🌍 The UK poised to join Trans-Pacific trade bloc

🗺️ AROUND THE WORLD

1. 🇵🇰 Pakistan: In a move widely seen as assuaging China, Pakistan is not participating in this week’s Summit for Democracy in Washington, which features senior representatives from over 100 countries. Pakistan also declined to participate in the inaugural summit in 2021.

2. 🇸🇪 Sweden: The Foreign Ministry summoned Russia’s ambassador for a Facebook post describing Sweden as a “legitimate target for Russian retaliatory measures” if it joins NATO. Sweden’s NATO bid has been stalled since last May.

3. 🇮🇩 Indonesia: FIFA is moving a major upcoming soccer event after protestors demanded Israel’s team be barred from entry. FIFA warned it may also disqualify Indonesia from 2026 World Cup qualification (though Indonesia hasn’t qualified since 1938, when it participated as the Dutch East Indies).

4. 🇵🇪 Peru: Prosecutors are investigating former President Pedro Castillo and current president Dina Boluarte for alleged money laundering. Boluarte is Peru’s sixth president since 2018.

5. 🇸🇦 Saudi Arabia: Riyadh will join the China-led Shanghai Security Organisation as a dialogue partner. The organisation was founded on the premise of pursuing a “multipolar world order”.

🇬🇧 THE UK | TRADE

The UK to join major Trans-Pacific trade bloc

Briefly: The members of a major Trans-Pacific trade bloc (the Comprehensive and Progressive Agreement for Trans-Pacific Partnership – or CPTPP) agreed to approve the UK’s membership application yesterday (Wednesday).

Some context: The CPTPP has 11 members which together represent a $10 trillion market with 500 million people. That’s nearly 14% of global GDP. The UK will become member #12, and the first new member since the CPTPP was signed in 2018.

Impressive right? Yet the economic benefits for the UK will be negligible:

• The UK already has trade deals or ‘EU rollover agreements’ with nine of the eleven CPTPP members

• The two new CPTPP markets for the UK are Brunei (similar population to Manchester) and Malaysia

So, by the UK’s own estimates, the CPTPP will boost British GDP by just 0.08% over the long term. By comparison, leaving the neighbouring $16 trillion EU bloc is estimated to cost the UK a 4% drop in GDP over the long term.

So why bother joining the CPTPP?

🗳️ Politics: Brexit has failed to deliver on many of the promises made by its proponents. So joining the CPTPP can be badged as a rare Brexit win.

🌏 Geopolitics: As a CPTPP member, the UK gets a veto over any new members. And China is next in line. So the CPTPP effectively gives the UK rare leverage over China. This adds weight to the UK’s new “Indo-Pacific Tilt”, which seeks to better position the UK in the key region.

📈 Getting in on the ground floor: As other major Indo-Pacific economies look to join the CPTPP (see below), the benefits for the UK will grow. Though that’ll take time (and will still be dwarfed by the costs of Brexit).

Intrigue’s take: The CPTPP was never really about trade. President Obama’s original aim was to form an economic bloc to balance China. But President Trump ended up withdrawing the US on his third day in office. And now China is trying to join. It feels about as repetitive as an episode of Days Of Our Lives.

Still, it’s nice to hear the faint sounds of champagne bottles being opened at 10 Downing Street (without triggering years of investigations).

Also worth noting:

• China, Taiwan, South Korea, Indonesia, Philippines, Thailand and Ecuador have all voiced an interest in joining the CPTPP.

• Canada has played a spoiler role twice in the CPTPP: the original deal almost collapsed in 2017 when Canada “screwed everybody”, and Canadian objections delayed the UK’s membership application earlier this month.

Today’s briefing is sponsored by Revolut

👔 CHINA | BUSINESS

China’s tech and e-commerce giant Alibaba announces major restructure

Briefly: The Chinese tech and retail supergiant Alibaba announced on Tuesday it will break its empire into six distinct and independently-run units: China e-commerce, international e-commerce, cloud computing, local services, logistics, and digital media / entertainment.

Each unit will have its own CEO and board, plus flexibility to raise its own capital.

The restructure ‘coincided’ with the surprise reappearance of Alibaba’s co-founder Jack Ma. Forgive those sassy ‘air quotes’, but these details are rarely ‘coincidental’ in China: Mr Ma mostly disappeared from the public eye after he criticised Chinese regulators in 2020.

Authorities went on to fine Alibaba $2.8B for anti-competitive practices and suspended Ma’s record-setting IPO. And it presaged a broader Chinese crackdown on Big Tech to rein in the sector’s relative power. It was all a stark reminder of who runs the show in China, and it spooked global investors.

Intrigue’s take: Tuesday’s announcement was reportedly crafted in close ‘consultation’ (sorry) with China’s authorities:

• It achieves Beijing’s aim of diluting the power of Big Tech

• It does that in a way that’s good for Alibaba (its shares have soared)

• And it calms anxious foreign investors by hinting that China’s crackdown on Big Tech might be reaching an end

This announcement is also a reminder that China is still the type of place where regulators can break up one of the world’s largest companies at a moment’s notice. When things go as planned, there’s a temptation to see China’s regulators as omniscient. But history tells us they put their pants on one leg at a time, just like the rest of us.

Also worth noting:

• Alibaba’s US share price on 23 October 2020 (the day before Ma’s controversial speech) was $309; two years later, it was $63.

• Chinese President Xi Jinping signalled an intention to boost private enterprise during his Two Sessions Speech earlier this month.

👀 EXTRA INTRIGUE

What we’re reading about the banking, business, and crypto worlds.

• UBS brings back former CEO Sergio Ermotti after Credit Suisse deal

• Our friends at The Web3 Daily Newsletter: a hype-free, 5-minute daily read, designed to be your gateway drug to Web3.

• Do Adani's woes matter for India's clean energy transition?

• Deutsche Bank is not Credit Suisse

📊 CHART OF THE DAY

Pensions are all the rage lately,

… and we mean that literally (Paris is currently burning). Governments in all OECD countries have similar headaches: as populations get older and enjoy their pensions for longer, who will pay?

Yesterday’s Poll: Do you think the BRI can still be considered a success for China and its partners?

🟨⬜️⬜️⬜️⬜️⬜️ 💸 Yes, 151 BRI signatory countries can't be wrong (18%)

🟩🟩🟩🟩🟩🟩 👎 No, it's saddling countries with too much debt and dodgy infrastructure (76%)

⬜️⬜️⬜️⬜️⬜️⬜️ 🖋️ Other (write in!) (5%)

Your two cents:

• 🖋️ T.F: “China's plans are measured in decades, not a few years. It's till too early to call.”

• 💸 T.L: “Adding the caveat that many of their BRI loans end up with the host nation defaulting and the project owned by China (such as the airport in Uganda in '21) it is definitely a win-win for China. The host nation still gets the benefit of the infrastructure.”