Aurelia Butler

NEW YORK (Reuters) – China’s holdings of U.S Treasuries tumbled in April to their lowest since May 2010, data showed on Wednesday, with Chinese investors likely cutting losses as Treasury prices fell after Federal Reserve officials signaled sizable rate hikes to temper soaring inflation.Chinese holdings dropped to $1.003 trillion in April, down $36.2 billion from $1.039 trillion the previous month, according to U.S. Treasury Department figures. China’s stock of Treasuries in May 2010 was $843.7 billion, data showed.The reduction in Treasury holdings may also have been aimed at diversifying China’s foreign exchange holdings, analysts said.The Chinese sales contributed to a drop in overall foreign holdings of Treasuries in April that helped propel yields higher. U.S. benchmark 10-year Treasury yields started April with a yield of 2.3895%, and surged roughly 55 basis points to 2.9375% by the end of the month.Japan’s holdings of U.S. Treasuries fell further in April to their lowest since January 2020, amid a persistent decline in the yen versus the dollar, which may have prompted Japanese investors to sell U.S. assets to benefit from the exchange rate. Japanese holdings fell to $1.218 trillion in April, from $1.232 trillion in March. Japan remained the largest non-U.S. holder of Treasuries.Overall, foreign holdings of Treasuries slid to 7.455 trillion, the lowest since April 2021, from $7.613 trillion in March.On a transaction basis, U.S. Treasuries saw net foreign outflows of $1.152 billion in April, from net new foreign inflows of $48.795 billion in March. This was the first outflow since October 2021.The Federal Reserve, at its policy meeting in March, raised benchmark interest rates by a quarter of a percentage point. It lifted rates by 50 bps in May, but at the June policy meeting on Wednesday lifted rates by a hefty 75 bps to stem a disruptive surge in inflation. The Fed also projected a slowing economy and rising unemployment in the months to come.In other asset classes, foreigners sold U.S. equities in April amounting to $7.1 billion, from net outflows of $94.338 billion in March, the largest since at least January 1978, when the Treasury Department started keeping track of this data. Foreign investors have sold stocks for four consecutive months.U.S. corporate bonds, on the other hand, posted inflows in April of $22.587 billion, from March’s $33.38 billion, the largest since March 2021. Foreigners were net buyers of U.S. corporate bonds for four straight months.U.S. residents, meanwhile, decreased their holdings of long-term foreign securities, with net sales of $36.7 billion, data showed. More

DUBAI (Reuters) – Most Gulf central banks followed the U.S. Federal Reserve on Wednesday, lifting their key interest rates by three-quarters of a percentage point, while Saudi Arabia made a smaller hike after the latest data showed inflation there slowing slightly.The U.S. central bank projected a slowing economy and rising unemployment in the United States in the months to come after raising its interest rate by its biggest hike since 1994.The Gulf Cooperation Council (GCC) countries have their currencies pegged to the U.S. dollar, except Kuwait. The Saudi Central Bank lifted its repo and reverse repo rates by 50 basis points (bps) to 2.25% and 1.75%, respectively. Saudi inflation edged down to 2.2% in May from 2.3% in April.The Central Bank of Kuwait raised its discount rate by 25 bps to 2.25%. Its peg to a basket, the composition of which is undisclosed, gives it more room to diverge from Fed policy if domestic economic conditions call for that.Monica Malik, chief economist at Abu Dhabi Commercial Bank, said, “on the whole, households in the region are seeing less pressures with weaker inflation than the global trend, albeit still rising. The economic outlook should still be supported by the investment programmes, which we see continuing.”The central banks of the United Arab Emirates, Qatar and Bahrain all hiked their key rates by 75 basis points in lockstep with the Fed.Oman, the remaining member of the six-country GCC, is widely expected to follow with a similar hike.The hikes “will create a headwind for recoveries in non-oil sectors by disincentivising borrowing and making it more attractive to save,” said James Swanston of Capital Economics.”However, we have tended to find that in periods when oil prices are high that it tends to be a stronger driver of credit growth than interest rates. This is usually a result of governments opting to loosen fiscal policy and, as a result, greater domestic economic confidence, which helps to drive demand for borrowing.”The Gulf economies rely heavily on hydrocarbons and have seen a huge windfall this year as oil prices soared amid supply concerns due to supply chain disruptions, the war in Ukraine and fears over a slowing economy, including due to hikes by world central banks as they try to tame inflation at multi-decade highs.(This story corrects to ‘hike’ from ‘cut’ in first paragraph) More

