Chris Vermeulen

Since the start of the COVID-19 virus event, Gold has rallied more than +26% to reach highs near $2090 on August 7, 2020. 

Yet, over the past 15 months, Gold has been trailing downward in a sideways price pattern. 

This price rotation has set up a very broad Pennant/Flag formation in Gold that has recently reached the APEX of the Flag setup.

This is very important for two reasons. 

First, as the global central banks begin to plan and prepare for more normalized monetary policy, and address credit excesses and inflationary price concerns, the advantages of Gold as a hedging instrument become more valuable. 

Secondarily, after a massive rise in asset prices and an even bigger global attempt to stimulate the economy after the COVID-19 virus event, the world has never been in this scenario. 

Near-zero interest rates, excessive amounts of money and credit throughout the world, asset prices showing near hyper-inflation trends, and the global central banks taking very little action to address any future economic concerns.


The luster of Gold over the past 15 months has slightly diminished. 

Global central banks, corporations, and consumers jumped into the easy money rally and ignored ongoing risks. 

Now, China’s economic concerns and corporate debt issues continue to plague the global markets. 

Investors are suddenly waking up to the potential of rising global risks over the past 12+ months – not subsiding.

Recently, China’s economic and credit/debt issues have spilled over into more broad market concerns. 

What used to be more of a junk-rated debt issue has now transitioned into more of a global concern as China’s demand for cheap credit over the past 8+ years may have created the components of a perfect storm in the making (source: Yahoo! Finance).

I published research articles about this many months ago – which are still relevant.

After reviewing some of my earlier research posts, I urge you to consider a unique situation that may be taking place in the global markets right now. 

I believe the US markets have transitioned into a new Depreciation Cycle Phase (started near the end of 2019). 

As the US Dollar continues to try and hold above the $90~$91 level, we may be entering a foreign market economic crisis prompted by US easy money policies over the past 12+ years. 

If this is the case, then the US stock market and the US Dollar may continue to show strength well into a foreign market collapse – also while Gold and Silver start to move higher.


This type of event will eventually spread into the US markets as concerns mount related to the depth and cross-border economic issues if any economic contagion event continues. 

Yet my thinking is that initially US assets, and the US Dollar, may rise as global traders/investors move away from global/Asian market risks and pour capital into safer US stocks and the US Dollar. 

This may prompt a rally phase in the US stock market and push the US Dollar above $95~96 briefly before traders realize the full scale and scope of this potential global crisis in the making.

This Daily Gold chart highlights the extended Pennant/Flag price formation and how Gold has started to see increased trading volume in what appears to be an upward price breakout. 

Still, Gold must break above two key levels before considering this potential rally phase confirmed: $1845 and $1920.


This Weekly Gold chart highlights a longer-term Fibonacci Price Extension pattern. 

It suggests that $2240 and $2600 are likely to be price targets for Gold if this rally continues. 

Many traders believe the last 15+ months of sideways trading in Gold has formed a “handle” for a bigger “cup-n-handle” price pattern. 

Ideally, I would like to see a Gold rally above $1925~1940 before attempting to confirm the “cup-n-handle” pattern.

My interpretation of the global markets and Gold is just as I stated above. 

Gold is starting to become more interesting for global investors as the China debt/economic crisis continues. 

Risks are mounting if the economic contraction in China/Asia continues. 

Global risks are already excessive after 24+ months of extended global central bank functions, easy credit, and increasing inflation. 

As a result of inflation, pricing pressures will eat away at profits for many firms. 

Slowing consumer demand could blow a big hole in demand for many assets.

Traders should prepare for a bout of price volatility headed into the end of 2021 as these issues continue to work themselves out. 

My technical analysis suggests this rally may continue into early January 2022. My cycle analysis indicates a change in price trend may initiate after January 18th or so. 

Yet, I also believe this potential rally in Gold may be just starting, and global concerns may be festering while the US stock market rallies. 

This is because global traders are piling into US assets/stocks while attempting to avoid economic/debt concerns in other world areas.

Gold will continue to react to this new concern and fear as it populates in traders’ minds. 

The luster of Gold will likely continue to grow – which may push Gold above $1950 before the end of 2021. 

Time will tell.

Argentina and the IMF: the looming clash over its $57bn bailout

Fears are growing that Buenos Aires will not be able to meet a $2.8bn repayment in March

Michael Stott and Lucinda Elliott in Buenos Aires 

© FT montage; Getty Images | Alberto Fernández, the president of Argentina

Argentina’s president was in no mood to compromise. 

Agreeing a quick deal with the IMF would mean “going down on my knees and complying with the creditors’ demands”, Alberto Fernández bellowed to a crowd of trade unionists in Buenos Aires last week. 

“That’s not what a Peronist does. 

We know who we represent: we represent you, not the creditors.”

As a March deadline looms for Argentina to repay billions of dollars to the IMF from a record-breaking $57bn bailout, the leftwing government faces an economic crisis and needs a fresh deal with the fund to unlock more cash. 

But instead of pushing for an agreement, Fernández and his key ministers are hardening their line ahead of midterm elections on Sunday, in which the governing Peronist party may lose its senate majority. 

