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New British Conservative Party leader Rishi Sunak waves outside Tory HQ in London.

REUTERS/Henry Nicholls

On Tuesday, former Chancellor of the Exchequer Rishi Sunak became the UK's prime minister after winning the Conservative Party leadership race. But he takes over from lettuce loser Liz Truss amid turbulent times — and faces historic challenges in steering the country out of its current mess.

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In recent years global supply chains have gotten badly kinked by resurgent protectionism, the economic havoc of the pandemic, deepening rifts between the US and authoritarian countries, and the war in Ukraine. The result is inflation levels not seen in advanced economies since the 1980s and a food security crisis of global proportions.

In this special edition of Signal, we’ll ask what comes next by surveying the scarcities, tracking the travails of truckers, scarfing down a handful of (micro)chips, and asking whether “friends” can really save the day. Enjoy!

- The Signal Team

Can you get by with a little help from your friends?

Alex Kliment

The pandemic inflicted a huge shock on supply chains, but there is another force at work remapping global trade flows too: the deepening ideological divide between the US and China, framed in Washington as a broader competition between democracies and autocracies.

The so-called “de-coupling” between the world’s two largest economies began during the presidency of Donald Trump, who slapped tariffs on China in a largely unsuccessful attempt to address the real harms that offshoring has done to some US workers.


But now, as global trade reorients itself in the wake of the pandemic, Washington is making a broader push for US companies to source their goods from factories in friendly democracies rather than authoritarian countries — China, Russia, and the gang — that could use their control over key materials or products to inflict pain on the West. Russia’s use of oil and gas to pressure Europe is one clear example, of course, but there are others: China’s monopoly on the production of rare earths used for electronics, or the precarious concentration of global microchip production in Taiwan, which lives under the constant threat of Chinese invasion.


US Treasury Secretary Janet Yellen recently touted the benefits of so-called “friendshoring” on a visit to South Korea, which is trying to lure American supply chains away from China and to start making more microchips itself. Southeast Asian manufacturing powerhouses like Malaysia, Vietnam, Thailand, and Indonesia are also keen to continue capitalizing as “friends” of the US.

Friendshoring may offer certain protections in a world of deepening ideological competition, but there are tradeoffs: “friendly” countries may not always produce goods as cheaply or efficiently, meaning that consumers may have to accept higher prices, particularly in the short term. Is the tradeoff of greater security in exchange for less efficiency worth it? More to the point, is it now unavoidable?

Shortages reach far beyond food

Willis Sparks

The war in Ukraine is just the latest crisis to befall global supply chains in recent years, and it appears likely to get worse before it finally eases. It’s not just about interrupted flows, shortages, and higher prices for food and fuel. According to a report published in May 2022 by Dun & Bradstreet, a total of at least 615,000 businesses operating globally depend on supplies from either Russia or Ukraine. About 90% of those firms are based in the United States, but supply chains in Europe, China, Canada, Australia, and Brazil are heavily impacted. According to the report, a total of 25 countries have a high dependency on Russia and Ukraine for a variety of commodities.

Five months into the war, it’s clear that the likeliest outcome of the current fighting will be a long-term stalemate. Russia doesn’t appear militarily strong enough to take and hold all of Ukraine, and Ukraine doesn’t appear strong enough to drive Russian troops completely off Ukrainian land. As a result, those who depend on resources and production inputs from Russia and Ukraine now know they’ll likely need to invest in new suppliers of hundreds of different commodities and products – from sunflower seeds to turbojets – to build better resilience into their supply chains, rather than simply waiting for the fighting to end.

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The Graphic Truth

Luisa Vieira

The pandemic sent global supply chains into a tizzy. Then, just as economies were embarking on their post-COVID economic recoveries, Russia invaded Ukraine, upending the global grain trade and sending supply chains spiraling further. Supply chain frictions have a lot of unintended consequences: Brexit-related supply chain issues made it hard for some Brits to get their hands on a pint of beer, while China’s punitive zero-COVID policy drove the auto industry – among others – into a full-blown crisis. We take a look at the Global Supply Chain Index from 2000-2022 along with key global economic milestones.

What We're Watching: Truckers wanted & not-so-cheap chips

Gabrielle Debinski

Where are all the truck drivers?

The global truck driver shortage has been disrupting already-out-of-whack supply chains, particularly in the US, the European Union, and Britain – further complicating their post-pandemic economic recoveries. Last year, the American Truckers Association said it was around 80,000 drivers short, while in Europe, a deficit of 40,000 truckers has contributed to long waits and empty shelves. What’s going on? The pandemic has upended the way we work. Trucking is an arduous and ungratifying gig: Drivers often spend days or weeks far away from home, and they don’t get paid for hours spent waiting for goods to be loaded and unloaded. The road can be grueling, the compensation is underwhelming, and the benefits are often … nonexistent. In the US, trucking salaries have plunged in recent decades. Median wages for truck drivers in 1980 were about $110,000 annually (adjusted for inflation); in 2020, they were just $47,130. Unsurprisingly, many truckers are opting for jobs with better conditions and pay, so trucking firms in Europe and the US are struggling to lure drivers back to work and recruit new staff. It’s particularly grim in the UK, where supply-side frictions have been exacerbated by Brexit. In the US, meanwhile, companies like Walmart are fighting back by offering massive salary hikes to attract truck drivers. Will it get the wheels turning?


Chipping away at supply chains

The US Congress this week passed the behemoth Chips and Science Act, which ponies up $52 billion in subsidies and incentives to boost domestic production of semiconductors, the invisibly thin microchips that are essential for everything from phones, cars, and factories, to fighter jets, cruise missiles, and artificial intelligence. With the bill, Congress is making a big move in a new global “Chips race” for dominance of the industry: the EU is now spending close to $50 billion on the same thing, and China, which still depends on the US and its allies for inputs into its home-grown chips, has poured hundreds of billions into someday becoming a semiconductor superpower itself. For all three of the world’s largest economies, the concern is the same: the semiconductor market is highly concentrated, particularly in Taiwan, which produces more than 60% of the world’s chips. That’s a problem commercially – in 2021, there was a global shortage after tech firms gobbled up the entire supply, leaving automakers scrambling for chips. But it’s also a problem geopolitically. China doesn’t want to be dependent on chips from a Taiwan that’s allied with the US, while the US and EU don’t want to rely on a Taiwan that could be taken over by China any year now. Critics of the Chips act say its a sop to powerful tech companies that can well afford to build their own factories, and there are questions about whether the money will be spent on the right things: making the chips is one thing, cutting edge R&D is a whole other bowl of chips, and the supply chain for a single chip can pass through many countries before final assembly. As a cautionary tale: the EU aimed in 2013 to double its share of global semiconductor production to 20% by 2020. It didn’t work.

Future-proofing: How we fix broken supply chains

“Envision supply chains like a strand of Christmas lights. If one light goes out, then the whole strand will stop working.” So says Eurasia Group’s Christina Huguet on the latest episode of the Living Beyond Borders podcast, which focuses on the moments those lights went out: when the pandemic hit shipping, manufacturing, and labor all at once. Huguet, along with moderator Shari Friedman, Eurasia Group’s Managing Director of Climate and Sustainability, and David Bailin, Chief Investment Officer and Global Head of Investments at Citi Global Wealth, look at what it will take more than two years later to turn those lights back on and create more resilient global supply chains.