Chinese president Xi Jinping has renewed his support for Russia’s security interests in his first phone call with Vladimir Putin since the early days of Moscow’s invasion of Ukraine. The diplomatic gesture is designed to show that Russia is not isolated as the leaders of France, Italy and Germany prepare to travel to Ukraine and Nato defence ministers convene in Brussels this week to beef up military help to Kyiv. The Kremlin said Xi noted “the legitimacy of the actions taken by Russia to defend its core national interests in the face of challenges to its security created by external forces”. It added that the conversation, held on Xi’s 69th birthday, was “traditionally warm and friendly”, adding China’s relations with Russia were at “an unprecedentedly high level”. Xinhua, the Chinese state news agency, reported that Xi repeated his previous calls for Russia and other countries to find an end to the war, but said China was “willing to continue mutual support with Russia on issues related to sovereignty, security and issues of major concern”.More on the war in Ukraine: The US will provide an additional $1bn in security assistance to Ukraine, including artillery and coastal defence weaponry, president Joe Biden said.Feedback on today’s newsletter? Write to me at [email protected]. Thanks for reading FirstFT Asia — Emily Five more stories in the news1. New Hong Kong textbook seeks to recast city’s history New textbooks sent to Hong Kong secondary schools teach that the city was not a British colony, but an occupied territory — a recasting of history that is part of Beijing’s ideological clampdown in the city.2. Fed raises benchmark rate by 0.75 points The Federal Open Market Committee lifted its benchmark policy rate to a new target range of 1.50 per cent to 1.75 per cent, noting in a statement that it “anticipates that ongoing increases in the target range will be appropriate”. Wednesday also marked the start of the mammoth task of shrinking the Fed’s $9tn balance sheet.Market news: US stocks and government bond prices rebounded after five consecutive days of declines, as the Federal Reserve announced its largest interest rate rise in almost 30 years.3. Bitcoin tumble leaves the average buyer in the red The cryptocurrency industry’s “bloodbath” worsened as bitcoin touched fresh lows for the year that put the average buyer of the world’s most popular digital asset deeper in the red. Bitcoin dropped below $20,000 for the first time since July last year while ether, the token linked to the Ethereum blockchain, fell to nearly $1,000.4. China retail sales slide China’s retail sales declined for a third consecutive month in May as lockdowns and mass testing campaigns under President Xi Jinping’s zero-Covid strategy curtailed growth in the world’s biggest consumer market. Retail sales, an important gauge of consumption, fell 6.7 per cent compared with the same month a year ago. 5. Laos hit by fuel shortages and growing default risk Struggling with acute fuel shortages, rising food prices and growing debt, the Asian country has become the latest in the region after Sri Lanka to come under serious financial strain after a surge in global energy and commodity prices. Moody’s Investor Service yesterday downgraded the country’s sovereign debt rating one notch further into non-investment grade. The day aheadIndia hosts meeting of Asean foreign ministers New Delhi will host a meeting of Asean foreign ministers for the first time as it marks its 10th anniversary of its strategic partnership with the group. (Hindustan Times) Shanghai’s Disneytown and hotel to reopen After closing on March 21 because of rising Covid-19 cases in the city, Shanghai Disney Resort said Disneytown and the Shanghai Disneyland hotel will reopen today. However, the main park will remain closed for the time being. (Reuters) Japan trade balance figures Data will be released for the month of May. Trade imports are expected to have increased at the fastest pace in six-months, according to a Reuters poll. (Reuters) What else we’re reading and listening toDisney’s India cricket ploy has Wall Street stumped Disney was this week trumped in the race for the sport’s coveted five-year streaming rights by its own former Asia chief, Uday Shankar. Disney still stumped up for cricket rights, however, agreeing to pay $3bn to air the sport on traditional television in India — a move that left analysts and some rival bidders baffled.

