Hormuz first, Beijing later

Insight: The highly anticipated meeting between Presidents Xi Jinping and Donald Trump – which had previously been set for March 31 to April 2 – has now been rescheduled for May 14-15. The White House said the delay allows Trump to remain in the US and manage the escalating conflict with Iran, including urgent efforts to reopen the Strait of Hormuz, a critical oil chokepoint whose closure has already disrupted global energy markets. Beijing has said little publicly, though its Foreign Ministry spokesperson has noted that leaders’ summits play an “irreplaceable” role in guiding the bilateral relationship – a measured but pointed reminder of what is being put on hold.

Impact: Beneath the official statements lies a latticework of unresolved questions. The closure of the Strait of Hormuz has rattled energy markets globally. And few countries feel that more directly than China, which counts Iran among its largest oil suppliers and has deepened those energy ties precisely as a hedge against Western pressure. That dependence gives China a significant stake in how the conflict unfolds, adding another layer of complexity to an already delicate bilateral dynamic. The summit has been positioned as a critical opportunity to reset relations between the world’s two foremost economic and military powers. China is adopting a careful wait-and-see posture, but with the Middle East consuming Washington’s attention, the longer-term trajectory of US-China ties is growing ever more uncertain.

The Philippines says it has just 45 days of fuel reserves left at current consumption levels, a reminder of how quickly distant conflicts in the Middle East can translate into real economic pressure across energy-import-dependent Southeast Asia.

Insight: What was once hailed as a breakthrough in financial inclusion is now showing signs of strain across Southeast Asia. While microfinance and easy credit have expanded rapidly in the hopes of enhancing accessibility to entrepreneurship and investment opportunities, they’re instead being used to cover basic needs, be it food or healthcare. Cambodia is among those seeing the worst of it, with a private debt-to-GDP ratio that surged more than fivefold to 135% in 2023 – millions of households now hold microloans that far exceed their income capacity. As wage growth lags and living costs rise, microcredit is no longer a pathway out of poverty, but a mechanism that risks locking vulnerable borrowers into cycles of debt.

Impact: The implications extend beyond household stress. As debt burdens mount, families are increasingly forced into dire circumstances, from selling assets to, in more extreme cases, entering informal or illicit work, including scam centers, to pay off loans. More fundamentally, it challenges a core development narrative: that expanding access to credit is inherently beneficial. Without stronger regulation and social safety nets, Southeast Asia risks turning one of its most celebrated development tools into a source of long-term economic and social vulnerability.

Insight: While Japan’s newish prime minister, Sanae Takaichi, was elected — at least in part — due to an avowed policy to strengthen immigration rules, the country’s private sector is shifting in the opposite direction. Toyota, for example, is not only increasingly employing foreign workers on the factory floor (and encouraging suppliers to do likewise) — it is actively supporting them with language support, interpretation services, signs in their native language and leisure activities tailored to what they would do at home. The aim, as Toyota executives admit, is not only to attract overseas personnel but — crucially — to retain them, so that the cost and time of training them is not wasted.

Impact: Japan’s ambivalent views regarding the wholesale immigration of foreign workers is breaking down in the face of an increasingly severe labor shortage. As the country’s baby boomers start to retire, the working age population (15 to 64) is expected to drop from 75 million (2020) to 62 million (2040). That translates into shortages not only of healthcare personnel, waiters and truck drivers, but also construction and factory workers, engineers and scientists. Even ‘physical AI’ (aka robots) will only be able to fill a proportion of those physical jobs. It is encouraging, therefore, to see companies seize the initiative to find and keep foreign staff. The incentives on offer are surely only going to increase in both value and creativity.

What happens when two presidents from countries that view the world completely differently sit down to negotiate? Our Berlin partner William Klein, who spent years in Beijing during Trump's first term, offers a rare glimpse behind the curtain. From the mechanics of preparing the now-postponed summit to the shifting balance of economic leverage, Bill's conversation with the South China Morning Post cuts through the noise to reveal how power actually works between Washington and Beijing – and why it matters more than ever to business leaders.

Read the full article here.