The future of the office

Covid-19 has forced a radical shift in working habits

Mostly for the better

Self-styled visionaries and people particularly fond of their pyjamas have for decades been arguing that a lot of work done in large shared offices could better be done at home. With covid-19 their ideas were put to the test in a huge if not randomised trial. The preliminary results are now in: yes, a lot of work can be done at home; and what is more, many people seem to prefer doing it there.

This does not, in itself, mean the end of the non-home office. It does mean that there is a live debate to be had. Some companies appear relaxed about a domestic shift. On August 28th Pinterest, a social-media firm, paid $90m to end a new lease obligation on office space near its headquarters in San Francisco to create a “more distributed workforce”.

Others seem to be against it. Also that month, Facebook signed a new lease on a big office in Manhattan.

Bloomberg is reportedly offering a stipend of up to £55 ($75) a day to get its workers back to its building in London. Governments, on which some of the burden will fall if the pandemic persists, are taking a similar tack, encouraging people “back to work”—by which they mean “back to the office”.

They face a difficult task. For working from home seems to have suited many white-collar employees. As lockdowns have eased, people have gone out into the world once more: retail spending has jumped across the rich world while restaurant reservations have sharply risen.

Yet many continue to shun the office, even as schools reopen and thus make it a more feasible option for working parents. The latest data suggest that only 50% of people in five big European countries spend every work-day in the office (see chart 1). A quarter remain at home full-time.

This may be due to the residual fear of covid-19 and the inconvenience of reduced-capacity offices. Until social-distancing guidance ends, offices cannot work at full steam. The average office can work with 25-60% of its staff while maintaining a two-metre (six-foot) distance between workers. Offices which span more than five floors rely on lifts; the queues for access, when only two people are allowed inside one, can stretch around the block.

Some offices are trying to make themselves safer places to work. The managers of a new skyscraper in London, 22 Bishopsgate, have switched off its recirculated air-conditioning. Others have installed hand-sanitising stations and put up plastic barriers.

But even if offices are safer, it can still be hard to get there. Many employees do not want to or are discouraged from using public transport—and one-quarter of commuters in New York City live more than 15 miles (24km) from the office, too far to walk or cycle.

However it also appears to be the case that working from home can make people happier. A paper published in 2017 in the American Economic Review found that workers were willing to accept an 8% pay cut to work from home, suggesting it gives them non-monetary benefits. Average meeting lengths appear to decline (see chart 2).

And people commute less, or not at all. That is great for wellbeing. A study from 2004 by Daniel Kahneman of Princeton University and colleagues found that commuting was among the least enjoyable activities that people regularly did. Britain’s Office for National Statistics has found that “commuters have lower life satisfaction...lower levels of happiness and higher anxiety on average than non-commuters”.

The working-from-home happiness boost could, in turn, make workers more productive. In most countries the average worker reports that, under lockdown, she got more done than she would have in the office. In the current circumstances, however, it is hard to be sure whether home-working or office-working is more efficient.

Many people, particularly women, have had to work while caring for children who would normally be in school. That might make it seem as though working from home was less productive than it could theoretically be (ie, when the kids were in school).

Tumble outta bed into the kitchen

But there are lockdown-specific effects which create the opposite bias, making work-from-home seem artificially productive. During lockdown workers may have upped their game for fear of being let go by their company—evidence from America suggests that more than half of workers are worried about losing their job due to the outbreak. A separate problem is that most studies under lockdown have relied on workers to self-report their productivity, and the data generated in this way tend not to be very reliable.

Research published before the pandemic provides a clearer picture. A study in 2015 by Nicholas Bloom of Stanford University and his colleagues looked at Chinese call-centre workers. They found that those who worked from home were more productive (they processed more calls). One-third of the increase was due to having a quieter environment. The rest was due to people working more hours.

Sick days for employees plummeted. Another study, looking at workers at America’s Patent and Trademark Office, found similar results. A study in 2007 from America’s Bureau of Labour Statistics found that home-workers are paid a tad more than equivalent office workers, suggesting higher productivity.

