Iran on Friday claimed it had targeted U.S. military forces in Syria and Bahrain, widening its attacks in the region as the U.S. completed its sixth consecutive night of strikes on the Islamic Republic.

The escalating standoff comes as the fragile truce signed by the U.S. and Iran last month showed further signs of unravelling. The interim agreement was intended to reopen the strategically vital Strait of Hormuz and stop the fighting.

U.S. Central Command said overnight that it had completed its latest major wave of strikes against Iran, hitting dozens of military targets, including air defenses, logistics infrastructure and maritime capabilities.

In a social media post, Centcom said more than 50,000 service members were operating across the Middle East, adding that they “remain vigilant, lethal, and ready.”

Iranian state media said the U.S. air attacks overnight had killed eight people and wounded 20, reportedly alleging that American strikes had hit civilian infrastructure, including bridges, a train station and an airport. CNBC could not independently verify the report.

Iran’s Revolutionary Guard, meanwhile, said that it attacked a U.S. command center in Syria’s al-Tanf region, according to state media. There was no immediate comment from the U.S. military or the Syrian government.

The U.S. military said in February that it had completed the withdrawal of forces from the strategic al-Tanf military base, which sits near the Syrian border with Iraq and Jordan.

Syria has sought to avoid being drawn into regional hostilities, with President Ahmed al-Sharaa telling a Chatham House event in March that the country would “remain outside” the conflict unless it is subjected to direct attacks.

Kuwaiti authorities said Friday that one of the country’s power generation and water desalination stations was hit in an Iranian attack, causing widespread damage.

Kuwait’s Electricity Water and Renewable Energy Ministry said via social media that it had extinguished a blaze triggered by the attack and was working to assess the damage and get the station working again.

Kuwait is known to be overwhelmingly dependent on desalination for drinking water, with almost 90% of the arid nation’s water demand satisfied through seawater desalination plants.

Air raid sirens were activated in Bahrain overnight, with the country’s Defence Force saying it had intercepted multiple aerial attacks from Iran. The alert followed a claim by Iran that it had targeted U.S. aircraft at the Sakhir airbase in Bahrain.

Jordan and Qatar also both said they had intercepted Iranian missiles.

U.S. President Donald Trump has insisted the war with Iran is going well, saying Thursday in a primetime address to the American public: “We are likewise winning big in Iran, and you will see the fruits of that labor very, very shortly.”

The U.S. president had threatened to strike Iran’s bridges and power plants next week if the country refused to return to the negotiating table.

Ian Lesser, distinguished fellow at GMF, a Washington-based think tank, said there appears to be a risk of the U.S. and Iran becoming mired in a so-called forever war.

“There’s a risk of this, but of course we were in essentially a cold and occasionally hot war with Iran for decades,” Lesser told CNBC by video call.

“I think in some sense this is misjudgment by the current administration. But it is also part of a pattern in the American approach to the use of force, that we have enormous capability and enormous operational prowess and we are hobbled by strategic mistakes,” he added.

Oil prices were higher on Friday, firmly on track to register bumper weekly gains.

International benchmark Brent crude futures with September delivery advanced 1.7% to trade at $85.72 per barrel, while U.S. West Texas Intermediate futures with August delivery gained 2.2% to trade at $80.63.

Both oil contracts are up more than 11% so far this week and on track for their best weekly performance since late April.

Chinese startup Moonshot AI has unveiled a new model it says closes the gap with leading U.S. offerings and surpasses OpenAI and Anthropic’s most capable systems on some benchmarks.

Kimi K3 still trails Anthropic’s Claude Fable 5 and OpenAI’s GPT 5.6 Sol on overall performance, the company said on Friday, but consistently outperformed other tested models.

The model beat Claude Opus 4.8 and GPT 5.5 — models that sit just behind Anthropic and OpenAI’s leading-edge systems — on benchmarks including coding and general agents, according to Moonshot.

It’s China’s largest AI model so far, with 2.8 trillion parameters, referring to the size of its neural network.

“Despite persistent hardware/compute capacity constraints in China, K3 demonstrates that pre-training scaling, paired with architectural innovation, can still deliver step-change gains for flagship Chinese models,” Bank of America analysts said in a note led by Alex Liu.

