THIS MORNING: PIF reportedly sets up second office in China

Good morning, wonderful people. Our budget deficit ballooned in the first quarter to its highest level in 8 years and the second-highest on record. Revenue was barely affected, though. The culprit was the government shoring up spending on subsidies and grant to get in front of the war’s impact — as well as a hike in defense spending (for obvious reasons). We have the breakdown in today’s news well below.

ALSO- Another big healthcare consolidation move saw Fakeeh Care snap up 100% of Al Fagih Hospital, Saudi VCs are stepping up as global and regional investors remain cautious, and 1Q earnings are out from Saudi Energy, Savola, and more. Let’s dive in.

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INVESTMENT — The Public Investment Fund (PIF) is reportedly expanding its physical footprint in China with a new office in Shanghai, unnamed sources told Bloomberg. Registered last year, the office operates under the fund’s Beijing hub and aims to support outbound agreements in China while also helping attract Chinese investment into Saudi Arabia, the sources said.

Why it matters: Although the international share of PIF’s international portfolio allocations has been limited to 20% as domestic spending ramps up, PIF Governor Yasir Al Rumayyan said the composition of overseas investments is shifting toward sectors such as global equities, infrastructure, technology, aerospace, and gaming — areas where China excels.

Our take: The Shanghai expansion points to a more transactional phase in Saudi-China investment ties, with growing scope for capital-for-localization that follows the example of PIF’s Lenovo investment and its subsequent Saudi manufacturing facility.

Data point

SAR 470 bn — that’s the financing provided to the Kingdom’s MSMEs by the end of 2025, up 33% y-o-y, Sama’s Executive Director of Non-Banking Financial Institutions Control Bader Alotaibi said. Outstanding MSME financing reached a record 11.6% of the total financing portfolio, with average growth of 27% over the past three years.

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The big story abroad

Mixed messaging over the US-Iran negotiations continues this morning, with President Trump vowing to bomb Tehran “at a much higher level” if an agreement isn’t reached soon. Trump’s post came after media reports of the two sides inching closer to ending the war and setting a framework for nuclear negotiations, with Iran’s response expected through Pakistani mediators by Thursday’s end.

Meanwhile, ceasefires seem to be shaking everywhere: Israel targeted an elite Hezbollah commander, its first strike on Beirut’s suburbs since the ceasefire in Lebanon. An attack on the Gaza Strip also targeted the son of Hamas’ chief Khalil Al Haia amid a renewed bombing campaign.

Over in the tech world: A tie-up between Anthropic and SpaceX will give the AI lab access to the Colossus 1 data center — and see the two explore opportunities for building data centers in space.

Also worth reading this morning:

• A “systemic jet fuel shortage” threatens summer travel in Asia and Europe.
• CNN founder Ted Turner passed away at 87.
• Apple agreed to a USD 250 mn settlement over delayed Siri AI features.