China’s local governments misappropriated billions in pension funds...Nike to cut China footwear output to counter tariff hit...Xiaomi SUV bookings reach 240,000

China’s local governments misappropriated billions in pension funds

China’s top auditor found that local governments have misappropriated tens of billions of yuan of state-run basic pension funds for various purposes, including debt repayment, as they face mounting financial strain, reports Caixin. The National Audit Office (NAO) reviewed RMB 4.1 trillion ($576.9 billion) of basic pension funds—covering public and private sector employees as well as urban and rural residents—across 25 provincial-level regions, identifying around RMB 60.2 billion in improperly used funds, according to the State Council’s 2024 annual audit report released Tuesday.

The most serious case involved the misappropriation of around RMB 40.6 billion in basic pension funds across 13 regions, with the money misappropriated for various purposes, including government debt repayment and the so-called “three guarantees”—ensuring basic livelihoods, public sector wages and essential government operations—the report showed. The “three guarantees” have taken on growing importance in recent years as local governments grapple with mounting fiscal pressures.

State pension funds are the first of China’s three-pillar pension system. They are strictly intended for pension payments. The funds are not supposed to be used for government debt repayment or budget shortfalls.

Nike to cut China footwear output to counter tariff hit

Nike Inc. is undertaking a major overhaul of its global supply chain to reduce its reliance on Chinese manufacturing for footwear destined for the US market. The move comes as the sportswear giant faces mounting tariff pressures and falling sales, reports Caixin. Currently, China accounts for about 16% of Nike’s footwear imported into the United States, Matthew Friend, Nike’s chief financial officer, said during an earnings call on Thursday. The company wants to cut that figure to a “high single-digit percentage range” by May 2026, shifting production to other countries to offset rising tariff costs.

Nike estimates tariffs imposed by the Trump administration will add roughly $1 billion to its expenses, highlighting the urgency of diversifying its sourcing strategy.

Still, Friend emphasized that China remains a vital part of Nike’s global manufacturing network. In the Greater China market, where retail foot traffic remains sluggish, Nike is concentrating on store upgrades and deepening its sports-related branding efforts.

Xiaomi SUV bookings reach 240,000

Chinese smartphone and electric-vehicle (EV) maker Xiaomi has been flooded with orders for its YU7 SUV, with analysts saying the car could challenge the dominance of the Tesla Model Y, the bestselling SUV on the mainland, reports the South China Morning Post. The company said that it received 200,000 pre-orders for the YU7 in just three minutes after bookings opened at 10pm on Thursday, with the number rising to 240,000 by 4pm on Friday.

The 240,000 bookings for the YU7, priced from RMB 253,500 ($35,366) to RMB 329,900, are categorised as “locked-in” orders because a deposit of RMB 5,000 cannot be refunded even if the buyer reneges on the agreement.

Such frenzy over a new EV is unprecedented in China, where monthly sales of 10,000 units for a single model are typically considered a success.

China rolls over Pakistan loans

China has rolled over $3.4 billion in loans to Pakistan, two senior Pakistani government officials told Reuters on Sunday, in a move that will help boost Islamabad's foreign exchange reserves, a requirement of the International Monetary Fund, reports Reuters. Beijing rolled over $2.1 billion, which has been in Pakistan's central bank's reserves for the last three years, and refinanced another $1.3 billion commercial loan, which Islamabad had paid back two months ago, the sources said.

The officials asked not to be named as they were not authorised to discuss the matter publicly ahead of an official announcement.

Another $1 billion from Middle Eastern commercial banks and $500 million from multilateral financing have also been received, one of the officials said. "This brings our reserves in line with the IMF target," he said.

China June factory activity decline eases

China’s factory activity improved for a second month but remained in contraction, as trade rebounds after the ceasefire in the tariff war with the US while weak domestic demand weighs on the economy, reports Bloomberg. The official manufacturing purchasing managers’ index was 49.7 in June, versus 49.5 in the previous month, slightly exceeding the median estimate in a Bloomberg survey of analysts. A reading below 50 indicates contraction.

The non-manufacturing measure of activity in construction and services rose to 50.5 from 50.3 last month, the National Bureau of Statistics said Monday. That compares with a forecast of 50.3.

For manufacturing, the new orders index expanded for the first time in three months, though a gauge of employment worsened again after a slight improvement in May. Among the 21 industries surveyed, more than half were in expansion territory, according to the statistics service.

Fingers in the pot

An audit by the Chinese National Audit Office (NAO) has found that local governments have misappropriated tens of billions of yuan of state-run basic pension funds for purposes including debt repayment, paying public sector wages and other government operations. Of the RMB 4.1 trillion ($576 billion) of basic pension funds reviewed, the NAO identified RMB 60.2 billion had been used improperly, with the most serious case involving the misappropriation of around RMB 40.6 billion across 13 regions.

The clearest message this sends is a confirmation of the fact that many of China’s local governments are in bad financial shape, and are having to dip into the longer-term focused pension funds to pay off more urgent requirements. There is also a chance that the numbers provided by the NAO are unlikely to detail the full extent of the issue.

China’s lack of comprehensive social safety net, within which pension funds play a major role, is also a key part of the country’s current consumer confidence struggles. And these findings are likely to decrease confidence both overall and also in local governments’ ability to pay out pensions when they come due.