South Korea’s central bank is widely expected to deliver its first interest rate increase in more than three years on Thursday, marking the beginning of a new monetary tightening cycle as persistent inflation, stronger economic growth and a booming semiconductor industry reshape the country’s economic outlook.

A Reuters poll conducted between July 7 and July 13 found that 36 of 37 economists expect the Bank of Korea (BOK) to raise its benchmark interest rate by 25 basis points to 2.75%, with another increase likely before the end of the year. If delivered, the move would underscore policymakers’ growing confidence that the economy is strong enough to absorb higher borrowing costs even as geopolitical tensions continue to fuel inflationary pressures.

The expected rate hike comes after consumer inflation accelerated to 3.2% in June, the highest level in two-and-a-half years, remaining above the BOK’s 2% target for a fourth consecutive month. Economists expect inflation to hover around 3% through the second half of the year, supported by elevated global energy prices, a weaker South Korean won and higher import costs stemming from the renewed U.S.-Iran conflict.

Governor Shin Hyun-song has repeatedly signaled that the central bank’s dual mandate of supporting growth and maintaining price stability is now aligned in favor of tighter monetary policy, a relatively rare situation that gives policymakers greater confidence to begin normalizing interest rates.

“It was relatively well broadcasted at the last meeting, when the BOK raised both its growth and inflation forecasts,” said Bum Ki Son, economist at Barclays.

“The governor made it clear that the bank’s mandates were, on a rare occasion, not conflicting but pointing in the same direction for a hike. We think this meeting is likely to be one where they will deliver that hike.”

AI Chip Boom Offers A Lifeline

Unlike previous tightening cycles that were driven primarily by inflation concerns, the BOK now faces an economy experiencing broad-based strength. South Korea’s economy expanded at its fastest pace in nearly six years during the first quarter, powered by record semiconductor exports as global artificial intelligence investment continues to accelerate.

The AI-driven memory chip boom has transformed South Korea into one of the world’s strongest-performing major economies this year. Samsung Electronics and SK Hynix have announced investment plans worth hundreds of billions of dollars to expand domestic production capacity, while companies across the semiconductor supply chain continue to benefit from shortages of high-bandwidth memory chips used in AI servers.

The export surge has significantly improved government finances and strengthened expectations that the current expansion can withstand moderately higher interest rates.

Adding to that optimism, the finance ministry on Tuesday upgraded its 2026 economic growth forecast to 3.0%, the fastest pace since 2021 and substantially above its previous 2.0% estimate. The ministry also projected growth of 3.0% this year, citing booming semiconductor exports and robust private-sector investment.

The government has simultaneously unveiled an ambitious industrial strategy centered on artificial intelligence, semiconductors and advanced manufacturing. Three large-scale projects announced last month covering semiconductor manufacturing, AI data centers and physical AI infrastructure are expected to receive accelerated funding, with next year’s budget set to exceed 800 trillion won for the first time.

Officials have also outlined longer-term objectives of lifting South Korea’s potential growth rate above 3%, raising gross national income per capita to $50,000, and cementing the country’s position among the world’s four largest exporters.

“While robust economic indicators, such as exports, driven by a semiconductor boom are clearly opportunity factors, there remain tasks that our economy needs to overcome at the same time,” Vice Finance Minister Lee Hyoung-il said.

Despite the stronger growth outlook, policymakers remain concerned about mounting inflation risks linked to geopolitical developments.

Renewed fighting between the United States and Iran has pushed oil prices sharply higher, increasing fuel costs for one of Asia’s largest energy importers. Higher crude prices are feeding directly into transportation, manufacturing, and utility costs, raising the likelihood that producer price increases will eventually be passed on to consumers.

Currency weakness has added another layer of inflationary pressure. The South Korean won has fallen more than 4% against the U.S. dollar this year and is expected to weaken further in the coming weeks, according to a separate Reuters survey. A softer currency raises the cost of imported commodities, industrial inputs and consumer goods, making inflation more persistent.

“We expect KRW weakness to be a key focus,” said Benson Wu, Korea economist at BofA Global Research.

“While policymakers have intensified verbal intervention and coordinated messaging across ministries in recent weeks, the impact on the won appears to have been limited.”

Wu added that investors will closely monitor whether Thursday’s decision opens the door to consecutive rate increases, although BofA does not currently expect back-to-back hikes.

Beyond inflation, financial stability concerns are also strengthening the case for tighter policy. South Korea continues to grapple with elevated household debt levels and rising housing prices, both of which could worsen if borrowing costs remain too low while the economy expands rapidly.