The Board of Control for Cricket in India pulled in $6.2bn for the five-year IPL deal, valuing each match at $15mn © AP

BTS is not bulletproof — nor is its talent agency Hybe has had nine years since the debut of BTS to reduce its dependence. It has made aggressive acquisitions of rival agencies and big bets on new artists. None of these moves has made much difference, writes Lex. Investing in this overpriced stock remains a bet on thirtysomething BTS members remaining popular in a business where attention spans are short.Oil vs human rights: Biden’s controversial mission to Saudi Arabia President Joe Biden’s decision to travel to Saudi Arabia next month and meet Saudi Crown Prince Mohammed bin Salman is a remarkable U-turn for a president who promised to treat the kingdom as a pariah and to engage with King Salman, not his son, MBS. Janan Ganesh: Joe Biden is right to go to Saudi Arabia, argues our chief political commentator. What do you think? Tell us in our poll below.

Mr Goldman, Mr Sex When Financial Times reporter Patricia Nilsson started digging into the porn industry, she made a shocking discovery: nobody knew who controlled the biggest porn company in the world. Now, Nilsson and her editor, Alex Barker, reveal who is behind it. Listen to the latest episode of Hot Money, our investigative podcast series on the shadowy power structures of the porn industry.Sanctions-hit Russian businessmen seek tips from Iran Since Russia invaded Ukraine in February this year, Iranian tour guide Ali’s business has boomed. But where once he hosted Russian tourists interested in Persian art, food and culture, now he welcomes businesspeople. Tehran’s expertise at accessing the world’s black markets is in demand as war in Ukraine offers unexpected benefitsJoin the FT in partnership with Seismic at Strategies For Dealing With The Great Resignation on June 30 where we will discuss the challenges and opportunities presented by the Great Resignation, with a focus on training and coaching successful sales teams. Register today for free.Food & drinkDon’t miss FT Globetrotter’s list of five of the best bean-to-bar chocolate makers in Tokyo, where you can find chocolate at its purest — and all crafted by pioneering artisans — in the Japanese capital. More

It is never ideal for a central bank to hold an emergency meeting; the very fact is prone to cause nervousness in financial markets. As it was, the European Central Bank seems to have been able to use its “ad hoc” meeting Wednesday morning to get somewhat back on the front foot after being caught out by market reactions to its monetary policy meeting the week before.That meeting came as investors had started to worry about how the ECB’s move towards tightening financial conditions would affect the borrowing costs of the fiscally weaker eurozone governments. Their disappointed hopes of a stronger commitment to contain widening sovereign spreads caused steep sell-offs: in less than a week, Italy’s borrowing costs rose by almost one percentage point.It was the speed of this change that forced the ECB’s hand. The past week has brought back chilling echoes of the eurozone sovereign debt crisis. Apart from the sudden widening of yield spreads, the analyst community is full of chatter about “fragmentation risk”. Conditions have quickly become ripe for speculative attacks on pressured sovereigns’ debt and a repeat of the ugly politics of creditor-debtor country antagonism.This is what the ECB had to arrest, having failed to foresee the rapid deterioration that its own earlier circumspection had caused. The terse statement from the emergency meeting is short, but should not leave any doubt that the bank has moved into a new phase. The meeting did three important things. First, the ECB now explicitly states that its monetary policy is in fact being unevenly transmitted to different member countries — its code for intervention in bond markets being justified. Second, it has moved from communicating the possibility of using its balance sheet reinvestments to combat excessive spreads to an express intention of doing so. And third, a new “anti-fragmentation” tool, mooted as an if-necessary resort for months, has now been ordered up from the technical staff.Early signs are that the more robust approach is working; yields and spreads have come down from the most recent heights. Whether it is enough is anyone’s guess, but the track has now been laid for several forms of intervention to come within weeks or months.Above all, this highlights the differences from the previous crisis. The ECB is now clearly in the game of containing spreads and, as important, its governing council is reasonably united behind this understanding. We are no longer in the world where former president Mario Draghi had to bounce his colleagues into action through dramatic unilateral “whatever it takes” statements. There is no doubt that the ECB has the means to prevent a fragmentation crisis; and the bank is finally working hard to dispel any doubts that it has the [email protected] More