The experience of lockdown has simply accelerated pre-existing trends, thinks Harry Badham, the developer of 22 Bishopsgate. That may be an understatement. Although the share of people regularly working from home was rising before the pandemic, absolute numbers remained small (see chart 3).

According to one view, the fact that office-working was so dominant until recently reveals that it must be more efficient than home-based work both for firms and for workers. By this logic the success of a country’s emergence from lockdown can be measured by how many people are back at their desks.

But there is another interpretation. This says that home-working is actually more efficient than office-work, and that the glory days of the office are gone. The office, after all, came into being when the world of work involved processing lots of paper. The fact that it remained so dominant for so long may instead reflect a market failure.

Before covid-19 the world may have been stuck in a “bad equilibrium” in which home-work was less prevalent than it should have been. The pandemic represents an enormous shock which is putting the world into a new, better equilibrium.

Brent Neiman of the University of Chicago suggests three factors which prevented the growth of home-working before now. The first relates to information. Bosses simply did not know whether clustering in an office was essential or not.

The past six months have let them find out. The second relates to co-ordination: it may have been difficult for a single firm unilaterally to move to home-working, perhaps because its suppliers or clients would have found it strange. The pandemic, however, forced all firms who could do so to shift to home-working all at once. Amid this mass migration, people were less likely to look askance at companies which did so.

The third factor is to do with investment. The large fixed costs associated with moving from office- to home-based work may have dissuaded firms from trying it out. Evidence from surveys suggests that firms have in recent months spent big on equipment such as laptops to enable staff to work from home; this is one reason why global trade has held up better than expected since the pandemic began.

Such investments are made at the household level too. In many rich countries the market for single-family houses is stronger than for apartments. This suggests that people are looking for extra space, possibly for a dedicated home office.

Pour yourself a cup of ambition

The extent to which home-working remains popular long after the pandemic has passed will depend on a bargain between companies and workers. But it will also depend on whether companies embrace or reject the controversial theory that working from an office might actually impede productivity.

Since the 1970s researchers who have studied physical proximity (ie, the distance employees need to travel to engage in a face-to-face interaction) have disagreed on the question of whether it facilitates or inhibits collaboration. The argument largely centres on the extent to which the bringing-together of people under one roof promotes behaviour conducive to new ideas, or whether doing so promotes idle chatter.

Such uncertainty is exemplified by a study in 2017 by Matthew Claudel of the Massachusetts Institute of Technology (mit) and his colleagues. Their study looked at papers and patents produced by mit researchers and the geographical distribution of those researchers. In doing so, they found a positive relationship between proximity and collaboration.

But when they looked at the buildings of mit, they found little statistical evidence for the hypothesis that “centrally positioned, densely populated and multi-disciplinary spaces would be active hotspots of collaboration”. In other words, proximity can help people come up with new ideas, but they do not necessarily need to be in an office to do so.

However, not everything about working from home is pleasurable. In July a study from economists at Harvard, Stanford and New York University found that the average workday under lockdown was nearly 50 minutes longer than it was before, and that people became more likely to send emails after work hours. There is also wide variation between workers in how much they enjoy working from home.

Leesman, a workforce consultancy, has surveyed the experience of more than 100,000 white-collar workers across the rich world during the pandemic. It finds that satisfaction with working from home varies according to whether that person has dedicated office and desk space or not.

The tide’s turned and rolling your way

And not everyone has the ability to work from home, even if they want to. Research published in April by Mr Neiman and Jonathan Dingel, both of the University of Chicago, found that across rich countries about 40% of the workforce were in occupations that could plausibly be completed from their kitchen tables.

Evidence of actual working arrangements during the pandemic backs up those speculations. A paper from Erik Brynjolfsson of Stanford University and colleagues, looking at American data, suggests that of those employed before the pandemic began, about half were working from home in May.

Indeed, it is uncertain whether the benefits of working from home can last for a sustained period of time. Mr Bloom’s co-written study on Chinese call-centre workers is one of the few to assess the impact of working from home over many months. He and his colleagues found that, eventually, many people were desperate to get back to the office, if only every now and then, in part because they were lonely.

