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The BGI, presented Wednesday by an international group of governance scholars, analyses measurable benchmarks of democratic accountability across 145 countries.

On a 100-point scale, the global score for democratic accountability slipped slightly from 65 in 2000 to 64 in 2023, the most recent data used in the project. The wave of democratisation observed in the closing decades of the last century has stalled in the last 15 years. Democratic accountability fell in 54 countries while it improved in 48 countries.

Yet the BGI — a collaborative project of the Luskin School of Public Affairs at the University of California, Los Angeles (UCLA), Berlin’s Hertie School and the Berggruen Institute, a think tank headquartered in Los Angeles — captures remarkably widespread growth in provision of public goods.

Encompassing healthcare, education, infrastructure, environmental sustainability and conditions to foster employment and rising prosperity, public goods improved in 135 of the countries studied, while declining slightly in just four. The global average jumped from 58 to 69 points from 2000 to 2023.

The third component of what the BGI authors refer to as the “governance triangle” is state capacity, defined as the ability to tax, borrow and spend, control territory, operate scrupulous, competent bureaucracies and administer predictable rule of law. The index finds the global average ticking up from 48 to 49 points; 56 countries had increased state capacity while 57 declined.

“What does it tell us about the world ahead?” Prof. Helmut K. Anheier, a Luskin School sociologist and BGI principal investigator, asked during the public release of the 2026 BGI on the UCLA campus.

“Countries are not really improving in their governance performance in significant ways. … We’re not really having forward-looking investment in governance capacity. There is considerable inertia.”

The largest improvements across all three BGI components occurred in Gambia, which the report groups with “low-capacity developing states.” These states score low across the board, particularly in the provision of public goods. This cluster constitutes the poorest countries with the least developed economies, which face the most serious challenges.

“They have the greatest exposure to likely future crises, whether it’s global warming, whether it’s a new pandemic, whether it’s another financial crisis, whether it’s the impact of AI,” Anheier said. “And they have the least capacity to respond to it.”

Bhutan, Georgia, Iraq and Tunisia — which make up the remaining top five countries with the largest improvements in the BGI — are classified as “capacity-constrained states.” They tend to be middle-income with struggling democracies. These countries score higher across the board than the low-capacity developing states, but their state capacity tends to lag compared to public goods and democratic accountability.

The capacity-constrained states risk falling into “a cycle that erodes the institutions they have built,” Anheier said.

“Consolidated democratic states”, a cluster of most of the world’s richest countries, which score highly in all three BGI components, have to confront domestic complacency. Further, in the United States and some others, “political dysfunction” is leaving mounting problems unaddressed and risking erosion of state capacity, Anheier said.

At the other end of the spectrum, the country with the farthest fall on the BGI since 2000 is Nicaragua. Second from last is Venezuela, followed by Hong Kong, Hungary and Turkey. The rest of the bottom 10 are Russia, Iran, Poland, El Salvador and Belarus.

Since 2023, which is the last year of data available for the study, Poland and Hungary have both seen government changes via election, despite serious democratic backsliding. Both had fallen out of the group of “consolidated democratic states” by 2023 and moved into the capacity constrained cluster.

The other eight countries at the bottom of the list are all places that once had some semblance of competitive elections, but by now have little or no remaining pretense of democracy. They are grouped by the authors among the “authoritarian and hybrid states”, which have by far the lowest democratic accountability but outperform even some struggling democracies in delivering public goods.

These regimes have tended toward faster economic growth in the period observed. But that seeming prosperity, typically fueled by extractive industries or overreliance on exports, masks “serious institutional weaknesses in these countries, including divided elites,” Anheier said.

Relatively few countries — 21 of the 145 — changed enough for better or worse to be classified in a new group by the end of the 23-year study period.

“Movement between them is rare, but this is largely what we should expect,” said Stella Ghervas, a UCLA historian on a panel of experts who discussed the BGI findings Wednesday. “Government systems are not created in a moment. They evolve over long periods of time.”

Local conditions shaping governance in each country can rarely be quickly reset through political will or even external shocks, Joseph C. Saraceno, a Luskin School data scientist and BGI co-author, said Wednesday.