A gradual tightening cycle would allow the BOK to lean against financial imbalances while keeping inflation expectations anchored without significantly undermining growth.

Markets will closely scrutinize the central bank’s updated policy statement and Governor Shin’s post-meeting remarks for clues about the pace of future tightening. While economists broadly expect another rate increase before year-end, much will depend on the trajectory of inflation, oil prices, exchange-rate movements and whether the current AI-driven semiconductor boom continues to support economic momentum.

However, the expected rate hike represents another sign that South Korea is entering a fundamentally different phase of the economic cycle. Rather than responding to weak demand, policymakers are now managing an economy benefiting from one of the world’s strongest AI investment booms, even as geopolitical tensions threaten to keep inflation elevated.

If inflation remains stubbornly above target and semiconductor exports continue to outperform, the Bank of Korea could become one of the few major Asian central banks embarking on a sustained tightening cycle over the coming quarters.

China’s leading memory chipmaker, ChangXin Memory Technologies (CXMT), is set to make its long-awaited debut on the Shanghai Stock Exchange’s STAR Market on July 27, according to two people familiar with the matter cited by Reuters.

The debut will mark the biggest semiconductor listing in mainland China since SMIC’s blockbuster IPO in 2020. It comes as Beijing intensifies efforts to build a self-sufficient semiconductor industry in response to escalating U.S. export restrictions and growing competition in artificial intelligence infrastructure.

CXMT last week said it would begin book-building on July 15 for its initial public offering, seeking to raise 29.5 billion yuan ($4.35 billion).

The offering is expected to be Asia’s largest IPO so far this year, underscoring renewed investor appetite for strategic technology companies despite a cooling rally in Chinese equities. Government officials and senior executives from companies across China’s semiconductor supply chain are expected to attend the listing ceremony, one of the sources said, highlighting the political significance Beijing attaches to the company’s market debut.

The IPO comes at a pivotal moment for the global memory industry, where demand has surged on the back of unprecedented investment in artificial intelligence infrastructure. DRAM chips, which temporarily store data for processors, have become one of the most critical components powering AI servers, cloud computing platforms and large language model training systems. The rapid expansion of AI data centers by hyperscalers around the world has tightened supply and driven a strong recovery in memory prices over the past year.

According to industry estimates, CXMT now holds roughly 7.7% of the global DRAM market, making it the world’s fourth-largest producer behind Samsung Electronics, SK Hynix, and Micron Technology.

While the Chinese company remains well behind the industry’s technological leaders, it has rapidly expanded production capacity as domestic customers increasingly seek alternatives to foreign suppliers amid intensifying geopolitical tensions.

The company said proceeds from the IPO will primarily be used to upgrade manufacturing facilities, expand production capacity, and advance next-generation memory technologies. Analysts view those investments as crucial if China hopes to narrow the technology gap with global leaders, particularly as AI workloads demand increasingly advanced high-bandwidth and low-power memory solutions.

CXMT’s listing marks another milestone in China’s drive to develop a domestic semiconductor ecosystem capable of reducing dependence on imported technology as Washington tightens export controls on advanced chips, manufacturing equipment and AI technologies.

Chinese authorities have poured billions of dollars into semiconductor development through state-backed investment funds, tax incentives and financing support. CXMT has emerged as one of the country’s flagship memory chip manufacturers alongside foundry giant Semiconductor Manufacturing International Corp. (SMIC).

The IPO also arrives as investors closely monitor China’s semiconductor sector for signs that domestic manufacturers can capitalize on AI-driven demand while navigating restrictions on access to cutting-edge foreign equipment.

Although CXMT has historically been viewed as trailing Samsung Electronics and SK Hynix technologically, industry analysts say the company has made meaningful progress in scaling production and improving manufacturing efficiency.

The fundraising could further strengthen its ability to compete in a market where memory producers are racing to develop more advanced DRAM products for AI accelerators and high-performance computing systems.

The transaction is also being watched for its potential impact on China’s capital markets. Large IPOs have at times raised concerns about draining liquidity from secondary markets, particularly as China’s technology stock rally has begun to moderate after a strong first half of the year.

Some analysts, however, believe strong structural demand for AI hardware will mitigate those concerns.

“Memory supply is still not enough,” said Donnie Teng, Greater China semiconductor analyst at Nomura.

He said the industry’s long-term outlook remains supported by sustained spending from global cloud providers on AI infrastructure.

“As long as AI demand is structurally positive and hyperscalers continue to spend their capex, the whole market can eventually absorb the liquidity drain from this IPO,” Teng said.