The release comes as the race for AI supremacy between the U.S. and China intensifies.

Chinese AI models are already gaining traction among Western companies as they close the performance gap with U.S. rivals and remain cheaper to use than the most advanced offerings from American labs. U.S. lawmakers are considering how to curb the growing adoption of Chinese AI models by homegrown companies.

Founded in 2023, Beijing-based Moonshot AI is one of China’s leading model builders. It raised $2 billion at a more than $20 billion valuation in May, Bloomberg reported.

Backers include Chinese tech giants Alibaba, which makes the Qwen series of AI models, and Tencent.

Chinese AI rivals’ shares dropped on news of the release. Z.ai, which released a new model to much fanfare in June, saw its stock plummet 28% on Friday. MiniMax Group, another Chinese model company, fell 16%.

“K3 raises the capability ceiling for China AI models, shifting the burden of proof to other independent AI labs,” said Liu.

Earlier this week, Alibaba saw its stock buoyed by news that it was partnering with Apple in China. However, shares dropped 4% Friday.

“For Alibaba, while it benefits from broad AI training/usage growth for its cloud service given tight compute environment, Alibaba Qwen’s “open-source leader” narrative may face some tests,” said Liu.

Chinese President Xi Jinping on Friday positioned China as a partner in artificial intelligence to the Global South, saying that countries should come together to build AI and help developing countries as well.

Speaking at the World AI Conference in Shanghai, Xi announced that China will provide developing countries with 5,000 opportunities in AI training and seminar programs, as well as develop AI cooperation with various blocs, including the Association of Southeast Asian Nations, the League of Arab States and the African Union.

“China is willing to work with all parties to seize and address the opportunities and challenges of artificial intelligence development with a more open attitude, more pragmatic actions, and a longer-term vision,,” according to a Google translation of his speech in Mandarin.

Xi said that AI development should not be a “solo performance” by a single country, but a “symphony of international cooperation” and China was “ready to be more open, take more practical actions, and assume a more visionary perspective.”

The remarks come a day after 29 countries signed an agreement in Shanghai to establish the World Artificial Intelligence Cooperation Organization, or WAICO, which will be headquartered in the city, according to Chinese state media outlet Xinhua.

Xi also urged to strengthen risk awareness, and ensure that AI was “secure and controllable,” and was “always remains under human control,” adding that countries should oppose “overstretching the national security concept in the field of AI, or placing one country’s security over that of others.”

While the Chinese president did not name a specific country, the U.S. has implemented various export controls measures aimed at curbing China’s access to high-end tech. The U.S. began tightening restrictions during President Donald Trump’s first term, including placing Huawei on the Commerce Department’s Entity List in 2019.

The Biden administration later introduced export controls in 2022 to restrict China’s ability to buy advanced computing chips and manufacture advanced semiconductors, citing national security risks.

Chip giant Nvidia has seen its market share in China plummet, saying in its annual report that it was unable to create and deliver a competitive product for China’s data center market that is approved by both Beijing and Washington.

“As of the end of fiscal year 2026, we were effectively foreclosed from competing in China’s data center computing/compute market, and our effective foreclosure from the China market helped our competitors build larger developer and customer ecosystems to challenge us worldwide,” it added.

At the event, Chinese tech heavyweight Huawei showcased its Atlas 950 SuperPoD supernode, which is designed to link multiple chips together to boost computing power. The company said it addresses the computing power needs of large-scale data center construction and large-scale model training.

India’s biggest public market offering this year, SBI Fund Management, has garnered bids worth 2.97 trillion rupees ($30.7 billion), underscoring the liquidity available in the market ahead of the much larger issues anticipated in 2026.

SBI Fund Management, which is a joint venture between State Bank of India and Europe’s Amundi Group, was in the market to raise 97.9 billion rupees ($1 billion). Its initial public offering was oversubscribed 41.6 times, owing to an enthusiastic response from institutional investors.