Listen here.

Hard Numbers: The scarcity edition

Gabrielle Debinski

2 million: As the war in Ukraine rages on, the African continent is facing a shortfall of around 2 million metric tons of fertilizer that’s causing an unprecedented loss in food production throughout the continent. A Senegalese official warned at a recent G20 meeting that starvation could kill more Africans than COVID-19.


10: American women are the latest victims of the supply chain crunch. Tampon shortages as a result of staffing issues at manufacturing plants, transportation disruptions, and the scarcity of materials like cotton caused tampon prices to soar almost 10% in the US in recent months.

50: Europe’s largest paper packaging company, Smurfit Kappa, recorded a whopping 50% increase in core profit during the first half of this year as a result of surging pandemic-related demand. Still, the company says it’s preparing for paper shortages across the continent in the months ahead as a result of mandatory gas rationing as EU states try to reduce their dependence on Russian natural gas.

10: Several Polish supermarkets are limiting sugar purchases to 10 kilograms per person after consumers cleared out shelves fearing further price hikes and scarcity of the sweet staple. Poland, one of Europe’s biggest sugar producers with ample supply of the stuff, recently recorded its highest inflation rate in 25 years.

This edition of Signal was written by Beatrice Catena, Gabrielle Debinski, Alex Kliment, Carlos Santamaria, and Willis Sparks. Edited by Tracy Moran. Graphic by Luisa Vieria. Art by Paige Fusco.

In a special Sunday edition of Signal, we take stock of the geopolitical situation halfway through one of the most tumultuous years in recent memory. Russia’s invasion of Ukraine boosted Euro-Atlantic unity but deepened fault lines between the “West” and powerful emerging markets. A global food crisis still looms, and later this year we’ll see pivotal and extremely contentious elections in Brazil and the United States.

If the last six months are any indication, you’ll want to buckle up for the second half of the year.

-The Signal team

Resilience in an era of crisis

Willis Sparks

We live in an era of emergency. Since 2008, we’ve seen a global financial crisis, a sovereign debt crisis in Europe, and a wave of unrest that sparked political turmoil across North Africa and the Middle East. Civil wars in Syria and Libya helped trigger a migrant crisis that upended European politics. Then came Britain’s exit from the EU, the surprise election of a US president who upended the most basic assumptions about America’s role in the post-war world, and a political crisis in the wake of his defeat. Next came a global pandemic that has killed millions and continues to inflict human, economic, and political damage in every region of the world. Now we have Russia’s war on Ukraine, millions more refugees, and a global food emergency that has only just begun. All of that has happened in the past 14 years.

Given all that, it’s obvious that deeper investment is needed in resilience at every level of government, commerce, and society. In a world of shocks, we need good shock absorbers. Political and business leaders now face a basic choice. They can build networks of trade and political alliances with only like-minded partners – those with similar political systems, cultures, or overlapping interests – to ensure competitors and potential enemies can’t gain strategic advantages by exploiting weaknesses like monopolies on needed resources or supply-chain vulnerabilities. Or they can diversify their partnerships to build relationships where they make the most sense for economic value and the common good. It’s possible that governments will now use sanctions, tariffs, export bans, subsidies, and other forms of protectionism as everyday weapons to build resilience by enhancing security. Others will continue to seek resilience through a broader diversification of their partnerships.

This choice will be most obvious in relations between China and the West. Will the US and EU begin to treat China primarily as a political and economic opportunity or mainly as a security risk? Will China seek a more confrontational role toward the West and the international institutions where it has outsized power, or will it continue to define its security through the dynamism of its global trade and investment relationships?

These are the questions most likely to determine how well the global economy and current international system absorb the next generation of shocks.

The Graphic Truth

Beatrice Catena

Prices at the pump are soaring. Since Russia’s invasion of Ukraine, much of the world has been affected by the economic impact of sanctions, higher inflation, constrained supply, and overall uncertainty. In the G20 economies, consumers tend to complain most about the price of unleaded gas, which is affecting their ability to get around town and go on holiday. We look at how far north the G20’s gas prices have been driven.

CIO Strategy Webcast Series

Citi Private Bank

Join us each week on Thursday at 11:30am EST for a conversation with senior investment professionals and external thought leaders on timely market events and ask your most pressing questions.

Register now.

Big bad bear market

Carlos Santamaria

If you're an American worker with a 401(k), you're probably worried about being in the claws of a certain furry animal everyone seems to be talking about these days.

We're referring to a bear market, a Wall Street term for when the value of stock indices like the Dow Jones Industrial or the S&P 500 fall under 20% or more from a recent peak for a sustained period of time. Since bears hibernate, it’s investor-speak for a market in retreat.


On June 13, the S&P 500 officially entered bear market territory — with big implications for both investors and people who are indirect participants in the stock market through their 401(k), America's most popular company-sponsored retirement account. Simply put, since your 401(k) is likely invested in stocks, the longer the current slump lasts, the less money you'll have for retirement.

But that's only true if the bear market is still ongoing when you retire.

In other words, if you can afford to wait it out, odds are that the bear will eventually be followed by a bull (market) — aka a cycle of expansion — once the current economic turmoil subsides. Still, you might have a problem if you're a baby boomer with only a few years left to reach retirement age, in which case you'll have to crunch the numbers to decide whether it's best to cash out now — with less money, and pay taxes on what you withdraw — or pin your hopes on a swift recovery.

The thing is, no one knows how long bear markets last. The average historical duration is about a year, but in the early 1970s the bear stayed in its cave for almost two years, the S&P 500 lost half its value, and the US economy took a whopping 69 months to completely recover.

During the 2007-2008 Great Recession, the S&P 500 decline was even sharper (57%) and the market only recovered after 49 months.

Will the bear be followed by an even scarier recession? Maybe, but it's not guaranteed.

One key difference between the current US bear market and previous ones that preceded recessions is that unemployment is still very low at 3.6%. When Americans start losing their jobs at a higher rate, though, that's likely a sign that a recession is on the way.

What’s more, with the Fed getting tough on interest rates to tame sky-high inflation, it’s certainly possible that the US economy won’t hit the Goldilocks “soft landing” of bringing inflation down to about 2% while avoiding a recession (two consecutive quarters of negative GDP growth).

Regardless, “making any prediction is unusually fraught” now due to an unprecedented set of shocks, including COVID and the war in Ukraine, says Robert Kahn, Eurasia Group's director of Global Macro-Geoeconomics.

Still, he adds, a recession seems more likely than not. It'll be painful, but not necessarily a catastrophe.

“Recessions can be moderate in tone,” Kahn explains. And whether or not we get one, “we’re going to have tremendous uncertainty heading into this slowdown period about how that plays out.”

