Aurelia Butler

China’s ambassador to Washington has warned Beijing will retaliate against US national security measures targeted at the country, including a mechanism to screen inbound investment being prepared by the White House.Speaking at the Aspen Security Forum, Xie Feng said China “cannot remain silent” while the US imposes sanctions and export controls that will make it harder for China to secure advanced US technology, including cutting-end chips.“The Chinese government cannot simply sit idly by,” Xie told the security forum on Wednesday. “We will not make provocations, but we will not flinch from provocations. So, China definitely will make our response.”Xie was speaking as the US administration puts the finishing touches to an investment screening mechanism designed to cut the amount of US money invested in Chinese entities involved in areas including semiconductors, quantum computing and artificial intelligence that could help its military.The commerce department is also preparing to update sweeping export controls from last year to close some loopholes and make it more difficult for companies such as Nvidia to sell AI-related semiconductors to China.Beijing has recently taken steps that have been interpreted as retaliation by the US and its allies. Following an investigation into US chipmaker Micron that American officials saw as tit-for-tat response, China in May banned some of the country’s entities from buying the group’s semiconductors. And earlier this month, Beijing said it would require Chinese companies exporting gallium and germanium to obtain licenses, which could throttle supplies of two minerals needed to make chips.“It is not our hope to have a tit-for-tat [measures]. We don’t want a trade war [or] technological war,” Xie added. “We want to say goodbye to the Iron Curtain, the silicon curtain.”Speaking about attempts to frustrate Chinese efforts to secure the most advanced chips, he said: “This is like restricting the other side to wear outdated swimwear in a swimming contest while you yourself are wearing a speedo.”

Xie refused to be drawn on speculation about Qin Gang, his predecessor as ambassador and now foreign minister, who has not been seen in public for almost four weeks. “Thank you for your care,” he said in response to questions on the official’s whereabouts.China’s foreign ministry has said Qin is ill but has provided no details, which has sparked speculation that the top diplomat may be under investigation.Pressed on China’s relationship with Russia and its refusal to condemn Moscow’s full-scale invasion of Ukraine, he said it was “natural” for the two neighbours to maintain friendly relations.He responded to a question about what redeemable qualities he saw in Vladimir Putin by saying he had not met the Russian leader. But he joked that president George W Bush had once said that he had looked Putin in the eye and “found him to be very straightforward and trustworthy”. “President Bush Junior said that he looked into the eyes of Mr Putin, saw his soul [and thought] he’s reliable,” Xie said, before chuckling out loud.Follow Demetri Sevastopulo on Twitter More

The United Arab Emirates said it had signed agreements estimated to be worth $50bn with Turkey as President Recep Tayyip Erdoğan tours the oil-rich Gulf in a bid to attract investment from the region and bolster his country’s ailing economy. The UAE’s state news agency said the Gulf state and Turkey forged a series of provisional agreements that included the establishment of a joint economic and trade commission, commitments to develop energy and natural resources projects, and an extradition pact.ADQ, one of Abu Dhabi’s state investment funds, also said it would provide up to $8.5bn through bonds to support reconstruction efforts after February’s earthquake that devastated a vast area of southern Turkey. The fund also said it would provide $3bn in export credit financing to Turkish companies to boost bilateral trade.It was not immediately clear how the estimated $50bn value of all the agreements was calculated. But the deals mark a deepening of ties between regional powers that have spent much of the past decade at loggerheads, often backing rival sides during the turmoil that erupted across the Middle East after the 2011 popular Arab uprisings. Erdoğan, who held talks with UAE President Sheikh Mohammed bin Zayed al-Nahyan, said the agreements would “elevate our relations to the level of strategic partnership”.The Turkish leader has this week visited Saudi Arabia, Qatar and the UAE to drum up support and investment for Turkey’s economy after he appointed a new economic team following his victory in May elections. His government has returned to more orthodox economic policies after Erdoğan’s management of the economy was widely blamed for pushing the lira to record lows against the dollar, fuelling soaring inflation and scaring off foreign investors. Bankers said Erdoğan took with him on his tour of the Gulf a list of assets in which Turkey is seeking to sell stakes as Ankara looks to raise foreign currency to replenish severely depleted reserves and manage a yawning current account deficit.The UAE, the Gulf’s trade and finance hub, has also over the past two years shifted away from its more assertive foreign policy towards what officials describe as economic diplomacy as it faces increasing competition from neighbouring Saudi Arabia. A Gulf-based banker said Emirati officials sent out an “all-points bulletin” to bankers in the UAE ahead of Erdogan’s visit “to be ready and help us on ideas and be ready to execute”. The rapprochement between Abu Dhabi and Ankara began two years ago, after Sheikh Mohammed held talks with Erdoğan in the Turkish capital. At the time, ADQ committed to invest $10bn in Turkey and had previously backed Turkish start-ups Getir, a grocery delivery company, and Trendyol, the country’s largest ecommerce firm.