Beyond its immediate fundraising impact, CXMT’s listing will be viewed as a barometer of investor confidence in China’s broader semiconductor strategy. Analysts expect a successful market debut to encourage further listings by domestic chipmakers seeking capital to expand production and accelerate research, bolstering Beijing’s ambition to build a globally competitive semiconductor industry despite restrictive U.S. technology controls.

South Korea’s ruling Democratic Party has proposed legislation that would make it easier for SK Hynix to establish joint ventures with outside investors to finance new semiconductor manufacturing plants, underscoring Seoul’s determination to strengthen its position in the global artificial intelligence supply chain.

The proposed amendment follows President Lee Jae Myung’s broader strategy to transform South Korea into a global AI powerhouse by expanding domestic semiconductor production and securing leadership in advanced memory chips that underpin AI systems.

If approved, the legislation would remove a key corporate governance restriction that has limited SK Hynix’s ability to raise capital for large-scale factory projects at a time when semiconductor manufacturers are embarking on some of the most expensive investment cycles in the industry’s history.

Under current South Korean law governing strategic industries with cutting-edge technologies, a subsidiary of a subsidiary cannot establish certain joint ventures with outside investors.

Because SK Hynix is owned by SK Square, which in turn is controlled by SK Inc, the memory chipmaker falls under this restriction.

The proposed amendment would allow SK Hynix to establish joint ventures to build semiconductor fabrication plants provided it retains at least a 50% ownership stake, enabling the company to attract external capital while maintaining operational control. The legislation is aimed primarily at SK Hynix because other major South Korean conglomerates, including Samsung Group, maintain different ownership structures that are generally less affected by the restriction.

The proposal comes only days after SK Hynix completed a $26.5 billion U.S. share sale, one of the largest overseas equity offerings by an Asian technology company. While the fundraising significantly strengthened its balance sheet, analysts expect the company to require substantially more capital to finance its long-term expansion plans as AI demand accelerates.

Building cutting-edge semiconductor fabrication facilities has become dramatically more expensive. Advanced memory fabs now routinely require investments running into tens of billions of dollars, driven by increasingly sophisticated manufacturing equipment, higher construction costs, and the transition to next-generation memory technologies.

Lawmakers backing the bill said companies can no longer rely solely on traditional financing methods to support projects of this scale. South Korea needs the “fast construction of fabs to win against other major countries and companies,” the draft legislation states.

The proposed legal change highlights how governments are increasingly reshaping corporate rules to strengthen domestic semiconductor industries amid intensifying competition between the United States, China, South Korea and Taiwan for AI leadership.

SK Hynix has become one of the biggest beneficiaries of the AI boom as the world’s leading supplier of high-bandwidth memory (HBM) chips used alongside Nvidia’s AI graphics processors.

HBM has emerged as one of the semiconductor industry’s most strategically important products because it dramatically increases data transfer speeds between AI accelerators and memory, making it essential for training and deploying large language models.

Demand for HBM has consistently outpaced supply over the past two years, allowing SK Hynix to establish itself as Nvidia’s primary memory supplier and significantly improve profitability.

The South Korean government has responded by unveiling plans to create new semiconductor manufacturing clusters outside the Seoul metropolitan area. Both SK Hynix and Samsung Electronics have pledged to invest about 400 trillion won ($268 billion) each in new semiconductor facilities, making the projects among the largest industrial investments in the country’s history.

Under the proposed legislation, any new joint venture established under the revised rules would be required to locate its headquarters or principal office outside the greater Seoul area, supporting the government’s broader objective of promoting regional economic development while expanding national semiconductor capacity.

The bill follows a global pattern of governments intervening more actively to support semiconductor manufacturing through subsidies, regulatory reforms and industrial policies. The United States, European Union, Japan and China have all introduced major initiatives aimed at securing domestic chip production amid growing geopolitical tensions and concerns over supply chain resilience.

Despite the policy support, investors have remained cautious.

SK Hynix shares fell 8.6% in Seoul trading on Tuesday, extending losses from the previous session as enthusiasm following the company’s Nasdaq debut faded and broader semiconductor stocks remained under pressure.

The near-term share price weakness, however, does little to alter the company’s strategic importance. As hyperscalers, including Microsoft, Amazon, Alphabet, and Meta, continue investing hundreds of billions of dollars in AI infrastructure, demand for advanced memory is expected to remain robust. That will reinforce SK Hynix’s central role in the global AI hardware ecosystem, explaining why South Korean policymakers are moving to give the company greater financial flexibility to fund its next phase of expansion.