“Despite all the talk of major transformations happening in global affairs, the underlying configuration of governance simply doesn’t appear to change very much,” Saraceno said. “We use the term inertia to describe this reoccurring pattern. In other words, the structures of global governance are resistant to movement as the conditions beneath them are quite sticky: political economies, demographics, resource endowments. These are deeply layered, and they push each country toward the world that it already inhabits.”

But the challenges lurking around the world may not wait for the slow and difficult processes of political change and development to catch up.

“With the few exceptions of those countries in the consolidated democratic world,” Anheier said, “the great majority of the countries in the world is ill-prepared for the future.”

The full report, ‘ 2026 Berggruen Governance Index – The Four Worlds of Governance‘, can be viewed and downloaded from the website of the UCLA’s Luskin School.

Frank Fuhrig, DNA

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The order, issued by the Ministry of Commerce on 2 May, marks China’s first known use of a formal blocking mechanism against US sanctions on domestic companies. It targets measures against Hengli Petrochemical Refinery Co, Shandong Shouguang Luqing Petrochemical Co, Shandong Jincheng Petrochemical Group Co, Hebei Xinhai Chemical Group Co and Shandong Shengxing Chemical Co. The firms had been placed under US restrictions linked to alleged purchases or processing of Iranian crude, including asset freezes and transaction bans.

The move places banks, insurers, commodity traders and shipping intermediaries in a difficult position. Compliance with Washington’s restrictions may now expose them to legal risk in China, while compliance with Beijing’s order may expose them to penalties under the US sanctions regime. For large Chinese banks with international operations, the dilemma is particularly acute because access to dollar clearing, correspondent banking and global capital markets remains central to their business.

China has long rejected unilateral US sanctions as illegitimate, especially when they apply beyond American territory. Until now, however, Beijing had often allowed major financial institutions and state-linked enterprises to quietly reduce exposure to sanctioned entities to avoid jeopardising access to the US financial system. The latest order changes that balance by instructing domestic parties not to recognise, enforce or comply with the penalties.

The legal basis lies in China’s blocking rules against what Beijing describes as unjustified extraterritorial application of foreign laws. Those rules, introduced in 2021 and strengthened by additional countermeasure regulations, allow authorities to prohibit compliance with foreign restrictions that impair normal business with third countries. The 2 May order says the US measures against the refiners improperly restrict lawful trade and harm the rights of Chinese entities.

The immediate trigger is Washington’s renewed pressure on Iranian oil revenues. Hengli’s Dalian refinery, with capacity of about 400,000 barrels per day, is among the most prominent privately owned refining assets to be targeted. US authorities have accused it of buying large volumes of Iranian crude. Hengli’s parent has denied trading with Iran and said operations remain normal.

Other sanctioned firms are part of China’s independent refining sector, often described as “teapot” refiners, clustered mainly in Shandong and surrounding provinces. These companies have become central to China’s discounted crude imports, including oil from Iran and Russia, as state refiners have generally been more cautious in handling cargoes exposed to sanctions risk.

The financial implications extend beyond the refiners themselves. Banks processing payments, lenders providing working capital, insurers covering cargoes, shipowners transporting crude and brokers arranging trades could all face competing legal obligations. International banks are likely to adopt a more conservative stance, while smaller domestic institutions may come under pressure to maintain services to companies protected by Beijing’s order.

Hengli has already moved to limit operational disruption. Its Singapore trading unit was restructured after the US designation, with a majority stake transferred to a company linked to a local government entity in Dalian. The shift has not fully reassured counterparties, as brokers and financial institutions remain wary of dealing with entities connected to sanctioned operations.

The confrontation comes as energy markets are adjusting to tighter enforcement against Iranian crude flows. China remains Iran’s largest oil customer, with independent refiners attracted by discounted barrels at a time when domestic margins are under pressure. Traders have reported that cargoes are often routed through complex shipping arrangements, with documentation obscuring origin and payments settled through non-dollar channels.

For Beijing, the order is also a political signal. It asserts that China will not automatically absorb the costs of US secondary sanctions when strategic commodities, energy security and private industrial champions are involved. It also offers reassurance to domestic firms that the government is prepared to use legal instruments rather than limit itself to diplomatic protest.