They have surprised IMF officials by insisting on big concessions, such as lower interest rates and much more time to pay.

“I have become increasingly pessimistic,” says a source close to both sides in the talks. 

“Right now, it’s so uncertain that anything could happen.”

At stake is the reputation of the IMF as it tries to help key emerging market economies out of pandemic-induced recessions and the future path of Argentina, a G20 member and major grain exporter which risks cutting itself off from the international community and retreating into isolation.

Most economists agree that failure to reach a deal with the IMF by the end of March would be disastrous. 

It would mean Buenos Aires falling into arrears with the fund, a move which would cut off credit from other multilateral lenders. 

With private investors already shunning Argentina after it defaulted briefly on their debt last year, a confrontation with the fund would leave Argentina an international financial pariah.

Yet for a hard core of the governing Peronist party, such a result would be hailed as a victory, proving that Argentina can defy the international financial system and pursue its own nationalist path towards economic development.

“The IMF’s relationship with us is not one of a creditor to a debtor,” says Juan Grabois, leader of a radical grassroots social movement allied to the ruling coalition. 

“It’s the relationship of a scammer to someone they’ve scammed. For us, the IMF is the devil.”

‘Only game in town’

The IMF’s $57bn bailout to Argentina was controversial from the start. 

Agreed in haste in 2018 when Mauricio Macri, the pro-investor president, hit a markets crisis that triggered a two-week run on the peso, the loan was approved amid strong support from Donald Trump, the then US president, for the Argentine leader, whom he considered a political soulmate.

Concerns about making such a large loan to a country that had already been bailed out 21 times in six decades by the fund were waved aside.

A history of debt — 1890

© UIG/Getty  After a borrowing spree to modernise the capital Buenos Aires, the country halted all debt payments, spurring a run on Argentine banks. It took four years for the country to emerge from default, buoyed by fresh investment from Britain.

“We were the only game in town,” Christine Lagarde, who was president of the IMF at the time, said in 2019 when justifying the bailout. 

“There was nobody else at the time to invest in the recovery process . . . and given the size of the challenge, we had to go big.”

The payment timetable for the $57bn loan aroused particular ire among critics in Argentina. 

They pointed out that while the IMF disbursed almost all the money before Macri faced re-election in October 2019, most of the repayments were bunched into two later years, 2022 and 2023.

In the event, Macri lost a primary by a landslide two months before the main election, markets plunged again and the IMF stopped the payments. 

Only $44bn out of the agreed $57bn was disbursed by the time Macri left office in December 2019 after a heavy election defeat and handed over an economy already in recession to Fernández.

“The loan from the fund was very obviously to finance Macri’s campaign,” says Santiago Cafiero, Argentina’s foreign minister. 

“The biggest loan in the history of the fund was used to finance capital flight in 2018-19, the fund has a big responsibility for that . . . there were inadequate procedures in the fund.”

Gerry Rice, the IMF’s director of communications, said last week that “we continue to work toward a programme that can help Argentina and face the challenges of the moment and set the basis for inclusive growth”. 

Rice has previously rejected Peronist claims that the fund broke its own rules with the bailout to Macri’s government.

Those briefed on the negotiations have been particularly concerned that economy minister Martín Guzmán, Argentina’s chief negotiator and formerly a moderate voice in the government, has toughened his line.

A history of debt — 1982

© Francois Lochon/Gamma-Rapho/Getty / Foreign debt ballooned to $46bn as the military regime under President Leopoldo Galtieri, above, borrowed from foreign banks to fund state industries. A failure to curb inflation triggered a default in 1989 and ultimately brought Peronist leader Carlos Menem to power. Foreign debt later surged to more than $100bn, as Menem failed to rein in public spending.

In October, he accused the IMF of using the loan to finance Macri’s election campaign. 

In an interview with the Financial Times, he blamed the IMF for Argentina’s looming shortage of dollars next year. 

“The reason why Argentina faces a problem in its balance of payments in 2022 is precisely because of the presence of the IMF loans”, he said. 

Argentina is due to pay the fund a total of nearly $19bn next year.

Such statements, says the source close to the talks, “affect how the fund’s shareholders see the country. 

It makes them less willing to accept a programme”.

Benjamin Gedan, who runs the Argentina project at the Wilson Center, says: the government’s arguments about the bailout “are completely irrelevant”.

“The Peronists for domestic political purposes want to re-litigate the terms of the last bailout rather than have a conversation about managing debt, the deficit and inflation. 

[They] say there is a tactical advantage to doing this but the reality is that the IMF leadership and board will judge a new programme on its merits,” he adds.

Ground control to Fernández

As the mood between Argentina and the IMF sours, the economy is stuttering.

Cut off from most sources of international finance, the government has resorted to printing money to help fund its deficit, fuelling inflation which is topping 50 per cent a year. 

To conserve scarce foreign currency, strict capital controls limit the amount of dollars Argentines can buy and the black market dollar has rocketed to almost the official rate. 

Ministers have ordered a price freeze to control the cost of more than 1,400 household items.

