TheChek News Flow

Luxury developments such as One Central Park fetch high prices from rich buyers who are undeterred by economic uncertainty

Shanghai’s high-end property market continues to buck the national downturn, with deep-pocketed buyers pouring capital into top-tier homes that are seen as value-preserving assets despite economic uncertainty, analysts said.

Buyers snapped up all 64 units offered at One Central Park, a luxury development in the city’s core Huangpu district, on Wednesday, spending 4 billion yuan (US$556 million).

Developed by Sunac China Holdings, Citic Group and Xinhu Group, the project is located in the city’s Xintiandi shopping and entertainment area. The flats in the sale were priced at an average of 185,000 yuan per square metre (10.8 sq ft). The largest duplex sold for more than 246,000 yuan per square metre, making it one of the most expensive residences sold in the city this year in per-metre terms.

The two earlier rounds at One Central Park also sold out within hours, and the project’s year-to-date sales have exceeded 10.8 billion yuan, making it the first residential project in China to surpass 10 billion yuan in 2025.

The sale on Wednesday, which included flats between 300 and 1,000 square metres, was nearly triple-subscribed during the registration period, triggering a points-based allocation system designed to curb speculative buying – the first such case in central Shanghai this year. The developer said it planned to launch the fourth phase of the project, focused on high-floor units, in June at the earliest.

Luxury home sales have shown sustained strength across the city. New home prices in Shanghai rose in April and May, outpacing national averages, according to Centaline Property.

Last week, new-home sales in Shanghai rose 72 per cent from the previous week, while average prices surged 49 per cent to a record 107,746 yuan per square metre, Centaline data showed. Buoying the figures, premium projects including Swire Properties’ Lujiazui Taikoo Yuan Residences and Greentown China’s Symphony Shanghai all sold out quickly on their launch days, Centaline said.

Units at Poly Real Estate’s Bund 98 and ITG Holding’s Origin Pile, in the suburbs, saw overwhelming demand this month as well, also triggering points-based sales restrictions.

“Inventory in central locations remains scarce, while demand from high-net-worth buyers, especially younger professionals and returnees [from overseas], is proving to be resilient,” said Zhang Yu, a research director at Centaline’s Shanghai bureau. “Luxury homes are increasingly seen as value-preserving assets amid economic uncertainty.”

Renewed economic confidence, improved liquidity and better-than-expected supply of premium projects in key cities were helping to lift sentiment in the upper end of the market nationwide, analysts said.

Overall, Shanghai’s home prices rose 0.5 per cent month on month in April, outperforming other tier-one cities, according to property information platform 58Anjuke.

“The data doesn’t point to a broad-based price increase, but rather reflects the weight of luxury supply pushing the average up,” said Zhang Bo, an analyst with 58Anjuke. “In essence, price trends in Shanghai today are entirely supply-driven. Premium locations and products perform strongly, while less desirable regions remain stagnant.”

The luxury segment was leading the current recovery cycle, said Yan Yuejin, vice-president of E-House China Real Estate Research Institute in Shanghai.

“It shows how deep-pocketed buyers are still willing to deploy capital into prime assets, even as the mass market remains subdued,” Yan said.

In Shanghai, sales of new homes priced at 30 million yuan or more hit 809 units as of May 19, on track to surpass 2,000 for the second straight year and to match or exceed the full-year tallies between 2021 and 2023, according to E-house.

“Capital is flowing into high-end assets seen as stable and resilient, especially as savings yields drop and broader investments remain volatile,” E-house’s Yan said. “Favourable homebuying policies have also helped maintain momentum beyond just one-off spikes.”

He added that strong demand for upgrades, especially in prime locations, along with recovering sentiment and a lack of resale listings, was giving the market further support.

As Chinese businesses have just started to tap global markets, it leaves them with enough room for future expansion, HSBC says

For eSignGlobal, a digital signature services provider from Hangzhou, the US-China trade tensions present an opportunity to expand globally, as it uses the conflict to its advantage.

“Chinese state-owned enterprises and private enterprises are growing cautious about using US services, opening up opportunities for our company,” said Eric Jin, founder and CEO.

He said the company’s growth would be fuelled by two main factors. First, rising data security concerns amid geopolitical tensions had forced Chinese firms to stop relying on US e-signature solutions and turn to domestic alternatives. Second, a growing number of Chinese firms expanding overseas had widened eSignGlobal’s client base.

Chinese companies were in the early stages of their global expansion journey, with considerable growth potential ahead, according to an HSBC report published on May 19.

Revenue at ESignGlobal, which has more than 3,000 partners including Alibaba Cloud and serves 6.1 million businesses and 120 million individual users, had more than tripled year to date from a year earlier, according to Jin. Alibaba Cloud is the cloud computing arm of Alibaba Group Holding, which also owns the Post.

