Opinion

Scott Bessent’s Fed Overhaul: How the Bank of England Blueprint Is Reshaping U.S. Central Bank Independence Under Trump

Published

4 hours ago

March 26, 2026

There is something deliciously ironic about the man who helped break the Bank of England now contemplating whether its institutional model could fix the Federal Reserve. Scott Bessent—U.S. Treasury Secretary, former Chief Investment Officer at Soros Fund Management, and a key architect of the 1992 “Black Wednesday” trade that forced sterling out of Europe’s Exchange Rate Mechanism—sat down in early March 2026 in the ornate Cash Room of the Treasury Building with interviewer Wilfred Frost of Sky News’ The Master Investor Podcast. The resulting conversation was interrupted, dramatically, by a White House aide informing the secretary that President Trump wanted him “right away” in the Situation Room. Iran. Oil at $120. The straits closing. Bessent departed and returned an hour later—and then calmly resumed discussing the structural architecture of American monetary institutions.

That juxtaposition—geopolitical fire on one side, institutional plumbing debates on the other—captures the peculiar moment the U.S. central banking system inhabits in 2026. Donald Trump has waged the most sustained assault on Federal Reserve independence since the Nixon era. Jerome Powell’s term as chair expires in May. Kevin Warsh has been nominated as successor. A Justice Department probe of the Fed’s building renovation costs has been widely interpreted as a political pretext to bend the institution’s will on interest rates. And through it all, Bessent has positioned himself as the most consequential—and arguably most complex—voice in the debate: a self-described guardian of market integrity who has simultaneously pushed, probed, and occasionally defended the Fed’s structural independence.

His measured comparison of the Federal Reserve and the Bank of England, delivered to Frost in that mid-March session, may prove to be among the most consequential policy signals of 2026. Understated in delivery, it was nonetheless rich with implication.

A Tale of Two Central Banks: What Bessent Actually Said

When Frost asked Bessent—a long-time Anglophile who spent formative professional years in London—whether he preferred the Bank of England’s operating model to that of the Federal Reserve, the Treasury Secretary was characteristically precise in his evasion-that-isn’t-quite-evasion.

“The Federal Reserve and the Bank of England are very different institutions,” Bessent said. “The Federal Reserve is a larger, more decentralized organization with multiple regional Federal Reserve Banks and Board of Governors members, but only a subset of these members have voting rights.”

He did not declare a preference. But the framing was deliberate. In Washington, what a senior official chooses to compare is often as revealing as what he endorses outright. Bessent’s willingness to surface the BoE model—its unified structure, its clearer Treasury-Bank coordination on financial stability, its post-1997 inflation-targeting mandate—as a reference point signals an intellectual appetite for institutional reform that goes beyond the usual rhetoric about “resetting” financial regulation.

The broader interview, which spanned Bessent’s macro investing philosophy, the economics of the Iran conflict, and his decision to decline the Fed chairmanship himself, painted a portrait of a Treasury Secretary who thinks about monetary architecture in frameworks shaped by three decades of global macro experience. He described his role as “guardian of the bond market”—a phrase that, when read against the BoE comparison, suggests he sees Treasury and the central bank as co-managers of a shared sovereign credit enterprise, rather than entirely separate sovereigns.

The Bank of England Framework: What It Would Mean in Practice

The Bank of England was granted operational independence in May 1997, when Chancellor Gordon Brown—in a move that stunned markets—transferred day-to-day monetary policy decisions to the Bank’s new Monetary Policy Committee. But the architecture that emerged was not independence in the American mode. It was coordinated independence: the Bank sets interest rates, but the inflation target itself is set by HM Treasury. The Chancellor writes the Bank Governor an annual letter specifying the target. Financial stability responsibilities are shared through the Financial Policy Committee, in which the Treasury is formally represented.

This is precisely the kind of structure that market analysts have begun examining in the context of the Bessent-Warsh era at the Treasury and Fed respectively. A Bloomberg Economics newsletter in February 2026, authored by senior economics editor Chris Anstey, explicitly explored whether Warsh at the Fed and Bessent at Treasury might “remodel” the central bank’s role along lines closer to the Treasury-Bank of England relationship. The BoE model offers three features that are increasingly discussed in Washington circles:

A government-set inflation target with central bank operational freedom to meet it. Under such an arrangement, the Fed would retain rate-setting autonomy but the 2% inflation target—currently self-imposed—would be formally codified in legislation or established by Treasury directive, making the mandate more politically accountable.
Integrated financial stability governance. The BoE’s Financial Policy Committee includes both Bank and Treasury officials in a formal coordination structure. Bessent, who has repeatedly argued that Treasury should “drive financial regulatory policy” and criticized what he calls “regulation by reflex” at the Fed, has already moved in this direction through his aggressive engagement with the Fed’s capital reform agenda and his remarks at the Federal Reserve Capital Conference.
A more unified, less federalist structure. The BoE has no equivalent of the U.S. system’s twelve semi-autonomous regional reserve banks, each with its own president and policy voice. Bessent’s proposal for residency requirements for regional Fed presidents—suggesting that local bank heads should actually represent their regions—represents an oblique challenge to the national talent-search model that has produced a technically homogeneous but geographically detached leadership class at the regional banks.

The Historical Irony: The Man Who Broke the BoE

Any honest account of Bessent’s BoE affinity requires acknowledgment of the extraordinary biographical irony at its core. As detailed in Sebastian Mallaby’s authoritative history of hedge fund investing, More Money Than God, Bessent was a young portfolio manager at Soros’s Quantum Fund in September 1992 when the firm launched its legendary assault on the British pound. His research into the vulnerability of Britain’s variable-rate mortgage market to interest rate increases helped convince Stanley Druckenmiller—Soros’s chief strategist—to put on what became a billion-dollar short position against sterling. On the day of the climax, it was Bessent calling for the position to be pressed harder.

The pound crashed out of the Exchange Rate Mechanism. The Bank of England burned through billions in reserves trying to defend an untenable peg. It was a defining moment for the institution’s post-independence reform—and, indirectly, for the credibility argument that central banks should not be subordinated to politically-imposed exchange rate commitments. In a sense, Bessent helped create the conditions for the BoE’s 1997 reform by exposing the limits of the old model.