Some companies which have tried large-scale remote working in the past have ultimately abandoned it, including Yahoo, a technology firm, in 2013. “Some of the best decisions and insights come from hallway and cafeteria discussions, meeting new people, and impromptu team meetings,” a leaked internal memo read that year.

The challenge for bosses, then, is to find ways of preserving and boosting employee happiness and innovation, even as home-working becomes more common. One solution is to get everyone into the office a few days a month. An approach whereby workers dedicate a chunk of time to developing new ideas with colleagues may actually be more productive than before.

A study from Christoph Riedl of Northeastern University and Anita Williams Woolley of Carnegie Mellon University, published in 2017, suggested that “bursty” communication, where people exchange ideas rapidly for a short period of time, led to better performance than constant, but less focused, communication.

Not much evidence exists that serendipity is useful for innovation, even though it is accepted by many as a self-evident truth. “A lot of people made a lot of money selling this watercooler idea,” says Mr Claudel of mit, referring to the growth in recent decades of open-plan offices, co-working spaces and trendy “innovation districts”.

Coming into the office now and then is not the only way of generating bursty communication. The same can be achieved, say, with corporate retreats and get-togethers. Gitlab, a software company, has been “all-remote” since it was founded in 2014. With no offices, it gathers together its 1,300 “team members”, who live in 65 different countries, at least once a year for get-togethers and team bonding.

Similarly, companies such as Teemly, Sococo and Pragli offer “virtual offices”, making it easier to communicate with colleagues, rather than going through the rigmarole of scheduling a video call. Using video messaging from Loom, a worker can record her screen, voice and face and instantly share it with colleagues—more useful than a conventional video call, as the video can be sped up or rewound.

Gitlab’s workers follow a “nonlinear” workday—interrupting work with bouts of leisure. Rather than talk to their colleagues over live video calls they engage in “asynchronous communication”, which is another way of saying they send their co-workers pre-recorded video messages.

More frequent working from home will also demand the use of new hardware, and the withering away of other sorts. At present, many companies host large data-centres, but these have proved less efficient as more people work from home. Goldman Sachs reckons that investment in traditional data infrastructure will fall by 3% a year in 2019-25.

In its place, companies are likely to spend more on technology which allows workers to replicate the experience of being in the same physical space as someone else (higher-quality cameras and microphones, for instance).

The more utopian technology analysts reckon that within five years, people will be able to put on a vr headset and immerse themselves in a virtual office—bad strip-lighting, and all.

There’s a better life

All this has wide-ranging implications for public policy. At present it is impossible to know whether home-workers will find it easier or harder to bargain with their employer for pay rises and improvements in conditions, though the idea of asking for a raise through a video chat is hardly an appealing one. Employers may also find it easier to fire remote workers than if they had to do it face-to-face. If so, then calls may grow for governments to give home-workers greater protections.

Another problem relates to employment law, argues Jeremias Adams-Prassl of Oxford University. Just as the rise of the gig economy has prompted questions and court cases about what it means to be an employee or self-employed, the increased popularity of home-working puts pressure on laws which were constructed around the assumption that people would be toiling away in an office. No one has yet thought through how firms should go about monitoring contractual working time in a world where nobody physically clocks in, nor about the extent to which firms may surveil workers at home.

Battles over employers’ responsibilities to their home-workers surely cannot be far away.

Should a business pay for a worker’s internet connection or their heating in the dead of winter?

Grappling with such questions will not be easy. But governments and firms must seize the moment. The pandemic, for all its ill effects, offers a rare opportunity to rewire the world of work.

Central banks will win the tug of war in markets

Covid flare-ups should not deter investors, especially when it comes to UK and German stocks

Mark Haefele

The composition of the UK stock market, which trades at a sizeable discount to other major markets, leaves it well placed to benefit from the global recovery from Covid-19 © Bloomberg

Financial markets are being pulled in different directions by two big forces: the injection of liquidity from central banks and concerns over a “second wave” of Covid-19 infections.

Daily news headlines can lead us to believe that, of the two, coronavirus is the dominant force for markets. The coming months are likely to show that it is not. Investors should back central bankers to win this tug of war, and set up their portfolios accordingly.

