The Chinese Communist Party Is 100. It’s Not Going Anywhere.

By Yi-Zheng Lian

A 20th-century poster issued by the Chinese government titled “Soldiers United Under the Red.”Credit...Buyenlarge/Getty Images


On July 1, the Chinese Communist Party celebrates its centenary. 

For those in the West banking on its demise, they’re sorely mistaken. 

Because while the party may have committed some significant missteps throughout its rule, it is still a formidable force that will remain a threat to the United States and Western allies for years to come.

The party has fared exceptionally well compared with other totalitarian parties and the states they built. 

Those who look to Russia for a historical parallel for China’s Communist Party mistake its staying power. 

Lenin’s party and the Soviet Union were in death throes at a comparable point in their life cycle. 

China under the C.C.P. has been recognized only relatively recently by the West as its most formidable adversary, not just militarily and ideologically, but also technologically and economically. 

The party has deeply Chinese roots. 

It exists on a continuum with China’s long dynastic history. 

It’s not going anywhere.

The C.C.P. is colossal, highly hierarchical and regimented. 

From its inception in 1921 with only 12 members, it has expanded to over 90 million, averaging almost 20 percent growth a year for 100 years. 

To maintain control and effectively rule the 1.4 billion population, the party leadership still uses centuries-old tactics but has refined them with high-tech techniques. 

For example, the sweeping surveillance the C.C.P. conducts on the Chinese people today is the legacy of the ubiquitous people-on-people watch system known as the “baojia” scheme, invented in the Qin Dynasty, revived in the Song dynasty, and perfected and used on a large scale during the Qing dynasty. 

The C.C.P. merely added the digital cameras. 

There has been no obvious opposition to such a surveillance system in China, at least among the Han Chinese. 

But that ought not to be a surprise: A Chinese Big Brother has been watching for 2,000 years.

For the recalcitrant, punishment awaits. (See the crackdown on Hong Kong’s democracy movement and the Uyghur Muslims in Xinjiang). 

The last two Chinese dynasties, Ming and Qing, were also particularly repressive, and long-lasting — together they survived more than 540 years. 

A long line of prior dynasties and emperors had already trained the people to be opportunistically oppressive to those below one’s status and submissive to those above it. 

But aside from the big stick, there are carrots too. 

Faithful party members are richly rewarded.

The C.C.P., like any of the more effective ancient Chinese ruling classes, diligently reads historical events for lessons. 

That has helped it navigate crises and, often, emerge stronger. 

Take the 1989 Tiananmen massacre. 

There the historical guide was the knowledge that among numerous Chinese rebellions throughout the several millenniums, those led by scholars and intellectuals were never successful. 

The C.C.P., then under the strongman Deng Xiaoping, judged that there would be practically zero resistance, and few political consequences, for cracking down hard on the pro-democracy demonstrators in Tiananmen Square and that any boycott by the West would quickly burn out. 

Sure enough, foreign investors quickly flocked back to China in greater numbers. 

Not long after that, the country became “the factory of the world” and was rewarded with World Trade Organization membership.

The C.C.P. also uses a tried and tested tactic of stating mistruths but presenting them as facts. 

Its root is an ancient China proverb, “Declaring a deer a horse” — the expression explains the high value of uttering patent falsehoods or telling blatant lies not meant to mislead or deceive. 

In a political context it means if someone powerful makes an obviously false public statement and you publicly accept it to be true, then he knows he can easily control you. 

The C.C.P. does that often. 

The latest example, from President Xi Jinping himself, was when he said that China sought an international image that was “trustworthy,” “respectable” and “lovable.”

Mr. Xi knows well that some politicians and corporate interests in the West need cover for continuing, or resuming, cozy business partnerships despite the much increased hostility toward China among many countries. 

It is not lost on Mr. Xi that even though President Biden has recently called on the Western world to put up a strong front of resistance to the C.C.P.’s ambitions, no country, not even the United States, has punished Beijing significantly enough to jeopardize the bulk of their business interests in China.