For Washington, the step complicates enforcement. Sanctions work most effectively when banks and intermediaries avoid designated firms without needing direct prosecution. If China compels non-compliance at home, US authorities may have to decide whether to escalate against financial institutions that continue servicing the refiners, a move that could widen the dispute from energy trade into the banking system.

Asian equities advanced sharply on Monday as artificial intelligence-linked chipmakers in South Korea and Taiwan drove regional benchmarks back towards record territory, erasing the losses triggered by the Iran war and restoring investor appetite for technology-heavy markets.

The MSCI Asia Pacific Index rose as much as 2.3 per cent on May 4, its strongest intraday gain since April 8, while the MSCI Asia Pacific excluding Japan Index climbed as much as 2.9 per cent. Benchmarks in South Korea and Taiwan, both heavily exposed to the semiconductor supply chain, gained more than 4 per cent each as investors moved back into companies seen as central to the global AI build-out.

The rally was led by the region’s dominant AI hardware suppliers, including Taiwan Semiconductor Manufacturing Co, Samsung Electronics and SK Hynix. These companies sit at crucial points of the AI infrastructure chain, from advanced foundry production to high-bandwidth memory chips used in data centres and graphics processors. Strong earnings from US technology groups have reinforced expectations that capital spending on AI servers, accelerators and cloud infrastructure will remain elevated through 2026.

TSMC has become the clearest symbol of that shift. The world’s largest contract chipmaker posted a 58 per cent jump in first-quarter net profit to a record level, supported by demand for AI processors, and guided second-quarter revenue to $39 billion to $40.2 billion. Its first-quarter revenue rose 35 per cent from a year earlier to about $35.7 billion, underlining the scale of orders tied to advanced computing.

Samsung’s semiconductor division also delivered a major earnings rebound, reporting 53.7 trillion won in operating profit for the first quarter on 81.7 trillion won in revenue. The group said memory sales were lifted by AI-related demand and tight supply, even as its mobile and display businesses faced margin pressure from higher component costs.

SK Hynix has benefited from its strong position in high-bandwidth memory, a category that has become central to AI accelerator performance. Demand from data centre operators and chip designers has pushed memory makers into long-term supply arrangements, with shortages expected to extend into 2027 as customers reserve capacity years ahead.

Taiwan’s broader market has also gained from the AI trade. The island’s economy expanded 13.69 per cent in the first quarter, its fastest annual pace in nearly four decades, supported by a surge in exports tied to AI hardware. Taiwan has overtaken Canada to become the world’s sixth-largest stock market by value, helped by TSMC’s rise and investor demand for companies embedded in advanced chip manufacturing.

Investor confidence has been strengthened by Nvidia’s expanding Asian supply chain. Its partners now span foundries, memory suppliers, electronics assemblers and companies linked to robotics and so-called physical AI. The shift has widened the rally beyond a handful of chip names, lifting component makers and specialist suppliers that provide substrates, packaging, power management and memory-related technologies.

The rebound also reflects a broader reassessment of geopolitical risk. The Iran war initially prompted investors to cut exposure to export-oriented and energy-importing markets, particularly those vulnerable to shipping disruptions and higher fuel costs. Yet the scale of AI-related earnings growth has helped offset those concerns, with funds favouring economies that are directly tied to semiconductor demand and less dependent on domestic consumption.

South Korea’s Kospi has been one of the year’s standout performers, supported by Samsung, SK Hynix and other technology exporters. Taiwan’s Taiex has also outperformed as investors price in continued demand for advanced nodes, AI servers and high-performance computing. The concentration of gains, however, has increased concerns that regional indices are becoming more dependent on a narrow set of semiconductor companies.

Valuations remain a key risk. Share prices in several AI-linked companies have risen faster than earnings forecasts, leaving markets exposed to any slowdown in capital expenditure by US cloud providers or delays in chip production. Memory supply shortages may support pricing in the near term, but they could also raise costs for downstream electronics makers and intensify competition among suppliers expanding capacity.