After setting up offices in Hong Kong in 2023 and Singapore in 2024 to serve markets in Southeast Asia, the company planned to form a sales team in Japan by the end of this year, Jin said. “We are also considering expanding to South America, Europe and the Middle East,” he added.

Going global pays off, according to the report. Mainland-listed companies in HSBC’s proprietary going global index, such as carmaker Great Wall Motor and textile firm Huali Group, delivered stronger earnings growth than major Chinese benchmarks such as the CSI 300 and CSI 500 indexes, both in the first quarter of 2025 and in 2024, the report said.

Last year, overseas revenue accounted for 11.7 per cent of total sales for companies in the CSI 300 Index, up 1.4 percentage points from a year earlier, according to the report.

The information technology sector had the highest proportion of international revenue at 31.4 per cent last year, while the overseas revenue contribution of consumer discretionary firms showed the most significant improvement among all sectors, rising 2.2 percentage points to 27.1 per cent.

Hangzhou-based electric-vehicle maker Leapmotor exemplifies the go-global trend.

Michael Wu, co-president of Leapmotor, expects at least 10 per cent of its EV deliveries to come from outside China in 2025, up from 4 per cent last year.

Leapmotor, which has tied up with Dutch car giant Stellantis for its overseas sales and production, expects global sales to reach between 500,000 and 600,000 units this year, up from 293,724 in 2024. The Hong Kong-listed company reported revenue of 32.16 billion yuan (US$4.5 billion) last year, with overseas revenue contributing 3 per cent.

While the US and China earlier this month reached a 90-day temporary truce in the tariff war, the punitive measures did some damage to Chinese exports. According to official data, exports to the US plunged more than 21 per cent last month from a year earlier.

In April, the higher US tariffs on US$18 billion of Chinese imports, including EVs, batteries, and semiconductors, triggered a decline in the market shares of Chinese export-reliant firms.

The negotiations resulted in Washington lowering duties on Chinese imports to 30 per cent from 145 per cent, and Beijing cutting tariffs on US goods to 10 per cent from 125 per cent.

“We would need a more permanent resolution to conclusively say that US-China trade issues are behind us,” said Kelvin Leung, Greater China divisional deputy president of CPA Australia.

Firms in the early stages of global expansion “may lack the scale and resources of larger multinationals but tend to be more agile, allowing them to react faster to policy shifts and market changes”, he added.

Champions League shake-up pays off as battle for viewers intensifies

Uefa’s rejig of its flagship tournament has boosted fan engagement and revenues ahead of competition from Fifa’s expanded Club World Cup

Uefa is under pressure. As football’s governing bodies jostle for global dominance, Europe’s premier club competition — the Champions League — faces a growing threat to its pre-eminence from Fifa’s ambitious new Club World Cup. 

With 75 years of history since it was formed as the European Cup, the Champions League remains football’s most lucrative and prestigious club tournament, set to generate the lion’s share of the €4.4bn in revenue forecast by Uefa across their three club competitions this season. But Fifa is encroaching, launching an expanded 32-team Club World Cup, with a $1bn prize pot, to be held in the US this summer. The move underscores a broader power struggle that could reshape the club football calendar. 

Yet despite the external pressure — and the internal gamble of a major format overhaul — there is a strong feeling in Uefa’s headquarters in the picturesque town of Nyon on the banks of Lake Geneva that the 2024/25 competition has delivered. At the end of the first season of a new format, which involved some teams playing an additional four matches, Uefa officials are hoping for a dream final in both a footballing and financial sense with Paris Saint-Germain meeting Inter Milan at Bayern Munich’s Allianz Arena, on May 31. 

PSG are seeking to win the competition for the first time after spending more than €2bn on new players in the 14 years of ownership by Qatar Sports Investment. They are up against three-times winners Inter, whose extraordinary 7-6 aggregate semi-final win over Barcelona will be remembered as one of the greatest ties in the history of European football. 

Earlier rounds of this year’s tournament provided ample drama of their own. Real Madrid, the holders, suffered a 5-1 quarter-final aggregate defeat to Arsenal, while earlier in the new group table phase, Manchester City and PSG were both forced into the knockout play-offs after failing to finish in the top eight.  

Uefa had taken a significant gamble, introducing the most radical changes to the competition since the European Cup became the Champions League in 1992. Four teams were added this season and the traditional group stage was scrapped in favour of the so-called Swiss model — a format first used at a chess tournament in Zurich in 1895. All 36 clubs were placed in a single league, each playing eight matches against different opponents. The top eight progressed directly to the round of 16; teams finishing ninth to 24th entered play-offs; and the bottom eight were eliminated.

