Resilience in the Chinese Economy Amid Middle East Troubles
1. The Chinese economy demonstrates remarkable resilience: The Chinese economy shows remarkable resilience, with both the manufacturing and service sectors recovering simultaneously. This marks the first month of the year where exports have grown, driven by sustained demand for AI-related products. Additionally, the Chinese stock market has outperformed many other major markets since late February 2026, coinciding with the start of the Israeli-Iranian conflict.
2. FAO: Middle East conflict drives global food prices up: According to a report released on April 3 by the Food and Agriculture Organization (FAO) of the United Nations, the food price index averaged 128.5 points in March 2026, representing a 3-point increase (equivalent to 2.4%) compared to February 2026. This is the second consecutive month of increase following a five-month decline starting in February 2026.
3. Gulf region promotes new energy corridor to the Mediterranean: Gulf states are considering extending pipelines beyond the Strait of Hormuz to reduce their dependency on this essential maritime route for exports. One of the main options being explored is the construction of a pipeline linking the Arabian Peninsula to the Mediterranean through the Israeli port of Haifa. This project is seen as a strategic step to restructure the regional energy network, especially amid growing geopolitical tensions.
4. Iran accepts RMB for passage rights in the Strait of Hormuz: Chinese cross-border payment service companies have seen significant growth after the announcement that Iran will accept RMB for transit fees in the Strait of Hormuz. Ships pay Iran a passage fee of $2 million for this vital energy transport route, which can now be fully paid in RMB.
Recent Developments in Japan and Italy
5. Japan shifts rice policy towards demand-based production: On April 3, the Japanese government announced a shift in its policy to promote rice production based on current demand, while implementing new measures to prevent shortages. This change marks a departure from the past policy of increasing production to address rising rice prices.
6. Microsoft invests $10 billion in AI in Japan: Microsoft’s President, Brad Smith, revealed a $10 billion investment plan in Japan over four years until 2029 to enhance AI and cloud computing infrastructure. This marks Microsoft’s largest investment in Japan and will cover technical aspects, human resource development, and cybersecurity.
7. Italy delays closure of coal plants: Italy postpones the definitive closure of its coal plants to 2038, 13 years later than initially planned, as part of the latest energy law recently adopted. This decision is part of a right-wing government initiative to relax climate targets amidst the worsening energy crisis fueled by the Iranian conflict, contrasting with other EU member states using renewable energy as a buffer against geopolitical disruptions.
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