Aurelia Butler

Hello. The Trade Secrets newsletter never sleeps, but it does go fortnightly from today until the beginning of September, and this is my last one till then. In the meantime you’ll hear some fresh voices in the newsletter every other week in the form of handpicked FT colleagues standing in. At this stage of the year it’s traditional for me to do a half-time (more or less) review: what’s happened, what was surprising, what was predictable, what we’ve learned, what to watch out for in the autumn. Charted Waters is on the state of China’s Belt and Road Initiative. The usual email address for any thoughts: [email protected], famine, pestilence and death. But it’s not all badWell, I didn’t see the Ukraine war coming, or the subsequent energy and food crisis, or the severity of the Chinese Covid-19 lockdowns. Then again, neither did many people, or the world would have been much better prepared.If you had to sum up the experience of 2022 so far it’s as follows: the big external events have been negative, but (and here’s a hostage to fortune) the global trading system has held up reasonably well. Even more heartening, perhaps even shocking for regular readers who know of my scepticism about governments’ handling of globalisation, is that the policy response has been mediocre but not entirely awful.The year started with, we all hoped, the resolution of supply chain snarl-ups, or at least the puzzle over their cause. In the optimistic corner (including me) were people contending that they mainly reflected a massive surge in consumer durables as households caught up on their goods spending after the lockdown. The pessimistic view was that the pandemic had shown up serious structural issues in the global trading system, particularly the US west coast ports, which could take billions of dollars of investment and years to resolve.Just when we thought this issue might get resolved, a bunch more supply-side shocks hit including the China lockdowns, which affected factories, trucking and ports, and the interruption to freight and trade from the Ukraine war — specifically gas to Europe and grain shipped through the Black Sea. The resulting inflation and falls in consumer and business confidence have threats of a demand crunch on top. This has more grim implications for trade, which tends to get hit particularly hard in recessions.What all this means is that if supply chain congestion eases — and cargo rates such as the Shanghai Containerized Freight Index have been flat-to-falling for months — it might be hard to work out for a while if it’s good news (ports increasing capacity or consumer demand normalising by shifting from goods back to services) or bad (weak demand as the world moves into recession). From the supply chains point of view, that’s going to be the story to watch for the second half of the year. You might think the distinction academic, but it does matter for the policy response — if it’s a demand issue, it’s for central banks and finance ministries to sort out, but if it really is something structural with the global trading system then some combination of regulation and investment will be needed.Speaking of policy, the big trading powers haven’t exactly seized the moment, though some have done more damage than others. The Biden administration continues, or tries to, down its route of treating supply chain problems as wartime exigencies and throwing emergency powers and federal money at them. Fresh from chartering planes to fly infant formula across the Atlantic to address a shortage caused by inept regulation, the US, after a lot of congressional squabbling, seems likely to go ahead with its Chips Act and shell out more than $50bn for the quixotic aim of creating a semiconductor supply chain inside the US. There’s little sign that Washington has the right analysis or the political unity to improve its trade policy.China having done its bit to trash world value chains with its Covid-19 lockdown — not trade policy as such, but certainly having that effect — means that of the big three, the EU has done the least harm and even a tiny bit of good. It’s still signing trade deals (albeit so far in 2022 only with a rather small partner in New Zealand). True, it continues to create unilateral instruments that might prove trade-distorting, but the debate over them shows there is at least an awareness that they might have downsides.Two brighter spots. One, a lot of emerging markets (Brazil, Vietnam and other east Asians, even India to some extent) have done pretty well in resisting the lure of protectionism. Two, although it only had to beat very low expectations, the repeatedly postponed World Trade Organization ministerial meeting, held in Geneva in June, didn’t actually collapse and so can be deemed a moderate success. The deals it did come up with were more about showing that the institution was still functioning than definitively solving a substantive problem, but nonetheless the deals were there. Globalisation has ridden out the multiple shocks to some extent, and a big hand to the companies actually running it, about whom I’ll write more in the autumn. But those disruptions are threatening to get bigger and it doesn’t seem that governments have a lot of ideas or consensus on how to address them.And on that cheery note, that’s all from me till September. Mind how you go now.As well as this newsletter, I write a Trade Secrets column for FT.com every Wednesday. Click here to read the latest, and visit ft.com/trade-secrets to see all my columns and previous newsletters too.Charted watersIt is a while since Trade Secrets assessed China’s Belt and Road Initiative, perhaps because attempts to rival the global investment plan have got little further than the last time Alan assessed the state of play.However, that is not to say that the BRI itself has not been changing, not least because of realpolitik in relation to Russia’s invasion of Ukraine as research from the Green Finance & Development Center at Fudan University in Shanghai has found with BRI spending in Russia dropping to zero.