What We’re Watching: US and China's rocky marriage and India’s unlikely success

China-US: Bad politics, good economics

President Joe Biden is a very different president than his predecessor, Donald Trump. But on some foreign policy issues – notably managing relations with China – the two are kindred spirits. US-China relations crashed under Trump, and Biden has kept the relationship on a mostly combative footing, leaving Trump-era tariffs on some Chinese goods in place. Still, while the White House talks tough about isolating China geopolitically, speculation of a US-China “decoupling” is misplaced. Beijing and Washington need each other because their economies are closely intertwined. The US is China’s biggest trading partner, with Americans importing a whopping $541.5 billion worth of Chinese imports in 2021. Even in 2020 – a slower trading year amid the pandemic – China and the US traded $559.2 billion worth of goods. What’s more, two-way foreign direct investment, which is more resistant to economic shocks, has ballooned in recent years (Chinese FDI in the US increased 61% between 2015 and 2020). The resilience of the bilateral economic relationship is also reflected in the fact that China is the third-largest export market for American goods (behind Mexico and Canada). Support for a tough-on-China stance gets rare bipartisan support in Washington these days, so political ties between Beijing and Washington will likely remain rocky. Still, with their economic fortunes so closely linked, China and the US are in this marriage for the long haul.


How is India doing so well?

On the surface, India seems to be having a moment. With record-breaking monthly exports and a post-pandemic bounce-back of 8.7% GDP growth pushing the size of its economy to $3.3 trillion, Prime Minister Narendra Modi seems well on his way to meeting his goal of making the country a $5 trillion economy before long. Meanwhile, both Russia and the West are courting Delhi as a key ally these days. But beneath the surface, not all is well. Despite Modi’s ambitious economic reforms, inequality remains stubbornly high, and the war in Ukraine has worsened inflation. Unemployment, meanwhile, is at 7.8%. In a country with 360 million people under age 15, that’s a big long-term problem. Meanwhile, Modi’s move to ban wheat exports has angered its Western partners, while the anti-Muslim bent of Modi’s ruling BJP party has antagonized Delhi’s Gulf partners. And of course relations with China, the other billion-strong Asian heavyweight, are strained. Modi looks secure at home, with no real opposition and a compliant media, but things aren’t getting easier for the world’s most populous democracy.

​Podcast: Could today’s crisis lead to future growth?

If you’re peeking out from under the duvet, wondering how to make it to 2023, be sure to listen up. In our latest “Living Beyond Borders” podcast from Citi Private Bank and GZERO Media, we examine the global risks setting the world on edge at the halfway point of 2022.

New COVID strains, supply chain issues, Russia’s war in Ukraine, climate change, soaring inflation, geopolitical decouplings — these are just a handful of the bubbling crises roiling the markets and the international order.

To delve into what’s happening in the markets and the future of financial growth and globalization, Eurasia Group’s Managing Director for Climate and Sustainability Shari Friedman speaks with David Bailin, chief investment officer and global head of investments at Citi Global Wealth, and Ian Bremmer, president of Eurasia Group and GZERO Media. Listen to their discussion here.

Hard Numbers: Global malnutrition alert, Europeans’ bleak view of economy, South Korea’s export crunch, Xi’s confidence

Gabrielle Debinski

8 million: Global food prices have risen amid the war in Ukraine, but it is particularly bad for emerging-market economies. UNICEF now says that up to 8 million children under the age of 5 could die from severe malnutrition in the coming months. The organization listed nearly two dozen “high risk” countries and urged developed states to step up and help.


-23.6: European confidence in the economy is going from bad to worse. The EU’s consumer confidence indicator for the eurozone plunged to -23.6 this month, the lowest it’s been since the peak of the pandemic in April 2020. Fears are mounting that the continent will soon fall into a recession as Russia tightens its grip on gas exports.

13: South Korean exports in the first 10 days of this month dropped 13% from the same period in 2021, a dramatic change from earlier this year when the country experienced an export boom amid the global post-pandemic recovery. The shift highlights the ongoing challenge for export-reliant economies amid the global inflation storm.

5.5: China’s economy has been pummeled by Beijing’s strict zero-COVID policy and a weakening housing market. But President Xi Jinping says his country is still on track to meet its 5.5% GDP growth goal this year. Economists, however, are skeptical and suggest it will be closer to 4%.

This edition of Signal was written by Beatrice Catena, Gabrielle Debinski, Alex Kliment, Willis Sparks, and Carlos Santamaria. Edited by Tracy Moran. Graphic by Ari Winkleman, art by Paige Fusco.

A boy drinks from a water pump in a village outside Sanaa, Yemen.
REUTERS/Khaled Abdullah

Today, in a special edition of Signal, we look at how water scarcity is driving both conflict and progress. In the end, is the glass half empty or half full?

This edition is part of the “Living Beyond Borders” series presented by GZERO and Citi Private Bank.

Thank you for reading. Please tell your friends to subscribe here.

- The Signal team

An increasingly thirsty planet

A boy drinks from a water pump in a village outside Sanaa, Yemen.

REUTERS/Khaled Abdullah

The amount of water on Earth has been more or less the same for the past 4.5 billion years. But today, a growing number of the world’s people don’t have access to enough of it. In fact, nearly half of the world's population lives in places that face water scarcity for at least one month every year. And more than 1.2 billion people lack regular access to clean water altogether.

For many of them, the situation is getting worse by the day, as climate change causes more frequent droughts or conflicts prevent people from getting to freshwater sources. The lack of access to clean water for drinking, cooking, and crops can cause illness, starvation, and death.

Small wonder, then, that water scarcity is one factor behind some of the world’s most intractable conflicts: Israel-Palestine, India-Pakistan, and now Russia-Ukraine.

The desperate search for water also has millions on the move. The UN warns that water scarcity could force some 700 million people from their homes in the coming years, in mass migrations that will test governments, humanitarian organizations, and societies alike.

But it’s not all parched earth, thirst, and conflict. Water scarcity can also give rise to spectacular practical and technological innovations, as the examples of water management in the arid landscapes of Israel, Nevada, and South Africa show.

In this special edition of Signal, we’ll look at how the world is coping with water scarcity and what’s at stake for an increasingly thirsty planet.

What We’re Watching: Water wars vs. cooperation

Gabrielle Debinski

Water wars?

Hundreds of millions of both Indians and Pakistanis depend on water from the Indus River for drinking, farming, and hydropower. The Indus Waters Treaty, signed by India’s prime minister and Pakistan’s president in 1960, guarantees how water from the river and its tributaries will be shared. This was put at risk in February 2019, when a suicide car bomb killed more than 40 Indian soldiers in the Indian-controlled sector of Kashmir. India’s transport minister responded with plans to “stop our share of water which used to flow to Pakistan.” The Pakistani government then warned it would treat any stoppage of water as an “act of war.” A treaty loses its values if one side decides not to honor it. Though tensions cooled in this case, the risk of a water war remains, because it’s simply too dangerous for these nuclear-armed and bitter rivals to fight a war with conventional weapons, and water will only become a more precious resource in coming years. Global warming could shrink the Himalayan glaciers that feed the river by more than a third in coming decades and make rainfall patterns more erratic, even as Indian and Pakistan water demand increases with population growth.


India and Pakistan are not the only rivals to successfully share water despite bitter differences on other questions. The five former Soviet Republics in Central Asia have not fought over access to the Aral Sea. Jordan and Israel haven’t waged war over the waters of the Jordan River. Threats over access to the Nile have not yet provoked war among Ethiopia, Sudan, and Egypt. A dispute over the Mekong River between China and its Southeast Asian neighbors has generated tensions but not widespread violence. Turkey and Armenia, neighbors with no diplomatic relations who have argued for decades over charges of genocide, have continued to share water from the Arpacay River, which forms the border between them. The two countries continued to honor the Soviet-era treaty that set water-use terms even while the two have fought on opposing sides of a war in 2020.