“Macri’s big idea was for Argentina to be part of the world,” says a second source close to the debt talks. 

“That is not part of the current Peronist ideology.”

A viral video meme, “The Dollar Goes to the Moon”, conveys vividly the sense of despair in the country. 

Using footage from the film Apollo 13, it shows mission control with the countdown to lift-off under way.

The flight director runs through a pre-launch checklist: “Economy?” “Stagnant,” comes the reply from colleagues in mission control. 

“Investment?” “Zero.” 

“Country risk?” “Through the roof.” 

“Small businesses?” “Bankrupt.” 

“Inflation?” “Rising.” 

“Price controls?” “In progress.” 

“Taxes?” “169 and counting”, and so on.

A shuttered store for rent in downtown Buenos Aires © AFP via Getty Images

Then the controller presses a button and a giant US dollar soars into space, to the despair of watching Argentines. 

“Damn, I didn’t buy,” sighs one. 

The clip has been shared 2m times across different social media platforms.

“The checklist in this rocket launch scene was perfect for our country,” says Andy Olivera, a comedian from Buenos Aires who co-produced the meme. 

“Our biggest concern as voters in Argentina is the economy, that’s why this video is so popular. 

People are poorer. 

It’s simple.”

Economists see a moment of reckoning approaching. 

“Inflation and the foreign exchange gap are at near multi-decade highs; the fiscal deficit is too wide for a country with limited market access; the central bank’s balance sheet has deteriorated markedly, with net FX reserves dwindling. 

And import and capital restrictions limit activity and cloud the growth outlook,” said Fernando Sedano of Morgan Stanley in a recent report.

The government dismisses such gloom. “Argentina is on the correct path,” says Cafiero. 

“The problem is the debt, the problem is not our path of economic recovery.” 

Yet bankers in Buenos Aires blame government policies for scaring away investors. 

As one put it: “Argentina has a viable economy but it is financially bankrupt. 

It’s like a company which keeps producing but can’t finance itself.”

The prospect of IMF negotiations not succeeding before the March deadline for a $2.8bn repayment to the fund is causing alarm. 

Both sides repeat mantras about making constructive progress, even though officials say privately that few real advances have been made so far.

“The chances of a deal have declined significantly,” says the second person close to the talks. 

“I would still put it as the most likely outcome but there are some people . . . who already think the probability is much lower”.

A history of debt — 2001

© Daniel Garcia/AFP/Getty / At the time it was the largest default by any country in history. Payments halted on $95bn worth of bonds. Two restructuring deals followed in 2005 and 2010 before Argentina entered technical default in 2014 after a US judge ruled it could not service its restructured debt abroad without paying the so-called ‘holdout’ creditors first.

The key sticking points are Argentina’s demands for surcharges to be dropped on the interest rates it pays to the IMF and to have more than the standard 10 years for repayment. 

For its part, the IMF wants to see a credible plan to cut the country’s fiscal deficit over the next few years.

With Argentina’s net foreign currency reserves running low, economic logic suggests that even a bare-bones deal would be the best outcome for both sides, yet the politics of a deal are becoming increasingly complex in Argentina.

The Peronist coalition is likely to suffer a heavy defeat on Sunday, something that would sharpen internal divisions ahead of the next presidential campaign in 2023. 

The radical wing, led by Cristina Fernández de Kirchner, the influential vice-president, believes the answer is to reinforce nationalist policies, step up government controls on the economy and insist the IMF gives way.

Analysts say Guzmán is under heavy pressure from hardliners to take a tougher line with the fund. 

In what was widely seen as a shot at the economy minister, Kirchner implied that the government had erred by not spending enough in an open letter published after the Peronists suffered a drubbing in primary elections in September.

Labour unions and civil society groups protest against the IMF in Buenos Aires in October © Anadolu Agency via Getty Images

“Our supporters voted for social assistance which didn’t happen,” says Eduardo Valdés, a Peronist congressman close to Kirchner. 

“Budgets which should have helped people were not fully spent.”

With polls showing the opposition heading for a big victory in Sunday’s elections, Fernández and his ministers want to be seen to take a hard line with the fund. 

Horacio Larreta, the Buenos Aires mayor who is among the opposition’s most popular figures, has said the bailout deal is not good or bad in itself and that the best way to renegotiate it is to convince the IMF that Argentina has a sound economic plan.

Guzmán said that the chances of an IMF deal by March depend “principally on the support of the international community for what Argentina is proposing”. 

He reiterated demands that the fund drop the interest surcharges it imposes on Argentina’s debt and give the country more time to pay.

“It’s a kind of weird strategy in which Argentina puts something on the table that is very hard for the fund to deliver,” says the second person close to the talks. 

“And they have it lingering there as an excuse in case there’s no agreement on a policy programme.”

The repeated Peronist outbursts against the fund have taken a toll in Washington — the US is the fund’s biggest shareholder. 

Officials close to the talks warn that among some of the IMF’s other larger shareholder nations, who must approve any new deal, patience with Argentina is wearing thin.

“They are not the country you would want to make an exception for,” says one official familiar with the negotiations. 

Guzmán’s own credibility with markets has also declined as months have passed without progress on the IMF talks. 