Policymakers around the world responded to the pandemic with unprecedented scale and speed. While they continue to support riskier assets, such as stocks and corporate bonds, through vast asset-purchasing programmes and rock-bottom interest rates, the most important thing investors can do is to stay invested.

In particular, we think the UK and German equity markets are likely to outperform, even though we expect Europe’s overall earnings recovery to lag other regions.

The composition of the UK stock market, which trades at a sizeable discount to other major markets, leaves it well placed to benefit from the global recovery from Covid-19. Some 40 per cent of the benchmark FTSE 100 group, by market capitalisation, is made up of value companies — meaning they trade at a low valuation compared with their earnings or assets. These should outperform as the recovery progresses.

The UK is also set to benefit from a recovery in Brent crude prices, which we expect to rise to $55 a barrel by the middle of next year. Energy stocks, typically a defensive investment, account for 11 per cent of the MSCI UK index, compared with 4 per cent for the MSCI World index.

While negotiations over a post-Brexit trade deal with the EU remain strained, the risk of no-deal seems exaggerated. Such an outcome would be mutually detrimental and both sides are going to work to steering clear of it.

Germany also has several advantages going into the recovery phase of the pandemic. The nation entered the crisis with strong public finances, reflected by a ratio of debt to economic output of around 60 per cent, compared with a eurozone average of close to 85 per cent. As a result, the country has been well placed to support its economy with large stimulus.

Berlin’s response has been to unleash a fiscal expansion equivalent to around 8 per cent of gross domestic product, and it has the potential to inject more if needed. The composition of the German market also helps, as it is heavy on industrial stocks that could rise in lockstep with a global economic recovery.

By contrast, the US equity rally since March has been narrowly focused on a handful of mega-cap tech stocks. The sharp rotation out of tech within the last week pushed the whole market lower, but it also highlights the need to diversify. We recommend investing in long-term trends that have been accelerated by the current crisis. For example, supply chains are likely to be less global and more local in future, which will benefit the automation and robotics sector. Europe is home to many of the market leaders in global factory and process automation.

Digitalisation of the healthcare industry also looks set to grow in the wake of the pandemic. Europe already accounts for 22 per cent of the companies in an MSCI index tracking such “medtech” companies.

Green initiatives at the core of Europe’s Covid recovery plans also provide an opportunity for the region’s companies. In July, EU leaders agreed on a €750bn recovery fund, the core element of which focuses on climate protection and digitalisation. Over the long term, this should encourage the development of areas such as renewables, energy efficiency, electric vehicles and infrastructure related to mobility and transport.

Further virus outbreaks could result in a more stop-start approach to reopening economies, but these will only slow, not derail, the recovery.

We now know more about the virus than at the start of the year. Estimates of both the mortality and virus transmission rates have fallen since the start of the pandemic, and a significant proportion of some populations have already contracted the virus.

This will allow policymakers to adopt less economically destructive measures in containing new outbreaks, including mask wearing, contact tracing and social distancing. In addition, there is evidence of progress on vaccines and therapeutics. While fears of a second wave will add volatility around the strength and speed of the recovery, we expect increased economic momentum over the coming year.

All this suggests room for global stocks to move higher. But investors will need to choose particularly carefully.

The Trouble With a Premature Vaccine

What happens to the global economy if the medicine ends up harming those it’s meant to cure?

By: Alex Berezow

Hope is beginning to fade that the world will have a safe and effective coronavirus vaccine before the predicted “second wave” arrives that will further suppress economic activity and recovery. Despite an unprecedented global effort, a deliverable vaccine might still be months away.

Almost certainly it won’t be ready by October as many hoped. Dr. Anthony Fauci, head of the U.S. National Institute of Allergy and Infectious Diseases, said November or December would be more realistic.

It is understandable that governments and politicians are trying to be optimistic. The global economy was pummeled in the first wave, and it is hardly in shape to receive another devastating blow if the second wave materializes and lockdowns are reinstated.

As economies open back up, some countries that were able to control the spread of the virus are now experiencing a resurgence of cases. In France and Spain, for example, the number of new infections is higher now than it was in March during the peak of the first wave.