But successfully managed disputes of the past don’t guarantee a peaceful future, so these and other potential water-based confrontations are worth watching.

Can water cooperation bring peace to the Middle East?

Water scarcity is one of the biggest crises emanating from climate change. If current trends continue, the UN warns that 5 billion people — more than two-thirds of the global population — could be living in areas grappling with extreme water scarcity by 2050. Long dealing with irregular rainfall, increasingly arid conditions, and a growing population, Israel has emerged as a global leader in clean water solutions. Israel, a tech hub, recognized early the importance of treating wastewater to meet growing domestic needs and to leverage it as a tool for international cooperation. In 2000, Israel, which straddles the Sea of Galilee and the extremely salty (and undrinkable) Dead Sea, revamped its water management system by building a slew of desalination plants. It has also revolutionized water recycling, treating wastewater effluent to make the liquid ready for human consumption and irrigation. The country currently recycles about 86% of water, using much of it for agricultural purposes in the arid Negev Desert.

This innovation has also presented opportunities for “drought diplomacy.” Last year, Israel and Jordan, who have long enjoyed a frosty peace, outlined a water-for-energy deal that will see Amman exchange solar energy capacity for much-needed desalinated water. Meanwhile, Israel has also partnered with Arab states, Egypt, and Bahrain on water-management approaches and equipment to mitigate shortages at home.

Innovative solutions to water scarcity problems can be found globally. The US state of Nevada recently inked a deal with California’s government, whereby Nevada will dole out cash to help the Golden State develop new water treatment facilities in exchange for increased access to Lake Mead. Similarly, drought-stricken South Africa, once facing Day Zero – whereby taps were slated to be turned off in major cities like Cape Town because of water shortages – has successfully found a slate of tech-based solutions, particularly for the robust agriculture sector.

CIO Strategy Webcast Series

Citi Private Bank

Join us each week on Thursday at 11:30 am EDT for a conversation with senior investment professionals and external thought leaders on timely market events and ask your most pressing questions.

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The Graphic Truth

Gabrielle Debinski

In many low- and middle-income countries, the availability of safe, drinkable water remains scarce. Though access has improved significantly in many places over the past two decades — by 152% in Afghanistan, for instance — the very low baseline means that still only 28% of that population has access to high-quality drinking water. Meanwhile, countries like the Central African Republic, Zambia, Nepal, and Pakistan saw their access reduced over the past two decades. Here’s a snapshot of the relative change in access to safe drinking water around the world from 2000 to 2020.

​Podcast: Saving the world’s water supply

In our latest “Living Beyond Borders” podcast from Citi Private Bank and GZERO Media, we examine the global risks related to the depletion of a vital ingredient needed for everything in life: water.

Severe weather events and climate change are causing an urgent water crisis. By changing our natural world, through both big and small disasters, water scarcity is disastrously on the rise worldwide.

To delve into this immediate threat, Eurasia Group’s Director of Energy, Climate & Resources Mikaela McQuade talks to Franck Gbaguidi, senior analyst of energy, climate & resources at Eurasia Group, and Harlin Singh, global head of sustainable investing at Citi Global Wealth.

Listen to their discussion here.

Hard Numbers: India’s record drought, privatized waterways, dripping wet smartphones, big oil meets little water

Carlos Santamaria

669: Already sweltering amid a heatwave, the capital of India now faces water shortages with the level at Delhi's biggest reservoir dropping to 669 feet, a record low. The city’s government, run by the anti-corruption AAP party, accuses the BJP-ruled Haryana state of deliberately withholding water from the Yamuna River, which it denies.


454 billion: Private corporations control 454 billion cubic meters of water around the world, about 5% of the global supply. This water-grabbing is a major problem in Africa, where China, India, Saudi Arabia, and the UAE are investing big in water-intensive agriculture projects.

3,190: That smartphone in your hand is soaking wet – maybe (hopefully!) not literally, but it took 3,190 gallons of water to manufacture it. The production of chips and semiconductors – which are what make smartphones smart – is one of the world’s most water-intensive industries.

15.5 billion: Global fossil fuel, electric, and mining companies stand to lose up to $15.5 billion in the coming years due to water scarcity, according to a new report. Projects at high risk include the Keystone oil pipeline in Canada, the Pascua-Lama gold mine on the Chile-Argentina border, the Carmichael coal mine in Australia, and the Oyster Creek nuclear facility in the US.

This edition of Signal was written by Gabrielle Debinski, Alex Kliment, Carlos Santamaria, and Willis Sparks. Edited by Tracy Moran. Graphic by Ari Winkleman. Art by Luisa Vieira.

In this special edition of Signal, we look at how the global economy is really doing, the inflationary pressures from Russia’s war in Ukraine, how developing countries are bearing the brunt, and how fried chicken is helping the Japanese yen. This edition is part of the “Living Beyond Borders” series, presented by GZERO and Citi Private Bank.

Thank you for reading. Please tell your friends to subscribe here.

- The Signal team

Read NowShow less

Today, we’ll bring you new angles on Russia’s invasion of Ukraine, track the war’s impact on election-year politics in France, Hungary, Brazil, and the US, and walk to the brink with Pakistan’s Imran Khan.

We’ve also got your Hump Day recs! Thank you very much for reading Signal. Please tell your friends to sign up here.

Willis Sparks

What We're Watching: Ukraine war bulletin, Hong Kong vs COVID, Pakistan's PM on the ropes

Carlos Santamaria

Oil ban, Churchill, Polish MiGs, Putin's fixes

Biden bans Russian oil, alone. The US president banned imports of Russian oil on Tuesday in a bid to increase economic pressure on the Kremlin. It’s not clear how effective this will be, given that the US accounts for less than 10% of Russia’s daily exports. Meanwhile, Europe, which slurps up almost half of those exports, has refused to join the oil ban for now, and there is virtually no chance of major customers like China or India turning down Russian crude. Meanwhile, Biden’s move carries political risks at home, as average national gas prices have already hit a record high of $4.17 per gallon. Taking more oil off the market could push prices even higher. As we head toward the midterms, how much economic pain will Americans take on behalf of Ukraine?


Zelensky plays Churchill. In a video address to a packed House of Commons on Tuesday, Ukraine’s embattled President Volodymyr Zelensky invoked two famous English wordsmiths — William Shakespeare and Winston Churchill — in an impassioned plea for more sanctions against Russia and the imposition of a no-fly zone over Ukraine. “We will fight in the forests, in the fields, on the shores, in the streets,” he said, adapting Churchill’s Dunkirk speech to his own country’s struggle against the Russian war machine. Zelensky received a standing ovation, but there is still little appetite among Western countries to risk direct combat with Russia by enforcing a no-fly zone.

