7 September 2018


7 September 2018

Good morning,

This week saw the triennial Forum on China-Africa Co-operation, FOCAC, take place in Beijing. Representatives from all 54 countries on the African continent gathered in the Chinese capital to, as the official event website puts it, “work together for common development and a shared future” – or, perhaps more accurately, jostle for access to their host government’s money.  And with the Chinese president’s announcement that the nation will pledge $60bn for African development over the next three years, there is plenty to fight over.


FOCAC’s  activity ranges from commercial to diplomatic up to ministerial level, and has been taking place every three years since 2000.  An in-depth analysis of the history of this event – sorry, I mean a quick trawl through Google – suggests that it hasn’t made too much of a splash in western media before, despite the chunky sums involved – another $60 billion in 2015 and $20 billion in 2012.


The longevity of this initiative isn’t that surprising. China long ago identified Africa as an opportunity, beating most to the punch, including the colonial powers that had over a century’s head start. Chinese companies, usually state-owned or at least state-supported, are involved in everything in Africa from mining to utilities to telecommunications to manufacturing. It has been a lucrative strategy and dovetails nicely with the grander ‘Belt and Road’ initiative, the 21st century equivalent of the Silk Road, taking in about 60 countries from the Far East to Europe and, well, Africa.


It has not all been plain sailing for Xi Jingping’s government however. There have been complaints emanating from China about the decision to spend lavishly abroad when government cuts are taking place at home. This dissent is matched by accusations from some African leaders, who suggest that China is good at giving money to ensure its companies win work locally, but rather less good at achieving a lasting social impact (such as new jobs) for the inhabitants of the poorest continent on earth.  Finally, there is widespread concern from all quarters that China is effectively engaging in “debt diplomacy”, using its considerable resource to ensure these countries are beholden to Beijing.


Xi knows this, hence his considerable efforts to make clear that the latest investment is designed to benefit everyone in the long term. Ultimately though, all bilateral relations have their challenges and this is no different. China has been carefully executing a strategy first hatched several decades ago, of using its home-grown companies, which monopolise the domestic market, to make inroads and build relationships abroad. It is one of many reasons why China’s GDP in 2017 was over $12 trillion, compared to $1.2 trillion in 2000 and just $30 billion in the middle of last century.  This is all before we even start to consider how China uses its might to achieve political goals – for example, the concern expressed this week at the Pacific Islands Forum about how the country offers large loans and infrastructure projects to small Pacific nations that do not recognise Taiwan. 

Former UK Chancellor George Osborne was reportedly fond of reminding people that China has been the world’s largest economy in 18 of the previous 20 centuries. Given it appears to be so far ahead of everyone else in terms of its strategic thinking, there should be no surprise that it looks on course to dominate this century too.


Jair Bolsonaro, leader of the Brazilian Social Liberal Party and a frontrunner in the country’s Presidential election, was yesterday stabbed at an election rally in the south-eastern state of Minas Gerais. Mr. Bolsonaro, a right-wing populist who has been dubbed the “Brazilian Trump”, underwent surgery to his intestines and is expected to make a full recovery.

 The Supreme Court of India has repealed Section 377, a 150 year-old act which made gay sex in the country a criminal offence. The move follows a lengthy campaign by activists, who had succeeded in getting a partial repeal of the bill in Dehli a decade ago, which was later overturned. The original law was introduced by the British in the 1860s and had remained ever since.  

British Airways announced last night that it is investigating the theft of customer data from both its website and mobile app. It is thought that the personal and financial details of about 380,000 transactions were affected, although BA has confirmed that the stolen data did not include travel or passport details. The breach took place between August 21st and September 5th 2018.

Business & Economy  

British insurance market Lloyd’s of London looks set to appoint John Neal, the former boss of Australia-based insurer QBE, as its new chief executive, according to sources who have briefed the Financial Times. Mr. Neal was sacked by QBE last year, when the company posted a surprise profit warning. Mr. Neal will replace Inga Beale, the first woman to lead Lloyd’s, who is due to step down next year.