Many believe he missed a golden opportunity to seal a deal with the fund last year, straight after successfully renegotiating $65bn of debt owed to international investors.

A history of debt — 2018

© Eitan Abramovich/AFP/Getty / Under a new free-market conservative government that had pledged austerity while promising to pull in fresh investment, Argentina secured a $57bn IMF credit line, the largest in the fund’s history. The current administration has been in negotiations to postpone repayments for more than a year.

“The [IMF’s] original plan was to have an agreement a year ago,” says the first source. 

“It was never the idea to get to the end of 2021 in this position. 

There were consistent warnings to Argentina that delaying would only make things more difficult”. 

“In two years, Guzmán has done nothing other than debt negotiations,” says Alfonso Prat-Gay, who was finance minister in Macri’s first year, before the IMF bailout. 

“The deal with private creditors last year just kicked the can down the road and nothing has been achieved with the IMF. It’s a fiasco.”

‘Absolute nightmare’

Sergio Berensztein, an influential political consultant and newspaper columnist, thinks the most likely scenario is what he terms “mediocre muddling through”. 

“There will be a suboptimal deal with the fund, a small devaluation” and some modest reduction in the deficit. 

“It won’t solve anything fundamental,” he adds.

Even if such a deal were struck, people close to the talks warn that it could quickly veer off track. 

A new IMF agreement would provide Argentina with fresh cash to repay existing debt to the fund. 

But a review of whether the country had met its obligations would be needed before every payment.

“It would be an absolute nightmare,” says the first person close to the talks. 

“Every three months you would have a nail-biting panic over whether the review was on track and whether the IMF board would approve a disbursement.”

Asked about the chances of reaching an IMF deal by March, Guzmán told the FT: “It will depend principally on the support of the international community for what Argentina is proposing”.

“We all think the same way,” says Cafiero, the foreign minister. 

“We want a good agreement, not a quick agreement. 

We need the fund to show willingness to advance on a . . . programme which includes the particularities of this country.”

As the prospects of a deal by March fade, some are starting to prepare for a worst-case scenario. 

“I’m pretty sure that Argentina will go into arrears [with the IMF], either because the negotiation ends without a programme or as part of the negotiation,” says the second person familiar with the talks.

“There seems to be a line of thinking within the Argentine government that arrears for the fund are more costly than for Argentina,” he says. 

“So they might play that card for a month to see if the fund is going to bend on some of Argentina’s demands . . . their policies are crazy.” 

A new German economic era dawns as the Bundesbank changes guard

Global tensions have convinced politicians that an economically strong and united Europe is more important than a balanced budget

Christian Odendahl 

© Ewan White

On Wednesday, German negotiators received some unexpected news as they began hashing out a coalition government programme: Jens Weidmann tendered his resignation as Bundesbank president, citing personal reasons for ending his eight-year term prematurely. 

A former economic adviser to Chancellor Angela Merkel, Weidmann represented the more hawkish views in the European Central Bank’s governing council.

Unlike some previous German central bankers, he did not resign to make a dramatic statement of dissent. 

But his departure marks the end of an era in which Germany’s concerns about government debt and inflation dominated its economic policies at home and in Europe. 

The incoming government’s appointment of the new Bundesbank head should reflect that change, without politicising the process.

The simplest explanation for Germany’s changing views is a generational shift. 

The economists who dominated the debate in Berlin during the euro crisis have made way for a younger cohort grounded in the international mainstream rather than beholden to German economic orthodoxies. 

Ministry officials, think-tankers and commentators with no memory of the 1970s but plenty of scars from the post-2008 financial crisis are increasingly shaping the country’s policy discussions.

Another reason is the effect of the past decade’s economic policies. 

Fears of ever-mounting debt in Europe, supposedly facilitated by the ECB’s bond-buying policies, have not materialised. 

European debt levels as a share of GDP stabilised before the pandemic even in Italy, before rising afterwards. Germany’s public debt came down fast until 2019 and is expected to return to its pre-pandemic levels by 2024.

The fear of runaway inflation — another popular trope in the commentariat — has turned out to be almost comically wrong. 

Far from letting prices get out of control, the ECB failed for years to push inflation up to 2 per cent a year. 

When reality failed to live up to the hawks’ fears, they moved on to warn of financial stability risks, only to be disappointed again. 

The German public does not study these numbers in detail, of course, let alone the economics behind them. 

But conservatives have cried wolf a few too many times, and their influence is waning.

Crucially, businesses are making their voices heard on fiscal matters. 

Increasingly alarmed by Germany’s low public investment, they have called on conservative parties to ditch their balanced budget “fetish” — as Merkel’s Christian Democrats put it — and improve Germany’s fraying infrastructure, which hurts businesses. 

Much of the public, observing the dismal state of Germany’s digitalisation during the pandemic, increasingly shares that view.

More public investment is needed, too, in the fight against climate change, the topic at the forefront of Germans’ concerns. 

Now that Germany’s highest court is enforcing climate targets, there is no place left to hide for fiscal hawks. 