Poland pledges jets to Ukraine … sort of. Warsaw has been firm that it won't transfer any of its MiG-29 jets to Ukraine directly, but it pledged on Tuesday to put them all at Washington’s disposal for onward transfer to Kyiv if America so chooses. US officials said, however, that the offer was likely untenable, citing logistical concerns and questioning the rationale. Ukrainians want the Polish MiGs because they are based on Soviet-era planes that Ukrainian pilots are familiar with and will thus require minimal training.

Putin tries to blunt the pain. With sanctions increasing and Western firms exiting from Russia, Putin on Tuesday signed a package of economic support measures for Russian people and businesses. The package boosts benefits for pensioners, slashes red tape for businesses, and eases the import and purchase of pharmaceuticals. Over the past two weeks, the Russian ruble has lost nearly a third of its value against the dollar amid the worst economic crisis Russians have faced in a generation.

Pakistani PM in trouble

Pakistan’s embattled Prime Minister Imran Khan will soon face a no-confidence vote. A motion was filed on Tuesday by 100 opposition lawmakers who blame him for the country’s ailing economy and high inflation. After the motion was accepted, opposition supporters took to the streets of the capital, Islamabad, and other cities to demand Khan step down within 24 hours. Khan, for his part, remained defiant, insisting that he'll survive all attempts to unseat him — as he did exactly one year ago. To stay in power, Khan needs 172 votes in the 342-seat assembly, where the ruling Tehreek-e-Insaf Party and its allies have a slim majority. However, eight members of Khan's party have threatened to withdraw their support, so the PM is on very shaky ground. The no-confidence vote could take weeks to schedule. Meanwhile, all eyes will be on Pakistan’s powerful army, which officially says it stays out of politics but has a long history of doing the opposite in the nuclear-armed nation.

Hong Kong’s COVID apocalypse

Two years in, Hong Kong now has the world’s highest daily per capita death rate from the COVID-19 virus. The 7.5-million-strong city-state has closely followed China’s zero-COVID policy and shunned mRNA vaccines, which means few people were exposed to the virus and developed antibodies before the latest variant hit. The COVID crisis has already delayed Hong Kong’s chief executive “election” by six weeks. Carrie Lam — the current leader, who has yet to say whether she’ll run for reelection — initially wanted to test the entire population, but powerful business leaders pushed back amid fears of a total lockdown. Hong Kong must now decide whether to relax its zero-COVID approach despite rising deaths, or risk more businesses relocating to its longtime competitor Singapore.

The Graphic Truth

Carlos Santamaria

The Biden administration on Tuesday banned US oil imports from Russia to punish its invasion of Ukraine. Although the US — the world's second-largest producer of crude — is a net exporter of black gold and far less dependent on Russian oil than European countries, the move will likely still hurt Americans via higher gas prices until other US oil suppliers ramp up production to fill the void. We take a look at where the US buys its crude from.

Putin invades the year’s big elections

Willis Sparks

Russia’s invasion of Ukraine is shifting politics inside every major country in the world. Here are four countries holding big elections this year — with details on how Vladimir Putin’s war is making a difference in Hungary, France, Brazil, and the United States.


Hungary — parliamentary elections on April 3

No EU head of government has friendlier ties with Putin than Hungary’s Prime Minister Viktor Orbán. But Russia’s invasion, says Mujtaba Rahman, head of Eurasia Group’s Europe desk, “is politically problematic for Orbán because it rekindles memories of the 1956 Soviet invasion for both pro- and anti-Orbán voters.” On the eve of what’s expected to be a close election, Hungary’s prime minister has had to strike a delicate balance on the war.

On the one hand, despite Hungary’s energy dependence on Russia, Orbán decided quickly after the invasion to back EU sanctions on Russia. On the other, fear of losing crucial pro-Russia voters to far-right election rivals encouraged him to oppose some EU plans, such as shipments of European weapons to Ukraine’s army.

In the end, Orbán’s dexterity in managing this crisis may boost his party’s chances next month.

France — presidential election on April 10 and April 24

Putin has done France’s President Emmanuel Macron an enormous favor. By starting a war during France’s six-month presidency of the Council of the European Union, he’s handed Macron the chance to play crucial European statesman rather than presidential candidate urgently hustling for votes.

The war has also sucked oxygen from the campaign of his rival, far-right favorite Marine Le Pen, who has “an embarrassing history of admiration for Vladimir Putin,” according to Rahman. In fact, her party courted controversy by borrowing money from a Russian-owned bank in 2014, when the National Rally Party was opposing Western sanctions against Russia over its seizure of Crimea.

Macron has now become a strong favorite to win a second-round victory on April 24.

Brazil — general election on October 2

Further afield, the war in Ukraine creates risks for Brazil’s President Jair Bolsonaro. Problem one is that he made a considerable show of visiting Putin in Moscow just days before the invasion to express “solidarity with Russia.” For some Brazilian voters, that’s an embarrassing reminder of Bolsonaro’s own controversial military background and hyper-macho political rhetoric. After the invasion, the president insisted that Brazil would remain “neutral,” alienating some voters on both sides.

But the Russian invasion’s biggest impact on Brazilian politics this year will be economic. In presidential polls, Bolsonaro now trails his main rival, former president Luis Inácio Lula da Silva, in part because high inflation (10% in 2021) has taken a toll on the purchasing power of millions of voters. A lasting global inflation shock, exacerbated by the Russia-Ukraine war, will undermine his chances of catching up.

US — midterm elections on November 6 and the 2024 presidential election

A recent poll found that 74% of American respondents said Russia’s invasion was unjustified, and 76% expressed a negative personal view of Vladimir Putin. But this is a question on which Democrats are far more united than Republicans, casting a shadow over GOP expectations of victory in November.

That vote is still eight months away, and President Biden’s relative unpopularity probably will deliver Congress to the GOP. By summer, Russia’s role in high gasoline prices will matter less than it does today to frustrated consumers.

But what about the 2024 presidential election? Just 3% of that poll’s respondents who voted for Donald Trump in 2020 were willing to say Biden is “doing a better job leading his country” than Putin is. If Trump runs again, his continuing public admiration for Putin — the former president called the Ukraine invasion “genius” — could cost him considerable support. After all, 58% of Republican voters back Ukraine at the moment.

Even if Trump settles for the role of GOP kingmaker, his support of Putin could divide both Republican leaders and voters — and alienate some GOP-leaning independents. Especially in the highly likely event that Russia features prominently in election-year headlines.

US ban on Russian oil imports not coordinated with NATO allies

What are the ramifications of the US ban on Russian oil imports? For Ian Bremmer, it’s not clear yet, but it could make Western allies look weaker because the US didn’t coordinate with them.

Any surprises on Russia’s list of unfriendly countries? Monaco and Switzerland, where Russians do a lot of business.

Is Xi Jinping facing a hard wartime choice for China? Not in his view. Ian believes that the Chinese want to avoid another Cold War, but if it happens, it’s very clear whose side they'll be on. Hint: not Biden’s.

Watch this week’s World In 60 Secondshere.

Hard Numbers: Golden Arches close in Russia, Kremlin lists its enemies, nickel blows up, North Korean nuclear program stirs

Tracy Moran

850: McDonalds will temporarily close its 850 restaurants in Russia in response to Putin’s invasion of Ukraine. The 62,000 people it employs there will, however, stay on payroll. The opening of the first McDonalds in the Soviet Union, in 1990, was a historic and optimistic moment during the Cold War.