And so by using these political strategies from ancient China and exploiting economic opportunities with the West to support its systemic repression, the C.C.P. has achieved political stability. 

In 100 years — fleetingly short in Chinese history — it has reached wide and deep into the substrata of Chinese society like the strong roots of a banyan tree, fusing every aspect of people’s lives with punishment and reward, mixing indigenous cultural norms and Western materialistic consumption. It is almost impossible to uproot and overturn a giant banyan tree.

Those in the West who think that the C.C.P. will implode and collapse rely on an easy narrative that says the party feeds on an imported Leninist ideology that it imposes on an unwilling populace yearning for freedom and democracy. 

But this view fails to recognize the C.C.P. as an exceptionally successful and rapacious Chinese ruling class that knows how to tap into the yin, or nefarious side, of the Chinese culture, suck up dark matter to grow its muscles and live long, and now to threaten the West.

Yet the communist empire is not without its weakness. 

The C.C.P.’s historical trajectory of power and the fortune of the Communist state it founded may have reached their zenith around the time when Beijing hosted the 2008 Olympics.

China’s real G.D.P. growth rate, the size of its working-age group, net foreign direct investment inflow, even Hong Kong people’s positive opinion of China and their claim of Chinese self-identification, all peaked around that time. 

But still, the world is not going to witness a China meltdown anytime soon, if history is any guide. 

The Ming dynasty, probably the most repressive among dynasties established by Han Chinese, wore on for some 72 years after its last peak. 

The Qing dynasty, established by foreign Manchurians, was no less repressive than the Ming; yet from zenith to collapse took about a century.

Banking on the dissolution of the Communist Party in China will only disappoint. 

Chinese history provides a template for countries as they create their China policies. 

Each nation must choose long-term means to protect its interests against the C.C.P. because the party may well outlive us all. 

The Western assumption that the growth of a middle class in China would lead it toward democracy — similar to other countries in the West — resulted in the costly 45-year failure of the engagement policy.

This is the most important lesson the world can learn on July 1. 

The date carries deep significance both because, looking back at the century past, so many Chinese have lost their lives and freedom to the C.C.P. and because, looking forward, it serves to deliver a grave warning to the West that a menacing challenge remains at its front door.


Yi-Zheng Lian is a former chief editor of the Hong Kong Economic Journal. He teaches economics in Japan and writes on Hong Kong and China. 

Internal rifts

Trying to heal the party’s wounds

The party Xi Jinping inherited had been torn apart by infighting. He now wants to ensure that no one in the party defies him


A few days after he took power in November 2012, Xi Jinping convened a “collective study” session of the Politburo. 

Looking at the 22 men and two women round the table in an imperial-era building in Zhongnanhai, the party’s headquarters, he may have felt uncomfortable. 

Most owed their positions to his predecessors, not him. 

The party had been traumatised by a fierce power struggle. 

Who was reliable? 

Beyond the high-walled compound, Chinese society was changing at a dizzying pace, with the emergence of a large middle class. 

An internet-fuelled information revolution was under way. 

Could the public be trusted?

Against a backdrop of an ink-brush painting of China’s iconic scenery, Mr Xi aired his concerns. 

The party’s ability to fulfil its “historical mission” and cope with change was beset by “many shortcomings”. 

Some members had lost their sense of conviction, he said. 

Their bones were “losing calcium”. 

Mindful of the recent Arab spring, he warned that in other countries, public resentment had led to social turmoil and the collapse of governments. 

In China, he said, corruption could “destroy the party and the country”.

It was a phrase Mr Xi’s predecessors had also used. 

Yet he meant not just common graft, but a political malaise within the party, of which rampant corruption was a warning sign. 

Mr Xi’s accession came after the biggest rift in the party’s top echelons since the 1980s. 

