1. US equity market exceptionalism may have peaked, says Ruchir Sharma.
A weakening dollar helped the rest of the world outperform the US in 2025, reducing the country’s share of the global stock market index from a high point of 66 per cent at the end of 2024 to 64 per cent now. While “American exceptionalism” may have peaked, this shift has ample room left to run given the still wide disconnect between America’s market cap and its 26 per cent share of the global economy.
I agree with this assessment of the Chinese economy.
China’s domestic economy is hardly growing, weighed down by a busted property market, too much debt and a shrinking population. But strength defines the export sector, which is expanding its share of global markets and propping up the overall economy. Without the export surge, nominal GDP growth would be barely 3 per cent, significantly lower than the officially reported rate of about 4 per cent. Wall Street analysts and economists keep urging China to unleash new stimulus, but their Keynesian bias is blinding them to the underlying problems. China’s total debt including households and corporations is already above 300 per cent of GDP; its augmented fiscal deficit (which includes its influential local governments) is above 11 per cent of GDP. Lacking the money for stimulus, Beijing will be hard pressed to spend more, and the domestic economy will keep disappointing... For the last two years, China has engineered a dramatic increase in its export volumes by slashing prices and holding down the value of the renminbi. As a result, China continues to gain global market share at the expense of rival exporters.
2. Adam Tooze points to an important consequence of Trump's Venezuela invasion: the stabilisation of Guyana's oil market.
3. This about the invasion of Venezuela and the kidnapping of Nicolas Maduro, and the emerging Donroe Doctrine generally is important.
Competition with China over resources in America’s “backyard” will only get fiercer, predicts Stephanie Junger-Moat, chief executive of Karcsi Global, a corporate consulting firm focused on Latin America. Chinese companies have extensive interests in both oil and mining in Latin America. They have invested in the “Lithium Triangle” of Argentina, Chile and Bolivia to supply their battery industry and have significant stakes in Chilean copper and Peruvian iron ore. Junger-Moat says competition could intensify if Trump moves to exert more control over the Panama Canal, which handles 5 per cent of maritime trade, and puts pressure on Latin American countries to limit Chinese trade and investment. “The clear short-term losers would be the countries stuck in the middle of this that are resource rich but with little negotiating power,” she says.
Given China's significant investments in mineral extraction in Latin American countries, the US invasion raises the prospects of a face-off between the two countries in America's backyard.
China has gone from doing nearly no business in the region two decades ago to bilateral trade worth more than $500 billion in 2024. Chinese mining companies extract copper from Peru and lithium from Argentina. China’s agricultural conglomerates import lifeline commodities like soybeans from Brazil. Chinese utilities power entire cities. China controls much of the shipping infrastructure and the ports that transit goods across the Pacific. Latin America’s 670 million consumers are also buying Chinese brands. In Mexico, dealerships sell gasoline-powered Chery cars and MG sedans. In Brazil, the fast-food chain Mixue sells ice cream, the e-commerce platform Meituan delivers food and the ride-hailing service Didi ferries people around. In Peru, Xiaomi smartphones are popular...China’s pursuit of deeper ties in Latin America began two decades ago. At the time, Chinese companies were scouring the world to secure copper, oil and iron ore to power China’s breathtaking economic growth. Chinese banks extended ever-larger loans to countries across Latin America in exchange for oil and critical minerals, and along the way China began building railways and highways and selling its goods. Since then, China has economically displaced the United States in 10 of 12 countries in South America alone, according to research by Francisco Urdinez, an associate professor of political science at the Pontifical Catholic University of Chile. China now engages in more trade, investment and development financing than the United States in most of the region, including Central America. China is Latin America’s largest official source of aid and credit, offering an estimated $303 billion in financing across the region between 2000 and 2023, according to AidData, a research institute at the College of William and Mary in Williamsburg, Va. Between 2014 and 2023, for every $1 lent or given in aid by the United States in Latin America and the Caribbean, China provided $3, said Brad Parks, the executive director of AidData. These investments in many cases have left the countries saddled with debt and obligations to fulfill contracts for commodities like oil.
Venezuela itself may well become the first flash point.