Either the next government acts by raising carbon prices and strengthening regulation — which is politically difficult, to put it mildly — or it ramps up subsidies for private investment, to help firms and households make the green transition. 

It is no surprise that conservatives are warming to the idea of more public support for investment.

Finally, global tensions have convinced both politicians and a large part of the German public that an economically strong and united Europe is more important than a balanced budget. 

The populist shocks of Donald Trump’s presidency and Brexit, added to Chinese and Russian assertiveness, require EU countries to emerge from recession strong enough to resist economic blackmail from abroad. 

Enforcing austerity before economies have fully recovered is now widely seen in Berlin as a mistake. 

And selling European infrastructure to Chinese companies — like the Greek port of Piraeus — is no longer considered a smart way to raise funds to plug fiscal holes.

There is a good chance that the incoming German government will put this new, cautious fiscal consensus into practice without making the issue politically divisive. 

The three parties likely to share power agree broadly on the need for investment and modernisation over the next four years. 

On Europe, the draft coalition agreement states that Germany should promote a strong recovery from the pandemic — on the basis of sustainable finances — and ensure climate investment is sufficiently high. 

Reforming Germany’s constitutional debt brake or Europe’s fiscal treaties has been excluded, but a flexible application of the rules can be expected.

The current bout of inflation, temporary though it will be, will be more challenging for the ECB. 

Conservative commentators will no doubt do victory laps, even though the inflation is a product of the pandemic, not the ECB bond-buying they warned about for years.

Germany needs a strong Bundesbank head willing to engage with the public on the new monetary consensus, without risking the bank’s standing as an apolitical, trusted guardian of stability. 

It would require taking that role out of the horse-trading of the coalition talks and settling on a modern, consensus candidate. 

Germany is changing in the way Germany always changes: a bit late and too cautiously, but in the right direction. 

The new Bundesbank president should be part of that change. 

The author is chief economist at the Centre for European Reform

China's Journey into the Unknown

With a wave of regulatory and other actions against leading private-sector firms, Chinese President Xi Jinping clearly intends to re-establish the Communist Party’s ultimate control over all aspects of Chinese life. Yet that effort may well kill the goose that lays the golden eggs.

George Magnus

OXFORD – China watchers have grown ever more anxious as President Xi Jinping has concentrated power in his own hands, and as the Communist Party of China’s leadership has become more coercive, both at home and abroad. 

The so-called trade war with the United States, deterioration in relations with many foreign governments, and the COVID-19 pandemic have had far-reaching consequences for China. 

And now comes Xi’s regulatory and legal clampdown on private firms and their owners, as he champions a new campaign to promote “common prosperity.”

The speed and scope of these developments exemplify the hazard of book-writing on contemporary affairs. 

Even so, the three books examined here provide (each in its own way) a valuable perspective on the more lasting aspects of Xi’s China, identifying features that can guide thinking about the future of a country that is both challenging the world and facing major challenges of its own.

The focus by these authors on systemic aspects of Chinese governance is all the more relevant in light of this year’s extensive and continuing regulatory measures. 

A broad array of sectors has been affected by this new regulatory activism, including technology, data, finance, education and tutoring, logistics, distribution, and now housing, where indebtedness, costs, and overbuilding have been deemed excessive.

The revival of the hoary slogan “common prosperity” is widely thought to signify the start of a crusade against inequality. 

While few details have been announced, the expectation is that the campaign will penalize those with “unreasonable” incomes and focus on so-called “tertiary distribution”: aligning private firms and billionaires with CPC goals through what amounts to coercive state-directed philanthropy.

The scale and urgency of the crackdowns reflect not only Xi’s own leftward shift but also the long build-up to next year’s 20th Party Congress in November, where he likely intends to break another party norm by securing a third term as president. 

Before then, Xi wants to re-establish state firms at the commanding heights of the economy and subordinate private firms and entrepreneurs to CPC objectives. 

The only question is which goals will be pursued through regulation, which through guidance, and which through fear.

The irony is that Xi has created a new contradiction for China. 

The CPC’s craving for control in all domains sits quite uncomfortably with the types of reforms that are needed to support growth and innovation. 

Whether the Party can resolve this contradiction is a moot point.


In China and the WTO: Why Multilateralism Still Matters, Columbia Law School’s Petros C. Mavroidis and André Sapir of the Université Libre de Bruxelles bring years of experience and sterling reputations in trade law and economics, respectively, to a crucial issue: Is China’s state capitalism compatible with its membership in one of the world’s most important – but also threatened – international institutions?

China and the WTO

That question is especially pertinent now that China may be embarking on a new path. 

Remember, it was the reforms and policies designed to win accession to the World Trade Organization in 2001 that underpinned China’s subsequent economic success and rise to trade dominance in the first place. 

The doubt about China’s compatibility with the WTO nowadays derives not so much from any specific breach of WTO provisions, procedures, and rules, but rather from the character of its economic system. 

Simply put, the problem is that its entire governance model violates the spirit of the WTO.

It is tempting to ask why no one thought so in 2001. 

But, in all fairness, few at the time imagined that China’s economy would become as large and integrated into the global system as it has, or that its political system would become as Leninist-Maoist as it has under Xi. 