The winner from this has been the Middle East, and Iraq in particular, as the FT noted earlier this year. The concerning perception from the point of those western regions trying to supplant the BRI — ie the US and the EU — is that China’s expansion in the Middle East has been at least in part because of a perception locally that, after withdrawal from Iraq and Afghanistan, western powers were disengaging from the region. (Jonathan Moules)Trade linksThe latest edition of must-listen podcast Trade Talks features the brilliant Lydia Cox, whose work on the burden of steel tariffs to the rest of US manufacturing I’ve mentioned before, on the regressive nature of American trade protectionism.The US and Canada have started proceedings against Mexico under the tripartite USMCA trade deal over provisions they say wrongly favour domestic companies in the clean energy market.The US and 17 other economies held a summit about supply chain participation, though if you can find any substance in the resulting statement you’re doing better than me.Trade Adjustment Assistance, the programme that compensated Americans who allegedly lost their jobs to trade, has lapsed, though to be honest it never really worked anyway.Trade Secrets is edited by Jonathan Moules More

TOKYO (Reuters) – The Bank of Japan’s two new policymakers said on Monday the central bank needs an exit strategy from its massive stimulus, a sign the board’s balance could tilt in favour of a withdrawal of Governor Haruhiko Kuroda’s radical monetary easing.Hajime Takata, a former private economist, said the BOJ must “always think about” an exit strategy even though now may not be the timing for an actual end to ultra-low interest rates.The other newcomer, Naoki Tamura, who joined from a commercial bank, said an exit from easy policy would become a focus of discussion once wages begin to rise in tandem with inflation.”Only when the BOJ can normalise monetary policy and exit can it describe its massive monetary easing programme as a success,” Tamura said in an inaugural news conference.Takata and Tamura joined the BOJ’s nine-member board on Sunday, replacing former economist Goushi Kataoka, a vocal advocate of aggressive monetary easing, and banker Hitoshi Suzuki. Their five-year term had expired.The arrival of Takata and Tamura, who both showed no reluctance to speak about an exit from easy policy, could shift the board’s debate less in favour of maintaining massive stimulus.Deputy Governor Masazumi Wakatabe, another vocal dove, will reach the end of his five-year term in March next year. That will be followed by the departure of Governor Kuroda, opening up the possibility of a shift https://tmsnrt.rs/3LtuvsI away from the current dovish policy bias.”The newcomers both seem to believe yield curve control can be tweaked sooner or later,” said Hiroaki Muto, an economist at Sumitomo Life Insurance.”The possibility of a tweak to yield curve control is heightening, although the timing will likely be after Kuroda’s departure,” he said. GRAPHIC: Doves and Hawks (https://graphics.reuters.com/JAPAN-ECONOMY/BOJ/dwvkrndxrpm/JAPAN-ECONOMY-BOJ.jpg) As part of its efforts to fire up inflation to its 2% target, the BOJ guides short-term rates towards -0.1% and caps the 10-year bond yield around 0% under its yield curve control (YCC) policy.With interest rates and inflation rising across the globe, markets have been rife with speculation the BOJ could follow in the footsteps of other central banks and dial back stimulus once the dovish governor Kuroda departs.While defending YCC as sustainable and effective in supporting the economy, Takata said prolonged ultra-low rates were narrowing bank margins and affecting the bond markets’ functioning.Former banker Tamura said there were “questions” around how effective the BOJ’s negative rate policy was in propping up the economy.”Upon an exit (from easy policy), the key would be how to adjust the level of the BOJ’s policy rates, and reduce its huge balance sheet,” Tamura said.Takata, a bond market expert, once wrote in a research note that the BOJ could come under pressure to consider exiting its ultra-loose policy if the European Central Bank (ECB) withdraws monetary stimulus.That view contrasted with his predecessor Kataoka, who consistently proposed ramping up stimulus by strengthening the BOJ’s commitment to ultra-low rates.The ECB last week hiked rates for the first time in 11 years, joining a wave of central banks tightening monetary policy to combat surging inflation.That left the BOJ among the few remaining central banks keeping its money tap wide open. Kuroda last week reiterated his resolve to keep interest rates ultra-low, after the BOJ’s widely expected decision to maintain an extremely loose monetary policy. More