As well as more matches to drive revenue growth, the overriding reason for the new format was an attempt to introduce greater jeopardy to the group phase. Analysis conducted by the European Clubs Association (ECA), which represents 700 clubs and is responsible for selling the Champions League’s commercial rights in a joint venture with Uefa, after this season’s league phase indicates that this primary aim was achieved.

Whereas 13 of the last 16 qualifiers had been decided ahead of the final round of group matches last season, only two teams had definitely qualified before the final round this season. In addition, the number of teams progressing to the knockout rounds from outside Europe’s top five leagues increased from three to six this season, suggesting greater competitive balance. In a less democratic development, the tournament’s final 24 did not contain any teams from east of Munich.  

Before Match day 8 — the final round of league games in January — just three points separated third-placed Arsenal from Brest in 13th: the 14 qualification places up for grabs led to a TV bonanza with the UK rights holder TNT Sports claiming it had attracted the best viewing figures of the 2024/2025 season so far.  

“We had high hopes, and the new format has definitely delivered,” says Charlie Marshall, chief executive of the ECA. “Match day 8 in particular was a real success — the competition caught fire.”

He adds: “Unlike under the old format, every game and goal counted . . . From a financial perspective, the market has over-delivered . . . The potential for future growth is huge.”

Uefa has not yet completed its full financial review, but early indicators are strong. A senior official at the organisation, speaking anonymously, says viewing figures have grown by double digits across all major markets. Television rights values had already increased ahead of this season, the source says. The global value of Champions League broadcast rights rose 20 per cent across the 2024-2027 cycle, compared to the previous three years, while commercial rights jumped by 25 per cent.

TNT Sports (formerly BT Sports), which has held rights for a decade, says its audience reach rose by 28 per cent this season, compared to the previous season, with minutes watched up 7 per cent. Amazon Prime, the other UK rights holder, is in the first year of a four-year deal.

“We were initially concerned that the league phase may not be understood, but it’s been a big success,” says Andrew Georgiou, president of Warner Bros Discovery Sports Europe, the company which operates TNT Sports. “There’s been more jeopardy, and more matches between the biggest clubs. 

He expects a further boost next year after two English clubs made it to the final of Uefa’s second tier competition with the winners qualifying for next season’s Champions League. “The Premier League is now guaranteed six teams in the Champions League next season after Manchester United and Tottenham reached the Europa League final, so audiences in the UK are likely to increase further.”

Still, the physical toll of the longer format has sparked concerns. Fifpro, the international players’ union, says the extended competition has contributed to a noticeable rise in injuries at elite clubs. The union would strongly oppose any further expansion — something the current format could theoretically accommodate.

Marshall insists there are no plans to do so as “we need to be relentlessly focused on delivering a premium, quality product”.  

Despite such worries about future plans and despite the potential threat posed by Fifa’s new competition, Uefa’s bet on a complex new format, for this season at least, appears to be paying off.

Spat stems from retracted study on grading of insurers’ portfolio holdings

Two US credit rating agencies have become embroiled in a rare public dispute over the reliability of scores for insurance companies’ growing stash of private credit investments.

The dispute involves a study, since withdrawn by its publisher, purporting to find that small credit rating agencies assign more generous scores to private credit investments than the larger and more established ones. Kroll Bond Rating Agency has accused Fitch Ratings of misleading market participants by relying on the study to raise doubts about the quality of its ratings.

Fitch on Monday published a report critical of Kroll and other groups, based on the 2024 study, issued by the National Association of Insurance Commissioners.

A Fitch spokesperson stood by its report, arguing the insurance commissioner’s group reached similar conclusions in prior studies. “If the (association) provides new information, we will update our analysis.”

The unusually overt quarrel highlights the intense competition in the fast-growing and lucrative $1.6tn private credit industry to carve out turf — not just among lenders, but among the groups paid to referee creditworthiness of the market’s opaque investment offerings.

“There’s a build-up of risk in the insurance industry and also potentially in the collateralised loan sector that is not being properly monitored,” said Ann Rutledge, a former senior Moody’s analyst and now chief executive of rating agency CreditSpectrum. “The opacity and the risk are both attributable to the fact that there are cracks in the foundation of the current SEC-regulated credit rating industry.”

Insurers and other investors use the types of ratings in question, known as private letter ratings, when no public ratings are available. Larger ratings firms historically have eschewed issuing these types of scores for private credit products, leaving the market dominated by smaller agencies.

Private letter investments were “inherently more risky given the lack of transparency and potential ratings inflation”, analysts at JPMorgan said in a recent note, adding “there is an inherent challenge in assessing credit quality from the outside as no part of the process, analysis, or information is transparent from the outside”.