48: On Tuesday, the Kremlin published a list of 48 countries and territories deemed “unfriendly” to Russia. The US, EU, and, oddly, Taiwan are all on it. A recent Kremlin decree permits Russians to repay any foreign currency debts to these “unfriendlies” in rubles. However, the decree does not oblige creditors to accept the nearly worthless Russian currency.

100,000: The London Metal Exchange suspended trading of nickel on Tuesday after prices more than doubled to over $100,000 per metric ton. Russia is the world’s third-largest nickel producer, and the war in Ukraine is fueling concern about the supply of the metal, which is used to make stainless steel and EV batteries.

4: Roughly four years since North Korea officially shuttered its Punggye-ri nuclear testing site, experts have detected “very early signs of activity” there. Analysts believe the Hermit Kingdom may be gearing up to resume nuclear and long-range missile testing. Not now, North Korea!

Humpday recommendations: Odessa, posh French real estate biz, Polish vodka

Read: Odessa: Genius and Death in a City of Dreams — by Charles King. Here is the tragic and triumphant biography of one of the world’s most fascinating cities. It’s a place where history, poetry, commerce, humor, and violence have collided for centuries. Sadly, this great place is making news this week for all the wrong reasons. — Willis

Watch: The Parisian Agency — Comment dit-on “super posh”? If you dream of buying a luxury home with a stunning view of the Eiffel Tower or Notre Dame, you need to check out The Parisian Agency. This Netflix series (Season 2 just dropped) follows a family-run real estate business that sells increasingly posh digs in the French capital to an increasingly wealthy clientele. You’ll come away practicing your pronunciation of “luxe” and “tip-top” while salivating over decors ranging from Versailles-style opulence to Creole-chic cabins. — Tracy

Drink: Zubrowka — Now that many Western retailers are boycotting Russian vodka, and some US states are even banning it, try this Polish brand, my favorite. It’s lightly flavored with a blade of bison grass — which it’s named after — in each bottle. Best served neat or on the rocks, but it also goes well with a splash of apple juice. — Carlos

Words of wisdom

“Why bother remembering a past that cannot be made into a present?”

— Søren Kierkegaard

This edition of Signal was written by Willis Sparks, Carlos Santamaria and Alex Kliment. Edited by Tracy Moran. Graphic by Paige Fusco. Spiritual counsel from Gabrielle Debinski and Frozen stars singing for Ukraine.

In this special edition of Signal, we'll look at how to transform the Great Resignation into the Great Return. We track the future of work and workplace culture, a cautionary tale from Germany, and the 1.1 million women in the US whom employers need to woo back into the workforce. This edition is part of the “Living Beyond Borders” series, presented by GZERO and Citi Private Bank.

Thank you for reading — please tell your friends to subscribe here.

- The Signal team

Getting from the Great Resignation to the Great Return

Carlos Santamaria

It’s a job seeker’s market.

Over 47 million Americans voluntarily left their jobs last year, almost 13% more than in 2019. That was before the pandemic, which has upended the relationship between workers and employers as much as it has disrupted all our lives.


It’s not just a US phenomenon. High turnover rates extend across comparable OECD economies. Nearly a quarter of Brits and a third of Australians plan on switching jobs in the next several months.

The picture is somewhat different in the developing world. Hundreds of millions of people who lost their jobs during the pandemic — mostly in the informal economy — still can't find work because COVID obliterated entire industries such as tourism. Chinese companies, meanwhile, are struggling to retain young employees who are fed up with low pay and long hours.

The Great Resignation is thus a global problem, in varying ways, as will be the Great Return. With the omicron scare easing in the West, many companies there have begun trying to figure out how to woo millions of now-remote (or recently resigned) employees back to the office — precisely at a time when it’s gotten harder to find and retain talent.

Here are three ways employers might have success.

The most obvious fix is to raise salaries. That’s already happening for some. US wages grew on average 4.5% last year, the highest annual rate in almost 40 years. But with US inflation currently at 7.5%, that annual bump is actually a pay cut in real terms, and higher salaries won’t entice everyone.

What’s more, upward pressure on salaries is likely to contribute to even higher inflation.

Another option is additional benefits for employees, especially those who feel more productive working from home and see little upside to returning to the office. Many companies have already adopted permanent hybrid schedules, with workers coming in twice a week.

But some CEOs want everyone in the office five days a week. They just don't get it, US organizational psychologist Adam Grant toldGZERO World. Grant argues that worker productivity “is about the purpose and the process that you bring to your job (...) not about the place you happen to be doing it in.”

Apart from going hybrid, governments are increasingly backing experiments such as four-day workweeks to deliver more work-life balance. This approach has already been tested — with varying degrees of success — in Iceland, Spain, and it will soon be trialed in England.

Finally, companies that struggle to find talent where they’re based might opt to find it elsewhere, including overseas. That means more people working remotely from other US states or even abroad, which could have big political implications.

Imagine all those American manufacturing jobs that went to Mexico thanks to NAFTA, or to China after Beijing joined the WTO. This time, though, US labor outsourcing would hit the laptop class — the one that has benefited the most from globalization and a digital-first world.

As Eurasia Group CCO Alex Kazan points out on the Living Beyond Borders podcast, a post-pandemic hiring spree of remote labor from low-income countries could be politically toxic amid the surge of nationalism and protectionism we've seen in places around the world. But if done right, it could also be viewed as an expansion of a flexible gig economy that can spur greater inclusion in a global workforce.

“We're still a long way away from a global labor pool, but certainly the normalization and acceptance of technologies that enable remote work make that a more plausible future,” Kazan says.

Meanwhile, WFH is not going away. If companies in advanced economies want to lure their employees back to the office, most firms will need to reshape workplace culture to embrace remote working and hybrid models.

The Graphic Truth

The pandemic has enabled some professionals to work remotely from home — or anywhere. Digital nomads wander the world in search of the perfect place to hunker down with their laptops, prompting some countries to offer them special visas. Where should you go if you can work from anywhere?

CIO Strategy Webcast Series

Citi Private Bank

Join us each week on Thursday at 11:30am EST for a conversation with senior investment professionals and external thought leaders on timely market events and ask your most pressing questions.

Register now.

What We're Watching: Gorillas in the gig economy & work struggles for the "sandwich generation"

Gabrielle Debinski

Gorilla unicorn to gig goat: a cautionary tale. Last year, a new Berlin-based food delivery company called Gorillas was going bananas. With its minimal branding, pro-biker vibes, and good service, the company became the first German tech “unicorn,” meaning it raised enough capital to be valued at more than a $1 billion dollars. But then the wheels came off as its gig workers, angry about late payments and poor working conditions, tried to organize in protest, and hundreds were fired. The company continues to function, but it recently set up its holding company in the Netherlands. The tale of Gorillas is both an inspiring and cautionary one. Over the past 10 years, gig work, facilitated by new technology platforms — think Uber, Seamless, Fiver, etc — has grown rapidly. Close to 30 million Europeans secure work through digital platforms, and the EU says that could rise to 43 million by 2025. In the US, one in 10 American adults relied primarily on “on demand” work as of 2020. This has vastly expanded opportunities for employment and broadened companies’ ability to source talent and skills on demand. But that flexibility comes at a cost for employees, who lack the workplace protections and benefits normally associated with full- or part-time work. Policymakers are still trying to balance the pros of flexibility with the cons of “precarity.” The EU is leading the legislative charge on this, with a sweeping set of reforms that would force gig platforms to classify their workers as employees and give them more bargaining rights. Supporters say it will boost the gig economy to a fairer footing, while critics worry it will make them less efficient and more expensive.


