Aurelia Butler

Good morning. The White House is seeking detailed information on Huawei’s latest flagship smartphone, which analysts have described as an important milestone for the Chinese tech group four years after US restrictions crippled its handset business.US national security adviser Jake Sullivan said on Tuesday that Washington needed to get “more information” on the precise “character and composition” of a chip powering Huawei’s newly released Mate 60 Pro, in answer to a briefing question on whether US controls on exports of advanced semiconductor technology were being thwarted.While Huawei has declined to reveal details of its suppliers for the Mate Pro, a dismantling of the phone by the consultancy TechInsights last week suggested it contained a 7-nanometre processor made by Semiconductor Manufacturing International Corp.The partially state-owned Chinese chipmaker became subject to export restrictions three years ago, when the US commerce department said there was an “unacceptable risk” of chip technology being diverted to it for “military end use”. Read the full story on Huawei’s “Made in China” smartphone — and what it could mean for the US-China tech war. More on chips: US private equity group KKR is planning an initial public offering for a chip equipment maker on Tokyo’s exchange in the fourth quarter, in what would be the market’s biggest IPO since 2018.Here’s what else I’m keeping tabs on today:EU GDP: Second-quarter growth figures are set to be released today.Tencent: The Chinese tech giant will unveil its artificial intelligence chatbot, joining the global race to dominate generative AI.Australia LNG strike talks: Workers at Chevron’s Western Australian natural gas facilities agreed to pause planned industrial action until Friday, just hours before they were expected to begin strike action amid a dispute over pay and conditions. Chevron’s Gorgon and Wheatstone operations in Australia account for more than 5 per cent of global liquefied natural gas capacity. (Reuters)Our Long Story Short newsletter provides a selection of the best work across the Financial Times and an insight into reporting life, written by a different female journalist each week. Don’t miss this Friday’s edition from Roula Khalaf, editor of the FT. Sign up now. Five more top stories1. WeWork is seeking to renegotiate nearly all of its leases around the world, weeks after the SoftBank-backed office space group warned that there was “substantial doubt” about its ability to continue as a going concern. The company’s drive to cut lease costs threatens a commercial real estate industry that is already suffering from the excess capacity that followed a coronavirus pandemic-driven surge in working from home. Read the full story.2. Exclusive: Universal Music has struck a deal with French streaming service Deezer to direct more royalties to artists and away from a “sea of noise” that includes amateurs, bots and white-noise soundtracks. The agreement is the biggest shift to the streaming business model since the launch of Spotify in 2008. Here’s how this deal could reshape streaming economics.Other media news: Disney is quietly giving players at this week’s US Open access to tournament coverage amid a heated dispute with pay-television provider Charter Communications that has blacked out coverage for millions of subscribers.3. Turkish president Recep Tayyip Erdoğan has abandoned his life-long hostility to interest rate rises, vowing to use “tight monetary policy” to counter soaring inflation, which the government said would hit 65 per cent by the end of this year. The remarks from Erdoğan, who had previously lashed out at the “interest rate lobby”, are a sign he is backing the more orthodox monetary policy of his new economic team. FT’s Adam Samson reports from Ankara. 4. Officials in China and Japan are pushing back against the strength of the US dollar as a rally by the greenback threatens to drive both the renminbi and the yen to historic lows. The People’s Bank of China set the trading band for the Chinese currency higher than expected on Wednesday while Japan’s top currency diplomat issued his sharpest warning yet against the yen’s fall. Here’s what analysts are saying. 5. Indonesia has threatened to curb TikTok’s shopping platform, months after the Chinese-owned viral video app said it would invest billions of dollars in the fast-growing south-east Asian country. The minister of co-operatives and small and medium enterprises, Teten Masduki, accused TikTok Shop of “monopolistic” business practices, and said Indonesia should follow the lead of other countries including the US and India in limiting the company’s activities. The Big Read

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More than 100 countries are exploring the idea of a central bank digital currency, ranging from China’s “e-yuan” to the UK’s “digital pound”. But as plans for digital cash gain momentum, so have the conspiracy theories. A growing throng of culture warriors have decried CBDCs as a tool designed by global elites and the World Economic Forum to destroy freedom or impose unwelcome environmental and social agendas.We’re also reading . . . Renaming India: Rumours that Narendra Modi’s government is poised to change the country’s official name could not have dropped at a more volatile moment.Arming Russia: The US has warned North Korea will “pay a price” for providing weapons to Russia at a potentially pivotal moment in the war in Ukraine.Texting in a crisis: Cyber space exacerbates isolation, bullying and depression, but instant messaging can be a lifeline for those who need it, writes Gillian Tett.Chart of the day

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Heat records in the 2023 northern hemisphere summer were “not just broken but smashed”, scientists from the EU earth observation agency reported. Read more on the world’s hottest season on record. Take a break from the newsOur ancestors were on the brink of extinction around 900,000 years ago, according to a new scientific report, with little more than a thousand breeding individuals eking out a lonely existence for more than 100,000 years. But this new theory has been met with scepticism, highlighting the challenge of reconstructing the story of our own species.