Three decades later, that same intellectual arc—skepticism of rigid institutional commitments, respect for market reality, appreciation for the need of clear mandates over ambiguous ones—appears to inform his thinking about the Fed. “Unlike most of my predecessors,” he told the Financial Times in October 2025, “I maintain a healthy skepticism toward elite institutions and elite viewpoints… But I have a healthy reverence for the market.” The Black Wednesday trade was, at its core, an argument that reality will eventually overwhelm institutional pride. Bessent appears to believe the same logic applies to the Fed’s current structural ambiguities.

Trump’s Escalating Assault: Where Bessent Fits

To understand what makes Bessent’s BoE musings consequential rather than merely academic, one must understand the full texture of the pressure the Trump administration has applied to the Federal Reserve since 2025.

The assault has been multi-frontal and escalating. Trump publicly demanded the Fed cut its benchmark rate to as low as 1 percent in July 2025. He visited the Fed’s headquarters in Washington in an unusual personal inspection of cost overruns in its building renovation—a move widely read as an attempt to manufacture grounds for removing Powell. Governor Lisa Cook was subjected to an attempted dismissal, ultimately challenged in court. Stephen Miran, Trump’s own Council of Economic Advisers chair, was installed as a Fed governor while remaining affiliated with the administration—a conflict of interest that drew sharp criticism from economists. And in January 2026, the Justice Department threatened the Fed itself with criminal proceedings over Powell’s congressional testimony about the renovation project. Powell responded with unusual sharpness: he called the probe a “pretext” to undermine monetary independence, and vowed to continue doing “the job the Senate confirmed me to do.”

Republican cracks followed almost immediately. Senator Thom Tillis of North Carolina, a Banking Committee member, declared that “if there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none.” Representative French Hill, chairman of the House Financial Services Committee, called the investigation an “unnecessary distraction.”

Into this maelstrom, Bessent has navigated with the precision of a macro trader managing risk on multiple books simultaneously. He challenged Trump’s “revenge probe” of Powell, reportedly opposing the DOJ move on both legal and economic grounds. He has previously described Fed independence as a “jewel box that has got to be preserved.” Yet he has also consistently pushed for structural reforms that would—incrementally and deniably—tilt the balance of influence toward Treasury. The residency requirement proposal for regional bank presidents. The push for a “fundamental reset” of financial regulation. The meeting with Bank of England Governor Andrew Bailey in April 2025, after which the Treasury noted Bessent was “pleased to discuss his remarks from earlier in the week”—a formulation that deliberately linked the bilateral meeting to a broader policy signal.

Whether this constitutes a sincere reform agenda, a sophisticated diplomatic shield between Trump and full institutional destruction, or some combination of both is a question that defines Bessent’s peculiar role in one of the most consequential institutional debates of the decade.

Kevin Warsh and the Architecture of Change

The nomination of Kevin Warsh as Powell’s successor adds another layer of complexity to the BoE comparison. Warsh, a former Fed governor and veteran of the 2008 crisis response, has long argued that the Fed has accumulated too many responsibilities and that its balance sheet policy has strayed from its core monetary mandate. He has advocated for a narrower, more accountable central bank—a vision that has clear family resemblances to the post-1997 BoE model.

If Warsh and Bessent share an intellectual framework—operational independence for rate-setting, greater Treasury-Fed coordination on financial stability and macro-prudential regulation, clearer mandate accountability—the result could be a genuine institutional reorganization that achieves many of the BoE’s structural features without requiring congressional legislation. Much of the architecture could be achieved through changes to Treasury-Fed coordination agreements, adjustments to the Fed’s self-imposed communication frameworks, and the gradual reshaping of the FOMC’s composition through appointments.

Markets appear to have absorbed this possibility with relative equanimity. Upon Warsh’s nomination announcement, financial markets were steady—a signal, analysts noted, that investors viewed him as credible even if they anticipated a more accommodating rate posture. Mohamed El-Erian of Queens’ College Cambridge observed in a January 2026 Project Syndicate essay that the Trump-Powell feud had “raised fears of a grim future of unanchored inflation expectations, macroeconomic instability, and heightened financial volatility”—but concluded that internal and external checks were likely “sufficiently robust to prevent a major accident.”

The Risks: Why the BoE Model Is Not a Simple Blueprint

It would be intellectually dishonest to present the Bank of England framework as an uncomplicated upgrade for the United States. Several structural differences make a direct transplant enormously complex—and potentially dangerous.

Scale and complexity. The Fed is not simply a larger version of the BoE. It manages monetary policy for the world’s reserve currency, oversees a banking system of incomparably greater global systemic importance, and functions as the global lender of last resort in crises. The BoE operates within the European regulatory ecosystem (notwithstanding Brexit) and manages a much smaller sovereign debt market. Coordinating Treasury-Fed relations at the scale of the U.S. dollar system involves risks of fiscal dominance—the historical tendency, as seen in pre-1951 America and in multiple emerging market economies, for treasury departments to subordinate monetary policy to their own financing needs.

The 1951 Accord’s shadow. The Treasury-Federal Reserve Accord of 1951, which ended Treasury’s wartime control over Fed interest rates, is the foundational document of modern Fed independence. Any formal Treasury-Fed coordination mechanism risks, at the margin, reversing the logic of that accord. The Council on Foreign Relations has explicitly noted that “the Fed did not secure true operational independence from the federal government until the 1951 Accord, which allowed it to set monetary policy without concern for the long-term borrowing costs of the U.S. government.” Bessent, as a student of economic history, understands this tension acutely.

Dollar dominance and credibility externalities. The dollar’s reserve currency status depends, in part, on global confidence in the Fed’s independence from political pressure. Even perceived coordination between Treasury and the Fed on rate-setting—let alone formal institutional mechanisms—could trigger a reassessment by sovereign wealth funds, central bank reserve managers, and international investors of U.S. Treasury paper as the ultimate safe asset. Bessent himself has described this moment as “extraordinary for U.S. dollar dominance”—a framing that suggests he understands the fragility of that dominance and the asymmetric risks of appearing to compromise it.

The inflation target question. If the inflation target were to be formally transferred to Treasury—as in the BoE model—a future administration hostile to price stability could, in theory, simply adjust the target upward. The self-imposed 2% target at the Fed, whatever its ambiguities, cannot be changed unilaterally by the executive branch. A legislated or Treasury-directed target could be.

Forward Scenarios: Three Possible Outcomes

As Powell’s May exit approaches and Warsh prepares for what could be a contentious confirmation, three broad institutional trajectories present themselves.

