Economic Risks in Global Markets

Foreign Investment or Foreign Control? Know the Difference. 💸 Investment can accelerate growth. 🛑 But blind dependency? That’s a shortcut to losing control. Africa has become one of the most attractive destinations for foreign capital — infrastructure projects, tech startups, agriculture, digital platforms… you name it. And yes, investment is necessary. But we must learn to distinguish investment from quiet takeovers. Ask yourself:  ➡️ Who sets the terms of these deals? ➡️ Who owns the infrastructure five years down the line? ➡️ What happens when those investors pull out — or get politically sanctioned elsewhere? Let’s take examples: ✅ Kenya's M-PESA — backed by Vodafone, yes, but deeply localized and with considerable local control. It shows that collaboration can work when done on fair, strategic terms. ❌ Ethiopia's telecom opening — The partial privatization brought major foreign players, but critics raised concerns over how much control was being handed over in exchange for much-needed cash injections. 🛰️ Many African countries rely on foreign-owned cloud storage and undersea cables. This means your most sensitive national data might be sitting on servers governed by foreign law. Think about that in times of geopolitical tension. We can't keep trading short-term funding for long-term influence. Sovereignty today isn’t just political — it’s economic and digital. If we don’t own or co-own the systems, infrastructure, and platforms we rely on, then we’re just renting our future. It's time for: - Smarter, transparent contracts - Stronger local negotiation power - Regional investment funds and infrastructure banks - A unified vision of what we’re building, why, and who for 💡 Africa needs capital — but it also needs conviction. Let’s stop being grateful for the check and start being clear on the terms. I’m Josiane Dongmo, and I help organizations build sustainable businesses across Central and West Africa. #SmartInvestment #AfricaEconomics #OwnershipMatters #TradeNotAid #AfricanSovereignty #DigitalAfrica #LongTermThinking #BuildNotBeg

The Hidden Risk in African Land Deals What the Data Reveals? This came to my attention because we’re currently assisting a company in a land acquisition negotiation. Land deals in Africa are complex. I see businesses making the same mistakes, often without realising the long-term risks. If you're involved in land acquisition, here’s what you need to know. What the Data Says A study analysing over a decade of data (2007–2018) found a clear trend: 1️⃣ More multinational activity in land-intensive sectors (agriculture, logging, mining) ➜ Increases the risk of local disputes, by 4–34% per additional investment. 2️⃣ Land deals over 200 hectares trigger even greater tensions. ➜ The larger the deal, the higher the risk of resistance. 3️⃣ Surveys show that communities near multinational operations frequently ➜ list "land management" as a major concern. Why This Important for Businesses 🔹 Land is survival ➜ In many African regions, land is not just property, it’s a lifeline for farming, income, and food security. ➜ Large-scale acquisitions often cut off communities from their main source of livelihood. 🔹 Tensions escalate fast ➜ Poor engagement? Unclear compensation? That’s when conflicts start. ➜ Disputes often begin with legal challenges but can escalate into violent protests. 🔹 Real-World Cases 📍 Liberia – After the Ebola crisis, palm oil companies expanded land holdings. Forced land deals sparked violent pushback. How to Handle Land Acquisitions the Right Way ✅ Engage early & transparently ↳ Consult communities, not just officials. Trust is built through dialogue. ↳ Clear communication prevents future legal and operational risks. ✅ Make land deals clear & fair ↳ No shortcuts. No quiet backroom agreements. ↳ Public documentation reduces future disputes. ✅ Create shared benefits ↳ Fair compensation, local jobs, and infrastructure investment make operations smoother. ↳ When communities benefit, projects face less resistance and last longer. 📌 The Key Takeaway Land acquisitions in Africa aren’t just about contracts, they’re about people. Handle them right and your project thrives. Handle them poorly, and you risk long-term instability. At the end of the day, businesses have two choices: 1️⃣ Build trust, engage communities, and succeed. 2️⃣ Ignore land concerns, face resistance, and struggle. 📌 Ever struggled with land deals in Africa? ♻️ Share this many overlook land risks.