The most prominent targets of the campaign that Mr Xi was about to wage were high-profile party grandees whom he accused of being “extravagant and dissipated” and plotting to “usurp the party and seize power”—in effect, to stage a coup.

To see why Mr Xi is changing the party, purging it of corruption and expanding its powers, it is important to understand the challenges facing him in 2012. 

Their scale was suggested by the coup-plotting charge, which had not been laid against party members of such rank since the arrest of Mao’s widow, Jiang Qing, and her “Gang of Four” in 1976. 

Those implicated were among the most powerful in China. 

They included Bo Xilai, a former party chief in Chongqing; Zhou Yongkang, who had overseen China’s domestic security services and legal institutions, including the police and the courts; and Guo Boxiong and Xu Caihou, two generals who had been the highest-ranking officers in the armed forces. 

All are now in prison or, in the case of General Xu, dead (taken by cancer).

Even now, a decade on from that intrigue, little is known about exactly what these men did that so alarmed Mr Xi. 

But officials still refer, cryptically, to their machinations, suggesting the trauma they inflicted was deep. 

The only detail released has been about their corruption. 

Phoenix Weekly, a magazine in Hong Kong with strong party backing, claimed investigators had found more than a tonne of dollar, euro and yuan banknotes in Xu’s basement.

But what is clear is that Mr Bo, backed by Mr Zhou, posed a serious political threat. 

Like Mr Xi, Mr Bo is a “princeling”—a son of one of China’s revolutionary founders. 

In the build-up to Mr Xi’s appointment as general secretary, Mr Bo had upstaged him in Chongqing by fighting mafia-like gangs, splurging on home-building for the poor and encouraging Mao nostalgia, especially singing “red songs”. 

It showed how politics was changing. 

In the age of Weibo and WeChat, a provincial politician could become a national celebrity without the help of state media. 

Mr Bo’s arrest in 2012 followed his wife’s murder of a British businessman and the flight of his police chief to the American consulate. 

It was the biggest political scandal of the post-Mao era.

As Tony Saich of Harvard University observes in a forthcoming book, the political sparring in which Mr Bo and his allies engaged “represented different visions for China’s future and different approaches to politics” from those of China’s then leader, Hu Jintao. 

Mr Bo tapped into public resentment of corruption and inequality. 

The red songs harked back to a time when life seemed fairer, albeit more austere. 

Mr Xi must have pondered Mr Bo’s popularity. 

His own approach to politics is now strikingly similar.

There was little sign in 2012 that the public was on the brink of revolt. 

But the internet, even if censored, had become a powerful weapon, helping people to organise protests over local issues. 

Anxiety about where this would lead must have focused Mr Xi’s mind on the Soviet Union and the dangers of its pre-internet form of information revolution: Mikhail Gorbachev’s glasnost.

Xi has a dream

Soon after that Politburo meeting Mr Xi lamented that nobody had been “man enough to stand up and resist” as the Soviet party crumbled. 

A few weeks later he recalled how it had fallen “suddenly with a loud crash” after more than 90 years in existence and more than 70 in power. 

“Why?” he asked. 

“Because everyone could say and do what they wanted. 

What kind of political party was that? 

It was just a rabble.” 

In 2018 he talked again about the Soviet party’s collapse, noting that, with just 2m members, it had defeated Hitler, but with 20m it had lost power. 

“Why? 

Because its ideals and beliefs had evaporated.” 

Under the slogan of “so-called glasnost” it had let members criticise the party line.

Mr Xi talks of a “Chinese dream” of a “great rejuvenation” by the next big centennial celebration: the 100th anniversary of Communist rule in 2049. Protecting the party from the fate of its Soviet counterpart and a repeat of Tiananmen is vital to that dream. As Mr Xi describes it, only the party can make China richer and stronger. Without it, he says, China will descend into chaos.


It may be thought that Mr Xi could relax. 

His mimicry of Mr Bo’s political style appears to be working. 

Another Tiananmen is unlikely. 