Scenario 1: Managed Convergence. Warsh and Bessent establish informal Treasury-Fed coordination mechanisms that functionally resemble BoE-style fiscal-monetary alignment without formal institutional change. The Fed retains its legal independence, but Bessent’s Treasury plays a more active role in financial regulatory policy, the inflation target becomes more explicitly codified, and the FOMC communication framework is simplified. Markets adjust incrementally. Dollar credibility is maintained. This is the outcome Bessent appears to be engineering.

Scenario 2: Institutional Erosion. Trump’s political pressure intensifies after Warsh’s arrival, driving a majority of the FOMC—reshaped through strategic appointments—toward persistent accommodation of fiscal policy. Long-term Treasury yields rise as investors reprice U.S. sovereign credit risk. The dollar weakens. Global central banks accelerate reserve diversification. El-Erian’s “grim future” scenario is not averted, merely delayed.

Scenario 3: Reform and Renewal. A genuine legislative overhaul—modeled explicitly on the 1997 BoE settlement, but adapted for U.S. scale—establishes clearer mandate accountability, a reformed financial stability committee structure, and a streamlined FOMC. Controversial but coherent, this outcome is the most intellectually defensible but politically the least probable in the current polarized environment.

The Bond Market as the Final Arbiter

Bessent told Wilfred Frost that his defining framework—the one that has guided both his investing career and his tenure at Treasury—is that “the crowd is right 85% or 90% of the time. It’s really when things turn, or when you could imagine a different outcome than the consensus, that’s when you can really make a lot of money.” In 1992, he imagined a different state of the world for the pound. The bond market confirmed the trade.

The bond market is now running its own analysis on the Fed-Treasury question. Daily Treasury trading volumes of approximately $1 trillion—a figure Bessent himself cited at the November 2025 Treasury Market Conference—mean that any credible signal of fiscal dominance would be priced swiftly and punishingly. Bessent knows this better than perhaps any Treasury Secretary in history. He made his fortune understanding how institutional commitments collapse under market pressure. Now he is the institution.

That is, in the end, the deepest irony of the BoE comparison. The man who broke one central bank through superior market analysis is now trying to reform another through institutional architecture. The question for global investors, policymakers, and the international monetary system is whether those two skillsets—speculative precision and institutional design—can coexist in one Treasury Secretary navigating the most politically turbulent period for U.S. monetary institutions since the Second World War.

The bond market will have an opinion. It always does.

Expert Takeaways for International Investors and Policymakers

Watch the Warsh confirmation hearings closely for signals on whether he endorses any formal Treasury-Fed coordination mechanisms. Language around “accountability,” “mandate clarity,” or “financial stability governance” will be more important than his positions on near-term rates.
The BoE comparison is a signal, not a blueprint. Bessent is unlikely to push for a formal legislative restructuring. The more probable outcome is incremental administrative convergence—enough to reshape practice without triggering constitutional or market crises.
Dollar-denominated assets carry a new institutional risk premium. The sustained assault on Fed independence—regardless of its ultimate outcome—has introduced a structural uncertainty into U.S. monetary credibility that sovereign investors will have to price for at least the remainder of Trump’s second term.
The 1951 Accord is the key historical precedent. Any future Treasury-Fed coordination framework that echoes pre-Accord arrangements should be treated as a materially negative signal for long-duration U.S. Treasuries and the dollar’s reserve currency status.

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Analysis

CPEC 2.0 and the Iron Alliance: China Doubles Down on Pakistan’s Economic Future

Published

5 minutes ago

March 26, 2026

Abdul Rahman

The Meeting That Signals More Than Courtesy

When Chinese Ambassador Jiang Zaidong called on Prime Minister Muhammad Shehbaz Sharif at the Prime Minister’s House in Islamabad on Thursday, the optics were familiar — two officials exchanging pleasantries in a gilded diplomatic room. But the substance beneath the ceremony is anything but routine. It was a recalibration of the most consequential bilateral relationship in South Asia, a public doubling-down on CPEC 2.0 at a moment when Pakistan’s economy is attempting one of its most delicate pivots in a generation, and when the region around it burns with geopolitical uncertainty.

Prime Minister Shehbaz, appreciating China’s steadfast economic support, reaffirmed Pakistan’s commitment to advancing CPEC 2.0, with a focus on agriculture, industrial cooperation, and priority infrastructure projects. Associated Press of Pakistan He also felicitated the Chinese leadership on the successful conclusion of the “Two Sessions” and thanked President Xi Jinping, Premier Li Qiang, and Foreign Minister Wang Yi for their warm greetings on Pakistan Day. The Express Tribune

Deputy Prime Minister and Foreign Minister Ishaq Dar, Special Assistant Syed Tariq Fatemi, and the Foreign Secretary were also present — a seniority of delegation that underscores how seriously Islamabad is treating this moment.

From Iron Ore to Iron Friendship: The Economic Architecture

To understand why Thursday’s meeting matters, follow the money. According to figures from the General Administration of Customs of China, total bilateral trade in goods between China and Pakistan reached $23.1 billion in 2024, an increase of 11.1 percent from the previous year. China Daily And the momentum has not slackened. Bilateral goods trade soared to $16.724 billion from January to August 2025, marking a 12.5% increase year-on-year. The Daily CPEC

Those are not the numbers of a partnership in cruise control — they are the numbers of a relationship actively accelerating.

The deeper story, however, lies not in trade volumes but in structural investment. By the end of 2024, CPEC had brought in a total of $25.93 billion in direct investment, created 261,000 jobs, and helped build 510 kilometres of highways, 8,000 megawatts of electricity capacity, and 886 kilometres of national core transmission grid in Pakistan. Ministry of Foreign Affairs of the People’s Republic of China For a country that, barely two years ago, was rationing foreign exchange for fuel imports, this is a transformation of physical and economic geography.

CPEC’s first phase was fundamentally an emergency intervention — a transfusion of infrastructure into a body politic that desperately needed it. Power plants. Highways. Ports. The second phase is a different kind of ambition altogether.

CPEC 2.0: From Hard Concrete to Smart Connectivity

As He Zhenwei, president of the China Overseas Development Association, observed, CPEC has shifted from “hard connectivity” in infrastructure to “soft connectivity” in industrial cooperation, green and low-carbon growth, and livelihood improvements, making it a powerful driver of Pakistan’s socioeconomic development. China Daily

This is the strategic logic of CPEC 2.0 in a single sentence: it is no longer primarily about pouring concrete. It is about embedding China’s industrial ecosystem inside Pakistan’s economy — transferring manufacturing capacity, agricultural technology, digital infrastructure, and green energy know-how into a country of 245 million people that possesses, in abundance, what China increasingly lacks: cheap land, young labour, and untapped mineral wealth.