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Additional contributions from Tee Zhuo and Gordon Smith More

The writer is a former senior vice-president at the World Bank When the Titanic set sail in 1912, it was considered unsinkable because the hull was constructed as 16 watertight compartments. The ship would reportedly still float if up to four of these compartments were damaged. A similar assumption underpins today’s international financial architecture in the face of a polycrisis: runaway climate change, financial faultlines, the health pandemic, geopolitical dangers, the next generation of artificial intelligence and global water and food shortages. International leadership seems to think that if two or more crises flare up simultaneously, the system will still float. This assumption is patently wrong. The interplay of the climate crisis with financial fragility alone threatens potentially insurmountable dangers unless immediate action is taken.Global debt has hit unprecedented levels, weighing down a system still shaken by the pandemic. A shadow banking system of “non-bank financial intermediaries” emerged following the financial crisis of 2008, and now dominates about half of global financing. The unregulated financing attributable to NBFIs is about $240tn. Meanwhile, the IMF and the World Bank struggle with their capacity to simultaneously tackle pandemic-induced deprivation and escalating climate change-triggered needs. Other risks, such as Russia’s war in Ukraine, add to the burden on the system. It is in this context that a worse-than-predicted climate crisis could bring the global financial system to its knees. The 16 climatic tipping points, identified by a group of researchers in an article in Science, are triggers for a possible collapse in highly leveraged global financial markets. The markets, including regulators and central banks, have failed to integrate the physical, transition and liability risks from climate change into the observable market data.Take one example: imagine if five of the largest property and casualty insurance companies and the three largest reinsurers failed following previously unlikely ice sheet melt and permafrost collapse, which would lead to flooding. The insurance companies would face unprecedented claims and a decimated investment portfolio, wiping out their capital bases. Furthermore, the effects of climate change on food shortages and supply chain collapses would render the system even more fragile. Price levels would rocket due to a massive injection of liquidity in the global financial system, as a result of defensive actions such as central bank bailouts. Banks would be knocking on central bank doors to fend off the impact of insurance company defaults.Taking global action now should be predicated on a recognition that the crisis that once seemed far in the future has arrived. Its reversal depends on an all-out effort to decarbonise economies. This obliges the G20, a group that accounts for 80 per cent of the world’s gross domestic product, to take the lead in addressing the inherent fragility of the current architecture. Members must act swiftly to regulate key aspects relating to growing climate danger, including imposing bank capital charges for carbon-intensive activities. Moreover, the G20 should impose a high enough carbon price to make it costly to use fossil fuels relative to clean energy sources, plus direct governments to reallocate the more than $5tn a year that they collectively provide in fossil fuel subsidies. These steps would help scale down atmospheric CO₂ towards 350 parts per million, which scientists consider a sustainable threshold. In addition, regulators and central banks need to integrate liability risks stemming from climate change into market data. That means financial markets would need to ensure a lower cost of capital for securities with low climate change risk exposure or with strong mitigation promise.Climate damages are translating into billions of dollars of unpriced losses globally, rendering shocks to a shaky system. To meet this challenge, the COP28 presidency ought to syndicate a $100bn adaptation fund among Opec countries. The proceeds would ease the immediate needs of the most vulnerable countries.If markets included a public function rather than just the private, there would be no need for proactive intervention at the global level. But counting on the markets led to global financial crisis in 2008. That might seem minor compared with the financial peril that climate chaos may bring. When divers reached the Titanic wreck on the ocean floor, they found the ship with its hull almost intact. Damage in one area had triggered its sinking. To avert a similar fate, the G20 must use its unique platform to act now. More