Airport-style security in the square helps, but support for the regime seems genuine. 

In a new book, “The Party and the People”, Bruce Dickson of George Washington University says few Chinese are willing to call for democracy “because they believe it is already happening”. 

Improved governance, a growing economy and a better quality of life are seen as evidence, he says. 

Democracy means ruling in the public interest, many believe.

But Mr Xi remains vigilant. 

Last year he launched another purge of the police, secret police, judiciary and prison system of which Mr Zhou (who was jailed for life in 2015) was once the overlord. 

Again, the aim is to eliminate corruption, but this time also “deeply and thoroughly eradicate the pernicious influence” of Mr Zhou. 

Thus the war on graft remains a political campaign, with the struggles of a decade ago in mind.

The extent of Mr Xi’s fretting is not so evident in remarks translated into English. 

His three-volume tome, “The Governance of China”, touted as a distillation of “Xi Jinping thought”, contains only anodyne speeches, with grittier parts removed. 

Pore through those available only in Chinese and a different picture emerges. 

In 2016 he talked of party members who “openly curse the party”. 

In 2018 he said: “Political problems within the party had not been fundamentally resolved.” 

He accused some members of “paying only lip-service” to the party’s leadership, and of remaining corrupt. 

Speaking in January at the Central Party School, a training academy for senior officials, Mr Xi said the country faced an “unprecedented increase” in domestic and external risks.

One of Mr Xi’s preoccupations is cementing the party’s grip on the army (of which he is commander-in-chief). 

In 2017, soon after the party’s Central Committee called him the “core” of the party leadership, Mr Xi gave a speech to military commanders. 

He again recalled the collapse of communism in the Soviet Union, the Arab spring and various colour revolutions. 

A big cause of these upheavals, he said, was that “At critical junctures armies stood by and watched, or even changed sides.” 

And in a rare mention of Tiananmen, he said a key reason why it had been possible to end the protests “quickly” in 1989 was because the army stayed loyal.

Mr Xi’s war on graft is in part about protecting the party from threats within. 

It has been the most sustained since the reform era began. 

More than 200 serving and retired officials with the rank of deputy provincial governor or above, including a dozen senior generals, have been investigated by the party’s internal-discipline agency. 

About three-quarters have been sentenced to prison or are facing trial. 

In Mr Xi’s first five years in office the agency handed to prosecutors an average of nearly 12,000 officials annually, more than twice as many as in the previous five years. 

A far greater number were punished in other ways, such as by dismissal. 

New regulations in 2017 supposedly offered more protection for those seized, such as a requirement that families be notified within 24 hours and that interrogations be videotaped. 

But the party’s agents have sweeping powers to work in secret should they reckon that informing people might impede their investigations. 

Torture is believed to be rampant. 

The public applauds Mr Xi’s resolve.

At the top, Mr Xi has taken a different approach. 

Far from giving more power to its highest institutions—the Central Committee, the Politburo and its standing committee—he has sucked it away. 

This has involved creating new mechanisms to ensure that power is concentrated in his own hands. 

He has set up commissions to supervise such areas as the economy, foreign affairs and national security. 

He heads them all. 

A constitutional revision in 2018 makes it easier for him to remain supreme leader for life (he is almost certain to win five more years at a party congress next year).

The party had lost its moorings when Mr Xi took over. 

Well into the 1980s almost every workplace had a party boss. 

Since then private business had created a middle class whose members had little direct contact with the party. 

Under Mr Xi, it has “reinserted itself into every organ of society,” says David Shambaugh of George Washington University. 

Once again, it is becoming a powerful force in people’s everyday lives. 

Unhedged: we are Japan, circa 1987

Is a huge rally coming?

Robert Armstrong

To a bullish mind, US stocks now have even further to run than Japanese stocks did in the late 1980s © Financial Times


America 2021, Japan 1987

Because I’m a pessimist by nature, this newsletter usually talks about risks to the downside. 

