Today’s top stories
US inflation was slightly weaker than forecast in April in a sign that the Federal Reserve’s programme of interest rate rises was taking effect. CPI dipped to an annual rate of 4.9 per cent, its lowest level since April 2021, while core inflation, which strips out volatile energy and food prices, dropped slightly to 5.5 per cent.
Ryanair won a European court case against the EU’s decision to grant Lufthansa billions in state aid to help the German carrier during the pandemic in a setback for regulators in Brussels.
Binance, the world’s largest cryptocurrency exchange, said a crackdown on crypto had made it “very difficult” to do business in the US, adding it now hopes to be regulated in the UK.
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“It is little exaggeration to say the future of economic globalisation is at risk.”
That’s the view of the FT’s editorial board on the intensifying crackdown on US consultancies operating in China, making it more difficult than ever for foreign investors to glean even basic information on potential acquisitions, Chinese partners or suppliers.
China on Monday said state security services had raided the offices of Capvision in Shanghai, Beijing, Suzhou and Shenzhen, broadcasting the action on primetime TV. It follows raids on Mintz and Bain & Company.
The US Chamber of Commerce warned that Chinese scrutiny of American companies had risen “dramatically”, particularly after a new counter-espionage law widened the scope of material that could be deemed sensitive for national security reasons, prompting visits from the “men in black”.
The clampdown threatens to undo the recent charm offensive by Li Qiang, China’s second-ranked leader after President Xi Jinping, to woo back foreign investors as it seeks to restart growth after a long period of pandemic disruption.
Ker Gibbs, former president of the American Chamber of Commerce in Shanghai, said it was “sending chills to the whole [foreign business] community . . . The lawyers and the due diligence people are like swamp guides. If you don’t have a swamp guide you are not going into the swamp.”
China is also caught up in a tit-for-tat diplomat expulsion row with Canada, which has ramped up measures to curb China’s development of advanced semiconductor technology.
In addition, China’s relations with the EU are under pressure over Beijing’s support for Russia. Beijing yesterday said it would retaliate if Brussels went ahead with sanctions on eight Chinese companies accused of selling equipment that could be used in weapons. The proposed new measures, seen by the FT, are being discussed by EU member states this week.
It may be that, as China’s domestic companies improve and expand, (exemplified by the rapid rise of the country’s motor industry), investment from western multinationals is becoming less essential, the FT notes.
However, it is these companies that have pleaded the case for continued engagement with China in the face of increasingly hostile domestic political opposition. If Beijing does not act swiftly to assuage their concerns, the FT concludes, “the result could be a fundamental breach between China and the multinationals that have long been its biggest supporters in the west”.
Need to know: UK and Europe economy
UK manufacturers urged ministers to stop “flip-flopping” and come up with an effective industrial strategy. The head of trade body Make UK said the country was the only major economy not to have one.
Recent more encouraging data on the UK economy has, however, led to a revival in the strength of sterling. Interest rates could hit their highest level since 2008 when the Bank of England makes its decision tomorrow. Here’s our explainer on the latest thinking.
Turkish president Recep Tayyip Erdoğan gave 700,000 public sector workers a 45 per cent pay rise just days before this weekend’s hotly contested election. Our Big Read has all you need to know on the battle between Erdoğan and his main challenger Kemal Kılıçdaroğlu.
The latest target for western sanctions on Russia is its lucrative diamond business. Our Big Read examines how G7 plans for an inspections regime could risk destabilising the global market.
Need to know: Global economy
US president Joe Biden failed to reach a breakthrough with Republicans to avert a crisis over the debt ceiling after a meeting yesterday. The issue is likely to dominate US politics and could shake up global financial markets over the coming weeks.
China’s imports fell in April, casting doubt over the pace of the country’s economic bounceback. Western companies said they had overestimated how quickly China would recover.
Indonesia has overtaken Australia and the Philippines to become the world’s second-largest supplier of cobalt, a battery metal, after the Democratic Republic of Congo. Many operations are being driven by joint ventures of Chinese companies and local groups, fuelling western anxieties about Beijing’s dominance of the electric car supply chain.
The market for lithium, another battery component, is also booming. Allkem, one of Australia’s largest lithium companies, is to merge with US rival Livent in a $10.6bn deal.
Latin America has abundant and cheap renewable energy, is one of the world’s biggest food exporters, is at peace, and is well placed to profit from the US shifting production from China. Yet the region’s leaders are squandering its opportunities, argues LatAm editor Michael Stott. Ecuador’s president Guillermo Lasso faces an impeachment trial related to contracts with state oil transport company Flopec.
Chief economics commentator Martin Wolf analyses the threats and promises of artificial intelligence and in particular its effect on work and productivity.
Need to know: Business
Despite the dramatic headlines of the past few months, profits in the US banking sector hit an all-time high of $80bn in the first quarter, an increase of 33 per cent on last year, as institutions benefited from rising interest rates, low loan defaults and an expanding job market. Former regulator Sheila Bair says Congress needs to protect smaller banks from investor nerves.
ChangXin Memory Technologies, a Chinese chipmaker, is going ahead with a listing in Shanghai to fund its expansion after receiving confirmation from US chip toolmakers that they can supply its new production lines.
Glencore, one of the world’s largest diversified natural resources groups, plans to build Europe’s biggest battery recycling plant.
Dividends at Britain’s privatised water companies surged to £1.4bn in 2022, according to FT analysis, despite rising household bills and public criticism over sewage outflows. The opposition Labour party said it planned a new regulator for England and Wales if it won the next general election.
A new global task force, in conjunction with Interpol and Europol, aims to crack down on sport streaming piracy that is costing the broadcast industry $28bn a year.
The World of Work
The debate over whether the UK is losing its top talent — and falling further behind New York as the home of the world’s top companies — has intensified in recent months. Does it pay for British executives to move to the US?
The Generation Z cohort of young lawyers — those born between 1995 and 2012 — are increasingly shunning the biggest global law firms for their lack of work-life balance and clashes with their personal ethics, according to a new survey.
The latest Working It podcast discusses the changing nature of recruitment and why employers now believe skills matter more than your degree.
LinkedIn is closing down its Chinese version, becoming the latest western company to shut services in China amid increased competition and a tightening regulatory environment.
Hybrid work has improved working lives for many, not just the elite, argues columnist Sarah O’Connor, and that is progress we shouldn’t throw away. Hybrid work is also fuelling demand for female networks.
Some good news
The World Health Organization said a new solution to manage post-partum bleeding could be a major breakthrough in reducing maternal deaths. The problem affects an estimated 14mn women each year with around 70,000 deaths — mostly in low and middle-income countries — or one death every six minutes.
Source: Economy - ft.com