As Mavroidis and Sapir make clear, even after Xi came to power, it took quite a while for people to recognize that the “reform and opening up” launched by Deng Xiaoping in the late 1970s was pretty much over, and that the country was undergoing a sharp political turn.

To illustrate this broader development, the authors identify two intractable issues that stand apart from the run-of-the-mill complaints that the Chinese leadership has confronted in the areas of foreign direct investment, procurement, services, currency controls, export terms, and subsidies.

The first issue is the unfair trade advantage given to state-owned enterprises. 

The authors note that SOEs typically account for about 15% of GDP in OECD countries, but twice that in China. 

SOEs’ share of GDP in China has been mostly stable for the last 20-25 years, but Chinese GDP has increased from about $1.2 trillion to $14 trillion over this period, implying that SOEs now account for about $3.5 trillion of output – or ten times as much as in 2000.

That level of output is highly significant in a global system where people are concerned about fair trade, level playing fields, and “behind-the-border” barriers to trade. 

We can anticipate that China’s massive SOE sector will be one of many controversial sticking points in its application to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, if that process ever starts.

The other intractable issue is forced technology and intellectual-property transfer, which is the price foreign firms in China pay for accessing Chinese markets (often by forming joint ventures with Chinese firms). 

In the wake of revelations about human-rights abuses and appalling labor and social conditions in Xinjiang, new objections born of ESG (environmental, social, and governance) criteria will likely complicate China’s trade relationships even more.

Mavroidis and Sapir warn that, having failed to liberalize as its state-capitalist economy evolved, China must now rely on a WTO system that might not survive unless either China or the WTO changes. 

The omens are not auspicious. 

No one can compel China’s government to reverse course. 

Unilateral measures, such as those employed by the Trump administration, have proven to be both unrealistic and unwise. 

Bypassing the WTO not only undermined that institution’s credibility and relevance; it also ultimately harmed the US itself.

The only recourse for the rest of the world, as Mavroidis and Sapir see it, is to try induce a change in behavior, at least as far as trade policy is concerned, by reaffirming a commitment to multilateralism that includes China. 

For example, applying new rules across the board incrementally (following a pattern applied in the past to Eastern European countries, Japan, India, and Brazil) could enable compromise in contentious areas, or at least provide a basis for dialogue and engagement.

It is laudable and necessary to explore possibilities for collaboration between China and liberal democracies within the WTO, not least because the institution’s survival depends on such progress. 

With their deep understanding of the power, scope, and mechanics of multilateralism in trade, the authors make a good case for what needs to be done. 

What remains in doubt is whether there is the political will to do it. 

For now, at least, any openness to compromise is being drowned by a cacophony of sanctions, appeals to national security, and other concerns.


In Chinese Antitrust Exceptionalism: How The Rise of China Challenges Global Regulation, Angela Huyue Zhang, a professor of law at Hong Kong University, takes a rather different approach to analyzing China’s governance model. 

Hers is a timely work: terms like antitrust and anti-monopoly have made frequent appearances in the new regulatory crackdown, generating much discussion about what the authorities’ agenda entails. 

Is it fundamentally about antitrust and market efficiency, or is it really about political power and control?

Chinese Antitrust Exceptionalism

Zhang may have started out by examining how antitrust law shapes markets, prices, and competition; but she acknowledges that, in light of China’s use of antitrust as an instrument in trade and foreign policy, her book is also about Chinese politics, economic institutions, and international relations. 

Her aim thus is to explain the role and application of antitrust law against the backdrop of China’s broader governance model. 

She first assesses China’s regulatory performance, and then considers cases in which European or US antitrust actions have affected Chinese firms.

China’s main regulatory agency is the State Administration for Market Supervision (SAMR), which was created in 2018 from three agencies beset by rivalry and bureaucratic inertia. 

The legal basis for antitrust enforcement derives from the Anti-Monopoly Law, passed in 2008, which prohibits monopolistic and anti-competitive conduct. 

It is supplemented by a plethora of other rules and regulations covering market and price conditions, contract law, and foreign-trade law.

The development of antitrust law and enforcement in China is of particular interest in today’s circumstances, partly because of the regulatory campaign, but also because of the ways in which China has used this instrument to retaliate against foreign measures taken against its own firms and entities. 

This has applied especially to the trade war with the US, which in fact spans not just merchandise trade but also financial assets, direct investment, and technology. 

The broad questions of antitrust and treatment under Chinese law are becoming especially important for foreign firms in China. 

As Zhang notes, the problem these firms face is not so much the law as the institutional environment and bureaucratic incentives that lead to biased enforcement outcomes.

A particularly contentious issue, as Mavroidis and Sapir also note, is the prominence and role of SOEs. 

One might add “private” firms that are technically incorporated but not actually private. 

Half or more of the US and EU firms operating in China regard current antitrust enforcement as unfair and arbitrary, and view regulators as prone to use their vast administrative discretion and media control to favor domestic firms.

Like Mavroidis and Sapir, Zhang understandably would like to see collaborative outcomes, such as US help promoting structural reforms within and by the Chinese bureaucracy to enhance due process in administrative enforcement. 