But for us cautious types, upside risk can be just as dangerous. 

For the conservatively positioned, a face-melting rally can really hurt. 

And there is some reason to think that we might just have one of those in the next few years. 

One way to express this possibility is to say the US stock market is analogous to the Japanese market in 1987.

It’s not a perfect analogy, but it’s informative. 

Here is a chart from Absolute Strategy Research, showing Japanese and US stock prices and price/earnings ratios, at a lag of 35 years:


If you get out of a market when price multiples look crazy — as one might have when P/Es hit 35 in January in ’87 — you can sit there, uninvested, while your imprudent friends become obnoxiously rich. 

Ian Harnett of ASR thinks the chart tells a tale of poor Japanese fiscal and monetary policy, which were too easy for too long:

“If you adopt inappropriate monetary and fiscal policy, the risk is that [the excess] doesn’t turn up in CPI inflation first, but in asset price inflation . . . 

That’s how you suddenly bust all your mean reverting [stock valuation] models. 

At 35 times earnings you got out because you were three standard deviations from what you had seen before, and it doubled from there.”

Arguing that current policy could well be inappropriate too, he points to a letter in the FT earlier this week from Mervyn King, former governor of the Bank of England, which said that:

“The large monetary and fiscal stimulus injected in the advanced economies is out of all proportion to the magnitude of any plausible gap between aggregate demand and potential supply . . . 

A combination of political pressure to assist in financing budget deficits, unwise central bank promises not to tighten policy too soon and an expansion of central bank mandates into political areas such as climate change, all threaten . . . a slow response to signs of higher inflation.”

King refers to the “deafening silence” of central bankers on the growth of broad money. 

To my ears what has been deafening is the mandarins’ silence about high asset prices, ie, about the analogy with 1980s Japan.

But bubbles are complicated things, and we should be careful to check if the Japan analogy is actually helpful. 

Here I proceed gingerly. 

I am no expert on economic history. 

I hope readers will respond to what follows, which is sure to commit errors of simplification, if not other kinds.

The roots of the Japanese bubble are often traced to the 1985 Plaza Accord, an agreement among Japan, the US, the UK, France and Germany to depress the value of the dollar, whose strength had led to trade imbalances and was killing (among other things) the US automotive industry. 

The subsequent rise in the value of the yen drove Japan’s export-driven economy into a recession.

Coming out of the recession in early 1987, however, Japan started to roar: strong real gross domestic product growth led by heavy fixed investment, a still strong but stabilising currency, lax monetary policy and a growing money supply, and consumer price inflation that was edging higher but did not look dangerous, all coincided.

The Bank of Japan grew restless about inflation before long. 

But there was a strong focus on keeping interest rates low to ensure that the yen did not appreciate again. 

And the stock market crash of 1987 scared central bankers worldwide into keeping rates lower for longer. 

Japan did the same, despite its strong economy. 

The central bank did not raise rates until 1989, by which time asset prices were at heroic peaks. 

Here are charts from an excellent paper about the bubble by BoJ economists Kunio Okina, Masaaki Shirakawa and Shigenori Shiratsuka, showing the strengthening yen against rate policy:


The loose monetary policy clearly did not cause the bubble by itself. 

Aggressive bankers, deregulation, euphoria and other factors had their role to play. 

But the BoJ economists conclude that maintaining low rates up to the end of 1989, despite official concerns about inflation, was key:

“The most important point in considering the relationship between the emergence of the bubble and monetary policy is that as low interest rates were maintained under economic expansion, expectations that the then current low interest rate would indefinitely continue proliferated after a certain point in time, which led to strengthening the effects of [other] mechanisms on the rise in asset prices.”

This picture (as well as the authors’ comments about public and political pressure for low rates) chimes with the US situation now, where long-term inflation expectations remain restrained, helping to justify high asset prices. 

For Harnett, the point is that Japan used easy monetary policy to depress the yen, which it could not possibly do, and trouble followed. 