Kroll, which was among the first to challenge the establishment credit agencies with its launch after the global financial crisis, said it was troubled by its larger rival’s boosting of “statistically unsound” research. It said Fitch’s criticism appeared geared towards supporting its own grab for dominance.

“In seeking relevance to increase its market share in private credit, Fitch appears to have undercut two foundational principles for any rating agency — integrity and analytical rigour,” Kroll said in a statement.

The study by the NAIC focused on the rise of private letter ratings for insurers’ private credit investments, which totalled about $350bn at the end of 2023.

It found confidentially-issued grades from smaller rating shops were more likely to deviate from scores by the association’s own securities valuation office and were notably higher on average. According to the original report, smaller groups such as Kroll tended to offer ratings three notches higher than the association’s internal score, while larger agencies such as Fitch offered ratings about two notches higher.

The study also showed that the number of privately rated securities held by US insurers grew from 2,850 in 2019 to 8,152 in 2023, and that the share of securities rated by small credit rating providers such as Egan-Jones, Kroll and Morningstar had grown to 86 per cent in 2023.

The report also noted that Fitch is the leading provider of private letter ratings among the big three US rating agencies, ahead of S&P Global Ratings and Moody’s Ratings.

But earlier this month, the insurance association announced it was removing the report from its website “to undergo further editorial work to clarify the analysis presented”.

Without naming names, the insurance association said it would “evaluate how the information we provide to the public could be misconstrued or otherwise utilised in inappropriate ways”.

The NAIC declined a request for comment.

Donald Trump makes risky bet by rekindling his trade war with the EU

US president has shifted the focus of his offensive from Beijing to Brussels

Donald Trump loves to make deals. And he may be calculating that his sudden escalation of tariffs on the EU will squeeze Brussels into making big concessions as he opens a new front in his global trade war.

But it is a risky bet. Although trade talks between the US and the EU had been moving slowly, Trump’s threat to put 50 per cent tariffs on all imports from the bloc from June 1 has raised the economic and diplomatic stakes dramatically.

The move threatens to jeopardise a recent recovery in global equity prices triggered by Trump’s tilt towards dealmaking and de-escalation with other trading partners, including the UK and China. It could also further damage strained transatlantic relations.

The gamble reflects the frustration of the president and his top officials with what they view as the EU’s obstruction in the negotiations — and a belief that Brussels will concede first or suffer more than the US if there is no deal.

“It’s a classic Trump bullying tactic, it’s what he does. If he doesn’t get what he wants, he pushes back and makes more threats, and then he waits to see what happens,” said Bill Reinsch, a trade policy expert at the Center for Strategic and International Studies in Washington.

“It’s intended to get the Europeans to back down — my reading of them is that they won’t,” he added.

In the Oval Office on Friday afternoon, Trump insisted he wasn’t looking for a quick agreement with Brussels, and vowed that the 50 per cent tariffs would take effect on June 1 as planned. “That’s the way it is,” he said.

US Treasury secretary Scott Bessent told Fox News that the purpose of the planned tariffs was to “light a fire under the EU” — suggesting that there was some leeway for negotiations before or after the June 1 deadline.

But the brinkmanship creates uncertainty, warn economists. “The proposed tariffs on the EU highlight a key forecast risk, whereby tariffs remain an ongoing tool to be wielded by the Trump administration whenever negotiations hit a snag. Repeated tariff threats and rollbacks will keep policy uncertainty elevated,” consultancy Oxford Economics wrote in a note on Friday.

Washington’s precise demands on Brussels are unclear. In his social media post on Friday, Trump rattled off his dissatisfaction with many aspects of EU tax, regulatory and trade policy that would be hard to address quickly.

Trade experts in Washington say the administration is frustrated that the EU’s offers are no different from those it has made to the US in the past.

“Normal methods of diplomacy and traditional approaches to trade negotiations have not resulted in a US-EU trade agreement by any administration. So I’m not surprised to see the president take a very different tack with the EU,” said Kelly Ann Shaw, a former White House official during Trump’s first term, and a partner in international trade policy at law firm Akin Gump.

“These threats of much higher tariffs do create an action forcing event, where the two sides are either going to come to an agreement or they aren’t,” she added.

“The American point of view is that the Europeans don’t understand that this time is different, and it’s not a conventional negotiation,” said Reinsch at CSIS.

On Friday, EU trade commissioner Maroš Šefčovič spoke with US commerce secretary Howard Lutnick and trade representative Jamieson Greer, but there did not appear to be a breakthrough.

“EU-US trade is unmatched & must be guided by mutual respect, not threats. We stand ready to defend our interests,” Šefčovič wrote on X after the discussions.