Sheikh Mohammed visited Turkey again in June, and bankers say there is now greater clarity for investments with the new economic team in place. Led by finance minister Mehmet Şimşek, this group has strong ties across the Gulf and has begun to reverse Erdogan’s controversial policies. Analysts say the Gulf, which is home to some of the world’s largest sovereign investment funds, was an obvious starting point for Erdoğan in his bid to rally support for the economy, as many western investors remain wary about the president’s commitment to more orthodox policies. After Erdoğan held talks with Saudi Crown Prince Mohammed bin Salman this week, Riyadh and Ankara struck an agreement for Saudi Arabia to buy Turkish drones in what was described as Turkey’s largest ever defence export deal. More

Today’s top storiesGoldman Sachs reported its lowest quarterly profit in three years, hit by falling trading and investment banking and losses from its push into consumer banking. Net income plunged by almost two-thirds to $1.1bn. Morgan Stanley also reported a drop in profits as trading slowed.The head of MI6 appealed to Russians that are appalled by the killing in Ukraine to join forces with the UK’s foreign spy agency. Sir Richard Moore in a rare public speech likened the situation in Ukraine to the 1968 Prague Spring when the Soviet Union quashed liberalising reforms.The FT revealed that Vladimir Putin ordered the seizure of Danone and Carlsberg’s Russian operations after businessmen close to the Kremlin expressed an interest in the assets.For up-to-the-minute news updates, visit our live blogGood evening.There was a double dose of much-needed good news for British prime minister Rishi Sunak today as new data showed inflation had fallen more than expected and Tata announced plans to build a landmark $4bn battery factory in the UK.The headline CPI figure fell from 8.7 per cent to 7.9 per cent in June, driven by lower petrol costs and in line with Bank of England forecasts. It marks progress in Sunak’s promise to halve inflation to 5.4 per cent this year ahead of a general election. The news also makes the UK less of an international outlier.

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Markets firmed up expectations of a quarter point interest rate rise from the BoE next month after the data was published. Traders now expect rates to peak just below 6 per cent early next year. The data sent shares in UK property groups and housebuilders upwards.There was encouraging news too on the “core” measure — which strips out volatile items such as food and energy — which fell to 6.9 per cent from a 31-year high of 7.1 per cent. Separate industry data yesterday showed the growth in grocery prices falling for a fourth consecutive month while the head of online grocer Ocado said the UK was “over the worst” when it came to food price inflation.Other cost of living pressures remain. New data today showed property rental prices and car insurance costs hitting record levels.Ahead of today’s CPI numbers, big investors said they were steering clear of UK government bonds, fearing that the country’s inflation problem would continue to push borrowing costs higher. Their reluctance to dive into the market has pushed gilt yields well above those in other major bond markets, putting more pressure on the government’s finances as it tries to find buyers for record quantities of gilts.But back to the good news. Sunak said Tata’s battery plant would “not only create thousands of skilled jobs for Britons around the country, but it would also strengthen our lead in the global transition to electric vehicles, helping to grow our economy in clean industries of the future”. The government said the decision was the “biggest investment ever” in the UK industry and the most significant since Japanese car companies moved to Britain in the 1980s. There was a note of scepticism however from the FT’s Lex column which said the project looked expensive and hard to pull off.In any case, Sunak’s buoyant mood could be shortlived. As we’ve experienced so many times in the past few years, fresh political turmoil is always just around the corner: the PM’s party faces potential defeat in three by-elections tomorrow. The polls coincide with the end of the parliamentary term, meaning Tory MPs will have to wait until September to air their grievances in Westminster. Before then, a long hot summer of discontent awaits.Need to know: UK and Europe economyA new survey showed the UK lagging behind its G7 peers on productivity, due to a lack of investment and improvement in areas such as management and leadership, technology adoption and innovation.

