The New Superpower
Late last week - around the same time we all got distracted by SVB - Xi Jinping was awarded an unprecedented third five-year term as president of China. Important point: as president, not as party leader which is a separate role. In any case, in doing so he has formally put one of Deng Xiaoping’s key legacies - the collective leadership formula - to an end. Full authoritarianism with a revered leader, a system that not only traumatized Deng’s family but also Xi himself, is now back in full swing in case there were any doubters left. And where Mao and Deng restricted their ambitions to the homeland, Xi will leverage China’s growing economic cloud to slowly replace the US as the world’s superpower.
By brokering a deal between Iran and Saudi Arabia as was revealed last week, China has now positioned itself as a direct force in the Middle East, slowly moving team Biden aside now that the latter’s relations with the Saudis are far from warm and its relations with Iran sub-zero. This will also affect Israel which was just beginning to warm up to the ruling elites in Riyadh. During my two most recent visits to Jerusalem it was clear that China was top of mind for many politicians and business leaders and the news makes it clear why: if the US is less dominant in the Middle East we will have to partner up to the new rulers on the block.
While early days for both Iran and Saudi Arabia (there is a lot to be resolved between the two), we are moving to a world where China will continue to use its economic power to implement its political agenda and you can see the contours of a powerful non-Western alliance emerging right before our eyes. Russia, China with Iran and North Korea in tow, cozying up to Saudi Arabia is creating an informal but very powerful authoritarian block that directly rivals the US.
In much simpler terms the post-war US-led world was one where economic power fueled democracies and open markets. Now economic strength is enabling an alliance of ever stronger dictatorships. How different from what we were thinking only some twenty years ago. Democracy, rule of law, global trade and in particular human rights, all in retreat.
Markets
Well the SVB saga disappeared from the headlines as soon as it got there, almost. The Federal Reserve’s bailout - challenged in some corners - will be followed by a process where the business is restructured and parts of it will be sold. It is a soft landing with limited contagion and thus no financial crisis, in a few years SVB will probably be a blip in financial history. And thus the markets bounced back on both Monday and Tuesday (today not so much), helped no doubt by stabilizing consumer price numbers and the prospect of a more careful approach to raise interest rates. Let’s see what happens, we remain in unprecedented economic territory and uncharted global movements. Turbulence in many different forms will keep coming at you.
That Dutch PM
Last week I ran an article on the Dutch and Canadian prime ministers and how alike they were in the art of obfuscation. Well, they are not all that similar when it comes to gutsy meet ups with the press. On Monday Dutch PM Mark Rutte went into the lion’s den by appearing on ‘‘Today Inside” a popular nationwide talk show with a reputation to create scandal and controversy, hosted by a set of outspoken and somewhat right-leaning hosts. And they were not at all intimated on having the PM at the table, on the contrary. After inquiring about his sex life (Rutte has been single forever) and suggesting that hooking up with Italian PM Giorgia Meloni might be something for him to consider, they went on to suggest he resign given all the scandals to finish up by diagnosing him as a '‘non-criminal psychopath”. Rutte remained unfazed, smiled through it all and rebutted everything that was thrown at him with his usual verbal devices. Trudeau would not even dare to engage at this level, in fact no sitting head of government on this planet would do this. But this is what the Dutch do to each other in public, and they love it. Debate, offend and be as direct and unpleasant as you can be. Even considering his diminished popularity, Rutte took his obfuscation skills to a new and unparalleled level and came out well, as always. Today’s crucial provincial elections tell us how it all translated at the ballot box.