Prime Minister Shehbaz has said that industrial cooperation will remain the “cornerstone” of bilateral economic ties and a defining feature of CPEC’s high-quality development in its second phase, inviting Chinese companies to consider Pakistan a preferred investment destination, particularly for relocating industries into special economic zones. China Daily

The sectors at the top of the agenda — agriculture modernisation, IT parks, mineral extraction, and green industrial zones — each represent a deliberate attempt to diversify Pakistan’s economic base beyond remittances and textiles. The Rashakai Special Economic Zone in Khyber Pakhtunkhwa, already operational, serves as the template: a dedicated industrial enclave designed to attract Chinese manufacturing relocation, create local employment, and generate export earnings in hard currency.

Agriculture, listed prominently in Thursday’s reaffirmation, deserves special attention. It is anticipated that due to road infrastructure development under CPEC, the distance and time for transporting commodities between Pakistan and China will decrease considerably compared with the sea route — promising high potential for increased trade of agricultural products, especially perishable goods such as meats, dairy, and fruits and vegetables. MDPI For Pakistan’s farming sector, which employs roughly 38% of the labour force but suffers from chronic productivity deficits, Chinese agri-technology partnerships could be genuinely transformative.

Pakistan’s Unlikely Economic Resilience Story

Ambassador Jiang’s commendation of Pakistan’s “economic resilience and reform efforts” was diplomatic language, but it pointed to something real. Two years ago, Pakistan stood at the edge of a sovereign default. Today, it is back from the brink — battered, cautious, but standing.

Pakistan’s 37-month Extended Fund Facility with the IMF, approved in September 2024, aims to build resilience and enable sustainable growth, with key priorities including entrenching macroeconomic stability, advancing reforms to strengthen competition, and restoring energy sector viability. International Monetary Fund

The results, while modest, are genuine. The IMF has forecasted 3.2% GDP growth for Pakistan in FY2026, up from 3% in FY2025, and a moderation in inflation to 6.3% in the same period. Profit by Pakistan Today Gross reserves, which had collapsed to barely two weeks of import cover, stood at $14.5 billion at end-FY25, up from $9.4 billion a year earlier. International Monetary Fund

Pakistan’s “Uraan Pakistan” economic transformation plan, meanwhile, sets a more ambitious horizon: the initiative aims to achieve sustainable, export-led 6% GDP growth by 2028 through public-private partnerships, enhanced export competitiveness, and optimised public finances. World Economic Forum Foreign direct investment has grown by 20% in the first half of fiscal year 2025, reflecting renewed trust in Pakistan’s economic trajectory, and remittances have reached a record $35 billion this year. World Economic Forum

None of this is a clean success story. The IMF has been explicit that risks remain elevated, structural reforms are incomplete, and the energy sector’s circular debt remains a chronic wound. But the trajectory — for the first time in years — points upward. And China is betting on that trajectory.

The Geopolitical Chessboard: Why Beijing Is Leaning In

China’s intensified engagement with Pakistan is not purely altruistic. It is profoundly strategic.

Gwadar Port remains the crown jewel of Beijing’s calculations. As the terminus of CPEC — a 3,000-kilometre corridor running from Kashgar in Xinjiang to the Arabian Sea — it represents China’s most viable land-based alternative to the chokepoint-prone Strait of Malacca, through which roughly 80% of China’s oil imports currently pass. Following the proposal by Chinese Premier Li Keqiang in 2013, the operationalization of CPEC is expected to reduce the existing 12,000-kilometre journey for oil transportation to China to 2,395 kilometres, estimated to save China $2 billion per year. Wikipedia

In May 2025, the strategic calculus deepened further. During a trilateral meeting between the foreign ministers of China, Pakistan, and Afghanistan, Chinese Foreign Minister Wang Yi announced the extension of CPEC into Afghanistan to enhance trilateral cooperation and economic connectivity. Wikipedia This was not a minor footnote. It was a declaration that Beijing intends to use Pakistan as the anchor of a broader Central and South Asian connectivity architecture — one that could reshape trade flows across a swath of the globe currently disconnected from global value chains.

For Pakistan, this is an extraordinary opportunity and a significant responsibility. Being the fulcrum of Chinese strategic logistics means attracting investment, yes — but it also means hosting Chinese personnel in a volatile security environment, managing debt obligations carefully, and maintaining the domestic political consensus necessary to sustain multi-decade infrastructure commitments. Prime Minister Shehbaz highlighted Pakistan’s constructive role in promoting regional de-escalation and stability The Express Tribune — an implicit signal to Beijing that Islamabad remains a reliable partner even as tensions with Afghanistan simmer, and as the broader Middle East grinds through its own turbulence.

75 Years: A Partnership With Institutional Depth

Both sides looked forward to high-level exchanges to mark the 75th anniversary of diplomatic relations between the two countries. Geo News That milestone — China and Pakistan established formal ties on May 21, 1951 — is worth pausing on. Seventy-five years is a rarity in the volatile geography of South Asia. It spans the Partition, three Indo-Pakistani wars, Pakistan’s nuclear tests, 9/11, the war on terror, and multiple economic crises. Through all of it, the “iron brotherhood” held.

The 75th anniversary will not be merely ceremonial. High-level engagements planned for the occasion are expected to include renewed investment commitments, potentially new frameworks for agricultural cooperation, and possibly the formal signing of long-delayed agreements on mining and mineral exploration in Balochistan — a sector that both governments identify as transformational for Pakistan’s fiscal self-sufficiency.

The Road Ahead: Opportunities and Open Questions

The reaffirmation of CPEC 2.0 from Thursday’s meeting is a signal, not a guarantee. Three structural questions will determine whether the next decade of China-Pakistan economic cooperation delivers on its extraordinary promise.

First, can Pakistan create a genuinely investable environment? Chinese companies, increasingly sophisticated in their global operations, want rule of law, profit repatriation mechanisms, and secure personnel — not merely political assurances. The prime minister assured a secure and conducive environment for Chinese personnel and investments The Daily CPEC, but assurances must be backed by institutional reform, upgraded law enforcement, and expedited project approvals.