The portion reserved for qualified institutional buyers was subscribed 140 times, with most of the bids coming from domestic institutional investors such as banks and insurance companies. Participation by retail investors was relatively muted, with subscriptions at 3.6 times the offer that closed on Thursday.

Institutional interest is good news for public issues of India’s largest stock bourse, the National Stock Exchange, and the country’s biggest wireless telecommunications company, Jio Platforms, expected to hit the market later this year.

Both companies are estimated to raise more than $3 billion each, according to Mumbai-based IPO intelligence firm Prime Database.

India has been the most prolific IPO market in the world over the last two years, with the highest number listings, but activity was subdued here during the first half of the year.

Rising energy prices due to the Iran war have squeezed the Indian economy, taking the sheen off its domestic consumption story. That has coincided with a global investment rally in AI stocks, an industry where India has no champions.

As a result, since the start of the year, the Indian benchmark Sensex has lost over 9.4% and has been among the worst-performing large stock markets. The broader Nifty 50 is down 7.9% so far this year. In June, after a ceasefire between Iran and the U.S., the Indian market recovered partially, and companies started announcing fundraising plans.

Stock market offerings worth $50 billion could flood the Indian markets this year, though the continuation of the Iran war remains a key risk.

Investors will be keeping a close watch on the listing of SBI Fund Management next week, as strong post IPO gains would increase appetite for new issues. SBI Funds is India’s largest asset management company and, as of March 2026, it had 29.5 trillion rupees ($395 billion) under management.

Seven & i Holdings Co. shares gained over 4% Friday after a Nikkei report said the 7-Eleven parent was nearing a deal to buy a stake in Polish convenience giant Zabka Group.

The potential transaction, expected to be worth several hundred billion yen, underscores Seven & i’s strategy to expand its overseas convenience store business by entering the Eastern European market, the Nikkei reported.

Zabka Group, established in 1998, has more than 10,000 franchise-operated stores in Poland selling hot snacks and groceries. Shares of the retailer, listed on the Warsaw Stock Exchange, closed 10.9% higher on Thursday, to hit a record high.

Seven & i has been accelerating its global expansion with an eye toward increasing its worldwide store count, including Japan, from 87,000 to 100,000 by 2030. The company expects that the Zabka investment will significantly bolster its retail network in Europe, according to the Nikkei report.

If finalized, the transaction would mark Seven & i’s first major investment in an overseas convenience store operator in five years, following its $21 billion acquisition of U.S. chain Speedway in 2021.

Seven & i Holdings and  Zabka Group did not immediately respond to CNBC’s requests for comment. 

China’s biggest weakness in its rivalry with the United States isn’t AI, semiconductors or tariffs. It’s finance, according to one of the financiers who helped open China’s markets to Wall Street.

Fred Hu, the former Goldman Sachs executive who helped engineer the firm’s landmark investment in Industrial and Commercial Bank of China before founding Primavera Capital, says Beijing’s financial system has become the country’s “short plank” as Washington and Beijing increasingly sever investment ties.

Hu’s private equity firm has backed several of the China’s tech and consumer conglomerates, including Alibaba, ByteDance, Yum China and ride-hailing firm Didi Chuxing. 

Hu also served as Henry Paulson’s principal adviser on China during the former U.S. Treasury secretary’s tenure as Goldman Sachs CEO and was a trusted adviser to reform-minded officials under then-Premier Zhu Rongji.

As U.S.-China competition extends beyond technology to the capital that fuels it, Washington has restricted American investment in Chinese companies developing sensitive technologies, while Beijing has sought to limit U.S. funding for some of its most promising startups. Hu argues that financial decoupling may come at a cost.

Chinese regulators have planned to restrict private tech firms from accepting U.S. capital without government approval, after Beijing ordered to reverse Meta Platform’s high-profile acquisition of startup Manus. Washington also bars its pension funds and college endowments from investing into Chinese firms developing sensitive technologies. Listings by Chinese firms in the U.S. have also become politically fraught in both countries.

American private equity funds have largely sailed through the sweeping rivalry unscathed, but Chinese peers have been squeezed from both ends, said Hu, whose firm manages about $20 billion in assets.