EU officials chafe at Trump’s demands, questioning why the world’s biggest trading bloc should offer unilateral concessions.

They argue that there is only about a 1 percentage point difference between EU and US tariffs and say that value added tax is roughly equivalent to US sales tax.

Brussels is also reluctant to give the US market access denied to other countries, which would breach World Trade Organization rules.

Officials also point out that while trade policy is handled by the European Commission, many of the barriers the US has issues with are national. 

“EU negotiators should hold their nerve. It certainly signals Washington’s edginess and impatience to get a deal,” said Georg Riekeles, associate director at the European Policy Centre in Brussels.

Riekeles urged the EU to copy Canada and China by retaliating strongly. “If the EU is ready to fight back, US bullying and escalation is ultimately so self-harming that you can enter deal territory.”

However, countries such as Ireland and Italy, which rely on US exports, have lobbied hard against strong countermeasures — and Trump will be counting on schisms within the bloc to force the EU’s hands.

But Michael Smart, a former Democratic congressional trade counsel now at Rock Creek Global Advisors, a consulting group in Washington, warned that “if Trump’s plan is to divide the bloc, it likely will have the opposite effect”.

Most member states have so far backed the commission’s approach of engaging but eating up time, believing that eventually Trump will back down because of the damage his tariffs will inflict on the US economy. They have indicated that Brussels is minded to stand firm.

“One of the reasons markets have calmed down is that they have already factored in more concessions from Trump,” said one EU diplomat.

“We don’t make policy decisions on the basis of tweets, at least not on this side of the Atlantic,” said another.

First Group dispute threatens to overshadow Labour’s rail nationalisation plans

Nationalisation of South Western Railway, one of UK’s busiest train operators, is first by the current government

A row over a £1bn train fleet has broken out between the government and private transport operator First Group, threatening to overshadow the first nationalisation of a train operator under the Labour government.

South Western Railway, one of the UK’s busiest rail operators, was taken into state control on Sunday. But only around five of its flagship new trains will be available to run, following years of delay in their rollout.

First Group held the contract to operate the SWR franchise from 2017 until this weekend alongside Hong Kong’s MTR Group, which had a minority stake. SWR carries more than 150mn passengers a year.

Transport secretary Heidi Alexander said this week that Labour’s plan to nationalise all train operators by the end of this parliament will “wave goodbye to 30 years of inefficiency, waste and passenger frustration” following the industry’s privatisation in the 1990s.

In a sign of the tensions between the government and some owning groups, Alexander said she had inherited “an abject mess from the private operator”, speaking at a depot in Bournemouth.

Only five of a fleet of 90 new “Arterio” trains are available, following delays in building the trains and a row with unions over their safe introduction, including whether drivers or guards should operate the doors.

The trains, built by Alstom in Derby, were meant to enter service by 2019. Department for Transport officials have written to First Group to accuse it of not informing them about January negotiations with unions regarding the trains.

The operator subsequently agreed a compromise deal with unions which will see the drivers open the doors, and guards close them.

First Group executives believe this will allow the trains to enter service more quickly, but there are frustrations within government over how the company has struggled with its industrial relations.

The executives maintain the DfT was kept informed throughout, including signing off on all its major decisions. They do not believe there have been any contractual breaches. First Group declined to comment.

One rail boss said the continued delays over the introduction of the fleet meant SWR faced a “potentially messy” first year, and there are concerns this could undermine the start of the wider nationalisation project, which is popular with the public.

Four train operators were nationalised by the previous government because of performance or financial problems, and London commuter lines C2C and Greater Anglia will follow later this year.

Staff, rolling stock leases and other assets must be transferred overnight, while the railway continues running.

The train companies will be combined with the operations of Network Rail, the state-owned operator of the UK’s railway infrastructure, on a regional basis to create “alliances”.

These will be overseen by a new public body, Great British Railways, which will unite track and train for the first time since British Rail disappeared, but not launch until 2027.

Standing by a train branded with the new GBR logo, Alexander said nationalisation is not a silver bullet given the problems facing the industry.

Passenger numbers collapsed to as low as 5 per cent of normal levels in 2020 when Covid struck, but recovered to exceed pre-pandemic levels for the first time at the end of last year, according to Financial Times analysis of industry data.

But revenue is still around 20 per cent below pre-pandemic levels, as a result of fewer commuters.

Train cancellations have meanwhile ballooned to their highest level on record, in large part because of driver shortages.

Alexander said the new structure would improve performance, and that the state-owned railway would prioritise recruiting more drivers and reduce the reliance on voluntary overtime.

Government officials also believe that nationalisation can significantly cut costs, including the £150mn a year paid to private companies to run trains.