Second, can the trade imbalance be addressed? Of the $23.1 billion in bilateral trade in 2024, China’s exports to Pakistan surged 17% year-on-year to $20.2 billion, while Pakistan’s imports from China fell 18.2% to $2.8 billion. China Briefing A bilateral relationship where one partner runs a structural deficit of more than $17 billion is not a partnership of equals — and it is not sustainable. Agricultural exports, IT services, minerals, and textile value-addition must be fast-tracked to rebalance the ledger.

Third, can CPEC 2.0’s agricultural pillar deliver at scale? The promise is significant. Chinese precision agriculture technology, drip-irrigation systems, seed science, and cold-chain logistics could revolutionise Pakistan’s food economy. But past agricultural cooperation agreements between the two countries have struggled with implementation. The devil will be in the provincial-level execution.

What is not in question is the strategic intent on both sides. China needs Pakistan as a corridor, a consumer market, and a geopolitical anchor in a region where its influence is otherwise contested. Pakistan needs China as an investor, a market for its exports, and — frankly — a financier of last resort when the IMF’s medicine grows too bitter.

Conclusion: The Partnership’s Next Chapter

Thursday’s meeting between Prime Minister Shehbaz and Ambassador Jiang was a paragraph in an ongoing novel — not the first chapter, and certainly not the last. Both sides reaffirmed the enduring Pakistan-China All-Weather Strategic Cooperative Partnership, emphasising the importance of continued close coordination on issues of mutual interest. Associated Press of Pakistan

What makes this moment distinctive is the convergence of timing. Pakistan is mid-reform, mid-stabilisation, and mid-pivot. China is mid-BRI, mid-reshaping of its global industrial footprint, and actively seeking to lock in reliable partners before the geopolitical weather of the 2030s becomes even more unpredictable. The 75th anniversary of diplomatic relations provides not just an occasion but an impetus.

CPEC 2.0, with its agriculture, IT, minerals, and green industrial agenda, represents the most sophisticated iteration yet of what Beijing and Islamabad have been building together since the 1950s — a partnership that transcends any single government, any single economic cycle, and increasingly, any single geopolitical era.

Whether Pakistan can convert this ironclad political commitment into tangible economic transformation for its 245 million citizens remains the defining question. The answer will not be written in diplomatic press releases. It will be written in crop yields, factory floors, export invoices, and the balance sheets of a nation that has been, for too long, more corridor than economy.

That is the chapter both sides are now trying to write.

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Analysis

PSX Sheds Nearly 3,500 Points as Iran Rejects US-Backed Ceasefire: Geopolitical Shockwaves Hit Pakistan’s Markets

Published

1 hour ago

March 26, 2026

Abdul Rahman

A Market in the Crossfire of Diplomacy’s Failure

At precisely 12:35 pm on Thursday, the Pakistan Stock Exchange told a story in a single number. The KSE-100 Index sat at 154,851.35 — down 3,462.09 points, or 2.19% from the previous close — as trading floors in Karachi absorbed the shockwave of a diplomatic rupture twelve hundred kilometres to the west. Iran had, in words almost contemptuous in their finality, dismissed Washington’s 15-point peace framework, delivered by Islamabad’s own envoys. “We do not plan on any negotiations,” Iranian Foreign Minister Abbas Araghchi told state television Wednesday evening. That sentence reached the Pakistan stock exchange before the opening bell.

The sell-off was not panic in the classical sense. It was something more calculated and, in some ways, more troubling: the rational response of investors recalibrating their probability trees when the single most important variable — ceasefire — has been removed. The KSE-100 has now shed roughly 18% from its all-time high of 191,032 points reached on January 23, 2026, a cumulative erosion that has quietly eviscerated the equity wealth of millions of Pakistani retail investors who piled into the market during last year’s bull run. Thursday’s session reaffirmed what the State Bank of Pakistan and institutional brokers have quietly acknowledged for weeks: the Middle East is no longer a distant variable in Pakistan’s macro story. It is the story.

Market Mechanics: A Broad-Based Rout

The damage on Thursday was, if anything, orderly — which is itself a signal of how far sentiment has fallen since the exchange’s historic circuit-breaker halt on March 2, when the KSE-100 plunged 16,089 points in a single session. Markets have re-priced geopolitical risk into baseline expectations; Thursday’s drop was a recalibration, not a meltdown.

Sector-level selling was pervasive:

Oil & Gas Exploration Companies (OGECs): Among the heaviest casualties. MARI, OGDC, and PPL — three pillars of the energy sub-index — fell sharply as elevated Brent crude prices above $100 per barrel paradoxically squeeze downstream margins while threatening energy import costs. The disconnect between the commodity’s sticker price and the actual flow of oil through a near-blockaded Strait of Hormuz makes valuation models temporarily unreliable.
Oil Marketing Companies (OMCs): PSO and POL extended losses as the combination of supply disruption risk and potential currency depreciation raised the spectre of working capital strain. OMCs in Pakistan operate on government-set pricing structures, and any lag in regulatory adjustment transfers losses directly to their balance sheets.
Commercial Banks: MCB, MEBL, and NBP traded deep in the red. Elevated interest rate risk and the prospect of foreign portfolio outflows weigh on sector liquidity. Pakistan’s banking system has seen significant foreign institutional activity thin out since late February; Thursday’s selling confirmed the trend.
Automobile Assemblers: Already suffering from a 26% month-on-month sales collapse in February, auto stocks saw additional pressure as consumer confidence — always the most sentiment-sensitive sector — receded further.
Cement and Power Generation: HUBCO, a bellwether for the power sector, declined alongside cement majors. Both sectors are acutely exposed to energy input cost volatility. A sustained spike in furnace oil and LNG prices — now a structural reality while Hormuz flows remain restricted — compresses margins with mathematical precision.

The broader market context is stark. The KSE-100 has declined 7.84% over the past month, even as it remains elevated on a year-over-year basis — a statistical comfort that offers cold consolation to anyone who bought equities in January.

Geopolitical Context: When a Mediator’s Message Gets Rejected

Pakistan occupies an unusual seat in this crisis: simultaneously a potential beneficiary of diplomatic relevance and an economic casualty of the very conflict it is trying to mediate. The United States delivered its 15-point peace plan to Iranian officials through Pakistan, the sources said — a gesture that Prime Minister Shehbaz Sharif had publicly embraced, announcing on social media that his government “stands ready and honoured to be the host to facilitate meaningful and conclusive talks.”