📉 IMF warns: banks now hold over $4.5 trillion in exposure to hedge funds, private credit and other “non-bank” lenders. 🔗 https://on.ft.com/3KTzPLs On the same day, major investment banks caution that equity markets are drifting into bubble territory. 🔗 https://on.ft.com/47oCfdO These look like separate headlines. They’re not. When leverage builds in the shadows and risk assets detach from fundamentals, stress doesn’t stay in the speculative corner — it travels back through bank credit lines, derivatives and liquidity promises into the core financial system that households and businesses rely on. After 2008, we raised capital buffers and imposed strict liquidity rules on banks — necessary reforms. But the reality is Banks are now safer on paper, but still exposed in practice — via prime brokerage, credit lines and liquidity guarantees to non-bank lenders, private credit funds and emerging stablecoin ecosystems. It’s not the large tech firms themselves that create systemic risk — many of them are cash-rich and unleveraged. The fragility sits with the leveraged holders: margin trades, swap exposures, private credit structures and synthetic ETF positions built around those equities. When prices fall, it’s the forced unwind of those structures — not corporate insolvency — that drives stress back through bank funding lines and into the real economy. Which is why calls to “deregulate to boost growth” need to be treated with care: • Deregulation assumes risk can be contained. • But today, banks and shadow finance are tightly coupled. • When the next correction comes, nonbanks won’t absorb the shock — they’ll transmit it straight back into the system. If regulation is seen only as a brake, the debate is always about how much to ease off. But if we treat it as market infrastructure — data rails, resolution mechanisms, transparent liquidity pipes — then it becomes an enabler of innovation and resilience, not a drag on growth. Crises never repeat exactly — but the architecture can rhyme. And right now, the parallels seem hard to ignore. Very open to perspectives — especially from those building in private credit, tokenised finance and financial market infrastructure. #Finance #Regulation #ShadowBanking #PrivateCredit #Stablecoins #MarketRisk #FinancialStability #PolicyDesign #ProductiveCapital

China is an International Market Failure Market Failure is a pivotal concept in public policy. The basic intuition here is that governments should consider intervening only when the market fails. This established framework is the bread and butter of domestic public policy analysis, but is seldom used in the international realm, and for good reasons. Countries have vastly different regulatory frameworks, labour standards, environmental rules, and levels of government involvement in the economy. Every sovereign nation-state is within its rights to decide its trade-offs and come up with its own policy mix. Thus, what we would otherwise call market failures are inherent to such a structure. For example, a country can choose to excel in a highly polluting industry. Even though such an act would produce negative externalities to the region, it is not framed as such because sovereignty is considered the higher value. This is a good principle to follow; we wouldn’t want other countries lecturing India on the developmental choices it makes. Hence, it’s a good idea not to see these issues through the lens of market failures, except if there’s a situation in which some actor’s domestic actions produce market failures with impunity at a scale that severely impacts several countries simultaneously. China is one such exception. I find it amusing that China claims actions against it are anti-market, while it’s the one upholding the principles of free trade. In reality, China's use of subsidies, currency manipulation, unfair trade practices, and many other policy instruments creates a lopsided relationship with the world that qualifies as a market failure. Here’s how. China's playbook is textbook market manipulation: Phase 1: Flood the market Heavy subsidies + currency manipulation → artificially cheap goods → global competitors exit → market concentration in China Phase 2: Exploit dominance Use market power for geopolitical leverage → export restrictions → artificial scarcity → strategic dependency The rare earths case study is telling: China first flooded global markets with subsidised rare earths, driving out efficient producers worldwide. With market dominance secured, it's using export restrictions as geopolitical leverage. This creates cascading market failures: - Information asymmetry: Distorted prices hide real production costs - Negative externalities: Strategic dependencies, job losses, reduced innovation - Market concentration: Production concentrated not due to efficiency, but subsidies The pattern repeats across industries—solar panels, pharmaceutical APIs, you name it. While individual countries respond with tariffs and export bans, these fragmented approaches miss the bigger picture. We need a coordinated response that recognises this for what it is: systematic exploitation of global trade rules. #china #geopolitics #overcapacity

Is Africa too dependent on foreign infrastructure partners? Wrong question. The real one: who sets the terms? → China built a big share. → Gulf money is surging (ports, power, SEZs). → Europe is back with “Global Gateway”. → India, Turkey, Brazil, the US, also in the mix. More capital. More choice. More leverage, if we use it. The risks are real: → Debt traps and opaque side‑letters. → Vendor lock‑in on O&M and spares. → Data and energy sovereignty handed away. → FX and offtake risk pushed to governments. So, we must change the playbook: → Competitive tenders, not single‑source MoUs. → Local content floors (people, parts, IP). → Open standards + data residency by design. → Blended finance with hard‑currency hedges. → Lifecycle deals (build‑own‑operate‑transfer, with KPIs). → Regional projects that anchor power + fibre + IXPs together. Bottom line: Africa mustn’t be built. It must be in the driving seat. Africa isn’t short of partners. It’s short of discipline at the negotiating table. What’s one clause should we insist on in every infra deal? ** *** *** ✍️ I work at the intersection of digital infrastructure, energy, logistics and strategy across African markets. Let’s build things that stay on.