This time around in the US, monetary policy is being used to make the US economy more equitable. 

It is the wrong tool again. Economic shocks help to justify both policies. 

In Japan in the 1980s, the shocks were the Plaza Accord and the 1987 crash. 

In the US today, it is the pandemic.

Albert Edwards, strategist at Société Générale, summed up the point nicely to me:

“In the same way the strong currency allowed Japan to pursue a changed monetary policy, the pandemic shock has allowed policymakers to cross the Rubicon into monetary-fiscal co-operation. 

The pandemic allowed a regime change to occur, in the same way the Plaza Accord did.”

Pelham Smithers, who leads a London research shop that has long focused on Japan, adds an important point. It was easier to tolerate high asset prices in the late ’80s because, as in America today, many companies were producing genuinely excellent results:

“The summer of 1988 is when things like steel companies went through the roof in Japan. 

It wasn’t a pure commodities boom, it was companies that were doing really well in the real world. 

They were raising prices, increasing volumes and not facing rising costs . . . businesses that were suddenly making a lot of money were on the rise. 

The economy had recovered, the yen was weakening and these were fixed-cost businesses, a triple-whammy.”

One disanalogy is the bond market context. 

In Japan in the 1980s, long-term bonds had higher yields than stocks (higher than stocks’ earnings-price ratio, that is). 

Here is a chart from Okina, Shirakawa and Shiratsuka showing what they call the yield spread, or earnings yield subtracted from the long-term bond rate:


That spread in the US now is even lower than it was in Japan in 1987. 

In fact it is negative. 

Earnings yields are low, but higher than long Treasuries. 

That might suggest, to a bullish mind, that US stocks have even further to run than Japanese stocks did.

We may indeed want to plan for the possibility of Japan-style asset price melt-up. It doesn’t seem like the central forecast, but it doesn’t seem impossible, either. 

One good read

My colleagues Harriet Agnew and Laurence Fletcher had an excellent piece last week on the legacy of the hedge fund manager Julian Robertson, who had proven especially adept at spotting talented analysts, many of whom have gone on to found their own funds.

What makes a good money manager? 

Most people think it’s brains, which are indeed necessary. 

But lots of smart people are lousy fund managers. 

A notion that keeps coming up in the Robertson piece is competitiveness, which I think is actually rarer than high intelligence. 

Everyone likes winning, but a burning hatred of losing is scarce, and hard to maintain. 

Some years ago I spoke to an executive at a famous family office about manager selection. 

He said that as soon as hedge fund chiefs got seriously interested in philanthropy, it was time to divest. 

It showed the competitive edge was slipping. 

I think he had a point. 


Unhedged: we are Japan, circa 1987 | Financial Times (ft.com)

Global banking regulator urges toughest capital rules for crypto

Basel committee report comes as authorities step up plans to regulate the fast-emerging sector

Philip Stafford in London

Institutions should have to hold the highest level of capital against crypto assets such as bitcoin, the Basel Committee on Banking Supervision said in a report © Bloomberg


Global regulators are calling for cryptocurrencies to carry the toughest bank capital rules of any asset, arguing that requirements for holding bitcoin and similar tokens should be far higher than those for conventional stocks and bonds.

Banks with exposure to volatile cryptocurrencies should face stricter capital requirements to reflect the higher risks, said the Basel Committee on Banking Supervision, the world’s most powerful banking standards-setter.

Its intervention came in a report released on Thursday as policymakers around the world step up plans to regulate the fast-emerging market.

The Basel committee acknowledged that while banks’ exposure to the nascent crypto industry was limited, “the growth of crypto assets and related services has the potential to raise financial stability concerns and increase risks faced by banks”.

Among the risks it cited included market and credit risk, fraud, hacking, money laundering and terrorist financing risk.

Some assets, such as stock tokens, would fit into modified existing rules on minimum capital standards for banks. Others, such as bitcoin, would face a new “conservative” prudential regime, it recommended.