Good eveningIt’s a big day for policymakers in Europe and the US as they lay out monetary responses to the deteriorating economic outlook and address the recent turmoil in financial markets.After a rare emergency meeting this morning, the European Central Bank pledged a new bond-buying plan to tackle surging borrowing costs in weaker eurozone countries. Prices of bonds in heavily-indebted Italy rallied after the announcement, following fears that the country had been heading towards the “danger zone”.The central bank’s move comes just a week after it had disappointed investors with a lack of detail over how it might tackle the “financial fragmentation” which meant borrowing costs rising more for southern eurozone countries than for those in the north.The ECB meeting is followed later today (2pm ET/7pm London time) by the US Federal Reserve’s announcement on interest rates. Investors in recent days have come to believe that the Fed might accelerate its policy tightening with a rise of 0.75 percentage points as it ramps up its fight against inflation. However, they remain uncertain about the impact of its “quantitative tightening”.Recent data highlight the need for action. US producer prices rose 0.8 per cent in May — an acceleration of 0.3 percentage points from the previous month — or 10.3 per cent on an annual basis. Diesel and petrol prices are soaring, while wider retail sales fell unexpectedly in May for the first time in five months as Americans put car purchases on hold.New surveys have also highlighted a darkening mood in the country. A survey of chief executive officers showed confidence dimming, reflecting “uncertainty driven by the unprecedented times we face as a nation and global community,” in the words of General Motors boss Mary Barra. It follows last week’s FT’s poll of top economists which showed 70 per cent believe a recession is coming next year.Chief economics commentator Martin Wolf takes a wider view of the challenges facing policymakers, drawing on his experiences as an economist at the World Bank in the 1970s. He argues that they need to avoid repeating the mistakes of that era, a similar time of surging inflation, wars in key commodity-producing regions, declining real wages, slowing growth, fears of tightening monetary policy and turbulence in stock markets.“What I remember most about that period was the pervasive uncertainty,” he concludes. “We did not have any idea what would happen next. Many mistakes were made, some out of over-optimism and others out of panic. The past does not repeat itself. But it is rhyming. Do not ignore time’s poetry.” Latest newsGlobal banking regulator urges closer links between pay and climate risksUS homebuilder confidence declines for sixth consecutive monthBiden tells US oil refiners rising profits ‘not acceptable’ as war ragesFor up-to-the-minute news updates, visit our live blogNeed to know: the economyGazprom, the Russian state-owned energy company, cut gas supplies to Germany, its biggest customer, for the second time this week, blaming turbine repairs. It also cut supplies to Italy, its second biggest buyer. Despite the slowdown in economic growth, the UK labour market is still running hot, with official data yesterday showing the number of full-time employees at a record high, redundancies at record lows and the number of unfilled vacancies at a new peak of 1.3mn. However, save for those lucky enough to earn a bonus, pay in real terms fell sharply.Latest for the UK and EuropeA new study showed that UK exports to the EU fell by 15.6 per cent, or £12.4bn, in the first six months of last year because of post-Brexit trade frictions over standards and technical specifications. Brexit is also being blamed for delays in introducing superfast broadband across the UK. Science columnist Anjana Ahuja says leaving the EU’s Horizon research programme “makes a mockery of the government’s self-proclaimed ambition to turn the UK into a global science superpower”. However, the government did this week grant a £500mn upgrade to the country’s largest scientific facility, the Diamond Light Source microscope in Oxfordshire.The FT revealed that Poland was poised to drop its opposition to a global minimum corporate tax, which could lead to EU adoption of the OECD proposals at a meeting of finance ministers on Friday.Global latestRetail sales in China fell for a third consecutive month in May as lockdowns and mass testing hit growth in the world’s biggest consumer market. Industrial production fared slightly better, gaining 0.7 per cent compared with last year, boosted by growth in new energy vehicles and solar cells.