The British high street has had its worst August for three years,  a survey by accounting firm BDO has found. High street sales fell by 2.7% year-on-year, the seventh month in a row that they have declined. Fashion and homeware shops were particularly affected, whereas the lifestyle section flatlined.

Tidjane Thiam, the CEO of Credit Suisse, has publicly ruled out leaving the investment bank to stand for the presidency of his native Ivory Coast. Mr. Thiam, 56, made the announcement in response to a growing campaign to enlist him. Pages have sprung up on Facebook bearing titles such as “One million signatures for Tidjane Thiam 2020” and “TT2020”.


What happened yesterday?

Ongoing concerns over fresh trade tariffs and general investor angst regarding the performance of emerging markets continue to impact global equities. The Nasdaq Composite fell 0.9% and the S&P 500 fell 0.4%, with technology stocks most affected, whereas energy stocks in a number of markets continue to falter off the back of fresh pressure on oil prices. By contrast, the Dow Jones Industrial Average performed better, nudging up 0.1%. In Europe, the pan-regional Stoxx 600 fell 0.6% and the FTSE 100 was down 0.9%, on much the same concerns that are affecting equities across the Atlantic.
Forex-wise, the dollar index was down 0.1%, with the euro remaining at $1.1624 and sterling rising 0.2% to $1.2927. Countries that performed particularly well against the dollar were South Africa, where the rand was up 0.7%, and Argentina, where the peso jumped 2.7%. At the other end, the Russian rouble hit its lowest point since 2016.

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UK Economic Announcements
(00:01) RICS Housing Market Survey
(08:30) Halifax House Price Index
International Economic Announcements
(07:00) Balance of Trade (GER)
(07:00) Current Account (GER)
(07:00) Industrial Production (GER)
(10:00) Gross Domestic Product (EU)
(13:30) Non-Farm Payrolls (US)
(13:30) Unemployment Rate (US)

Columns of Note

The FT’s Editorial Board writes about the impending parliamentary elections in Sweden, which are due to take place on Sunday. The anti-immigrant Sweden Democrats, which had no seats in parliament until 2010, is on the cusp of winning up to 20% of the vote and challenging the century-old supremacy of the ruling SDP. The piece notes that the Sweden Democrats are now reaping rewards for having taken a consistent, if very harsh, view of immigration for a number of years, whereas the more established parties lack credibility, having only recently started to give the issue their attention. A desirable outcome for the writers would be for the SDP and the centre-right Moderate Party to find a way of working together in the likely event of a hung parliament – a challenge for a country with no tradition of “grand coalitions”.
Christian May’s Editor’s Note column for City AM leads with a look at Amazon’s recent jump to join Apple as a $1trn company (based on market cap). He unfavourably contrasts the position of Amazon CEO Jeff Bezos, now worth an estimated $130bn, with the life of the average Amazon warehouse worker, who toils with few rights, very limited security and a constant fear of missing efficiency targets. May suggests that Bezos should spend some time on his shopfloor and look to improve the quality of life for his workforce.

Did you know?

David Cameron’s royal connections are well-known (he is fifth cousin twice-removed to the Queen) but the former PM’s status as a descendant of William IV also opens the door to a number of other family relationships. Amongst others, Cameron is a great x29 grandson of William the Conqueror and a great x25 grandson of King John. Perhaps most interestingly though, he is a great x22 grandson of both Edward II of England, who suffered a humiliating defeat at Bannockburn in 1314 – and the man who inflicted that defeat, one Robert Bruce.

Parliamentary Highlights

House of Commons

No business scheduled

House of Lords

House of Lords (Hereditary Peers) (Abolition of By-Elections) Bill [HL] - Committee stage (day 2) - Lord Grocott
House of Lords (Hereditary Peers) (Abolition of By-Elections) Bill [HL] - Committee (day 2) - Motion to regret - Lord Trefgarne
Mental Health Units (Use of Force) Bill - Second reading - Baroness Massey of Darwen

Scottish Parliament

No business scheduled