While she recognizes that there are fundamental ideological fault lines between the US and China, she is hopeful that repeated interactions between the regulatory authorities on both sides might lead to cooperative outcomes. 

But this seems rather implausible at a time when the CPC has embarked on a campaign that is billed as an effort to overcome liberal capitalism.

Zhang also worries that the anti-China consensus in many democratic countries is drowning out the voices of progressive Chinese reformers who are advocating for a freer, more equitable, and more open China. 

But such warnings seem passé. 

The Chinese government’s behavior and rhetoric offer nothing to suggest that there is scope for compromise or backtracking on governance. 

Even if we accept that there are committed progressive reformers in China, it is obvious that they do not have Xi’s ear.


Finally, Yuen Yuen Ang, a political science professor at the University of Michigan, gives us an altogether different and engaging brand of insight. 

Unlike the other books considered here, the focus of China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption – a title evoking America’s late-nineteenth-century period of rapid economic growth, soaring inequality, deepening social tension, and rampant corruption – is entirely domestic. 

Starting from the observation that corruption is normally associated with poor performance, faltering social progress, and political instability, the book considers why China’s corruption-ridden economy nonetheless has been able to grow rapidly and more or less consistently since 1978.

China's Gilded Age

The relevance of this question is underscored by Xi’s long and relentless anti-corruption campaign, which has already resulted in the incarceration or other punishment of some 1.5 million people, including many top officials. 

Xi’s purge certainly entails a genuine effort to root out graft and other abuses of power, but it also reflects an effort to enforce party discipline and neutralize political rivals. 

Equally important, while the governance issues raised by the other two books speak to how Xi’s China works, the dynamic of corruption points to one factor that could someday be its undoing.

Ang’s quantitative and analytical work (including interviews conducted in China and comparisons with Russia, India, and the US) will be of particular value to those interested in corruption as a broader concept. 

By unbundling its varied forms, she shows that some are much worse than others when it comes to economic development. 

Her central argument is that China’s Gilded Age can be attributed to corrupt exchanges, rather than to the more garden-variety types associated with theft and embezzlement.

In China, the principal corrupt actors are political elites rather than rank-and-file bureaucrats and apparatchiks. 

This distinction is useful, because, whereas the latter seek personal gain and have limited other objectives, the former can offer special deals, cheap credit, tax breaks, access to people, and procurement tenders. 

It is they who control public funds and valuable resources such as land. 

Ang calls this type of corruption “access money,” and it has indeed played an essential role in China’s economic development until now.

Deng’s famous “reform and opening up” strategy created strong incentives for access money, because it combined greater reliance on markets and the CPC’s political monopoly rule, a model guided by the lodestar of national prosperity and strength. 

This mix of incentives gave party leaders and officials a direct stake in economic growth, and in promoting private businesses and new industries while still preserving their control over people, processes, decision-making, and resources.

To facilitate access money even further, Chinese leaders have deliberately curtailed other forms of corruption that prevent or inhibit entrepreneurial growth. 

This policy has involved new laws, tax structures, financial oversight, and other mechanisms that increase the state’s capacity to monitor and punish corrupt behavior of which it disapproves.

Ang illustrates all this by examining in some detail the career paths of Bo Xilai, a former provincial party secretary of Chongqing and rival to Xi, and Ji Jianye, a former mayor of Nanjing. 

Both were notoriously corrupt but avid promoters of local economic growth. 

Bo’s tenure in Chongqing typified the regional competition that has long been a feature of post-Deng China, and which has certainly benefited economic growth.

Ang notes that this corruption-driven development has produced some interesting paradoxes. For example, economic growth has been impressive overall, but it is highly unbalanced and uncoordinated. 

But while local officials remain corrupt and motivated by economic development, regional competition may in fact have crested under the administration of Hu Jintao and Wen Jiabao (2003-2013). 

Under Xi, it has slipped, probably owing to a change in the link between economic performance and political promotion. 

Other factors are now equally or more important for ascending the party ladder.


While not part of Ang’s brief, there is other evidence of kleptocracy at work in China over the last decade or so. 

Years of high credit growth in China, dating back to the big stimulus program in 2008, have coexisted with reams of statistics that consistently fail to show where and how that credit has boosted the economy (though housing and infrastructure have been exceptions).

The monetary boost is not a fiction. 

The deposits, assets, and surge in bank balance sheets in the financial system are real, but they contrast with rather more pedestrian economic statistics showing a rising volume of credit for every additional yuan of output. 

The money must have gone somewhere, but exactly where remains a mystery.

In any case, the question is whether this hitherto successful form of corruption in China will continue to support economic growth, or whether it will finally become too corrosive for Xi’s government, or even the CPC, to manage. 

According to Ang, those hoping for answers need to look beyond the economy. 

But, at a minimum, one can infer from the new troubles in China’s property market (which are likely to persist in the coming years) that even access money has limits beyond which economic and financial instability become endemic.

Xi’s crackdown may have made officials more fearful, but Ang maintains that the drivers of corruption are deeply embedded, owing to the government’s huge power over the economy and the bureaucracy’s patronage system, and that it will eventually undermine political stability. 