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Global oil supply will “struggle” to meet still rising demand next year, the International Energy Agency said today, despite signs that record prices at the pump are starting to hit consumption. Our Big Read examines US president Joe Biden’s attempts to mend fences with Saudi Arabia and limit the damage to energy markets roiled by Russia’s invasion of Ukraine.The latest in our Economists Exchange series features the FT’s Delphine Strauss talking to Nobel laureate Christopher Pissarides, who argues that policymakers can no longer bring about social change through monetary and fiscal stimulus that will fuel inflation but not bring any fundamental shift in workers’ bargaining power.The slowing of New Zealand’s house price boom as interest rate rises bite is being watched closely by markets across the world. “New Zealand is a canary in the coal mine,” said one economist. “It’s a test case for a central bank to push up rates as house prices are soaring to deal with inflation.”Laos, the latest Asian country to come under serious financial strain from surging energy and commodity prices, had its sovereign debt status reduced to “junk” by Moody’s Investor Service.Need to know: businessGerman energy company HH2E’s €1bn investment in a green hydrogen plant is one of the biggest moves so far in the country’s efforts to go carbon neutral as well as weaning itself off Russian gas.A Bank of America survey showed three-quarters of global fund managers expected company profits to deteriorate, the weakest reading since the 2008 financial crisis. Especially gloomy are those fund managers in Hong Kong, who pleaded with the government to reopen the city borders or risk a “permanent” loss of talent, even as coronavirus cases begin to rise again. The UK ordered airlines to make sure all summer flights went ahead after disruption meant between 2 and 4 per cent of flights were cancelled during the first week of May, compared with a normal rate of 1 per cent. Unions blamed staff cuts, while operators cited long waiting times for new workers to pass security checks. Next week rail journeys will also be disrupted by the most significant industrial action in 30 years.Almost half of UK Covid loans went to businesses not facing financial distress, according to a new report. It also found that the loan guarantee schemes could have saved between 150,000 and 500,000 businesses with between 500,000 and 2.9mn jobs.One particular market has bounced back strongly from Covid disruptions: Europe’s illegal drug business. Cocaine supply has passed pre-pandemic levels while more potent and dangerous drugs are beginning to appear, with increased activity from Mexican gangs, according to a European monitoring agency.The World of WorkAre you ready to ditch those elasticated waistbands and “Zoom mullets” for more formal attire for the return to the office? The new edition of our Working It podcast discusses how the pandemic has changed what we wear to work.On-demand services such as ultrafast delivery apps have grown rapidly in recent years, but, says columnist Sarah O’Connor, the growing awareness of how gig workers are exploited, combined with cutbacks in consumer discretionary spending, could spell the end of the “servant economy” model. The latest flashpoint involves ride-hailing app Bolt, which is being taken to court by the UK’s GMB union over employment rights. Get the latest worldwide picture with our vaccine trackerAnd finally…What’s your favourite book of 2022 so far? We’re collecting reader recommendations for our popular Summer Book series next week and would love to hear from you. Follow this link and share those titles you think fellow FT readers might enjoy.© Getty Images/iStockphoto More