Tehran’s response was unambiguous. Iran’s Foreign Minister Araghchi noted that the US is sending messages through different mediators, which “does not mean negotiations”. Iranian state broadcaster Press TV, citing a senior political-security source, laid out a five-point Iranian counteroffer that would in effect be a nonstarter in Washington: Iran’s five-point counteroffer would give Tehran control over the Strait of Hormuz, alongside demands for war reparations, a comprehensive halt to Israeli-American airstrikes, and legally binding guarantees against any future military action.

The Strait of Hormuz remains the fulcrum of the global energy crisis. The IEA assesses that the current episode is the largest supply disruption in the history of the global oil market, with flows through Hormuz collapsing from 20 million barrels per day to a trickle and Gulf production cuts of at least 10 million barrels per day. For context: on a yearly basis, 112 billion cubic metres of LNG, or 20% of global LNG trade, normally passes through the Strait of Hormuz.

Why does Pakistan feel this so acutely? The country sits at the intersection of three distinct vulnerabilities. First, as a net energy importer that covers roughly 80% of its oil needs through purchases priced in US dollars, any sustained elevation in Brent — which has traded above $100 per barrel since mid-March — mechanically expands the import bill and widens the current account deficit. Second, Pakistan’s worker remittances — its most important source of foreign exchange, recording a robust $3.3 billion in February 2026 — flow overwhelmingly from Gulf countries now engulfed in an active war zone. Workers’ remittances climbed 5% year-on-year to $3.3 billion in February 2026, although they declined 5% month-on-month. Analysts at Topline Securities have warned of a potential structural decline in Gulf-sourced remittances if Pakistani workers are evacuated or if Gulf economies contract under the weight of the crisis. Third, the China-Pakistan Economic Corridor (CPEC), which runs arterially through Pakistan’s western borderlands, depends on Gulf-linked energy commodity stability for both its operational economics and its Chinese financing logic.

The macroeconomic trap is elegant in its cruelty: the crisis that Pakistan hoped to mediate its way into diplomatic relevance on is simultaneously the crisis most likely to derail its IMF-supported stabilisation programme.

Deeper Analysis: A Fragile Macro Architecture Under Stress

Pakistan’s economy entered 2026 on a genuine upswing. The State Bank of Pakistan maintained its policy rate at 10.5%, signaling a cautious approach as policymakers monitor the impact of geopolitical developments and volatility in global commodity markets. Foreign exchange reserves had climbed to a relatively comfortable $16.3 billion at the SBP, with commercial banks adding a further $5.2 billion. After years of IMF conditionality, fiscal consolidation, and a painful devaluation cycle, the rupee had stabilised and inflation was finally trending downward from its 2023–2024 peaks.

The Iran war has introduced a new stress vector into every one of those achievements.

The table below contextualises Thursday’s drop within Pakistan’s recent history of geopolitically-driven market shocks:

Event	Date	KSE-100 Drop (Points)	Drop (%)	Recovery Period
US-Israel Attack on Iran (Opening Shock)	2 March 2026	16,089	-9.57%	Ongoing
Iran-Pakistan-India Tensions (May 2025)	7 May 2025	~3,560	-3.13%	~3 weeks
Covid-19 Global Shock	March 2020	~7,500	-14.2%	~5 months
India-Pakistan Military Standoff	Feb 2019	~2,300	-4.8%	~6 weeks
Iran Ceasefire Rejection (Today)	26 March 2026	3,462	-2.19%	TBD

Thursday’s drop is not the largest Pakistan has endured in this crisis. But it arrives at a psychologically critical juncture: markets had spent the better part of the prior week pricing in the possibility of a US-brokered deal. Reports indicated that Washington is seeking a month-long ceasefire to facilitate negotiations on the proposed settlement plan. S&P 500 futures increased 0.9% during Asian trading hours, while European futures rose 1.2%. Brent crude declined around 6% to approximately $98.30 per barrel — numbers that had sent the KSE-100 racing upward by over 2,600 points in Wednesday’s session. Thursday’s reversal represents the full unwind of that hope trade.

The current account picture is deteriorating. Pakistan’s trade deficit stood at $3.0 billion in February 2026, with exports recorded at $2.3 billion and imports at $5.3 billion. Cumulative trade deficit for 8MFY26 widened 25.3% year-on-year to $25.1 billion. Sustained oil prices above $100 per barrel add approximately $1.5–2 billion annually to the import bill for every $10 per barrel increment above pre-crisis baseline. With Brent having averaged well above that threshold since late February, the pressure is both real and compounding.

Foreign portfolio investors, already cautious, have an additional reason to step back. Pakistan’s equity market had attracted significant foreign interest through 2024–2025 on the back of the IMF deal and stabilisation narrative. That narrative is intact — but it competes, now, with a geopolitical risk premium that no earnings growth story can easily offset.

Investor and Policy Lens: Caution Without Paralysis

For institutional investors navigating the Pakistan stock exchange today, the risk calculus has shifted but not inverted. The market’s price-to-earnings ratio — estimated at approximately 7x by leading brokerages — remains among the lowest of any major emerging market. That is not an invitation to complacency; it is, rather, the signal that the market has already priced in considerable stress and that entry levels for patient capital with a 12–18 month horizon are intellectually defensible.

What this week has clarified is that the resolution timeline for the Iran conflict is non-linear. Leavitt warned that if talks with Iran don’t pan out, President Donald Trump “will ensure they are hit harder than they have ever been hit before” — language that introduces a binary tail risk scenario that no valuation model can responsibly discount.

For policymakers in Islamabad, the immediate priority is rupee stability. The currency has shown unexpected resilience through the crisis — a reflection of the IMF programme’s credibility and the SBP’s reserve position — but a sustained period of elevated oil prices combined with declining remittances would test that resilience severely. The SBP’s decision to hold the policy rate at 10.5% reflects a careful balance: cutting rates prematurely risks inflation re-acceleration; raising them would strangle a recovery the government cannot afford to lose.

The Pakistan government’s diplomatic pivot — positioning itself as indispensable interlocutor — is strategically sound. The risk is that success in that role requires the conflict to end, and an end that benefits Pakistan’s macro position requires a ceasefire that Tehran has now explicitly rejected.

Global Ripple: Emerging Markets on the Defensive

Pakistan’s Thursday session did not occur in isolation. Goldman Sachs said crude prices were trading on geopolitical risk as Middle East supply fears remain elevated, noting that near-term price movements are being driven less by changes in the base case outlook and more by shifts in the perceived probability of worst-case scenarios. That observation applies with full force to frontier and emerging equity markets whose fundamentals are hostage to commodity prices they do not control.