BANGKOK (Reuters) -Shares in Thai Life Insurance Plc (TLI), Southeast Asia’s largest initial public offering (IPO) so far this year, closed slightly below the offer price on their first day of trading on Monday.TLI initially rose 0.63% but ended the day 0.62% below the IPO price, with the broader Thai market up 0.49%TLI was the most actively traded stock on the Bangkok stock exchange with over 639 million shares changing hands, data showed. TLI shares were priced at 16 baht, and the sale of 2.3 billion shares raised at least 34.4 billion baht ($937 million), with about half coming from investors who bought before the deal went public, according to regulatory filings.The volume of capital markets deals, especially IPOs, has fallen sharply in 2022 in Asia as global financial markets remain roiled by geopolitics, rising interest rates and ongoing uncertainty caused by Chinese regulatory upheaval.Thai Life’s flat opening was a reflection of high valuation and broader market performance, analysts said. The flat debut is in line with Thailand’s listed insurance sector, which has weakened over the past month.Share prices of major insurance stocks have fallen by about 5.3% since TLI published its revised prospectus on June 24 ahead of its IPO launch, according to Global Equity Research analyst Arun George, who publishes on Smartkarma.”Given the past growth record for the company, we see no reason for it to trade at a premium to its embedded value and hence, the shares will probably head lower,” said Sumeet Singh, Aequitas Research director.TLI’s total revenue declined 0.69% in 2020 and grew just 1.49%, reaching 109.2 billion baht in 2021, according its financial accounts.Thailand’s economy was among the slowest in the region to recover from the impact of the pandemic, according to the latest report from the Asian Development Bank.TLI has the third-largest market share among Thai insurers and competes with other market leaders – AIA, FWD and Muang Thai Life Assurance. It plans to use funds from the IPO to invest in digital transformation and strengthening partnerships. The insurer’s IPO has been the largest equity capital market deal in Southeast Asia in 2022, according to Refinitiv data. There were $2.45 billion worth of IPOs in the region in the first half of 2022, compared with $6.1 billion in the same period last year.($1 = 36.7000 baht) More

