loyalists and cronies, the largest redistribution of property since the mass privatisation of the 1990s. It is not that the elites have suddenly discovered a taste for the rule of law or democracy. But even those loyal to the regime crave rules and institutions that can resolve conflicts fairly. Third is the change in geopolitical climate that Mr Putin himself helped bring about. Russia sees itself as reshaping the global order. In reality it is a mere catalyst: Russia’s war on Ukraine has accelerated the crisis of Western democracy, the rise of populism and globalisation fatigue. Russia now finds itself in a world where rules are weak and where economic and technological strength and brute force dominate. In the rules-based world, Russia could exploit asymmetries: Europe’s dependence on its gas, its seat on the UN Security Council, the Soviet nuclear legacy. But Europe now buys its gas elsewhere, Russia’s Security Council seat has been devalued with the UN itself, and its nuclear blackmail has undermined the non- proliferation regime, depriving Russia of its status as an arbiter. When the order itself begins to crumble, the benefits of Putinist revisionism quickly disappear. At the same time, Russia is suffering an identity crisis. For the first time in generations it lacks an external model to define itself against. Historically it defined itself in relation to Europe and the wider West. They were there to catch up with, to fall behind, to confront. That old axis is gone. The West as a single cultural, military and political entity is in crisis. There is no “there” against which one can define “here”. This is not an ideological issue. It is structural. Any development in Russia has to have an internal source of meaning—and the government is unable to provide it. Fourth is growing ideological control without any balancing dividend. The previous social contract, whereby the state stayed out of people’s private lives while citizens stayed out of politics, has collapsed. In the past the system bought people’s loyalty with convenience, services and consumption. Now all it can offer is repression, intrusion and censorship—of which this year’s internet restrictions are the most striking manifestation. The issue is not so much repression itself as repression without purpose. An ideology by definition presupposes an image of the future. This one demands discipline without offering one. People are required to be loyal
without being told what future that loyalty serves. The political reality does not look desirable even for most of the technocrats involved in its construction. Optimism has been burned out from within. All four factors create a situation which in chess is known as a Zugzwang: when every move worsens the position. The system can persist for as long as Mr Putin remains in power. But his every move to preserve and expand it accelerates decay. His instinctive response may be to intensify repression. He may start another war. But these actions would only make things worse. He cannot restore the connection between power and the future. He can only make the rupture bloodier and more dangerous. ■ This article was downloaded by zlibrary from https://www.economist.com//by-invitation/2026/05/06/vladimir-putin-is-losing-his- grip-on-russia
The pact that could help America and China repair relations A bilateral investment treaty is a way to find middle ground on sensitive sectors, write Max Baucus and Stephen Roach May 7th 2026 THE LONG-AWAITED summit between Donald Trump and Xi Jinping finally appears to be at hand. After having been cancelled once and now reset for May 14th-15th in Beijing, the meeting presents the two leaders with a great opportunity to repair the damage from a protracted Sino-American conflict. Their last meeting, in South Korea in October 2025, produced a slight easing of tensions but no breakthrough. We believe that the upcoming summit opens the door for a powerful initiative: a joint endorsement by both leaders of a Bilateral Investment Treaty.
A BIT, as it is commonly known, is an agreement between two countries establishing the terms and conditions for cross-border private investment. These pacts have proliferated over the past half-century, and more than 2,200 are now in force; America has 40 and China 110, more than any other country. The idea behind BITs is to spur growth by lowering investment barriers. Unlike Mr Trump’s misplaced fixation on bilateral trade imbalances, where one country’s success is viewed as a zero-sum threat to the other, a US- China BIT has the potential to stimulate capital formation, employment, income and consumption in both countries. In late 2016, after nearly a decade of negotiations, agreement on a BIT between America and China was more than 90% complete, according to then US Trade Representative Michael Froman. Following the first election of Mr Trump in November 2016, however, negotiations were halted, never to resume, even during the Biden administration. For America—whose BIT programme dates back to the Reagan presidency of the 1980s—these treaties have played an important role in establishing negotiating leverage with trade and investment partners. America’s 40 operational BITs contain a wide range of bespoke features, including “side issues” that fit the unique characteristics of each partnership and serve American interests: special rules for intellectual-property investment (Poland), foreign-exchange reserves (Egypt), local-content requirements (Turkey), government procurement practices (Uruguay), and so on. A similarly tailored approach could be taken with China. American negotiators have long pushed for market-opening initiatives such as transparent licensing, intellectual-property protection and improved labour standards. The alleged unfair use of government subsidies by China’s state- owned enterprises could also be addressed in a new BIT. Crucially, this works both ways. China has its concerns about US government subsidies, exacerbated by America’s newfound penchant for industrial policy. For both countries, clarifying dual-use (military-civilian) technology applications would be another priority in BIT negotiations.