Further savings can be made by reducing duplication in an industry which has fragmented since privatisation, such as combining back-office functions of the various train companies as they come into public ownership.

But there is concern within the industry that the government will not give GBR autonomy to run the railway without political interference.

“There needs to be less micromanagement from within the DFT, but it's not clear they are willing to let go,” one person said.

Richard Bowker, former head of the Strategic Rail Authority who presents the Green Signals podcast, said bringing together track and train is a “pragmatic and sensible thing to do”.

“But the key is not who owns it,” he said. “It is: are the people who are running it day to day going to be genuinely empowered to make the right decisions to run the railway?”

Asked whether she would commit to not interfering in the running of GBR, Alexander said: “I do not want to be the Fat Controller,” a reference to the fictional character in the Thomas & Friends television series. “I want experts to be running the railway.”

SoftBank’s Masayoshi Son floats idea of US-Japan sovereign wealth fund

Washington and Tokyo discuss possibility of fund that would make large-scale US tech and infrastructure investments

SoftBank founder Masayoshi Son has floated the idea of creating a joint US-Japan sovereign wealth fund to make large-scale investments in tech and infrastructure across the US.

The idea has been raised at the highest political levels in Washington and Tokyo, according to three people close to the situation, and could become a template for other governments to forge closer investment ties with the US.

The plan, which has been discussed directly between Son and US Treasury Secretary Scott Bessent and outlined to other top government figures in both countries, has not yet crystallised into a formal proposal, according to three people close to the situation. 

The joint fund idea has been raised several times in recent weeks, however, as Japanese negotiators and the Trump administration edge towards a trade deal. Japan has dug into a position where it will push for zero tariffs, while the US side has made it clear that it will go no lower than its “baseline” tariff of 10 per cent.

But following a call between Donald Trump and Japanese Prime Minister Shigeru Ishiba on Friday, the latter told domestic media he now expected that a planned meeting between the two on the sidelines of the G7 meeting in Canada in mid-June would be a “milestone” in negotiations.

Under the suggested wealth fund structure, the US Treasury and the Japanese ministry of finance would be joint owners and operators of the fund, each with a significant stake. They would then open the vehicle to other limited partner investors, and could potentially offer ordinary Americans and Japanese the chance to own a slice.

One person familiar with the discussions said that to be effective in its investment ambitions the fund would have to be “enormous” — with potentially $300bn in initial capital and then heavily leveraged.

The appeal of the joint fund would stem from its capacity to deliver a revenue stream to both governments, according to people briefed on its details.

“The theory is that Bessent is looking for revenue streams for the Treasury that do not involve raising taxes, and however far out this joint fund may sound, it would in theory provide that,” said one person briefed on the situation who added that the idea had been pitched as marking a clear break with previous strategies.

The person added that they believed Bessent “wants something that can become the blueprint for a new sovereign-to-sovereign financial architecture, while Japan wants a properly governed covenant that protects Japan from the ad hoc decisions of Oval Office politics.”

In the past, the person added, the US government, or individual state, would offer tax incentives for big direct investors to build factories or infrastructure projects. The expectation behind that strategy was that government would indirectly receive tax at some point. But investment made by the envisaged joint fund would directly deliver profits in proportion to the original investment.

Son is close to Trump and was a prominent visitor to the incoming president’s Mar-a-Lago home in December. He has been central to the joint fund proposal, said the two people close to the situation, potentially hoping that he would ultimately play a role in directing the fund’s investment decisions. 

The SoftBank boss is used to making high-stakes bets and stood beside Trump in January to unveil his $500bn Stargate plan to build US data centres and artificial intelligence infrastructure with OpenAI and Oracle. It is the kind of project that could attract investment from the proposed wealth fund, said one of the people familiar with Son’s thinking.

A spokesperson for the Treasury declined to comment. SoftBank declined to comment.

DR Congo eyes US minerals deal tied to peace in rebel-hit east by end of June

Another round of negotiations in Washington expected next week

Officials from the Democratic Republic of Congo are optimistic they can reach a deal with Washington next month to secure US investment in critical minerals alongside support to end a Rwandan-backed rebellion in the country’s east. 

The scope of Kinshasa’s negotiations with Washington is hugely ambitious, and combines giving US companies access to lithium, cobalt and coltan deposits in return for investment in infrastructure and mines, with efforts to draw a line under 30 years of conflict in regions bordering Rwanda.

Two people close to the negotiations said an investment deal with the US and separate peace deal with Rwanda were possible “by the end of June”. But potential stumbling blocks remain substantial.  

The US hopes to regain a foothold in a mining sector that has been dominated by China since Beijing reached its own multibillion dollar mines-for-infrastructure deal with Kinshasa in 2008.