The strong dollar has wiped billions of dollars off the second-quarter sales of US companies, prompting many analysts to cut their earnings guidance for the remainder of the year.The list of bellwethers stomaching multimillion or multibillion-dollar hits has grown in recent days after the US currency surged to its highest level in 20 years.IBM, Netflix, Johnson & Johnson and Philip Morris were among the companies to warn last week that the strengthening dollar could weaken revenues in the coming months.That group is expected to swell in the coming days as titans of the technology industry such as Apple, Google-owner Alphabet and Microsoft — which generate a substantial portion of their business outside of the US — release quarterly results. The currency shock has muddled an earnings period that was being closely studied for signs of a weakening global economy, as high inflation and tighter monetary policy weigh on business and consumer demand.The dollar has been buoyed by the Federal Reserve, with policymakers in Washington quickly raising interest rates in an effort to cool inflation, which in June hit a 40-year high. They are expected to deliver another jumbo rate rise this week.US companies with large businesses abroad suffer as the strong dollar lowers the value of their international sales and makes them less competitive compared with local rivals.Go deeper The Fed must emulate the tactics of Volcker’s fight against inflation, writes former chair of the US Federal Deposit Insurance Corporation Sheila Bair. Five more stories in the news1. UK and France to get board seats on satellite tie-up The governments in Paris and London will each take up a seat on the board of an enlarged European satellite operator which aims to challenge billionaire space entrepreneurs Elon Musk and Jeff Bezos. Eutelsat and OneWeb confirmed today they are in talks to merge and bring low earth orbit capabilities to more customers.2. China plans three-tier data strategy to avoid US delistings China is preparing a system to divide US-listed Chinese companies into three separate groups, two people familiar with the plans have told the Financial Times. The companies would be divided into those with non-sensitive data, those with sensitive data and others with “secretive” data which would have to delist. The plan is a potential concession by Beijing to try to stop American regulators from delisting hundreds of Chinese groups.3. Jair Bolsonaro kicks off re-election bid The far-right Brazilian president launched his re-election campaign in Rio de Janeiro yesterday in front of thousands of supporters by burnishing his conservative credentials while making overtures to women voters. Bolsonaro faces an uphill battle if he is to win October’s election, with polls putting him 10 to 15 percentage points behind leftwing former leader Luiz Inácio Lula da Silva.4. US military chief warns of ‘significant’ increase in Chinese aircraft intercepts General Mark Milley, chairman of the US joint chiefs of staff, said China was conducting “dangerous intercepts” against American military aircraft and ships and was also targeting Canada, Australia, Japan and Washington’s other allies. Meanwhile, the controversy surrounding Nancy Pelosi’s planned trip to Taiwan is deepening. Several people suggest in private that China is threatening possible military action if the trip goes ahead in August.5. Sergei Lavrov counters accusation Russia is ‘exporting hunger’ Russia’s foreign minister yesterday met Egyptian president Abdel Fattah al-Sisi as part of a tour of several African nations designed to counter western accusations that Moscow’s invasion of Ukraine has led to a global food crisis. Lavrov’s comments came on the day Russia admitted responsibility for a series of missile strikes that hit the key Ukrainian port of Odesa. Two cruise missiles hit the port a day after Moscow signed a deal allowing Kyiv to resume grain exports.The day aheadMarket outlook Future trading suggests Wall Street is set for a quiet start to the week as investors await the Federal Reserve’s latest interest rate decision and the impact of tighter monetary policy on surging inflation. The S&P 500 finished 0.9 per cent lower on Friday, taking its losses for the year to 17 per cent. Texas manufacturing: A regional survey from the Dallas Federal Reserve will give an insight into the Lone Star state’s manufacturing activity. Big businesses, including Caterpillar and Chevron, have been expanding in Texas, drawn by the promise of low taxes and less regulation. But Texas’s power grid operator warned earlier this month of possible rolling blackouts due to the heatwave.Company earnings Whirlpool, the home appliance manufacturer, is expected to report that revenue in the second quarter slid 2 per cent from a year ago to $5.2bn. The company earlier this year raised prices in all regions where it does business to offset rising raw material costs and made the decision to exit Russia in the wake of its war in Ukraine. Logitech also releases earnings and investors will be looking for any insights on consumer spending from the computer hardware maker.UK leadership race The BBC hosts a live head-to-head TV debate between Rishi Sunak and Liz Truss, the final candidates in the running to replace Boris Johnson as prime minister. Find out who their cabinet favourites are.Pope Francis apologises to indigenous peoples of Canada The pontiff is expected to apologise to the indigenous people of Canada for generations of abuse and cultural suppression at Catholic residential schools across the country. Pope Francis will visit the small Alberta prairie community of Maskwacis, site of the former Ermineskin Indian Residential School, now largely torn down. (Reuters)What else we’re readingCompanies cannot win America’s culture wars US companies have for decades written cheques to politicians on both sides of the political divide to buy access and advance their interests. Yet executives are increasingly caught between two sides on topics they never wanted to be debating, like abortion. Some business leaders are now wondering whether to lie low.Jane Fraser keeps Citigroup out of harm’s way — for now Global financial markets have had a turbulent year, and for Wall Street veterans that raises a familiar concern: How is Citigroup going to screw up this time, writes US Financial Editor Gary Silverman. But to many analysts’ and investors’ surprise its recent results were better than expected. A good start for chief executive Jane Fraser and her new backer Warren Buffett. Investors, tread warily in emerging markets After eye-popping price drops in the first half of the year, more analysts are recommending higher across-the-board exposure to emerging market assets. But historically cheap pricing may not be enough given macroeconomic headwinds, writes Mohamed El-Erian.Rethinking insurance: how prevention is better than a claim The insurance sector is evolving, with technologies such as wearable devices making it easier to collect real-time data on customers. This has become instrumental in developing schemes focused on preventing claims, such as offering consumers incentives for physical activity.

By working with consumers and businesses to change behaviour and reduce risks, insurers hope to limit the likelihood and severity of payouts © FT montage: Dreamstime

Imposter syndrome is actually the human condition A bit of self-doubt is part of a healthy professional life, so why do we label it as a disease? Women, in particular, are fed up with being told how to change to operate better in a given environment, writes Viv Groskop, because it ignores the reality of an imperfect world.How to leadOttoline Leyser is the Regius Professor of Botany at Cambridge university. The 57-year-old professor is also head of the body trying to turn Britain into a “science superpower”. She thinks we have valuable leadership lessons to learn from vegetables and believes in the value of collaborative research and supporting people who take “astonishing intellectual risks”.Thank you to those readers who voted in Friday’s poll. A total of 85 per cent supported blocking Donald Trump from running for the presidency in 2024. On the same day as the poll ran, Trump’s former political adviser Steve Bannon was convicted of contempt of Congress. I’ll be back in your inboxes tomorrow — Gordon. More