Failure to control the coronavirus has put economies and political careers in jeopardy. It’s little wonder why President Donald Trump is under enormous pressure to have a vaccine shipped before Election Day in the U.S.

As public confidence in the medical establishment wanes, leading U.S. pharmaceutical companies have pledged that they will not release a vaccine until they are certain of its safety and efficacy. The question of who assumes liability becomes critical to the timing of a vaccine.

Why Vaccines Take Time

Unfortunately, the process of vaccine testing can only be rushed up to a point. Clinical trials that assess the safety and effectiveness of vaccines take a certain minimum amount of time. No government stimulus or political influence can expedite this process and ensure that basic safety and efficacy standards are met. The reason is that large clinical trials are logistically difficult, often enrolling tens of thousands of volunteers and employing dozens of medical centers across the world.

The testing itself is likewise time intensive. Once volunteers receive their vaccine (or placebo), they are then monitored over the course of weeks or months to determine if they develop the disease or a potentially dangerous side effect. Scientists can reach a conclusion only after enough data has been collected. Occasionally, trials can be cut short if the data is overwhelmingly convincing, but that is not the norm.

Vaccines are not like other pharmaceutical drugs, which are usually administered to patients who are already sick. In the case of a severely ill patient, the primary concern of an experimental drug is efficacy over safety; after all, it doesn’t really matter if the drug harms the patient because he or she is about to die anyway.

But the reverse is true for vaccines; because they are given to potentially millions of healthy people, including children, safety is the far bigger concern. Even if the vaccine works, rare but serious side effects could harm thousands of people. (This is one reason that we do not vaccinate against smallpox.

The vaccine has killed people. Though it is theoretically a biological warfare agent, the risks of a mass smallpox vaccination campaign greatly outweigh the risk of a bioterrorist attack.)

Other vaccines have also harmed people, or worse. In 1966, a poorly designed vaccine against respiratory syncytial virus killed two kids and worsened the illness in many others. One decade later, a vaccine against pandemic swine flu triggered a rare type of paralysis known as Guillain-Barre syndrome in 450 people. It happened again following vaccination against the 2009 H1N1 pandemic influenza.

Measure Twice, Jab Once

Now liability becomes critical. If a vaccine against the coronavirus produces nasty side effects, it would deal a catastrophic blow to public confidence in major institutions across the board. Everyone has a stake in the production of a successful vaccine. Yet, there are legitimate concerns that a coronavirus vaccine, especially one developed under rushed conditions, may not work as intended.

A vaccine developed against the original SARS virus made the disease worse in animal models.

And a clinical trial for a coronavirus vaccine produced by AstraZeneca in collaboration with the University of Oxford has been paused because one volunteer is thought to have developed a severe adverse reaction.

It is difficult to overstate the potential damage that a rushed coronavirus vaccine could inflict on confidence in the biomedical community. This is why several major pharmaceutical companies have pledged not to release their respective vaccines until they are shown to be safe and effective by the standards of the U.S. Food and Drug Administration.

They may have realized that a premature vaccine deployment is a gamble that may not be worth the financial, reputational and legal risks. After it announced that the clinical trial was paused, AstraZeneca’s stock price fell. Pharmaceutical leaders know that the fallout from releasing a bad vaccine could become an existential threat to their companies and want to avoid being liable for such a scenario.

On the flip side, it is equally difficult to overstate the economic damage of not having a vaccine in the next few months. The longer the pandemic continues, the longer the global economy suffers.

The public will become angry, and they will direct their anger toward the institutions they believe failed them. World leaders, therefore, may hope that a vaccine is deployed as soon as possible in order to save their countries’ economies (and, by extension, their own jobs), even if it comes with some risk.

Many of them believe the economic consequences do more harm to the population as a whole than the virus. Already being held accountable for economic damage, the governments want the introduction of a vaccine without assuming the liability for that as well.

Stuck in between is the general public that simply wants an end to all this. Over the past six months, the public has been bombarded with contradictory information and vociferous debates over shutdowns and school reopenings. Misinformation, particularly on social media, is rampant.