Compared with the deep capital pool in the U.S., “finance is still China’s short plank,” he told CNBC in Singapore last week. “Blackstone can do without China. But China’s private equity funds still rely heavily on the U.S. in fund raising,” he said.

The U.S. stock market is worth roughly $75 trillion, against $22-odd trillion for China and Hong Kong combined, with thousands of pension funds available for private funds like Hu’s to tap into.

Chinese state funds are usually small and scattered across local governments, with Beijing keeping a firm grip on the country’s massive pool of household savings that could otherwise fill the gap left by the retreating U.S. capital.

“With U.S. investors deterred by regulatory risk from Washington, China’s startup ecosystem has lost a major source of capital. Chinese PE and VC shops can only fill a small fraction of the gap left behind,” said Kyle Chan, a fellow at Brookings Institution, a Washington-based think tank.

He anticipates that U.S. restrictions on American capital flows to China will tighten further.

Beijing, for its part, has never aspired to Wall Street’s model.

“Capital is an absolutely critical resource that Beijing does not want to relinquish control over,” said Chan. Chinese policymakers see the U.S. economy as being steered by private finance — at odds with the party-state’s intention to set overall policy direction itself, Chan added.

China’s financial system has been central to Beijing’s tech and industrial ambitions, marshaling vast sums into strategic sectors, such as electric vehicles, artificial intelligence, and renewable energy.

Private equity and venture capital activity has remained well below its 2021 peak, partly because public capital crowded out private investors, according to Rhodium Group. Government-led funds contributed 81% of new capital last year, up from 65% in 2019, it estimates. “Rather than retreating, Beijing is intensifying its control over the allocation of resources, both public and private,” the research firm said.

Over the long run, Rhodium warns, this approach is likely to compound wasteful spending and inefficiency in the economy, even as it advances industrial goals in the short term.

China has the capital to incubate more homegrown tech companies and to help traditional industries transform, but few renminbi funds are built to be a meaningful player in dealmaking and corporate restructuring, Primavera’s Hu said. 

The country’s national savings rate hovered near 43% of its GDP, more than double the U.S. rate of about 18%, accumulating 167 trillion yuan ($24.6 trillion) in household wealth as of end-2025.

“Households overwhelmingly favor property, bank deposits, and guaranteed products over venture investing,” said Han Shen Lin, China managing director at The Asia Group, a Washington-based advisory firm.

All that idle cash points to what Hu calls an “underdeveloped” financial system: Chinese households cannot freely invest abroad and have soured on property and stocks at home, while the country’s fund managers struggle to raise money in their own market.

China’s securities regulator this year tightened the screw on mainland investors channeling money into overseas stocks, as part of a broader push to keep capital outflows in official channels that give Beijing more visibility and control.

Chinese fund managers have increasingly courted Middle Eastern sovereign wealth to seek funding, but the Gulf’s money pool is far smaller than America’s – and shallower than China’s own wealth stash, Hu said.

“Ultimately, Beijing is most constrained by its own fear of ceding control over capital resources,” Chan echoed.

Not a habitual critic of China, Hu describes himself as deeply patriotic and believes Chinese leadership remains committed to reform and opening. Primavera often convenes small gatherings to bring wary Western executives and institutional investors to visit robotic firms, battery makers, and electric-car plants in the country.

In 2010, when Hu’s name circulated for a senior position at China’s central bank, he chose Primavera instead. Asked about the decision — a subject he rarely addresses in public — Hu said, despite a passion for public policy, his life and education have built him to act as a bridge between China and the West, outside the system.  

Hu remains optimistic about investing in China, even in its sluggish consumer sector — though the returns now demand more of fund managers. Solid brands and business models can still create value, he said, seeing gains in tightening distribution and controlling costs, rather than from waiting for an upturn.  

Demand is recovering slowly, Hu said, pointing to two indicators for assessing the reviving confidence: whether this summer’s university graduates find jobs, and whether the property market has found a floor. 

To get consumers spending, Hu said the government needs to act on three fronts: steady and transparent policy that gives the private sector certainty, a fuller social safety net, and a rebuilt consumer-credit market — thinned since regulators forced Ant to restructure its lending arms — so that spending no longer depends on savings alone. 