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The International Energy Agency warned that Europe could face a winter gas crisis if Russia halted supplies. “Our simulations show that a cold winter, together with a full halt of Russian piped gas supplies to the European Union . . . could easily renew price volatility,” it said. Energy editor David Sheppard said the west must prepare for further disruption, including attempts to weaponise oil supplies for the first time.Armenia has become a key stop on a new “silk road” for goods heading for sanctions-hit Russia. The booming trade, especially in used cars, is infuriating the US and the EU.Need to know: Global economyZhejiang, one of China’s most populous provinces, has deleted Covid-19 mortality data that might have given an insight into death tolls after Beijing relaxed its controls at the end of last year. Cremations jumped 73 per cent in the first quarter to 171,000, well above the number of deaths reported in 2022 and 2021.Colombia’s president Gustavo Petro defended his reform agenda, including a pledge to end investment in fossil fuels. “The Colombian economy has got potential aside from just oil: the development of a productive agriculture industry . . . tourism, taking advantage of the country’s beauty, and the possible export of clean energies,” he said.Is Dubai the new Geneva? A new Big Read explains how the UAE has become the place where Russian oil gets traded, much to the frustration of the US, which fears some of this business could end up as sanctions busting. Fresh protests are expected in Kenya against new tax laws, the latest in a series of violent demonstrations that have left many dead. The protests have been organised by the opposition, led by former prime minister Raila Odinga. India’s fragmented opposition parties have created an alliance in order to unseat Narendra Modi’s party, the BJP, at next year’s election. Modi will be seeking a third term as prime minister. Previous attempts to unite against the BJP have failed.Need to know: businessMicrosoft is to charge $30 a month for generative AI features in its popular Office software, a bigger premium than expected on a technology that many in the industry hope will bring a powerful boost to revenues.The fight between Chinese fast-fashion rivals Temu and Shein will continue inside a US courthouse. The smaller Temu — started last year by ecommerce platform Pinduodou — accuses Shein of conducting anti-competitive practices to maintain its market dominance.Pret A Manger has turned an annual profit for the first time since 2018: £50.6mn in 2022 compared with losses of £226mn in the previous year, during the pandemic. Its success is due to coffee subscriptions and international expansion.Our Tech Tonic podcast series on social media continues with a discussion of how the “creator economy” is shaping the platforms’ future. The World of WorkSix years after #MeToo began, sexual harassment at work continues. This week, the Working It podcast seeks to understand why, in the wake of the FT’s recent investigations into hedge fund manager Crispin Odey and star architect David Adjaye. FT journalists and an NYU professor weigh in on why it is so difficult to report, changes in corporate culture and avoiding unwanted advances.FT Columnist Simon Kuper chronicles the creation of a perfect place for writing — in a tiny Parisian flat. Purchased two decades ago when property prices allowed a journalist to do so, it was in need of a little renovation.Some good newsDeforestation in Colombia fell by 29 per cent to its lowest level in 10 years, according to new figures released by the government. Particular gains were made in the Amazon region. Environmental protection and deforestation have been a priority for the current government. Colombian environment minister Susana Muhamad announces the lowest deforestation figures since 2013 © AFP via Getty Images More