While the public trusts scientists and doctors in general, its trust in a coronavirus vaccine is minimal. Two-thirds of Americans say they won’t be first in line to get the vaccine when it comes out. It’s hard to blame them. Just imagine the public backlash if the media depicts children with a vaccine-induced illness because the jab wasn’t tested sufficiently.

One way to interpret the pledge co-signed by several pharmaceutical companies is as an appeal to the government to assume liability. Perhaps behind the message is a subtle hint that they would be willing to release a vaccine that is “good enough” if governments shouldered all the risk. But that’s unlikely to happen.

Until the clinical trials are completed, the public will just have to wait while the government and pharmaceutical companies remain in a standoff that runs against an economic clock and mounting social pressure.

China’s Rapid Shift to a Digital Economy

China may well be the only major economy to achieve positive growth this year. It owes this, in no small measure, to a decade of commitment to heavy investment in technology-driven structural transformation.

Zhang Jun

zhang45_Shen DongbingVCG via Getty Images_chinadeliveryworkers

SHANGHAI – Despite taking a serious hit from COVID-19 lockdowns, China’s economy has proved resilient. It has not, however, fully bounced back: some activities, especially in the service sector, simply cannot be revived. Yet, unlike most of the world, China seems unlikely to become mired in a long recession, not least because of its rapid digital transformation.

China’s digital economy was growing strongly before the pandemic. In 2018, it already accounted for CN¥31.3 trillion ($4.7 trillion), or 34.8% of GDP. While this is only about one-third the size of America’s digital economy, it represents years of growth that outpaced that of nominal GDP. The COVID-19 crisis is set to reinforce this trend.

As the pandemic has destroyed some businesses and industries, it has also greatly accelerated the uptake of digital technologies. Unable to leave their homes, households embraced applications like, Meituan, Eleme, and Pinduoduo, which enabled them to purchase food, oil, vegetables, and daily necessities online.

Moreover, within a month of closing their classrooms and evacuating their campuses, schools and universities moved online – a shift that spurred the rapid development of online conferencing and learning platforms. Likewise, companies took advantage of digital tools – from communication platforms like Enterprise WeChat and DingTalk to e-contracts – to keep their businesses running. More than 20 million online meetings, with more than 100 million total participants, have been initiated on DingTalk in a single day.

Just as technology helped life go on during lockdowns, it has enabled China to roll back restrictions without risking public health. A growing number of local governments are implementing Alipay Health Code – a mobile-phone application that assigns users a color code indicating their health status. That way, they know when they should be quarantined, when they can safely visit public spaces, and when they can travel.

This also lets authorities track – and mitigate – risks. If a person visits, say, an airport or hotel, they must show their personal QR code. A quick scan will show whether they have visited a high-risk area within the last 14 days. Such tracing – not only during travel, but also in schools, offices, and other contexts – is essential to avoid another COVID-19 outbreak and further economically damaging lockdowns.

But the health applications of new digital technologies extend much further, and are transforming China’s entire health-care industry. Beyond the rise of online medication purchases, 5G-based remote medical-consultation platforms, such as Ping An Good Doctor, have been flourishing, laying the groundwork for a new industrial model.

During the initial outbreak in Wuhan, when local hospitals were overwhelmed with COVID-19 patients, such platforms enabled people to consult with medical experts from Beijing via video. As China’s 5G network coverage improves, such remote consultations – including diagnoses, hospital referrals and appointments, and health-management services – will become even more widely accessible. This will be particularly valuable for households that currently lack easy access to better medical resources, say, because they live in remote areas.

Technology is also propelling research and development in health. For example, Huawei’s medical-intelligence app EIhealth is being used for viral genome research, anti-viral drug development, and medical imaging and analysis. It has accelerated the search for COVID-19 treatments and vaccines, and improved virus detection. And, thanks partly to algorithm-assisted screening, frontline hospitals in China have already conducted more CT scans in 2020 than in all of last year.

A similar digital transformation is sweeping China’s financial industry. With 562 million users, China’s mobile-banking apps were the third-largest category of apps by customer base – after short-video and shopping apps – at the end of March. Chinese mobile-banking apps now average 50 million monthly active users.