China is still owed, by one estimate, about $10 billion that Venezuela is paying off through oil shipments. In 2024, more than half of its crude exports — or 768,000 barrels — went to China, according to Kpler, a global oil monitoring service.
4. Some facts about India's Electronics Manufacturing Service (EMS) providers.
Dixon, a 30-year-old company, is on track to produce around 40 million smartphones in FY26, capturing over 50% of India’s mobile outsourcing market. Yet, it spends less than 1% of its revenue on R&D, according to its annual reports. In contrast, Chinese ODM Huaqin Technology, which also started off as a contract manufacturer, spends around 5% of its revenue on R&D... India’s largest listed EMS players with foreign-partner JVs—the likes of Dixon, Syrma SGS, and Amber Enterprises—spend 0.2–0.9% of their revenue on R&D. Their patents reflect this: Dixon’s are valued at a mere Rs 2 crore, while Syrma’s intangible assets, valued at over Rs 1.5 crore in FY25, grew through acquisitions rather than internal R&D.
They have also not been able to capitalise on their JVs with foreign design companies (ODMs).
Indian EMS players have chased this be-all-end-all through joint ventures (JV) with Chinese, American, and Taiwanese original design manufacturers (ODM). They’ve brought home some of the biggest ODMs through JVs such as Dixon-Longcheer, Bhagwati-Huaqin, and Syrma SGS-Shinhyup Electronic... On the face of it, Dixon and its ilk’s JVs with foreign partners seem a win-win Indian companies learn to manufacture complex products such as smartphones and TVs, and foreign players get access to one of the largest consumer-electronics markets in the world. But there’s often an implicit power imbalance in the way they’re structured.“Such partnerships transfer process discipline, quality systems, and operational know-how, but core design authority and roadmap ownership usually stay with the foreign partner,” says Sanchit Vir Gogia, an analyst at tech-research-and-advisory firm Greyhound Research. Another executive at an EMS firm put it more directly. “Even if they tell us how a certain printed circuit board is made, it’s limited to supporting its manufacturing in our factories. We never know what future technologies foreign companies are working on back home,” he says. The result: partnerships meant to facilitate tech-transfer from one partner to another don’t actually end up doing so. The little design that is getting localised in India is that which is tweaking pre-existing products for local use cases... Foreign partners carefully control what—and how much—knowledge flows to their Indian counterparts, which creates a hierarchical power dynamic within the partnership.
On top of it all, the integration of design and manufacturing ecosystems remains broken. “India has research institutions and it has manufacturing lines. What it lacks are applied industrial labs tied directly to clusters—places where engineers solve production problems, test reliability, and feed learning back into design,” says Gogia. Without this shared infrastructure, firms face a beguiling choice: over-invest individually or under-invest collectively. Most end up choosing the latter. Most EMS firms operate on razor-thin margins. “Where capital costs are already high, long-horizon R&D stops being a strategic bet and starts looking like a threat to liquidity,” says Gogia. The only thing that makes it viable is scale.
5. In a reflection of ageing and weak infrastructure, parts of Berlin suffers a power outage that stretches from Saturday to Wednesday, in Germany's longest outage since the Second World War!
6. India's declining tax to GDP ratio
And tax buoyancy
I'll blog more on this separately. But this is intriguing.
7. On India's public e-bus systems.
Under India’s electric bus programme, cities don’t buy e-buses directly. Procurement runs through central agencies earlier under the Faster Adoption and Manufacturing of Electric Vehicles (FAME) scheme, and now under PM-ebus sewa. These agencies aggregate demand, float tenders, and sign long-term contracts with manufacturers and operators. The goal is scale and cost control. It also shifts control away from cities. Central government agencies such as CESL and NVVN act as buyers of record. They sign contracts with OEMs and hold warranties. Payments flow through them. Meanwhile, state transport undertakings (STUs) operate the buses. They schedule routes, deploy drivers, and handle breakdowns on the ground—paying a per-kilometre fee which goes to the OEMs. “This structure wasn’t accidental,” said a former NVVN official. “The electric bus push came from the Centre, and the subsidy came from the Centre. So control also stayed central. That’s very different from how states normally buy buses.”