Philip Haffey rustles a feed sack and the cows come trotting to him. The fourth-generation dairy farmer in Northern Ireland’s County Armagh produces 1.4mn litres of milk a year. The grain his cattle eat, when they are not chomping grass or silage, is imported from Great Britain.But those cereal imports could prove a nightmare for him under Boris Johnson’s new bill to unilaterally rewrite the Brexit trading rules for the region. Farmers say the prime minister’s initiative threatens the dairy sector, which is worth £1.5bn a year to Northern Ireland and is part of the largest integrated industry across the island.The bill envisages a dual regulatory regime, where goods entering the region could be produced either to UK or EU standards. But if rules diverge and the grain that Haffey feeds his cattle is grown with pesticides not permitted in the EU, he would no longer be able to send his milk for processing in the Republic of Ireland.That would do more than just inconvenience a farmer who happily voted for Brexit. The region does not have enough plants to process all the milk it produces, meaning the 800mn litres a year produced by Northern Irish farmers that is processed south of the border — a third of the region’s output — would have nowhere to go except Great Britain.Milk from north and south is also mixed together so butter, cheese, Baileys Irish Cream liqueur, baby formula and other products are made with supplies from both jurisdictions indistinguishably.Haffey objects to Irish Sea customs checks for British goods entering the region under the post-Brexit trading arrangements, known as the Northern Ireland protocol. “We are part of the UK, so things should flow as freely to Northern Ireland as they do to Wales,” he said. “I think pressure needs to be exerted on the EU.”But even he stops short of calling for the protocol — which London says is causing “peril” to societal and political conditions in the region — to be scrapped altogether, for one simple reason. As Alan Cleland, a farmer in County Down put it: “Loads of bits and pieces of the protocol are problematic. But from the point of view of our milk, it seems to be working.”

Alan Cleland, a dairy farmer from County Down: ‘From the point of view of our milk, [the Protocol] seems to be working’ © Paul McErlane/FT

London’s bill to give ministers power to tear up parts of the protocol is already undermining the industry’s image, said Gerry O’Reilly, a dairy farmer south of the border in County Cavan and a shareholder in Lakeland Dairies, a large processor.Northern Irish milk, including from Haffey, keeps Lakeland supplied, particularly at the end of the year when herds like his are not producing, he said. “Already, even, damage has been done,” O’Reilly said. “If you’re an international buyer you’d say, ‘I want steady supply for five to 10 years but you have all this political nonsense’. It weakens us straightaway.”In order to preserve the 1998 Good Friday Agreement that ended three decades of conflict, the protocol left the region inside the EU’s single market for goods and subject to EU rules and oversight, rather than put customs checks on a land border that is now largely invisible.But unionists say the customs checks in the Irish Sea that were imposed instead undermine the region’s status as part of the UK. The Democratic Unionist party has paralysed local political institutions to press its demands for the Irish Sea border to be scrapped.

Dairy, which trades on its image of rolling pasture lands, has become one of the most emblematic all-island industries in the quarter century since the Good Friday Agreement.“Dairy is Ireland’s flagship,” said Conor Mulvihill, director of Dairy Industry Ireland, a trade body. The industry is worth €13bn to the Republic of Ireland and 85,000 people are employed in it on both sides of the border. “It’s mental what is being proposed.”Whiskey is another industry with north-south supply chains that, since the Good Friday Agreement, has boomed, rising from just four distilleries two decades ago to 42. Malt and grains cross the border every day, as does newly distilled spirit to be matured.“It’s very important we have a single set of rules,” said William Lavelle, director of the Irish Whiskey Association. “If the protocol is in any way undermined or disapplied . . . it would just bring a whole range of new headaches.”But other industries complain that the protocol has brought costly red tape that could make it difficult for some products, such as sausages, to be sold in Northern Ireland.

This week’s bill aims to introduce a “green lane” with no customs checks for goods from Britain that are staying in Northern Ireland and to end oversight of the rules by the European Court of Justice.Mike Johnston, head of the Dairy Council for Northern Ireland, welcomed London’s recognition that there is no “one size fits all” approach. But he said the worst-case scenario bill could mean “we would just have to stop buying grain” from Great Britain. The industry buys 400,000 tonnes a year, so “UK cereal farmers could lose out . . . there’s a lot hanging on this”.UK officials were divided over the extent of the potential crisis. One said there were “misconceptions out there” and that industries selling into the bloc would continue with EU regulations.