The mainstream belief is that deregulated markets lead to economic prosperity. This is wrong. The 2007 housing crisis is a glaring example. Unregulated mortgage lending led to excessive debt, causing a financial meltdown. Instead, we need to regulate mortgage lending to prevent such excesses. When banks lend irresponsibly, they inflate housing bubbles. These bubbles burst, leaving ordinary people in financial ruin. Regulation can curb this destructive cycle. Another common belief is that private debt doesn't matter. This is also wrong. High private debt levels stifle economic growth. When households are drowning in debt, they can't spend on goods and services. This reduces demand, leading to slower economic growth. Policies to reduce private debt levels are crucial. Debt jubilees or targeted debt relief can free up household income for spending, boosting the economy. Mainstream economists often focus on asset price inflation as a sign of economic health. This is misguided. Rising stock and housing prices don't reflect real economic growth. They create wealth for a few while leaving the majority behind. We need to shift our focus to real economic growth. Investing in infrastructure, education, and technology can create jobs and improve living standards. This is the path to sustainable prosperity. Ignoring these steps risks repeating past mistakes. We've seen the consequences of unregulated lending and high private debt. We can't afford another financial crisis. It's time to learn from history and implement policies that promote real economic growth. The stakes are too high to ignore.

Insightful Article from Foreign Affairs on "China’s Real Economic Crisis": China's economic challenges stem from its long-standing industrial policy: it emphasizes production over consumption. This approach has led to significant overcapacity in sectors such as steel, electric vehicles, and solar panels, resulting in falling prices, increasing debt, and factory closures. While this model has historically driven rapid growth, it now poses serious risks to both China’s domestic economy and global markets by depressing prices and escalating trade tensions. Beijing’s reluctance to move away from this production-centric strategy is closely tied to maintaining political control. By ensuring industries remain dependent on state-backed financing, the government secures loyalty from business elites. However, this approach is becoming increasingly unsustainable, deepening economic inefficiencies and straining international trade relations. The West's response of imposing trade barriers may not address the underlying issues and could even push China to reinforce its industrial policies. Read: https://lnkd.in/eJ3kCjCM

🇨🇳 China produces one-third of everything manufactured on Earth. That concentration creates a problem the world has never seen before. Beijing channels 7-8% of GDP into industrial policy each year. That is $1.4T flowing into sectors like electric vehicles, batteries, solar panels, and semiconductors. The OECD economies spend a fraction of this amount. The results appear impressive. BYD holds 30% of China's EV market. Chinese manufacturers produce 80% of global solar panels, 60% of wind turbines, and over 50% of all electric vehicles sold worldwide. The country dominates rare earth processing and builds half the world's shipping tonnage annually. But look closer and the picture changes. 🔍 When China launched its EV strategy 15 years ago, roughly 500 companies entered the sector. Today, 150-200 remain, and most lose money. BYD and 9 other firms control 65% of the market whilst the rest fight over scraps. Even Xi Jinping has urged firms to stop what Beijing calls "involution competition"—their term for destructive price wars and overcapacity. This pattern repeats across sectors. Real estate, building materials, metals processing, semiconductors, pharmaceuticals. The state directs massive resources into industries, sets growth targets too high to meet through organic demand, and creates incentives for conformity rather than competition. Companies produce more than markets can absorb because the system rewards output over profitability. The costs show up everywhere. Productivity growth has stalled. Deflation pressures mount. Waste and corruption spread. Loss-making firms survive because of political connections rather than commercial viability. Now the world faces the consequences. 🌍 China's trade surplus runs at 5% of GDP, with manufacturing surplus double that. Exports surge whilst imports stagnate. Countries across the Global South have started imposing trade defences. Mexico, Turkey, Brazil, India, South Africa, Vietnam, Thailand—all major Chinese trading partners—worry about premature deindustrialisation as cheap Chinese goods threaten local industries. george magnus draws a parallel to Japan in the 1980s and 1990s. Japan had world-class firms and technological prowess. It also had systemic imbalances, bubbles, and overcapacity that no amount of industrial excellence could overcome. Great companies do not protect an economy from poor macroeconomic governance. China's 15th Five-Year Plan arrives in the coming weeks. Industrial policy will remain central to Beijing's strategy. This approach will worsen domestic problems and intensify global pushback against Chinese exports. The inevitable backlash against China exporting its overcapacity represents a threat potentially bigger to the world than Trump's tariffs. When an economy controlling one-third of global manufacturing floods markets with subsidised goods, no tariff policy can match that disruption. -- Follow my newsletter Drift Signal for more.