Primavera’s money is moving into AI at several levels: large-language-model developers, physical AI, such as robotics and automation, and energy infrastructure, including wind and battery storage to keep data centers powered. 

The firm is also betting on upgrading traditional industries, such as healthcare, education, and manufacturing, to create additional value with the technology. 

Nvidia unveiled a new AI model for robots and vision AI agents on Wednesday, deepening its push into the physical AI market in Japan.

The company’s new model, Cosmos 3 Edge, is a so-called world model, designed to help systems perceive and navigate physical environments in real time. Cosmos 3 edge is a World models are systems that can learn from a wider range of inputs compared to large language models (LLMs). The rollout follows the launch of Cosmos 3 in May.

The regional expansion takes center stage during CEO Jensen Huang’s two-day visit to Japan, where the Silicon Valley chip giant is expanding its physical AI footprint by forming a coalition that local industrial giants, including Fujitsu, Hitachi, and Kawasaki Heavy Industries, intend to join, according to Nvidia.

“The next frontier of AI is in the physical world, and this is a once-in-a-generation opportunity for Japan,” Nvidia CEO Jensen Huang said in a Wednesday statement. “Japan invented modern manufacturing. Now, it has the opportunity to reinvent it for the age of intelligent industries.” 

The tech giant’s partnership with Japanese firms comes just months after Microsoft‘s $10 billion investment in the country, which aims to build out AI infrastructure and beef up cybersecurity. Japanese investment giant SoftBank has bet heavily on the boom in AI. It’s looking to partner with Microsoft and Sakura Internet to develop AI in Japan.

Japan’s AI market is expected to reach $27.9 billion by 2029, opening doors for U.S. firms to invest, according to the International Trade Administration. This growth is driven by Tokyo’s active push to promote AI adoption across industries, coupled with the eagerness of local firms to forge international partnerships.

Ajay Rajadhyaksha, global chairman of research at Barclays, told CNBC last month that the country holds an advantage in Asia, driven by its diverse AI and clean structural growth stories.

Nvidia is also aggressively expanding its AI footprint into Japan’s healthcare and biotechnology sectors by extending its reach into agentic AI for advanced sciences through new drug discovery and medical robotics initiatives.

When it comes to agentic AI, Nvidia highlighted the ongoing expansion of Tokyo-1, the AI drug discovery consortium operated by Xeureka, a Mitsui subsidiary. The platform, which has steadily grown since its initial announcement in 2023, is powered by the Nvidia BioNeMo Agent Toolkit, a platform for accelerating autonomous AI drug discovery.

Japan’s pharmaceutical heavyweights are already scaling their involvement. Major drugmakers, including Astellas Pharma Inc, Daiichi Sankyo, and Ono Pharmaceutical are utilizing Nvidia’s specialized biology toolkit to streamline their workflows, the U.S. company said in a blog post.

Beyond biotech, Nvidia said it is making inroads into industrial automation through a partnership with Kawasaki Heavy Industries.

Vibe-coding startup Emergent on Wednesday became the second Indian artificial intelligence company, within a month, to be valued at more than a billion dollars, signaling that the South Asian country was finally entering the AI race

Emergent, which was launched a year ago, raised $300 million in a Series C funding round that valued the business at $1.5 billion, the company said in a release Wednesday.

Bengaluru-based investment firm Creaegis led the round and was joined by India family office firm Claypond and Californian fund Sentinel Global. Existing investors Khosla Ventures, SoftBank Vision Fund 2, Lightspeed, and Y Combinator also participated.

“We built Emergent for the non-technical entrepreneur and the small business owner, with 70% of our users having no prior coding experience,” said Mukund Jha, co-founder and chief executive of Emergent. About 12 million apps were built on Emergent in the last year by “small business owners and solo entrepreneurs,” Emergent said.

Exactly a month ago, India’s full-stack sovereign AI company Sarvam raised funds of $234 billion from a clutch of investors, gaining a post-money valuation of $1.5 billion.

These developments are “consistent with broader momentum we’re tracking,” Deepika Giri, head of research for AI, analytics and data at IDC Asia Pacific, told CNBC, adding that “nearly half of Indian enterprises are already testing agentic AI solutions.”