A BIT is a sensible way for countries to come to workable arrangements on “sensitive” sectors they are reluctant to expose to cross-border investment. China maintains a “negative list” that includes, among others, defence, rare earths, genetics, nuclear power and education. Though America does not maintain a formal negative list, it does have a national-security review process, known as CFIUS. Also, it has expanded its “entity list” to restrict Chinese companies associated with surveillance, human-rights abuses and weapons of mass destruction, as well as limiting Chinese access to advanced semiconductors, other AI-related activities, biotech and sensitive communications technology. These exclusionary lists offer a way for countries to reach broad agreement on a BIT without getting tripped up on individual industries they choose to protect. They were a stumbling block in the final negotiations on a Sino- American deal in 2015-16. But they can also be an opportunity, if both sides treat them as starting points to negotiate future reductions in their respective lists. That could turn the BIT into a dynamic agreement, modifiable over time. Just as important, America and China could use a BIT to address the thorny issue of forced technology transfer. American and other multinational companies have typically been required to invest in China through joint ventures with local firms, which have usually got more out of the arrangement through transferred technology and know-how than their international partners have received through market access and extra revenues. Eliminating ownership caps on direct investments by American and Chinese multinationals would do away with the need for joint ventures, which have stymied cross-border acquisitions in both countries. Solely owned Chinese and American tech firms could be big beneficiaries of such a change, not least in advanced semiconductors, the new battleground in AI. Any technology transfers they might undertake would still need to comply with BIT protocols that have been negotiated to manage the shared priorities of AI security, privacy and competition. In America the politics of pushing through a BIT are tricky. Approval of any treaty requires two-thirds support in the Senate—unlikely, especially with China, in the current hyper-partisan climate. But there may be a way around this: rebranding the effort as a “congressional-executive agreement”, like
those that framed NAFTA and its successor, USMCA. Such accords can be passed with a simple majority in both houses of Congress. Going back to the negotiating table on the stalled Sino-American BIT would be a solid first step in rebuilding mutual trust. Both leaders could tout it as being pro-growth. Investment treaties are typically of interest only to business executives and policy wonks. But this one, rekindled, could transform the upcoming summit in Beijing from a placeholder event into one that the world’s two most powerful men can legitimately celebrate as a major milestone. ■ Max Baucus was a United States senator from 1978 to 2014 and America’s ambassador to China from 2014 to 2017. Stephen Roach was Morgan Stanley’s chief economist from 1982 to 2012 and is currently on the faculty at Yale University. This article was downloaded by zlibrary from https://www.economist.com//by-invitation/2026/05/07/the-pact-that-could-help- america-and-china-repair-relations
Trump and Xi will struggle to strike a major economic deal China is pushing Donald Trump for concessions on Taiwan
Trump and Xi will struggle to strike a major economic deal Just avoiding a renewed clash will count as success May 7th 2026 LONG-SUFFERING OBSERVERS of Chinese-American relations have a plea: banish the term “grand bargain”. For a time, doe-eyed optimists and investors thought Donald Trump and Xi Jinping might overcome their countries’ rivalry to strike a major, even epochal, deal. They imagined a package involving some mix of balanced trade, real openings in the Chinese market and American military retrenchment in East Asia. When the two leaders meet in Beijing on May 14th and 15th, they will accomplish far less. All going well, they will prolong their countries’ tetchy trade truce—and that is about it.