Stablecoins — cryptocurrencies pegged to traditional assets such as currencies — would also qualify for existing rules if they were fully reserved at all times, the committee said. Banks would have to monitor that this was “effective at all times”, it added.

All other crypto assets, including bitcoin and ethereum, would go into the new more strenuous regime. The Basel committee proposed a risk weight of 1,250 per cent, in line with the toughest standards for banks’ exposures on riskier assets.

That would mean banks would in effect have to hold capital equal to the exposure they face. A $100 exposure in bitcoin would result in a minimum capital requirement of $100, Basel said.

The standards would apply to assets created for decentralised finance (DeFi) and non-fungible tokens (NFTs), but potential central bank digital currencies were outside the scope of the consultation, it added.

Bitcoin rose 9 per cent over the past day according to CoinMarketCap, while ethereum gained 2.5 per cent.

The Basel proposals come as global regulators grapple with the rapid emergence of digital assets and mushrooming interest from investors. US authorities also want to take a more active role in supervising the $1.5tn cryptocurrency market because of concerns that a lack of oversight risks harming investors in the highly volatile and speculative industry.

State Street and Citigroup are among the banks that have indicated they are looking to provide more crypto services to customers.

Prudential rules set requirements on liquid assets and capital levels that a bank must set aside so it can wind down in an orderly way, without harming its customers or creating panic in the market.

Digital tokens that are based on traditional assets, such as shares, bonds, commodities and cash, would fit into the first category for crypto assets.

However, they would have to have the same level of legal rights as the traditional asset, such as the right to a dividend or other cash flows some do not currently carry.

The consultation ends in September. 


Global banking regulator urges toughest capital rules for crypto | Financial Times (ft.com)

Fixing the Broken Pandemic Financing System

Among the many failures following the World Health Organization's declaration of a Public Health Emergency of International Concern on January 30, 2020, was the slow mobilization of global financing for pandemic response efforts. What is needed now is not just more investment but also a better delivery system.

David Miliband, Elizabeth Radin, Christopher Eleftheriades 


NEW YORK – Since the G7 last met in August 2019, COVID-19 has resulted in 3.5 million deaths and economic losses projected to reach $22 trillion by 2025 – an economic shock 80% greater than the one following the 2008 global financial crisis. 

Each of those cataclysmic events sparked bold, effective multilateralism that made the world safer and more prosperous thereafter. 

The G7 now has an opportunity to demonstrate the same kind of leadership at its summit in Cornwall this week.

As the current G7 president, the United Kingdom hopes to lead the global recovery from the COVID-19 recession in a way that strengthens the world’s resilience against future pandemics. 

Achieving this objective will require more money, but also further-reaching financing and reforms. 

Today’s leaders must address the specific failings of past pandemic financing efforts by linking long-term investments in preparedness to early-stage rapid financing mechanisms.

The devastation caused by COVID-19 has underscored what experts have said for years: our national, regional, and global systems are grossly inadequate for detecting and containing outbreaks. 

Investment of billions of dollars is needed to avoid trillions more in losses and untold human suffering in the future.

Proposals on how to finance pandemic preparedness abound. 

But unless preparedness plans and systems can be activated rapidly and at scale when an outbreak occurs, we will not have achieved the necessary level of resilience. 

In our work with the Independent Panel for Pandemic Preparedness and Response (IPPR), we have reviewed the recent history of pandemic financing and found that the current system was too slow to mobilize in the critical first months of the COVID-19 response.

One month after the World Health Organization’s January 30, 2020, statement declaring COVID-19 to be a Public Health Emergency of International Concern, the WHO Contingency Fund for Emergencies and the United Nation’s Central Emergency Response Fund had allocated a total of just $23.9 million.

Even three months later, only 5% of the UN’s (then) $6.71 billion Global Humanitarian Response Plan had received financing. 

Moreover, it took three months from the WHO’s declaration for the World Bank’s insurance and capital-market instruments to kick into gear. 