This is an “unusually fast experimentation and workforce automation at scale for a market this size,” she said.

Market research firm IDC expects 45% of Indian organizations to use specialized cloud services by 2026, to gain computing access, which will ease a key bottleneck for training and inference.  

It said India also has the broadest AI accelerator stack in APAC — spanning NVIDIA, AMD, and hyperscaler silicon — giving it a flexibility that most markets lack. An accelerator stack is any piece of hardware that can be used to train AI workloads, while hyperscaler silicon refers to customized chips.

These factors, coupled with a vast engineering and AI talent pool, could help India shed its reputation as an AI laggard, experts said, but cautioned that these are still early days in that journey.

Sarvam’s funding reflects confidence that India can build “valuable intellectual property in indigenous and multilingual AI,” Mohammad Hassan, head of APAC dividend forecasting at S&P Global Market Intelligence, told CNBC.

Emergent’s fundraise highlights the strength of Indian technology talent, which could prove to be “India’s trump card in the long run AI race,” he added, calling the developments “positive signals” but not proof of a major shift.

India trails in the global AI race as it does not yet produce cutting-edge chips domestically, nor does it yet have a frontier-scale foundation model on a par with leading U.S. or Chinese models. Its data center capacity also lags considerably behind the AI leaders.

But the South Asian country, which hosted a major global AI conference this year, has been confident of making a mark in the AI space by building applications on top of foreign foundational models.

During the global AI summit in February, Indian Prime Minister Modi said that his vision was for India to be “among the top three AI superpowers globally,” not just in terms of being a consumer but also a creator.

India being a major IT services exporter has the software talent to build AI applications for the globe, but securing unfettered access to foundational models remains a key risk to its ambitions as countries are increasingly attaching strategic importance to this technology.

It will take “at least three to four years” for India’s AI ecosystem to grow to a point where it creates a “flywheel effect,” Neil Shah, vice president of research at Counterpoint Research, told CNBC’s “Inside India” on Thursday.

Hello, this is Priyanka Salve, writing to you from Singapore.

Welcome to the latest edition of  “Inside India“ — your one-stop destination for stories and developments from the world’s fastest-growing large economy.

Over the last decade, China reversed its brain drain, luring thousands of skilled workers back home to help fuel its rise as a technology powerhouse.

India is taking the opposite approach. It is sending more of its vast, young workforce overseas. This week, I unpack why India is signing mobility pacts with several of its trading partners even as anti-immigration sentiment is on the rise across the world.

Any thoughts on today’s newsletter? Share them with the team.

From Europe to New Zealand and Russia to the Middle East, labor mobility pacts have become a common feature in many of the recent deals India has finalized with its trading partners.

The lack of opportunities for highly skilled labor in the country, with one of the largest working-age populations, coupled with India’s increasing reliance on remittances to fund its finances, is driving the government to secure passage for its workforce overseas.

Unlike China, which has become a manufacturing powerhouse generating jobs at scale, India has not been able to fully address its “grave challenge of an unemployment rate hovering around 5% to 6%,” Jayant Krishna, senior fellow and chair on India and emerging Asia Economics at the Center for Strategic and International Studies, told CNBC.

“If we add under-employed people, the rate jumps up alarmingly,” Krishna said, adding that by placing skilled and semi-skilled workers in overseas markets, India manages “the aspirations of our ever-expanding working-age population.”

India’s government has become increasingly reliant on money sent home by its overseas workers, receiving the highest amount of remittances globally, equal to roughly 3% of its GDP, experts said.

But this policy doesn’t come without resistance, especially at a time when anti-immigration sentiment is on the rise across the world. Last week, Prime Minister of New Zealand Christoper Luxon hailed the country’s free trade deal with India that also enhances labor mobility for Indian workers.

“You have enriched our country economically, socially and culturally,” Luxon told a crowd of Indian diaspora in Auckland. But the deal, which is awaiting final clearance from parliament, faces strong opposition from coalition members of Luxon’s government.