Today’s top storiesGerman chancellor Olaf Scholz vowed to boost growth by banishing the “mildew of bureaucracy” as he came under intense pressure to tackle economic problems that are fuelling support for the far-right. A new forecast predicted the economy would shrink 0.5 per cent this year.“It is fundamentally wrong that 30 seconds of the recording of a washing machine gets paid the same as the latest single by Harry Styles.” The FT revealed a deal by Universal Music that could reshape the economics of music streaming, the first big shift in the business model since Spotify launched in 2008.The UK aviation regulator is to review the “logic error” that led to last week’s failure of air traffic control systems.For up-to-the-minute news updates, visit our live blogGood evening.New UK and eurozone stats today have highlighted the parlous state of the housebuilding industry, hit by rising interest rates, skills shortages and high inflation.UK housebuilding slumped in August at the second-fastest pace since the first Covid lockdown, according to the S&P Global/Cips UK Construction Purchasing Managers’ index, as concerns about the economic outlook dented demand for new building, especially in the residential sector. Big developers such as Crest Nicholson, Taylor Wimpey and Persimmon have warned on profits under a “perfect storm” of events, including borrowing costs rising just as the government withdrew its Help to Buy scheme, which offered state-subsidised loans for first-time buyers.Barratt Developments, the UK’s biggest housebuilder, warned today it would be at least two years before the market for new homes recovered. In the meantime, construction companies are going under at the fastest rate in a decade. Surging mortgage rates are also contributing to the squeeze on UK living standards which is set to last some time, according to separate survey data today. Interest rates are at a 15-year high of 5.25 per cent although Bank of England governor Andrew Bailey suggested today that the UK was nearing the top of the policy-tightening cycle.Tenants are having an equally tough time, as our Extreme Renting series illustrates. Those in London are being hit especially hard as landlords pass on higher borrowing costs, but the situation is equally bad across Europe.In the eurozone, housing construction has fallen at the fastest rate since the start of the pandemic. The decline in overall construction was strong in France and Italy, but particularly bad in Germany, where the industry is in crisis as a wave of insolvencies claims a growing number of big developers.“We are at the end of a 10 to 15-year property boom,” said Moritz Schularick, head of the Kiel Institute for the World Economy. “The financial cycle is now such that every day another property developer is going bust . . . The old funding models are no longer sustainable.”The narrative is quite different across the Atlantic where big housebuilders have enjoyed large share price gains thanks to the rebound in the new homes market, despite the rise in mortgage rates. The market has even attracted an $814mn bet from Warren Buffett’s Berkshire Hathaway. Need to know: UK and Europe economyThe crisis over UK school buildings at danger of collapse because of low-strength concrete has forced Prime Minister Rishi Sunak on to the defensive. The affair highlights a lack of spending on buildings and maintenance going back decades, says economics editor Chris Giles. The government today published the list of schools affected. A parliamentary report said the UK had clawed back less than 2 per cent of more than £1bn in losses from fraud and error on taxpayer funds made available to businesses during the pandemic.The European Commission appointed Belgian politician Didier Reynders as the EU’s competition chief, while incumbent Margrethe Vestager takes leave of absence to run for the top job at the European Investment Bank.Turkish president Recep Tayyip Erdoğan abandoned his long-held hostility to rate rises, vowing to use “tight monetary policy” to cool inflation, now set to hit 65 per cent by the end of this year.Poland’s central bank is expected to cut interest rates in spite of double-digit inflation, fuelling concerns that its decisions are being driven by politics in a crucial election year. The National Bank of Poland was among the first central banks to raise rates in autumn 2021 and is now set to lead the way in cutting them.Need to know: Global economyThe Financial Stability Board, the world’s most powerful financial watchdog, warned of “further challenges and shocks” ahead as high interest rates threatened economic recovery. A top Federal Reserve official signalled that US interest rates would stay on hold when it makes its next decision on September 20.Oil prices topped $90 for the first time this year as Saudi Arabia and Russia extended production cuts. The move threatens to reignite global inflation fears as well as cause problems for US president Joe Biden ahead of next year’s election.Transnational crime groups involved in drug trafficking, migrant smuggling and extortion have become so big they are damaging Latin America’s economic performance, the IMF said.Taxes across the world are set to rise as countries spend big on defence, welfare and the green transition: our new series heralds the return of big government.Central bank digital currencies could speed up the introduction of cashless societies, much to the dismay of assorted conspiracy theorists. Read more in this deep dive. Anger over surging electricity costs has triggered protests in Pakistan that risk derailing an IMF deal. The country narrowly avoided default in June after securing the $3bn loan that came with strict conditions to reform the country’s economy, including cutting energy subsidies and imposing new taxes in the power sector.Kenyan president William Ruto called for debt relief for African countries to help their fight against climate change. Almost half the countries in sub-Saharan Africa, including Kenya, are either in, or at high risk of, debt distress.Need to know: BusinessEurope’s tourism industry has enjoyed its best summer season since before the pandemic as an increase in American visitors helped offset the impact of extreme heat and stubborn inflation. European carmakers believe “e-fuels” may allow them to keep selling combustion-engine vehicles despite the EU’s plan to ban them from 2035. Campaigners called the exemption on e-fuels a “Trojan horse” for fossil fuels.More than one in eight UK bank branches that were open at the start of 2023 will have closed by December, with almost three-fifths of the network vanishing since 2015, according to FT analysis. The UK pulled back from a clash with Big Tech over private messaging measures in its online safety bill. The sector still faces a host of fresh legal obligations from new EU laws aimed at curbing its power.The World of WorkThe UK is set to roll back sickness benefits for more people with disabilities and long-term health conditions to encourage them back into the workforce. Critics said the move would leave vulnerable people in hardship without a significant boost to the number employed.Why is British management so bad and what can be learnt from the US experience? Listen to the new Working It podcast. Staff shortages at accountancy firms are fuelling a movement in US states to relax education requirements for joining the profession. Regulators say state legislation could have dire consequences, unravelling a system that allows accountants to practise nationwide.Read how business school lessons have helped victims of the war in Ukraine and more in our Masters in Management special report.Some good newsSome of the entries for this year’s Wildlife Photographer of the Year competition organised by the UK’s Natural History Museum are now online ahead of the awards and exhibition next month. This image captures the moment a young monkey catches a ride on a passing sika stag on Japan’s Yakushima Island.Forest Rodeo © Atsuyuki Ohshima More

