Shipping waters incident highlights wider US-China tensions

Today’s top stories

• Mike Lynch, one of the UK’s best-known tech entrepreneurs, is among those missing after a luxury yacht sank off the coast of Sicily.

• Democrats are on the defensive after Kamala Harris’s economic plans were criticised for being gimmicky.

• US secretary of state Antony Blinken termed today’s ceasefire talks in Israel as “maybe the last opportunity” to end the fighting and avoid a regional escalation.

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Good evening.

Hostilities over shipping waters have led to increased tensions between China and the US and its allies today. This morning, China and the Philippines traded barbs over an incident in the disputed South China Sea, in which both countries accused the other of ramming its ships. The reef belongs to the Philippines’ exclusive economic zone although Beijing claims sovereignty over it. China’s coastguard condemned the Philippine vessel for having “illegally intruded” its waters.

Flashpoints over the past year have long threatened the maritime détente between the two countries, including an occasion in June when Beijing’s coastguard used axes to puncture Philippine boats, injuring one sailor.

The event was a microcosm of wider global tensions between China, the world’s second-largest economy, and western allies in the region, underlining the delicate balance that countries wedged between the two superpowers have to strike to keep both parties on side. Analysts have suggested that China is responding to concerns about the US’s attempts to suppress its rise.

Singapore’s premier, Lawrence Wong, echoed that sentiment. The city state is one of many across the globe caught in the crosshairs of the rivalry. “The mutual suspicion and distrust will continue,” Wong said, adding that it would bring grave consequences for international trade, security and co-operation.

The Biden administration is not innocent. The global race for dominance in fields such as AI has soured relations further while increasing curbs on chip exports to China has caused Beijing to respond in turn, leaving the rest of the global economy hanging in the balance.

The tensions threaten to erode co-operation in other fields too. Researchers are currently trying to salvage a 45-year old science and technology pact signed by Jimmy Carter and Deng Xiaoping, with its future uncertain.

Anxieties abound in Washington over the potential of a Trump victory to add fuel to the fire as the former president has pledged a 60 per cent tariff on Chinese goods. However, the real issue for China will be its inability to rely on exports to manage its deflation-debt doom-loop, Morgan Stanley’s Chetan Ahya argues. Tariffs are just one of a raft of issues blighting its economy. And, he adds: “Investors hoping that volatility eases for the rest of the year may not like what they see on the calendar.”

Need to know: UK and Europe economy

The UK’s commercial real estate market has begun to recover faster than the rest of Europe, after a difficult two-year downturn for the sector brought on by high interest rates. 

Nigel Farage, leader of the UK’s populist Reform party, is the country’s highest earning MP, making £1.2mn a year, according to figures published by the parliamentary authorities.

Germany’s finance minister Christian Lindner has come under attack, after it emerged that he wrote to colleagues to veto new military aid for Ukraine. Germany is Ukraine’s largest military donor after the US.

Need to know: Global economy

Investors anticipate a “soft landing” for the US economy, but they are growing increasingly concerned that the major central banks are moving too slowly to cut rates, according to a Bank of America survey.

In an interview with the FT, Mary Daly, president of the San Francisco Fed, said the central bank needs to take a gradual approach to cutting rates.

Investors who cut their equity exposure during the tumult in markets earlier this month sharply increased their positions in the week to last Friday, Deutsche Bank flow data shows.

Need to know: business

Start-up failures in the US have risen by 60 per cent over the past year, according to data from Carta, as cash raised during the pandemic-era technology boom dries up.

Iron ore prices have hit their lowest level in two years, cumulatively wiping out about $100bn in market capitalisation of the “big four” iron ore miners — BHP, Rio Tinto, Vale and Fortescue.

Japan’s 7-Eleven, the world’s biggest store chain, has received a takeover offer from Canadian retailer Alimentation Couche-Tard. The news caused shares in Seven & i Holdings to jump almost 23 per cent today.

AMD has agreed to acquire AI infrastructure group ZT Systems in a $4.9bn cash and stock transaction, extending a spate of investments by the chip company as it seeks to challenge market leader Nvidia.

Water consumption by dozens of facilities in Virginia’s “data centre alley”, home to the world’s largest concentration of data centres, has jumped by almost two-thirds since 2019, amid warnings from environmental campaigners.

The World of Work

What’s the most annoying thing about young people at work? That they are often right, the FT’s Pilita Clark argues.

The FT’s business book of the year longlist has been released, with various compelling tomes on management styles and organisational structure making the cut.

Brian Niccol, the new Starbucks chief executive, has persuaded the coffee chain to set up a “small remote office” for him in Newport Beach, California. Will his style of working set a wider trend?

Some good news

Parkinson’s disease affects 10mn people worldwide. However, researchers at the University of California, San Francisco have found that a new technology that deploys deep brain implants to continuously adjust electrical stimulus to an individual’s neural activity can provide enhanced therapy. It’s the first clinical trial of its kind.

Source: Economy - ft.com