Global briefing: China hits back/ Reshaped FDI flows/ Constrained Russia/ Disinflation/ PIGS are flying

Insights on five things that matter this week

In this week’s global briefing:

1. China hits back: China’s restrictions on exports of key rare earths are a response to the semiconductor restrictions imposed on it, reflecting some of the leverage that China has.  Expect more frictions to come as strategic competition continues.  

2. Reshaped FDI flows: Headline global FDI flows reduced in 2022, but this conceals an increase in greenfields FDI projects.  Geopolitics and competitive industrial policy are reshaping the FDI landscape, leading to increased real economy investment.

3. Constrained Russia: beyond the short-lived mutiny, Russia faces a series of other constraints.  The economic costs of the sanctions are increasingly evident, and it has limited diplomatic support.  I’m placing increasing weight on positive scenarios.

4. Disinflation: PPI data from Europe and beyond show the scale of the supply side shocks that are working their way through economies.  This sharp unwinding of producer prices will contribute to lower core and hea…