From Istanbul to Jakarta, from Nairobi to Karachi, the message from Tehran on Wednesday night landed with the same cold clarity: the ceasefire that equity markets needed to stabilise has been deferred. Wall Street forecasters are raising their expectations of recession, driven in part by the Iran war and inflation risks — a recessionary shadow that, if it materialises in the United States, would compound Pakistan’s external account pressures through reduced export demand and tighter global financial conditions.

The emerging-market risk premium has widened measurably. Capital that would ordinarily rotate into high-yield frontier positions is staying home.

Conclusion

Markets, at their most honest, are simply the aggregated judgment of thousands of minds simultaneously estimating the future. On Thursday, those minds looked at Tehran’s rejection, calculated the diplomatic distance still to be covered, and moved the KSE-100 down by 3,462 points. It was not hysteria. It was arithmetic.

Pakistan is at once too geopolitically exposed to be insulated from this crisis and too strategically valuable to be abandoned by it. The country that carried Washington’s peace proposal to Tehran now awaits Tehran’s final answer — and so, with every tick of the index, does its stock market.

The gap between where oil trades and where it should, between where the rupee holds and where it could break, between diplomatic ambition and market reality — that gap is the story of Pakistan’s 2026. And it will not close until a ceasefire does.

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AI

The Rise of China’s Hottest New Commodity: AI Tokens

Published

1 hour ago

March 26, 2026

Abdul Rahman

Imagine a new global commodity traded not in barrels or bushels, but in trillions of invisible computational units — weightless, borderless, and already reshaping the architecture of economic power. In the summer of 1858, a copper-core cable crossed the Atlantic seabed and rewired who controlled the flow of value across empires. In the spring of 2026, something structurally similar is happening, only the cable is digital, the commodity is China’s AI tokens, and the empire building is happening in plain sight.

The numbers are now difficult to ignore. China’s daily consumption of tokens — the tiny data units processed by AI models — has surpassed 140 trillion as of March 2026, a more than 1,000-fold increase from the 100 billion recorded at the beginning of 2024, and over 40 percent higher than the 100 trillion logged at the end of last year. China.org.cn Liu Liehong, administrator of China’s National Data Administration, announced the figure publicly and framed it not as a technical milestone but as a strategic one. The surge, he said, signals China’s AI industry “evolving from basic chat functions to more sophisticated systems capable of decision-making and task execution.” This is bureaucratic language with a geopolitical subtext: China is no longer catching up in artificial intelligence. It is setting the pace in the metric that matters most — actual usage, at scale, in the real economy.

From OpenRouter to the World: How China’s AI Tokens Surpassed the US

The clearest empirical signal of this shift has come from an unexpected source: OpenRouter, a San Francisco-based API aggregation platform that functions as a kind of global stock exchange for large language models. OpenRouter data published on February 24, 2026, shows that models built in China account for 61% of total token consumption among the platform’s top ten most-used models, with aggregate consumption reaching 5.3 trillion tokens out of a combined 8.7 trillion. Dataconomy The three most-consumed models that week were all Chinese. MiniMax M2.5 claimed the top position with 2.45 trillion tokens consumed in a single week — a 197% increase from the prior week. Moonshot AI’s Kimi K2.5 followed with 1.21 trillion tokens, and Zhipu AI’s GLM-5 placed third with 780 billion tokens, itself up 158%. TechBriefly

The historical reversal was swift and decisive. In the first week of February 2026, the weekly call volume of Chinese models had jumped to 2.27 trillion tokens, sending a strong signal of pursuit. Just one week later, Chinese models officially surpassed their US counterparts with 4.12 trillion tokens versus 2.94 trillion. By the week of February 16th, Chinese models had soared to 5.16 trillion tokens — a 127% increase in three weeks. 36Kr The growth is structural, not episodic, and it has been observed at the highest levels of the American venture capital industry. Andreessen Horowitz partner Martin Casado estimated that roughly 80% of startups using open-source AI stacks are running Chinese models. TechBriefly OpenRouter COO Chris Clark put the dynamic plainly: Chinese open-weight models have gained large market share because they are “disproportionately heavy in agentic flows run by U.S. firms.”

Ciyuan: When a Nation Brands Its Commodity

Beijing has never been content to let economic transformations arrive without a conceptual framework to accompany them. At the 2026 China Development Forum, Liu Liehong used the term ciyuan as the official Chinese translation for “token” during a speech on AI development, effectively resolving a debate within China over how the term should be rendered. South China Morning Post The naming is deliberate and worth examining. In Chinese, ci translates to “word,” while yuan carries double meaning: it is the basic unit of Chinese currency, and the suffix used when naming most foreign currencies in Mandarin. Liu said the token, or ciyuan, was not only a value anchor for the intelligent era but also a “settlement unit” linking technological supply with commercial demand, thereby allowing business models to be quantified. South China Morning Post

The People’s Daily had introduced the concept in January, describing ciyuans as the smallest unit of information processed by large models — possessing characteristics “emergent in the intelligent era” of being quantifiable, priceable, and tradable, with a new value system centered on their invocation, distribution, and settlement rapidly taking shape. TechFlow The semantic move is not accidental. China is not simply producing more AI tokens than the United States. It is trying to name, define, and ultimately govern the unit of account for the next phase of the global technology economy. Jensen Huang arrived at the same conceptual destination independently. At Nvidia’s GTC developer conference last week in San Jose, clad in his trademark leather jacket, Huang told the audience that “tokens are the new commodity,” declaring that Nvidia should no longer be seen mainly as a chip maker but as a builder of what he calls “AI factories” that produce tokens in large numbers. South China Morning Post Two of the world’s most consequential technology figures, one American and one Chinese, are now converging on the same metaphor — which suggests the metaphor is correct.

The Structural Edge: Electricity, Architecture, and the Token Economy

China’s dominance in China’s AI tokens is not a speculative narrative driven by state media hype or a single viral product launch. It rests on compounding structural advantages that are difficult to reverse quickly through policy alone.

The most fundamental is energy. China’s total electricity costs are approximately 40% lower than in the United States — a physical cost advantage that competitors cannot easily replicate. China Academy When a developer anywhere in the world calls a Chinese AI model’s API, the request is processed in a Chinese data center powered by the Chinese grid. The economic value of that electricity is exported globally as a high-margin digital service — one that bypasses customs, evades tariffs, and barely registers in conventional trade statistics. Industry estimates suggest that converting raw electricity into AI processing services can increase its value by up to 22 times compared to simply exporting electricity at the grid rate. China.org.cn China’s western regions — Xinjiang, Inner Mongolia, Yunnan — provide abundant, low-cost renewable energy at scale. The country has also built a vertically integrated supply chain spanning ultra-high-voltage transmission equipment, liquid-cooled data centers, and server assembly that few rivals can match.