Olaf Scholz has vowed to boost growth by banishing the “mildew of bureaucracy”, as the German chancellor comes under intense pressure to tackle economic woes that are fuelling support for the far-right.Scholz on Wednesday called for a “Germany pact” between the government in Berlin, federal states, municipalities and the opposition to re-energise the country amid deep gloom about sluggish economic growth and the slow pace of reform.“Only together will we shake off the mildew of bureaucracy, risk aversion and despondency that has settled on our country over years and decades,” he said in remarks made to the Bundestag while sporting an eye patch he has worn since falling while jogging over the weekend. Germany has been engulfed by a wave of national angst in recent months amid warnings from the IMF and OECD that the country will be the slowest growing of the world’s leading economies this year. The Kiel Institute for the World Economy, one of Germany’s top economic research bodies, blamed “weak industrial activity, the crisis in the construction sector and weak consumer spending” for cutting its forecasts on Wednesday, expecting the German economy would shrink 0.5 per cent this year. That compares with its summer forecast for a contraction of 0.3 per cent. Scholz, whose fractious three-way “traffic light” coalition with the Greens and liberal Free Democrats has been suffering from infighting and a slump in the polls, said finding a new national momentum was the only way to defend the country against “those who want to draw political profit from scenarios of decline and panic mongering”. That was widely seen as a reference to the far-right Alternative for Germany (AfD), which has witnessed a surge in support in recent months, overtaking the chancellor’s Social Democrats (SPD), to reach second place in national polling, after the centre-right opposition Christian Democratic Union. Uwe Jun, a political scientist at the University of Trier, said that Scholz’s plea for unity was an attempt to show leadership at a time when he was under attack for what critics say is his weak governing style.“The German economy is not in very good shape, there are lots of fears that a recession will come and also the popularity of the traffic light coalition is very low,” he said. Jun warned that Scholz faced an uphill struggle given the scale and range of issues facing the country and the difficulties of managing his divided coalition. “It’s good to show that he’s willing to do this,” he said. “But in the political reality, it takes time [and] there are lots of problems.” Adding to the stream of bad news, orders for German manufacturers fell at the fastest monthly pace since the pandemic hit more than three years ago, although this largely reflected a drop-off in big-ticket items. The 11.7 per cent decline in German industrial orders in July was the biggest such fall since April 2020. Excluding big ticket orders worth more than €50mn, industrial orders rose 0.3 per cent in July. Turnover in German industry, however, was down 1 per cent month-on-month in July. The leader of the CDU, Friedrich Merz, said the country was “suffocating in bureaucracy” that he said was worsened by the current government, which succeeded Angela Merkel’s “grand coalition” between the CDU and SPD in 2021. Scholz rejected the idea of additional stimulus packages to boost the economy, saying that his government was already investing record sums — including tens of billions in support for the green transition and chip production. Instead, he promised to revitalise growth by speeding up digitalisation for online government services and e-invoices — areas in which Germany lags behind its EU counterparts — and making it easier to found and grow start-ups. Wolfgang Lemb, an executive board member at Germany’s largest trade union IG Metall, welcomed Scholz’s remarks as he warned that more than 20,000 additional approvals would have to be issued in the next few years in order to make adaptations to industry and the energy network as part of the country’s ambitious green transition. 

“This cannot be done with the current planning and approval procedure,” he said, speaking at a business event in Berlin. “For the modernisation of Germany, its acceleration and digitalisation is more urgent than ever.” He said that Scholz’s promise of more speed was a good one, but added: “Now it has to become concrete.”Scholz said that his government was also tackling a lack of investment in the state-owned Deutsche Bahn rail network, whose often late-running trains have become a source of national anxiety.The coalition remained committed to building 400,000 new apartments a year, even though industry figures have warned that they expect only half that number to be constructed in 2023 amid a surge in interest rates and construction costs. Scholz plans to ease the pressure on the sector through a €7bn package of corporate tax relief passed last week, which includes new rules on the depreciation of investment costs for builders. More