Is the “sandwich generation” being frozen out? The pandemic has been difficult for people of all demographics, but the costs – and disruptions – have been particularly severe for the “sandwich generation.” Those include people in their 30s, 40s, and early 50s who are trying to balance careers along with caregiving responsibilities for young children and parents. This burden is disproportionately felt by women, who make up 60% of this demographic in the US, according to Pew. Anecdotal evidence in the US, UK, and parts of the European Union, suggests that the pandemic has forced these already-stretched individuals to give up jobs and shed work hours in order to take on the added burden of helping with home-schooling and elder-care responsibilities. There are signs that many of these women have not made their way back into the labor force. While men have mostly recouped their pandemic job losses in the US, women are lagging far behind: there were at least 1 million fewer women in the workforce in January 2022 than two years earlier, according to the Bureau of Labor Statistics. Some experts warn that things are still taxing for older members of the “sandwich generation” because young adults, whose education and work life have been disrupted for the past two years, are becoming more dependent on their parents for housing and other support. Many businesses are ramping up “return-to-work” programs to help lure women back to work after long absences. But these programs are often limited in scope, and being out of work for extended periods can make it more difficult to secure desirable roles.

Hard Numbers: India needs non-agri investment, American women lag behind, WFH forever, Iranian job woes

Gabrielle Debinski

90: India will need to create 90 million new non-agricultural jobs by 2030 to reach its economic potential, according to McKinsey. The pandemic drove tens of millions out of cities to work in farming back in their villages, but economists now say that the government needs to boost urban production to maximize growth.


63: The US economy has shed millions of jobs since March 2020, with female workers accounting for 63% of the lost gigs, according to the National Women’s Law Center.

91: A whopping 91% of Iranians surveyed say they feel negative about their local job markets. The Iranian labor market continues to be strangled by tough economic sanctions, but if a nuclear deal is reached in the near term, employment opportunities and industry will expand significantly, experts say.

59: Two years into the pandemic, 59% of Americans who can work from home say they are doing so all or most of the time. Before the pandemic, 23% said they worked from home frequently.

Podcast: Living Beyond Borders 

GZERO Media and Citi Private Bank teamed up to produce a special-edition podcast series called “Living Beyond Borders.” The segments focus on everything from pandemic lessons and what to expect at work in 2022 to China’s changing trade priorities and the importance of biodiversity to the global economy.

Listen to the series here.

This edition of Signal was written by Gabrielle Debinski, Alex Kliment, and Carlos Santamaria. Edited by Tracy Moran. Graphic by Ari Winkleman, art by Annie Gugliotta.

In this special edition of Signal, we'll look at why there will be no US-China Cold War (yet), track declining population growth in both countries, and fight business culture wars over Xinjiang. This edition is part of the "Living Beyond Borders" series, presented by GZERO and Citi Private Bank.

Thank you for reading — while you're at it, please tell your friends to subscribe here.

— The Signalistas

The US and China are too busy to fight

Willis Sparks

At the dawn of the US civil rights movement, Atlanta mayors William Hartsfield and his successor Ivan Allen promoted Georgia’s capital as “the city too busy to hate.” Whatever the reality of race relations at the time, both men wanted Atlanta to avoid the confrontations plaguing other southern US cities, and to open their city as the commercial hub of the “new South.”

In recent decades, US and Chinese leaders have relied on a similar approach to relations between the two countries. The risk of conflict was obvious, given differences in their interests and political ideologies, but there was much money to be made and stability to be gained as long as they protected their mutually profitable business opportunities.

But over the past five years, US and Chinese words and deeds have taken on a harder edge. As US post-Cold War dominance of the international system has eroded, and as Xi Jinping has more explicitly offered China’s leadership as an alternative to the West’s global rule-setting, Washington and Beijing have seemed headed toward a digital-age Cold War. Former US President Donald Trump pushed for a more open confrontation between the two powers, and current President Joe Biden has done little to change course.

There is good news, however, for those who believe that a US-China Cold War would be catastrophic for both countries and the world. In reality, both countries are far too busy to transform rivalry into hate. But it isn’t just business opportunities that now preoccupy them. It’s also major domestic challenges and distractions, particularly for China, that demand something close to their full attention.


Troubles at home

One year into the job, Biden knows the success of his presidency will depend on helping to end the pandemic, revive the US economy, and deliver on more of his legislative promises. With midterm elections in November, his need to focus on these priorities is increasingly obvious. Fights with China won’t help, because they undermine investor confidence in the country’s immediate and longer-term future and distract from the issues his voters care more about.

Xi faces an even longer list of domestic problems. In a year in which he wants a smooth path toward a third term as China’s leader, and the indefinite extension of his power, he’s coping with both urgent and longer-term challenges for China.

First, China is days away from hosting the Beijing Winter Olympic Games in the middle of a public health emergency — and Xi is well aware that the credibility of his government’s COVID response is very much on the line. From the beginning of the pandemic, China has enforced a zero-COVID policy, imposing large-scale lockdowns in response to small numbers of infected people.

Now, with the Games about to begin, the much more transmissible omicron variant has appeared inside multiple Chinese cities, and more than 20 million people have been locked down in response. An added complication: it will be months before China can roll out an mRNA vaccine that’s more effective than currently available Chinese vaccines.

This problem arrives at a moment when China’s economy was already cooling off — and this slowdown creates a more urgent worry in China than a temporarily stalled economy in the US or Europe. China is still a middle-income country. To reach Western levels of prosperity, it needs growth above 6 percent for another generation, according to Eurasia Group estimates.

But in a world where factories’ production depends less heavily on cheap labor and more on robots, that’s a serious concern for China’s future. The country’s changing demographics — fewer workers and more retirees as birth rates remain low — compounds that problem.

Then there’s China’s debt problem. For decades, the state has boosted growth by encouraging Chinese lenders, some of them state-owned, to finance real estate and other speculative projects with little worry over the financial wisdom of each investment. When big companies have struggled to repay, the state has subsidized repayment to avoid a systemic financial crisis.

But when borrowers believe that government will prevent default, they take on even more risk, including by borrowing more from foreign lenders, creating a debt bubble. In recent years, China has tried to allow some companies to default and fail. But reform comes with risks that demand careful attention.

Bottom line: Biden and Xi have good political reasons to talk tough, and to challenge one another at the margins. But both leaders have bigger worries to manage, and the two countries still need strong economic ties to address their own problems.

The Graphic Truth

Gabrielle Debinski

For decades, the Chinese Communist Party was worried about overpopulation. In 1978 it told Chinese families they could only have one kid to contain the ballooning population size. But after years of restricting the number of births, China's population is now shrinking — fast. This demographic trend is a massive problem for China, currently vying to overtake the US as the world's largest economy. Meanwhile, the US population has also started to decline over the past decade. We compare their population growth rates from 1961-2020.