But another said: “There’s obviously no fix. They’re stuffed. The dual regulatory regime can never work for agri.”Dairy farmers said the risks were very real. The UK in 2021 authorised the use of an EU-banned insecticide, although London says it was not used in the end, and UK standards on gene editing are diverging from EU rules.Charlie Weir, another farmer in County Armagh, regretted voting to leave the EU “because it’s just been one lie after another” from London. “Why, if the protocol is so bad, is Northern Ireland the only region in the UK that in the first quarter has grown?” he said.“We could be left with higher costs and lower prices,” said another Armagh farmer who voted to stay in the EU and asked not to be named because of deep, enduring divisions in the region. “The protocol is unbelievably good for Northern Ireland — it’s just the best of both worlds,” he said. Additional reporting by Peter Foster in London More

The writer is Senior Fellow at Brown University. Josh Felman contributed to this articleShocks such as Covid and the Russian invasion of Ukraine command our attention. But it is shifts — that is, major transformations — that will determine the long-run trajectory of the global economy. Consider five major shifts and their potential consequences. First, the era of extraordinarily cheap finance is over. As inflation grips the world economy, a cycle of monetary tightening is under way. Long-term real interest rates are unlikely to rise to levels seen during the previous era of inflation, since growth now is much weaker and ageing populations will depress investment opportunities. But the era of zero interest rates has ended.Higher interest rates will destroy wealth as asset prices descend from frothy valuations. They will also expose companies and countries that have accumulated large amounts of debt. The result will be defaults and financial crises, especially in emerging markets. Second, the era of trade hyperglobalisation is over. Over the past decade, anti-globalisation forces have gathered strength. Over the next decade we will see this shift play out. Geopolitics will trigger protectionism; hedging will drive greater self-sufficiency in food, energy, essential drugs, resources and technologies; the weaponisation of interdependence, reflected in sanctions against Iran and Russia, will deflate the lure of globalisation; and capital will exit from odious regimes.The world will not actually deglobalise, since trade of some types (services) and in some regions (the west) will continue to expand. But the scale and speed of integration that the world witnessed for about 25 years are surely behind us.Third, economic convergence will stall. For three decades, poorer countries have been catching up with the living standards of richer countries, reversing two centuries of divergence. But this dynamism was propelled in large part by cheap finance and hyperglobalisation. Meanwhile, as the historic addition of the Chinese and Indian workforce to the global labour supply nears its end, the world economy will move from plentiful supply to shortfall, reinforcing inflationary pressures. Fourth, already weak global co-operation will dwindle further. The pandemic revealed the shambles that now characterises the multilateral system put in place after 1945. The financial costs of producing and distributing vaccines to the world were trivially small compared with the potential benefits in lives saved and economic losses averted. Yet the major powers and institutions proved unable to accomplish this task.This is not the only example. The World Trade Organization has been on life support for decades, a victim of geopolitical rivalry and the west’s inability to figure out ways to provide good jobs for workers who lost out when the global industrial base shifted east. More fundamentally, the sheen has come off the idea — going back to Norman Angell’s The Great Illusion — that global integration was good for peace and would broadly restrain superpower rivalry. The new era could see full-blown US-Chinese rivalry in the economic and security realms. It used to be a G1, G2, G7 or G20 world. Now we are destined to a G-minus world because of domestic developments in the world’s two largest economies, the US and China. This is the fifth shift. The US is now two different nations. An internally polarised America is a less attractive and unreliable partner for other countries. Access to its markets and provision of generous finance are no longer part of its foreign policy arsenal or its soft power. Meanwhile, China has become a threat to its neighbours. Xi Jinping is dashing both the possibility of China becoming truly rich and the hope once entertained by the world that it would become politically open. Grim as these five shifts seem, silver linings can be sighted. Deglobalisation away from China provides opportunities for other countries to fill the vacated space. Vietnam, Bangladesh and Indonesia have taken advantage, and so too can other developing countries. Global food shortages and the drive for self-sufficiency should encourage policymakers in south Asia and sub-Saharan Africa to focus on boosting agricultural productivity and farm incomes. This could bring faster overall growth, as South Korea, Taiwan and China showed decades ago.Finally, conditions are ripe for the world to grasp that, intermittent as their gifts are, the sun and wind are more reliable, less destructive sources of energy than Russia and the Middle East. Producing more renewable resources helps the planet and drains war chests. That should motivate the world to act. More