... The model works when buses run as expected. When they do not, authority fragments. STUs can log faults and track downtime. They cannot escalate repeated failures directly to manufacturers or demand design fixes. Those decisions sit higher up the chain and move through contract clauses and payment cycles... The state transport units can track downtime and flag violations, but the actual fines are processed by the contract owner—the central aggregator agencies in this case. What follows is less a punishment than a reconciliation exercise. Numbers are logged. Penalties are calculated. And eventually, amounts are just adjusted against future payments, often weeks later... More importantly, those deductions are capped by design. Under the gross cost contracts used for electric buses, penalties apply only after fleet availability falls below a defined threshold, usually around 85–90%. Contracts also set a maximum amount that can be deducted in a day and another cap for the entire month. Once those caps are reached, deductions stop, even if the buses continue to remain idle. Effectively, a bus that breaks down briefly and one that is out of service for several days can end up facing similar financial penalties.
8. Elon Musk tweeted in response to Nvidia's launch of its own autonomous driving software.
What they will find is that it’s easy to get to 99% and then super hard to solve the long tail of the distribution.
This is the challenge for AI applications
Musk is right that it is the edge cases that have made fully autonomous driving so hard. The real world is way messier than any computer simulation. A good example occurred in San Francisco in December when a power outage knocked out scores of traffic lights, causing problems for the robotaxis operated by Waymo, owned by Alphabet. In spite of its fleet clocking up more than 100mn miles of autonomous driving, Waymo’s cars froze when the lights went dark, clogging the city’s streets. In such unexpected circumstances, remote human interventions are still needed to instruct the cars how to respond. Waymo uses an app called Honk to summon human gig workers to solve other problems too, such as shutting car doors after passengers have left them open.
9. China's EV manufacturing is increasingly dependent on exports for survival.
The China Passenger Car Association, an industry group based in Beijing, has forecast the country’s auto exports will rise by 20 per cent this year, driven by EV sales from Tesla rival BYD... Mexico, Middle East, Russia and parts of Europe are among the top export markets, according to Chinese data. Chinese carmakers are rapidly setting up factories and sales networks around the world to circumvent rising tariffs, except in the US, where they are limited by levies and security controls. Overseas sales, which include exports and cars made by Chinese companies in markets outside China, account for about 20 per cent of the Chinese industry revenue and close to half its earnings, according to UBS. Seven of China’s biggest auto groups — BYD, Great Wall Motor, Chery, SAIC, Changan, GAC and Geely — have 31 factories overseas. Shenzhen-based BYD, UBS analysts noted, was “the most aggressive” with plans to double the number of its European stores from about 1,000 to 2,000 by the end of 2026. The domestic outlook in China remains tough as Beijing scales back tax breaks and subsidies for electric cars. This will put financial pressure on a crowded EV market where more than 100 companies face wafer-thin margins and a regulatory crackdown on unsustainable discounting practices. Goldman Sachs analysts said profits this year would be further diminished with “aggressive” EV competition, with the release of 119 new models — roughly one every three days — and slowing volume growth.
As China’s economy boomed and car ownership soared, annual ICE sales rose from 3.9mn in 2005 to peak at 23.9mn in 2017, according to data from the China Association of Automobile Manufacturers, another local industry group. Now, having retreated to about 14.5mn in 2025, ICE sales in China are set to sink to below 5mn by 2030, their lowest level in about 25 years, UBS has forecast.
An alternative telling of the boom in software employment and salaries is a boom in demand for people who — while certainly mathematically skilled — are primarily distinguished by their aptitude in using these skills to work closely with others in finding creative solutions to complex and multi-faceted problems. Contra the narrow focus of policymakers on Stem subjects or coding, now more than ever our economy rewards broad skillsets: team players, problem solvers, good communicators and creative thinkers.
Even within tech and other deeply quantitative fields, roles combining strong coding skills with creativity and collaboration are the ones in which people have thrived. People in mathematical jobs with the lowest emphasis on social skills (actuaries and mathematicians among others) have fared markedly worse both in terms of employment and earnings than those for whom collaboration, creativity and interpersonal interaction play a larger role (software developers among them).
11. Finally, the job market for economists in the US is bleak.
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