Currency movements have added another layer to the market response. A weaker won has supported earnings translation for South Korean exporters, while Taiwan’s market has drawn stronger foreign inflows on expectations that AI-linked exports will keep growth elevated. Japan’s yen strengthened during Monday’s regional trading, reflecting a mix of safe-haven demand and shifting expectations around monetary policy.

Japan’s yen rallied sharply against the dollar on Friday as traders braced for further official action from Tokyo after suspected currency intervention jolted global markets during a packed week of central bank decisions.

The dollar fell to around 155.60 yen at one point in London trading, before recovering part of the move to trade near 156.40. The rebound in the yen followed a dramatic reversal on Thursday, when the Japanese currency strengthened by about 3 per cent after the dollar briefly climbed above 160 yen, a level widely viewed in markets as politically sensitive for Tokyo.

Japan’s top currency official Atsushi Mimura said authorities remained concerned about speculative moves and were watching markets closely. Finance Minister Satsuki Katayama had already warned that Tokyo was ready to take decisive action if currency movements became disorderly. The comments reinforced market expectations that further intervention could follow, particularly during Japan’s Golden Week holiday period, when thinner trading conditions can magnify exchange-rate swings.

Bank of Japan money-market data suggested authorities may have spent about 5.48 trillion yen, or roughly $35 billion, to support the currency on Thursday. The scale would be close to the size of Japan’s July 2024 intervention, when authorities moved after the yen weakened to a 38-year low near 162 per dollar. Tokyo typically does not confirm intervention immediately, preferring to disclose monthly figures later, but unusually large projected fund flows at the central bank often provide an early signal of official activity.

The pressure on the yen has been building for months as the interest-rate gap between Japan and the United States remains wide. The Bank of Japan kept its policy rate at around 0.75 per cent this week, although three board members dissented and argued for a rise to 1 per cent. That split underlined growing concern inside the central bank that imported inflation, higher energy costs and yen weakness could feed into domestic prices.

The Federal Reserve also left rates unchanged, keeping its target range at 3.5 to 3.75 per cent. The gap between US and Japanese yields continues to encourage carry trades, in which investors borrow cheaply in yen and invest in higher-yielding dollar assets. Such positioning has made the yen vulnerable whenever markets believe Tokyo’s warnings lack force.

The intervention threat gained urgency after oil prices climbed on concerns over disruption linked to the Iran conflict and risks around the Strait of Hormuz. Japan, heavily dependent on imported energy, faces a double blow from higher crude prices and a weaker currency, which raises the local cost of fuel, food and raw materials. That dynamic complicates the Bank of Japan’s effort to normalise policy gradually without damaging a fragile recovery.

The broader central bank backdrop added to volatility. The European Central Bank kept its deposit rate at 2 per cent while signalling that inflation risks had intensified. The Bank of England held Bank Rate at 3.75 per cent in an 8-1 vote, with one policymaker favouring an increase. Across major economies, policymakers are balancing weaker growth signals against renewed price pressures from energy and supply disruptions.

Currency traders said Japan’s challenge is that intervention can slow a slide but rarely reverses a trend unless supported by monetary policy or a shift in global rates. A one-off operation may force investors to cut speculative positions, but renewed dollar strength can quickly restore pressure on the yen if US yields remain elevated and the Bank of Japan moves cautiously.

The timing of the suspected intervention was also significant. With European markets partly thinned by the May Day holiday and Japan heading into an extended holiday stretch, liquidity conditions were expected to remain fragile. Authorities have often chosen moments of thin trading to maximise the impact of currency operations, but such moves also increase the risk of sudden reversals when full market participation returns.

For households and companies in Japan, the exchange-rate battle has direct economic consequences. A weaker yen benefits exporters by raising the value of overseas earnings, but it also lifts import bills and squeezes consumers through higher costs. Large manufacturers have been able to absorb some of the pressure, while smaller businesses reliant on imported inputs face tighter margins.

By Nitya Chakraborty Just two weeks before the scheduled summit of U.S President Donald Trump with the Chinese President Xi Jinping in Beijing on May 14-15, the report of the World Intellectual Property Organisation (WIPO) on the status of AI related applications, has unnerved the U.S. administration as the latest Chinese supremacy in robot related […]

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