The country’s Foreign Minister, Winston Peters, in a post on X, said the trade deal with India is creating “unprecedented immigration settings” and will make it harder for “kiwis finding jobs.” Months earlier, Shane Jones, a minister in the Luxon government and a member of Winston’s party, NZ First, said the deal would lead to a “butter chicken tsunami” coming to New Zealand.

Modi’s recent visit to Australia – where India overtook the England as the top country for Australians born overseas last year – also sparked anti-India protests. Australian social media personality Hugo Lennon heckled Modi in Melbourne, shouting, “No more Indians! This Country is for Australians,” according to local media reports.

Meanwhile, the U.S., one of the biggest recipients of Indian workers, is tightening visa rules even as negotiations are ongoing for a trade deal with New Delhi. Washington’s move has only given India an added incentive to strike labor mobility deals to export workers to Russia, Israel and the European Union, and Finland earlier this year.

The U.S. created H-1B visas in 1990 and they’re used heavily by U.S. tech giants to bring in highly skilled workers from overseas. India has been, by far, the biggest recipient of H-1B visas, but the Trump administration is trying to drastically reduce the country’s reliance on the scheme.

India observed the vicissitudes of H-1B politics in the U.S. and “drew the evident lesson: do not leave your diaspora’s access to foreign labor markets hostage to another nation’s domestic politics,” Ronak D. Desai, visiting fellow at Stanford’s Hoover Institution, told CNBC.

“Mobility grounded in treaty is politically far more durable than mobility granted by unilateral visa policy,” he added.

India’s move to export labor stands in sharp contrast to its fellow billion-plus-people neighbor, China, which has seen a flood of returnees in the last decade, partly due to the geopolitical tensions that led to the expulsion of Chinese scientists from the U.S.

China has a term for the phenomenon: Haigui, literally, a “returning from across the sea,” according to the Boym Institute think tank.

“Haigui” has seeded its semiconductor, biotechnology, and artificial intelligence sectors, experts said, adding that Beijing also created the domestic capacities to absorb this highly skilled talent.

“Professionals with portable skills have been extremely valuable to help China’s technological advancement,” Rafiq Dossani, adjunct senior Economist at RAND Corporation, told CNBC.

While Beijing offers both incentives to return and infrastructure, India lacks the ability to spur development of advanced technologies like artificial intelligence, he added.

India spends about half of one percent of its GDP on research and development, lower than the global average of 1.7% and significantly below the over 3.5% spent by the U.S.

In the absence of comparable opportunities in India, the Modi government does not see “brain drain” as a major concern, Pramit Chaudhuri, South Asia practice head at Eurasia Group, said.

Rather, they are choosing to promote it, he added. 

India’s inflation accelerates to 4.38% in June, exceeding forecasts
India’s consumer price inflation rose to 4.38% in June, up from 3.93% in May as the U.S.-Iran war ‌and a weak monsoon raised food and fuel prices, adding to cost pressures. The headline inflation number was above economists’ expectations for a 4.30% rise, according to a Reuters poll.

India ramps up missile sales in Indo-Pacific as China’s assertiveness turns neighbors wary
India will supply its BrahMos and Astra missiles to Indonesia, the country’s third such agreement in the Indo-Pacific, underscoring New Delhi’s rise as a defense supplier in the region amid growing concerns over China’s assertiveness.

Coming up

July 16: SBI Fund Management IPO closes.

China’s economy in the second quarter expanded at its weakest pace since the fourth quarter of 2022, reinforcing calls for policy stimulus as an accelerating slide in investments deepened the strain on growth, while consumption stayed subdued.

Gross domestic product growth came in at 4.3% in the April to June period, data from the National Statistics Bureau showed Wednesday, missing economists’ forecast for 4.5% growth in a Reuters poll, and slowing from 5% in the first quarter.

That second-quarter growth came below Beijing’s full-year growth target range of 4.5% to 5%, the least ambitious goal in decades, amid tensions with trade partners, including the U.S. and the European Union, and sluggish domestic demand.

Given the disappointing growth, Tianchen Xu, senior economist at Economist Intelligence Unit, expects stimulus measures to be ramped up in the third quarter, including a policy rate cut to stimulate investment demand.