The expansion will endure: Seeking sustained returns

Citi Private Bank

The economic recovery and bull market are maturing, with moderate growth expected ahead. We believe portfolios should evolve to provide exposure to more defensive sectors, quality firms and dividend growth strategies. In Outlook 2022 we highlight asset classes and regions that may lead the way in 2022 and beyond.

You can click here to read the full report, learn more about key themes in the report, and view related videos.

What We’re Watching: COVID Olympics, US-China business dilemma, China and the US midterms

Gabrielle Debinski

COVID at the Games. The Beijing Winter Olympics, which begin on Friday, will be the most serious test to date of China's zero-COVID policy. President Xi Jinping wants to make a big international splash with the Games, as his predecessor did with the Beijing Summer Olympics in 2008. That'll be tough with stadiums only half-full with domestic spectators pre-screened by the Communist Party, and no foreign fans allowed to attend at all. To avoid an outbreak at the Olympic Village, China initially imposed strict testing and quarantine policies for everyone attending the Games. But it’s possible that the CCP is having at least some doubts about this policy's ability to contain the omicron variant: Only days out from the inauguration ceremony, authorities have relaxed testing and isolation guidelines, signaling a slight pivot in China's pandemic management strategy. Does this mean the Olympics will be the beginning of the end of zero COVID? China's economy — and the world's — would surely benefit from a transition to living with the virus. Beijing says it is developing its own mRNA vaccines to achieve this, but that could still be many months away.


Xinjiang business culture wars. The Beijing Winter Olympics will also pose a big test for multinational corporations that will try to attract business in China despite the CCP’s ongoing human rights violations. US firms will worry about American consumer boycotts if they source products from Xinjiang, where some Chinese manufacturers rely on Uyghur forced labor. (Elon Musk recently came under fire for opening a Tesla showroom in the region.) But if US corporations take a firm stand on Xinjiang and other politically-sensitive issues in China, they risk a similar backlash from Chinese consumers. Last year, a vocal online movement in China called for the boycott of Nike after the multinational corporation criticized abuses in Xinjiang. Indeed, the CCP is more game to stoke nationalist fervor at the expense of business opportunities than the US government, which is reluctant to support consumer-led boycotts that hurt US businesses. Now, American corporations will face a very tough choice between drawing the potential ire of the US public or nationalist Chinese consumers.

China enters US midterms campaign. Republicans and Democrats in the US Congress don’t agree on much these days, but they do find much common ground on China — specifically, the need to counter Beijing’s growing economic and diplomatic clout. This “tough-on-China'' competition will surely intensify in the lead-up to the November midterm elections. Last summer, the Senate passed a bill to augment the US’ tech capabilities and “global competitiveness” – for instance by producing more US-made semiconductors instead of relying on Chinese chips. Tellingly, the legislation explicitly refers to China as the "greatest geopolitical and geoeconomic threat" to US foreign policy. The House of Representatives, meanwhile, passed two separate research and development bills, with some Democrats saying the Senate bill was too focused on countering China. In the months ahead, expect Republicans to jump at the opportunity to cast the Democratic party — and President Biden — as weak on China. Senator Marco Rubio from Florida, who is up for re-election, has previously sent out campaign emails with the subject line "Dems <3 China.” This could prove to be a decisive electoral strategy considering that most Americans have a negative view of China, and support a more assertive stance towards its government.

Podcast: The US and China

This two-part instalment of Living Beyond Borders, a special podcast series from GZERO and Citi Private Bank, focuses on the relationship between the US and China. Moderated by Caitlin Dean, head of the Geostrategy Practice at Eurasia Group, the two episodes feature David Bailin; Chief Investment Officer and head of Investments for Citi Global Wealth; Steven Lo, co-head Citi Global Wealth for Asia-Pacific; and Ian Bremmer, President at Eurasia Group and GZERO Media. Watch part I (Tariffs, tutors, and tension) here and part II (Common prosperity, coal, and competitiveness) here.

Quiz: Nixon goes to China

Carlos Santamaria

February 21 is the 50th anniversary of Richard Nixon's historic visit to China, which began the normalization of US relations with the world's most populous Communist state — instantly shifting the Cold War balance of power. This bold move by a US president who had made his political reputation as an anti-Communist crusader shocked many at the time, but it helped set the stage for deeper ties between what are now the world's two most powerful nations and largest economies.

How well do you know the details of Nixon's week-long trip? Take our quiz to find out.


1. How did Nixon refer to National Security Adviser Henry Kissinger during his meeting with Mao?

A. A foreign policy genius

B. A ladies' man

C. A doctor of brains

2. The leader of which Asian country brokered Kissinger's secret 1971 visit to China that paved the way for Nixon's trip?

A. Yahya Khan, Pakistan

B. Indira Gandhi, India

C. Suharto, Indonesia

3. What did Nixon say while touring the Great Wall?

A. How long is it?

B. This is a great wall.

C. Who built it?

Hard Numbers: GDP wars, WTO rules in Beijing’s favor, Africans support Chinese engagement, China winning 5G battle

Gabrielle Debinski

5.9: China’s GDP could grow on average 5.9 percent per year until 2025, according to the Center for Economics and Business Research, which predicts that China will overtake the US as the world’s largest economy by the end of the decade. The Chinese economy was worth $18 trillion in 2021, compared to America’s $23 trillion.


645 million: Amid an ongoing trade war between the world’s top two economies, the World Trade Organization ruled last week that Beijing can slap $645 million worth of tariffs on US goods. A decade ago, the US placed tariffs on some Chinese products, including steel pipes and solar panels, saying that Beijing was giving unfair subsidies to state-owned companies.

59: The US has been trying to discredit China’s growing influence in Africa, but it’s not working: 59 percent of Africans view China’s economic and political clout favorably. Almost exactly the same number — 58 percent — feel the same about the US.

90: More than 90 countries have signed up to use 5G networks made by the Chinese telecom giant Huawei. Meanwhile, only eight nations have so far agreed to join the US ban on Huawei. Why? Many analysts say it’s because China offers way superior 5G infrastructure.

Answers

1. C — According to the now-declassified transcript of their conversation, when Mao asked Nixon about Kissinger's PhD, the US president responded that his national security adviser was a "doctor of brains." Mao was however also very interested in Kissinger's playboy reputation, which Nixon acknowledged and joked about.

2. A — Soon after taking office in early 1969, the Nixon administration put out feelers to China through Pakistan, whose dictator personally delivered a message for China’s PM Zhou Enlai to relay to Mao. Mao agreed to start a dialogue — under the condition that the US withdraw all its forces from Taiwan. When Zhou finally met Kissinger in Beijing, the Chinese kept their promise to the US of total secrecy.

3. B — On the fourth day of his visit, Nixon took a road trip outside Beijing to check out China's most famous monument. After admiring the centuries-old structure, he famously quipped to the American media: "I think that you would have to conclude that this is a great wall." (The original quote is much longer.)

This edition of Signal was written by Gabrielle Debinski, Carlos Santamaria, and Willis Sparks. Art by Jess Frampton, graphic by Ari Winkleman.

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03/09/2022