The second advantage is architectural. Chinese AI laboratories have pioneered efficiency-first model design under the pressure of US chip export restrictions. DeepSeek V3’s Mixture-of-Experts architecture activates only a fraction of the model’s parameters during inference, with independent tests showing its inference cost is roughly 36 times lower than GPT-4o. MiniMax M2.5, despite having 229 billion total parameters, activates only 10 billion during inference. China Academy These are not merely clever engineering choices. They are the product of operating under genuine resource constraints — constraints that have paradoxically made Chinese models leaner, cheaper, and more deployable at global scale.

The third advantage is price. MiniMax M2.5 charges $0.30 per million input tokens and $1.10 per million output tokens. By comparison, Claude Opus 4.6 costs $5 per million input tokens and $25 per million output tokens — roughly 10 to 20 times more expensive. TechBriefly In the new agentic AI era, where a single automated workflow can consume millions of tokens in a matter of hours, this price differential is not a marginal consideration. It is frequently the deciding factor. A Silicon Valley developer who once tested workflows with GPT-4 at tens of dollars a day has little rational reason not to switch when a Chinese alternative delivers comparable benchmark performance at a tenth of the cost.

Alibaba Token Hub and the Industrialization of Ciyuan

Corporate China has received the signal and reorganized accordingly. Alibaba has established a new internal division called the Alibaba Token Hub, directly overseen by Chief Executive Eddie Wu, moving the research team that develops its flagship Qwen models, the consumer-facing app division, and major AI-related products under a single unified structure. Bloomberg The unit will focus on creating, distributing, and applying tokens — the basic computing units used by AI models — while integrating several internal teams to cover the full AI stack, from foundation model development to enterprise-level AI applications. TechNode The naming of the division after the commodity it produces is itself a statement of intent. Alibaba is not building an AI company. It is building a token factory.

The reorganization lands against a backdrop of surging Chinese AI cloud pricing that reflects genuine demand pressure. Alibaba Cloud announced price increases on select services effective April 18, 2026, citing global AI demand, rising supply-chain costs, and sharp increases in token call volume. Baidu Smart Cloud made an identical announcement the same day. Zhipu launched a new agent-optimized model and simultaneously raised its API price by 20% on March 16th. Tencent Cloud adjusted billing strategies for its intelligent agent development platform starting March 13th. 36Kr When Chinese AI providers raise prices in unison, it is not a cartel behavior — it is a market clearing mechanism. The supply of ciyuans is being consumed faster than it can be provisioned, and the price signal is propagating through the ecosystem.

A report jointly released by Andreessen Horowitz and OpenRouter shows that the total token call volume of Alibaba’s Qwen series ranks second globally at 5.59 trillion, second only to DeepSeek’s 14.37 trillion. 36Kr These are not vanity metrics: they represent real developer adoption, real API revenue, and real geopolitical influence embedded in the codebases of companies that may scale into tomorrow’s global technology infrastructure.

The Counterpoints: Profitability, Chip Constraints, and Sovereign Risk

Honest analysis demands acknowledgment of what the token volume data does not tell us. Market share on OpenRouter — a platform beloved by independent developers and AI hobbyists rather than large enterprise procurement departments — does not translate automatically into enterprise dominance. The main battleground for corporate AI workloads remains, for now, in the hands of American providers offering the accountability, compliance tooling, and integration depth that large institutions require. OpenRouter represents a thin slice of the global AI market; its developer-skewed demographics mean the 61% figure overstates Chinese penetration of the full economy.

The profitability question is equally live. Aggressive token pricing is partly a land-grab strategy — buying market share at margins that may not be sustainable. The simultaneous wave of Chinese cloud price increases in March 2026 suggests the economics are tightening. DeepSeek’s inference costs may be radically lower than GPT-4o’s, but training costs, talent costs, and the escalating expense of acquiring increasingly scarce advanced chips under US export restrictions are real. Washington’s ongoing efforts to tighten the chip embargo — extending restrictions to additional Nvidia architectures and closing loopholes used to route chips through third-country entities — represent a genuine long-run constraint on China’s ability to scale inference capacity. And sovereign risk is not zero. Developers in regulated industries and allied governments face real legal and reputational exposure from routing sensitive workloads through Chinese infrastructure, regardless of how cheap or fast those tokens may be.

Token Exports as a New Form of Digital Soft Power

Yet the strategic logic of China’s position is more durable than its critics typically concede. Tokens are intangible, bypass customs, evade tariffs, and don’t appear in official trade statistics. China exports massive compute and electricity services, yet it remains virtually invisible in trade data. China Academy This invisibility is a feature, not a bug. Token exports occupy a legal and regulatory grey zone that trade hawks find difficult to target. You cannot sanction a token. You cannot put a tariff on an API call. The infrastructure that produces the tokens — the data centers, the power grid, the model weights — sits firmly within Chinese sovereignty and beyond the reach of extraterritorial enforcement.

Beijing appears to understand this clearly. China has named 2026 the “Year of Data Element Value Release,” is building a single national data market with unified property rights, and by end of 2025 had compiled over 100,000 high-quality datasets totaling more than 890 petabytes — roughly 310 times the digital collection of the National Library of China. MEXC The scale of data assembly, combined with cheap inference, low-cost energy, and rapid model iteration cycles, constitutes a vertically integrated token economy that took China’s industrial sector decades to assemble in steel or semiconductors — and that is being assembled in AI in a matter of years.

Chinese artificial intelligence service stocks rallied this week after state media highlighted a sharp increase in domestic AI model adoption and a surge in the token usage they generate. Bloomberg The market’s reaction is rational. Investors are pricing in what economists have been slow to formally model: that the token, like oil before it, will become a commodity whose production geography matters enormously to the distribution of global wealth. The country that most cheaply produces what the world most needs will, history suggests, extract durable rents. In the oil era, that was the Persian Gulf. In the token era, the early evidence points unmistakably toward the Yangtze River Delta, the Pearl River Delta, and the data centers of Guizhou province humming with renewable hydropower.

The British Empire laid the cables. The rest, as they say, was history. The question now is who controls the flow — and at what price per million tokens.