Urban fixed-asset investment, including real estate development and infrastructure projects, declined 5.7% in the first six months from a year earlier, worse than expectations for a 4.9% drop in a Reuters poll.

Xu attributed the steepening investment slump to local governments channeling resources into debt restructuring and a shortage of eligible projects in the pipeline. “Boosting infrastructure investment will be a key focus for stabilizing growth.”

Beijing’s campaign to rein in excess capacity and end bruising price wars will also weigh on private investment in the near term, said Sarah Tan, economist at Moody’s Analytics.

The investment in real estate, infrastructure and manufacturing plunged 18%, 2.4% and 1.2%, respectively, according to the official data.

In June, China’s retail sales grew 1%, rebounding from a 0.6% drop in the prior month and exceeding economists’ forecast for a 0.1% fall. Retail sales in May posted their first monthly decline since late 2022, dragged down by tepid demand and merchants’ steep discounting.

Industrial output expanded 5.3% in June from a year ago, stronger than the forecast 4.7% growth, and gaining pace from 4.5% expansion in May.

Chinese economy has grappled with a deepening supply-demand imbalance. Robust industrial production and exports tied to the global AI investment boom continue to power headline growth, even as consumption and private investment weakens amid a prolonged property downturn and volatile energy prices.

The statistics bureau noted “acute” imbalance between excess supply and sluggish demand, urging policymakers to step up “counter- and cross-cyclical adjustments.”

Urban investment slumped for the first time in decades last year, falling 3.8% from a year earlier, and steepened from a 4.1% contraction in the first five months, as a prolonged property downturn and tighter constraints on local governments’ borrowing hampered one of China’s traditional growth drivers.

The intensity of pullback in investment has been “unprecedented,” said Li Daokui, a professor of economics at Tsinghua University. Speaking at a macroeconomics seminar earlier this week, the former China central bank advisor called for a substantial expansion in government borrowing to more than double this year’s planned 12 trillion yuan ($1.7 trillion) in new debt issuance.

Economists are divided over whether the slowdown will force Beijing’s hand on stimulus.

Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, said the weaker headline growth is unlikely to prompt a meaningful policy shift in the coming months, with a strong first quarter and resilient exports keeping the annual target within reach.

Better-than-expected retail sales and industrial output would give policymakers “more wiggle room” on near-term stimulus, said David Chao, global market strategist at Invesco.

Exports remain the bright spot in an otherwise cooling economy, as the global AI buildout helps offset the headwinds from Middle East conflict.

China’s export growth beat expectations in June, clocking the strongest rise since late 2021, powered by demand for chips, computers and parts, and power equipment.

Surging tech-related imports also point to a deepening AI infrastructure cycle at home, said Chao, with autos and consumer goods adding momentum.

The export strength, however, is straining ties with trade partners. China’s surplus with the European Union widened 24% in the first half, according to Larry Hu, chief China economist at Macquarie, driven by machinery and vehicle shipments.

“Despite a three-month trade truce, the growing surplus keeps the risk of a China–EU trade conflict elevated,” Hu said.

Reflecting the two-speed growth in labor market, workers at companies with overseas revenue were more upbeat about their job prospects than those at domestically focused firms, according to Morgan Stanley.

Pay cuts remained households’ top concern, the bank estimates, lowering income growth over the next 12 months to about 5% from its previous forecast of 5.8%.

Chinese urban unemployment rate, which excludes those who leave cities for rural areas, remained steady at 5% in June. The leadership is targeting an unemployment rate of less than 5.5% over the next five-year period.

A separate survey conducted by Li’s team, that counted people who have been jobless for the past two years and are no longer covered in the official labor force survey, showed China’s broad unemployment rate at a much-higher 10.2%. More than half of the roughly 24 million long-term unemployed are aged 16 to 24.

Youth joblessness has been a particular sore point for official statistics. Beijing had discontinued the youth unemployment rate in 2023 after it surged to a record 21.3%, before reinstating it months later under a new methodology and at a lower rate.

The youth unemployment rate fell to 15.6% in May, the lowest level in nearly a year.