#SustainableFinance: EU watchdogs warn that weakening rules risks another financial crash. Financial supervisors issue unusual warning as EU prepares to simplify regulation 🤔 Simplification, maybe. Deregulation, no. ====== "Europe’s drive to simplify and streamline financial regulation is making top supervisors nervous about the risk of key safeguards being watered down. Two of the EU’s most senior financial supervisors told the Financial Times they were determined to avoid crisis prevention measures being swept away in the push to revive the region’s sluggish economic growth. “If it is about deregulating and lowering the bar on financial protections, we will not be ready to tackle volatility.’’ said Dominique Laboureix, head of the Single Resolution Board — which handles failing Eurozone banks. ‘‘That means crises, which means less growth.” The pointed intervention, which is uncommon for the watchdogs, comes after the European Commission recently announced plans to drastically cut the scope of business #sustainability disclosure rules it introduced two years ago. It is also reviewing capital rules for banks and insurers as part of plans to boost financial market activity and growth. Some officials want Brussels to go further. The heads of the German, French, Spanish and Italian central banks wrote to the commission recently calling on it to remove “unduly complex” areas of financial rules that distort international competition without improving financial stability. Laboureix said he was “absolutely ready” to engage with calls for the burden of regulation to be eased. But he warned policymakers not to forget the lessons of the last big banking sector meltdown. “Don’t forget the 2008 crisis. What did that mean? Bailouts everywhere.” “I am ready to discuss simplification, but I am not ready to lower the bar in terms of protecting financial stability,” Laboureix said in an interview. Frank Elderson, vice-chair of the ECB supervisory board, pointed out that after the 2008 financial crisis Eurozone governments spent €1.5tn in capital support and €3.7tn in liquidity support for the financial system. Europe’s economy shrank 4.3 per cent in 2009 as the crisis took its toll. “It’s good to remember why we did that in the first place,” Elderson said in an interview, adding: “We need not be complacent and say the next decade will be rosy — so we have to be wary about doing away with supervisory functions that could lead to this situation repeating itself.” Elderson told a banking conference in London last week: “The debate on competitiveness should not be used as a pretext for watering down regulation.” Instead of lowering regulatory requirements he said the EU should focus on harmonising them across its 27 members. “Don’t cut rules, harmonise them,” he said. (...)" Financial Times #Transparency #OmnibusEU #ESG #EUOmnibus #ClimateFinance #ClimateAction https://lnkd.in/dXC3j6qH

Launched this study exactly eight years ago. Still a good read and a stern warning. The press release stated: While CM2025’s focus on upgrading China’s industrial base is a necessary undertaking—both for the sake of China’s environment and the long-term sustainability of its economy—the report cautions against stoking tensions with international trade partners through the implementation of a carefully orchestrated industrial strategy. This includes through policy tools such as subsidies, continued support for inefficient SOEs, limiting market access for foreign business, and state-backed acquisitions of companies from the EU and elsewhere. “Instead of moving ahead with the progressive market-based reforms announced at the Third Plenum in 2013, state planners are unfortunately falling back on the old approach of top-down decision making,” said European Chamber President Jörg Wuttke. “This poses serious problems, not only for European business but also for much of China’s private sector and the wider economy.” The report seeks equal treatment for foreign companies under CM2025, with President Xi Jinping’s Davos speech and the State Council’s No.5 Notice from January 2017 identified as potentially providing the necessary impetus for realising this. It also provides recommendations on how the Chinese authorities can better drive innovation by establishing the market as the decisive force in China’s economy. Additional suggestions are made to European Union authorities and Member State governments on how to respond to the risk of increased state-intervention that will disrupt the market order of their domestic economies, including through a structured process that carefully screens investments that appear to be state-backed. https://lnkd.in/e_xwKukA