The DR Congo’s mining minister Kizito Pakabomba told the Financial Times that an agreement with the US would help “diversify our partnerships”, reducing the country’s dependence on China for the exploitation of its vast mineral riches.

A deal could also lay the foundations for co-operation between the DR Congo and its neighbours including Rwanda, in the export and processing of metals.

But in a sign of tensions underlying the talks, DR Congo officials said there could be no question of sanctioning of Rwandan involvement in Congo’s minerals trade until M23 rebels retreated from a swath of territory they have occupied since January, and the Rwandan troops allegedly supporting them withdraw across the border.

Rwanda has long been accused of using security concerns across its border as a smokescreen for the plunder of Congolese resources including coltan used in mobile phones, and gold. Rwandan president Paul Kagame’s government denies supporting the M23 rebels, while claiming that his army is defending itself against hostile forces.

People close to the talks said that Kigali saw the negotiations as an opportunity to legitimise access to Congolese resources and attract US investment to expand its own existing metals processing. But before considering any such prospect, Kinshasa wants first to regain control of territory, including the cities of Goma and Bukavu, that it has lost.

“It would be very difficult for us to accept that particularly because there are still Rwandan troops in the [DR Congo] and there are still M23 troops committing abuses,” said a senior Congolese official who asked not to be named.

Yolande Makolo, Kagame’s spokesperson, said “Rwanda’s defensive measures along” the border, “are necessary as long as threats and the cause of insecurity in the DRC persists”. More important than the date of any peace agreement, she said, was for it to “deal with the root causes and be long-lasting”.

But Makolo added that Rwanda was “optimistic” about the approach the administration of US President Donald Trump was taking.

“Economic collaboration between the countries of the region that leverages our respective strengths, and benefits all our people is what we ourselves have always envisioned for this part of the continent. This is why we are committed to this process,” she said.  

A person close to the talks said Massad Boulos, Trump’s Africa envoy and father-in-law to his daughter Tiffany, had called for another round of negotiations in Washington next week to iron out some of the differences.

Boulos, who met Congolese President Félix Tshisekedi in Kinshasa and Kagame in Kigali in April, said last week he had provided both parties with the first draft of a peace agreement.

A spokesperson for the US State Department said: “Both participants have committed to work to find peaceful resolutions to the issues driving the conflict in eastern DRC, and to introduce greater transparency to natural resource supply chains. Respect for each country’s territorial integrity is at the centre of the process.”

Canadian pension giant to invest more than £8bn in UK

Government plans for infrastructure are ‘huge opportunity’, says CDPQ chief

Canada’s second-largest pension fund plans to invest more than £8bn in the UK over the next five years, in a boost to chancellor Rachel Reeves as she seeks external investment to fund big infrastructure projects.

Caisse de dépôt et placement du Québec, which manages C$473bn (£254bn) on behalf of 6mn pension savers, planned to increase its allocation to UK assets by 50 per cent over the next five years, the fund’s chief executive Charles Emond told the Financial Times in an interview. 

“We’d like to be a partner of trust and choice in the UK,” said Emond, adding that the government’s plans to increase infrastructure spending were “a huge opportunity and we’d like to be there in the early stages to see if we can do something”. 

He added that the UK would be “top of the list” compared with many other countries in terms of “willingness, clarity, transparency, deal mode and execution, seriousness and welcoming us . . . from that perspective they stood out and I think real stuff will come out of it”.  

CDPQ — one of the world’s largest infrastructure investors — currently invests C$32bn (£17bn) in the UK, with assets including stakes in Wales-based electricity generator First Hydro Company and London Array Offshore Wind Farm, located in the Thames Estuary.  

The fund sold its stake in Heathrow airport late last year after owning it for more than 16 years. 

Emond, who took the reins at CDPQ in 2020, a year after joining from Scotiabank, said he expected the fund’s allocation to Europe more broadly to grow from its current level of 15 per cent of the portfolio to as much as 17 per cent, with new investment focused on assets linked to the energy transition.   

“In Europe, energy security matters a lot . . . governments have financial constraints . . . that’s where private capital like us can come in,” said Emond. 

The Montreal-based fund’s plan to increase investment in the UK, as well as in France and Germany, comes as it is preparing to rebalance assets away from the US, which currently make up around 40 per cent of its portfolio. 

The 52-year-old chief executive said the fund’s US exposure would probably be “trimmed a little bit” as it was “at a peak after a decade of outperformance”. But he added it remained the “deepest, biggest, closest market to us and we will continue to deploy money there”. 

CDPQ’s plan to invest more in Britain comes as 17 of the UK’s largest defined contribution pension providers have pledged to invest at least 5 per cent of assets in their default funds in British private markets by the end of the decade, a move the government hopes will drive £25bn of investment into the UK.