Beyond making banking more convenient, digital technologies have enabled financial institutions to expand and improve their services. For example, using big data, cloud computing, artificial intelligence, and distributed-computing architecture, commercial banks have vastly improved their ability to serve small and micro businesses and ordinary households.

Financial technology firms have made similar strides. Credit-based financing for small and micro enterprises has long posed a challenge to institutions. Yet, with the help of Alipay and online-banking services, Ant Financial served more than 16 million clients and extended CN¥2 trillion in credit last year. And it is not alone.

The growth of China’s digital economy has been a boon for employment as well. The China Information and Communications Technology Academy reports that in 2018, the digital economy created 191 million jobs and accounted for one-quarter of overall employment – an 11.5% increase year on year.

Among the main beneficiaries of these new jobs are young, educated Chinese, who now have more opportunities to work as independent professionals in a new kind of gig economy. The increased labor-market flexibility brought about by digitalization is likely why urban unemployment hasn’t increased significantly in recent years, despite the decline in GDP growth.

Though China still lags in some key technologies, there is no denying the tremendous progress in its digital transformation. This process is set to continue and even accelerate in the coming years, not least because of the government’s planned investments in new infrastructure, including 5G networks and data centers.

China may well be the only major economy to achieve positive growth this year. It owes this, in no small measure, to a decade of commitment to heavy investment in technology-driven structural transformation.

Zhang Jun is Dean of the School of Economics at Fudan University and Director of the China Center for Economic Studies, a Shanghai-based think tank.

JPMorgan in talks to settle spoofing claims for $1bn

Payment and deferred prosecution agreement would resolve investigation by multiple US agencies

Laura Noonan, US Banking Editor

JPMorgan earlier this year said it faced allegations including ‘unjust enrichment and deceptive acts’ relating to trading of precious metals and Treasuries © JUSTIN LANE/EPA-EFE/Shutterstock


JPMorgan Chase is in advanced talks with US authorities to pay $1bn to settle allegations it manipulated metals and Treasuries markets using a technique known as spoofing, according to people familiar with the situation.

The proposed settlement would allow the bank to avoid prosecution over the alleged activities, one of the people familiar with the situation told the Financial Times.

Two former JPMorgan traders — Christian Trunz and John Edmonds — have already pleaded guilty to criminal charges of placing thousand of false orders to manipulate the prices of precious metals between 2007 and 2016.

JPMorgan’s former head of metals trading, Michael Nowak, and two other former traders and one ex-salesperson are contesting federal racketeering charges over their alleged role in what prosecutors described as a “massive multiyear scheme” to manipulate metals markets.

A settlement would end investigations by the Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission into the bank’s culpability for spoofing by its traders in gold, silver, other metals and US government bonds.

In its annual report published in April, JPMorgan said it was “engaged in discussions with various regulators” about allegations including “unjust enrichment and deceptive acts” relating to the bank’s trading of precious metals and Treasuries.

Two people familiar with the situation said that the settlement would not result in any restrictions on JPMorgan’s trading or operations. One of the people said the bank was negotiating a deferred prosecution agreement, which allows banks to continue with their activities as long as they fulfil certain conditions.

The $1bn figure for the size of the proposed payment was first reported by Bloomberg. 

JPMorgan declined to comment. The SEC declined to comment. The DoJ had no immediate comment. The CFTC did not immediately return a request for comment.

Criminal penalties for spoofing were introduced under the Dodd-Frank regulations that were brought in to clean up Wall Street after the 2008 financial crisis.

Other banks, including Deutsche Bank, UBS and HSBC have been fined for spoofing precious metals markets.

In the case of JPMorgan, the DoJ has alleged that Mr Trunz “learned to spoof from more senior traders, and spoofed with the knowledge and consent of his supervisors”.

When the charges against Mr Nowak and the other three traders were brought in 2019, Brian Benczkowski, then assistant attorney-general, said his department would “follow the facts wherever they lead . . . Whether it’s across desks or upwards into the financial system.”

Additional reporting by Kadhim Shubber