Now that Xi has made himself the sole unchallengeable leader, the battles for political succession will intensify, as will factional rivalries fueled by the forms of corruption that he has allowed to continue.

Yuen Yuen Ang, China’s Gilded Age: The Paradox of Economic Boom and Vast Corruption, Cambridge University Press, 2020.

Petros C. Mavroidis and André Sapir, China and the WTO: Why Multilateralism Still Matters, Princeton University Press, 2021.

Angela Huyue Zhang, Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation, Oxford University Press, 2021.

George Magnus, a research associate at the University of Oxford’s China Centre and SOAS University of London, is the author of Red Flags: Why Xi’s China Is in Jeopardy (Yale University Press, 2018).

Waking up to the new sleep rules

Before the pandemic, working life trapped most of us in a one-size-fits-all schedule

Simon Kuper

© Harry Haysom

Spending some time in Madrid, I marvel at the mornings. 

This is a city that sleeps late. 

When I first got here, I’d stagger out before 9am in search of coffee, and find the breakfast places still closed. 

Spaniards wake up at times when Americans are already at work.

I know Spain has sleeping problems: people here sleep 30 or 40 minutes less per night than the European average, possibly because they are in the wrong time zone. 

In 1940, the dictator Franco moved the country to German time to show solidarity with Hitler, and nobody ever moved it back. 

Yet Spain’s late mornings are what I’ve been looking for all my life. 

I always found that traditional school and working start-times forced me out of bed too early.

Many other people clearly feel the same way: during lockdowns, when homeworkers were suddenly able to choose their own wake-up times, most slept later. 

Let’s hope that the current revolution in working practices institutionalises that freedom.

Before the pandemic, working life trapped most of us in a one-size-fits-all schedule. 

Americans had it particularly bad. 

“Working nine to five, what a way to make a living,” sang Dolly Parton but, in fact, the commonest starting-time for American workers in 2015 was between 7.45 and 7.59am (which may be one of many explanations for the US’s current Big Quit).

Night owls in particular sacrifice sleep in order to get to work at ridiculous times

Dawn starts favoured people with the chronotype — or genetically determined sleeping propensity — of early birds. 

Walter Mischel, the psychologist who invented the famous Marshmallow Test, found he was happy waking up at 5am, which meant that he had often done two hours’ work by the time others were just starting to self-medicate on coffee.

Apple’s chief executive Tim Cook claims to rise before 4am. 

Because of a silly association of early rising with virtue, the larks were regarded as conscientious workers. 

They became the bosses, and set the schedules for the rest of us. 

They generally weren’t keen on naps: the siesta should be a recognised worldwide productivity fix, but instead it has been mostly hounded out even in Spain.

“Standard employment schedules force [night] owls into an unnatural sleep-wake rhythm,” writes Matthew Walker in Why We Sleep. 

“Job performance of owls as a whole is far less optimal in the mornings, and they are further prevented from expressing their true performance potential in the late afternoon and early evening as standard work hours end prior to its arrival.” 

Also, owls in particular sacrifice sleep in order to get to work at ridiculous times. 

Before the pandemic, nearly a third of Americans were averaging six hours a night or less.

Early schedules are especially damaging to adolescents, who naturally wake up late. 

“Schools Start Too Early”, bluntly declares the US’s Centers for Disease Control. 

The American Academy of Pediatrics recommends that middle and high schools start at 8.30am or later, but in 2014, 93 per cent of high schools and 83 per cent of middle schools in the US began before that time, leaving kids dozing through double math. 

The German chronobiologist Thomas Kantermann has said: “The later the chronotype, the worse the school results.”

People choose their professions based partly on their chronotypes. 

Early birds do well as bakers or teachers, whereas morning newspapers were traditionally staffed by owls: certainly before the internet arrived, workloads peaked in the evening, when the next day’s edition was “put to bed”. 

But either way, adult sleeping habits were shaped by work — part of capitalism’s hegemony over our bodies, argues anthropologist Matthew Wolf-Meyer.

I left the office in 1998 and began working from home. 

I have found it a higher-productivity life: instead of wandering the office corridors too zonked to function, I rise when I feel sufficiently slept (often going back to bed for a bit after getting the kids off to school) and take a 20-minute power nap in the afternoon. 

I have the rare privilege of living on my natural schedule.

The pandemic extended this right to tens of millions of new homeworkers. 

During lockdown, most of them started their days later, even though there was no nightlife to keep them up.

In the UK last autumn, for instance, the average working day for homeworkers began at 10.45am (and ended late too). 

In an international study of 113,000 people in 20 countries, Ju Lynn Ong of the National University of Singapore and others found that later starts, and the convergence of weekday and weekend wake-up times, helped lower the average resting heartbeat — a measure of good health.

Given that remote work is here to stay, the moral is obvious. 

Let people choose their own start-times whenever possible. 

There may need to be core hours when everyone in a team is working — between 10am and 3pm, say — but beyond that, let’s overthrow the tyranny of the early birds, though preferably only after a long lie in.