its intensified efforts to spur innovation and further boost consumption and investment.

That was the collective view of economists and business leaders at the recent ‘CEO: Grow with China’ roundtable event, hosted by China Daily.

“China’s economy is right on track to meet its pre-set annual growth target of around 5% for 2025, supported by its ultra-large domestic market, strong innovation capability, as well as a string of supportive policies aimed at boosting consumption and emerging industry investment,” said Lin Shen, a researcher at the Chinese Academy of Social Sciences’ Institute of World Economics and Politics.

“Government policies aimed at fostering innovation and developing emerging industries have been steadily implemented. Fiscal policies and other innovation-friendly measures will play a crucial role in sustaining economic growth throughout the year,” Lin said.

Lin said that the impact of new growth drivers, including artificial intelligence-powered manufacturing, have already started to benefit the economy. He said: “Our new quality productive forces, coupled with AI empowerment, have integrated well with manufacturing and the real economy. There will be significant progress in application scenarios.”

Ole Gerdau, chief operating officer at Deutsche Bank China, told the forum: “Even though there are certain geopolitical headwinds, we are still very optimistic about China’s economic prospects this year as the country’s fiscal and monetary policies go hand in hand.”

He added that consumption will be the key driver of the economy, contributing around two-thirds of China’s growth this year.

Gerdau said the emergence of Chinese AI start-up DeepSeek is changing people’s perception about China’s innovation strength and technological advancements. “This creates a wake-up moment for the world that now might be the time to invest in China. We expect this year to be the turning point where international investors are going to shift their focuses and have a higher allocation into the Chinese market,” he said.

China is prioritizing new quality productive forces and enhancing financial services to enterprises in its economic agenda for the year, as policymakers recently announced the rollout of a raft of supportive measures aimed at creating new growth drivers for the world’s second-largest economy.

The People’s Bank of China, the country’s central bank, said recently that it will reduce the reserve requirement ratio and interest rates as appropriate, based on the domestic and international economic and financial situation, as well as the performance of financial markets.

And the National Development and Reform Commission announced that it would establish a national venture capital guidance fund, with the goal of enhancing, strengthening and expanding innovative enterprises. The fund is expected to attract nearly 1 trillion yuan ($138 billion) in capital from local governments and the private sector.

The participants at the roundtable emphasized that emerging sectors such as AI have great potential in China, presenting new opportunities for enterprises.

China’s AI-led innovation is also offering opportunities for businesses like Rolls-Royce, said Troy Wang, executive vice-president of Rolls-Royce Greater China. “China’s focus on innovation-driven growth is making it continue to be an important country for Rolls-Royce, and it’s so much more than just a market for us,” Wang said.

“Rolls-Royce just achieved a record year in 2024 in terms of business performance and we’re confident about 2025,” he said, adding that the company is building Beijing Aero Engine Services Co Ltd, a joint venture in the capital, into a world-leading digitally enabled aeronautical engine repair and overhaul shop.

Rani Jarkas, chairman of Cedrus Group, said that the development of AI requires a large amount of electricity, chips and applications, and China has it all. “Technology speaks for itself,” he said. “I think the innovation will continue and the opportunities will grow for Chinese companies going abroad and for foreign companies to come to explore the market and set up local units here.”

Huang Yanxiang, co-founder and CEO of Shanghai CarbonNewture and an environmental, social and governance expert, said the current wave of AI-led innovation in China is transforming industries by integrating AI with manufacturing, boosting efficiency and giving rise to new business models. For CarbonNewture, this means deeply integrating AI into its carbon accounting platforms, improving data analysis and reporting capabilities to deliver more precise and actionable insights.