Emond said this commitment from UK pension funds could create a “positive synergy” and help attract more overseas investment into the UK. He said CDPQ was keen to invest alongside British retirement funds as “like-minded partners” with local knowledge. 

The fund currently has C$25bn in France — its second-largest market in Europe — which Emond also expects to increase by 50 per cent by the end of the decade.

He added he was investing “time and effort” in exploring opportunities in Germany, with the country’s energy needs and loosened fiscal rules ushering in “a new beginning there with plenty of opportunities”.

Defence spending is up — but on all the wrong things

The changing nature of military operations will affect both markets and politics

Defence is the new tech when it comes to hot sectors. Or is it the other way round? That’s a question worth asking as defence stocks have rallied in recent weeks on everything from news of Donald Trump’s “Golden Dome” missile defence shield, to the new UK-EU security pact that would give UK defence companies access to Europe’s €150bn defence fund, to the broad understanding that US-China strategic competition is here to stay and Europe will be spending more on its own defence.

The issue is whether all this new spending will pay off, or whether technology disruption is changing not only the nature of war but the business of defence itself.

Military budgets in the US have long been huge (defence is the single largest item in the federal budget) and are getting even bigger under Trump. The president has requested a record $1tn for defence in the “big beautiful” budget bill, which just passed the House by one vote and will now go to the Senate.

Chinese military spending is also on the rise: the country is the second-largest spender after the US and has the world’s largest navy. Europe’s defence investment is set to increase sharply too, as it reprioritises its own security in the wake of Russia’s war in Ukraine and as the sense grows that the US has become an unreliable ally.

But much of this new investment is going to legacy items, such as F-35 fighter jets, ships and submarines. Trump’s missile defence plans are straight out of the Reagan-era Star Wars playbook. Some analysts have begun asking whether — even considering increased global conflict — this is money well spent at a time when technology is shifting the nature of war.

Cheap drones and missiles can, after all, now take out lines of Russian tanks moving into Ukraine. They have also been used by Houthi rebels in the Red Sea to destroy multiple ships and force the US into spending almost a billion dollars on military operations.

In some ways, Ukraine has been a testing ground for this shift in warfare. As Erik Prince, founder of the private military company Blackwater who now heads private equity firm Frontier Resource Group, noted in a February speech on the future of war, the Russia-Ukraine conflict has “massively accelerated warfare” in a way that we haven’t seen “since Genghis Khan put stirrups on horses”.

Today, innovations such as 3D-printed canister explosives on drones guided by software can take out Russian tanks for a few thousand dollars, while hackers figured out how to jam the navigation systems of American-made $150,000 javelin missiles within weeks. Add the growing power of artificial intelligence and you have, says Prince, who is a former Navy Seal, a situation in which the next big military innovations probably won’t come from the Pentagon, or even the defence research and development agency Darpa, but from “smart people” in “their garages”. As he put it, “trillions of dollars of installed capacity” is becoming obsolete.

This “tech-driven deflation and decentralisation have come in a major way to warfare for the first time”, according to market analyst Luke Gromen, who has also covered the topic recently. He likens the defence industry’s problem to an “incumbent’s curse” similar to Netflix’s decimation of Blockbuster Video, in which old-line defence firms will be outpaced by ground-up innovation. Louis Gave of Gavekal Research has called it “the Microsoft-ification of warfare”, a trend that could “undermine the comparative advantage of the world’s military superpowers”.

Just as companies such as IBM and Microsoft democratised PC ownership (you used to have to work for a large company to get access to mainframes), so ground-up innovation is shifting the nature of warfare today. This has potentially profound implications for incumbent defence contractors from Raytheon to BAE Systems to GE Aerospace and others who have seen their share prices rise in the recent market rallies. Their products could end up being the military equivalent of a mainframe computer compared with the laptops increasingly used on the battlefield.

Of course, these companies have their own innovation efforts under way. There are also many cutting-edge start-ups from Silicon Valley to Israel that aim to capitalise on high-tech, decentralised warfare. But the changing nature of war is not just a market question — it has macroeconomic and geopolitical implications as well. As Gromen puts it: “Western investors are operating based on a first principle of US military dominance as an infallible fallback support for US foreign policy, economic policy, and the USD system itself.” What if that assumption is incorrect?

For starters, you would be likely to see decreased reliance on the US manufacturers — something that is already happening, as evidenced by Europe’s rearmament plans, which rely on EU firms. It also begs the question of whether the US can afford to boost military spending at a time when debt and deficit levels are raising alarms. Finally, the democratisation of warfare gives both individuals and individual nations more defence autonomy. Success in this new world may be measured less on budget size and more on tech savvy.