By the time its initial $196 million insurance payout was released in late April 2020, it had to be shared across 64 countries, 59 of which were already managing COVID-19 outbreaks. 

Although multilateral agencies eventually committed billions more to help low- and middle-income countries – often on concessional terms – it is clear that more stopgap financing was needed to facilitate responses in the very first days and weeks of the pandemic.

Moreover, when significant financing did start to flow, much of it went toward rushed and fragmented strategies. 

Eligible countries had not been required to define how response funds would be used prior to the emergency, owing not so much to an operational oversight as to a fundamental design flaw. 

The problem lay in the fragmentation between preparedness funds and “rapid-response” financing facilities, each of which had their own governance arrangements, planning frameworks, and funding criteria.

This compound failing – under-investment in preparedness, delayed financing for the response, and discontinuity between the two – points to the need for an International Financing Facility for Pandemic Preparedness and Response. 

As outlined in the IPPR’s final recommendations, this mechanism should have the capacity both to mobilize long-term (10-15-year) contributions of approximately $5-10 billion annually to finance ongoing preparedness and to disburse up to $100 billion at short notice by front-loading future commitments in the event of a pandemic declaration. 

Such financing can be provided by issuing a social bond against future commitments, much like the International Finance Facility for Immunization (IFFIm) has done for vaccines.

We are not proposing a new implementing agency. 

Rather than creating a “Global Fund for Pandemics” that would operate alongside the Global Fund to Fight AIDS, Tuberculosis, and Malaria, we envision an additional financing vehicle that could dedicate funds to existing institutions – like the Global Fund and GAVI, the Vaccine Alliance. 

The goal, ultimately, is to support global public goods related to preparedness: surveillance systems, research and development, and rapid-response protocols (to allow for surges in the health workforce, effective public communication, and the pooled procurement of essential supplies).

To be sure, gaps in financing were not the only, or even the primary, failing that allowed a novel coronavirus outbreak to become a global catastrophe. 

If there is a single factor to blame, it is a lack of political leadership at the highest levels of national government and the international system. 

But here, too, a dedicated financing facility is part of the solution.

The facility we propose would be overseen by a Global Health Threats Council, a multilateral, multisectoral body designed to elevate pandemic preparedness and response to the highest levels of the international system. 

Led by chairs from the UN General Assembly and the G20, the Council would be charged with maintaining political support for preparedness and response, monitoring progress toward global targets, and holding decision-makers accountable. 

With the authority to allocate significant funds from the financing facility, the Council could wield both carrots and sticks to ensure national-level preparedness, and would hold a global credit card for responding to future health crises.

Central to this model is the combination of preparedness and rapid response – both of which would be governed by a unified global council, managed by an integrated facility, and financed through a single instrument. 

This structure ensures that as soon as an outbreak is detected, response financing can be deployed seamlessly by the same body that is responsible for planning, surveillance, and otherwise maintaining readiness. 

Financing both efforts through a single instrument – a long-term forward funding contract – would minimize the amount of funds sitting idle and ensure ongoing political engagement between crises.

If G7 leaders hope to build resilience against future pandemic threats, they must first acknowledge the collective governance failures in the earliest days of the COVID-19 crisis, many of which stemmed from under-investment in preparedness. 

Then they must earn their title as world leaders by committing to a plan of unified governance, management, and financing of pandemic preparedness and rapid response. 

Otherwise, they will not have done enough to contain future outbreaks before they, too, become catastrophic pandemics.


David Miliband, a former British foreign secretary and member of the World Health Organization Independent Panel for Pandemic Preparedness and Response, is CEO of the International Rescue Committee.

Elizabeth Radin, a lecturer in epidemiology at Columbia University, is a Council on Foreign Relations International Affairs Fellow at the Airbel Impact Lab.

Christopher Eleftheriades is Lead of Innovative Finance at the International Rescue Committee.