Brazil’s president Luiz Inácio Lula da Silva has ruled out signing a trade deal with the EU unless Brussels eases requirements for Brasília to open up its manufacturing industry to foreign competition. Lula, who is in Brussels to try to speed up progress on a trade deal between Brussels and the Mercosur bloc of four South American countries, said he wanted to change rules that would prevent signatories handing government contracts to domestic companies without a competitive process that would be open to foreign firms. A proposal circulated between the Brazilian, Argentine, Uruguayan and Paraguayan officials that are working on the deal would, Lula said, allow governments to continue to award contracts to smaller domestic firms, as “every country in the world” does, and support a “sovereign industrial policy”. It would be presented in Brussels “within two to three weeks”, Lula said at a press conference, saying he believed the EU officials would bend to the Latin American countries’ demands. The remarks are a fresh obstacle to completing a process that has been beset by delays since a deal was provisionally agreed in 2019 — despite claims by the Brazilian president on Wednesday that he was “for the first time” optimistic of concluding talks before the end of this year. Brussels has also irked the Mercosur quartet by sending a letter that required the group to make binding commitments to protect the rainforest and labour rights. Lula reiterated his objections to the missive.“The Amazon is the sovereign territory of Brazil. We have a sovereign commitment to end deforestation,” he said. “The letter threatens us with sanctions and punishments if we do not fulfil certain requirements.”However, Valdis Dombrovskis, EU trade commissioner, told the Financial Times in an interview that the “sustainability instrument” was necessary to provide assurances to member states, which must ratify the deal, and civil society groups that the destruction of the rainforest under Lula’s predecessor Jaír Bolsonaro would not happen again. The trade commissioner also suggested that the EU was unlikely to support Mercosur’s attempts to loosen competition requirements, warning against reopening an agreement that took more than 20 years to negotiate. “That would distract us once and would lead us again to very long negotiations with an unpredictable outcome.” Despite the disagreements over the trade deal, Lula hailed the first summit between EU and Latin American and Caribbean leaders in eight years. “There are very few times I have seen EU countries showing so much interest in Latin America,” he said. “It is possibly because of the dispute between the US and China or possibly due to Chinese investment in Africa and the Latin American region.”China has overtaken the EU as the biggest trading partner for Latin America after the US and is investing in mines, infrastructure and other projects. Lula said if the US and the EU stepped back, there were “other countries that want to invest.”He welcomed an EU commitment to provide €45bn in development aid by 2027, but added that the region still needed to contribute to the $100bn pledge, made in 2009 by developed countries, to help poorer countries fight climate change. The leaders in attendance agreed to condemn the US economic embargo on Cuba.Europe was also “succeeding” in its bid to convince Latin American leaders “that a total alignment of their side with Russia would be a huge mistake”, an official said, adding that Lula and Argentine president Alberto Fernández had led efforts to secure a summit declaration expressing “deep concern on the ongoing war against Ukraine”.European officials said they had seen “an evolution” in Lula’s position on Russia.However, on Wednesday Lula did not call for Russia to withdraw from Ukraine and refused to cast it as the aggressor. “The world is getting tired of this conflict,” he said, but it would only end when neither side believed it could win. The leaders have committed to meeting once every two years, with the next summit due to be held in Colombia in 2025. More

Poland and four other EU member states asked Brussels on Wednesday to extend trade curbs on Ukrainian grain amid concerns that Russia’s blockage of Black Sea shipments could put further pressure on their domestic markets. Poland, Hungary, Slovakia, Bulgaria and Romania have restricted imports of Ukrainian grain since last spring in response to protests by their farmers about a grain glut that sent cereal prices crashing and which they blamed on Ukrainian imports.In May, Brussels persuaded them to drop unilateral measures, which violated EU trade law, by agreeing that Ukrainian shipments would only transit through the five countries on route to other destinations. The EU also handed out €100mn to the affected countries. Ukrainian grain has provoked an embarrassing U-turn for Poland, one of the staunchest western supporters of Kyiv’s war against Russia. Poland has led calls for solidarity with Ukraine and last year Warsaw backed the EU removing tariffs on Ukrainian foodstuffs to help its economy.But ahead of a fiercely contested national election this autumn, the rightwing government in Warsaw has grown worried about losing the support of farmers who are a cornerstone of its electorate. The demand for an extension of controls beyond mid-September is likely to meet strong resistance. Several member states whose own industries have suffered from sanctions on Russia are annoyed that Poland and others are seeking special treatment.“The initial illicit grain blockade was like the camel’s head under the tent. By giving in to the demands of these countries, it’s now become excessively hard for the commission to counter the further escalation of these issues by Poland,” said one diplomat.But Polish prime minister Mateusz Morawiecki warned Brussels against preventing what was agreed by the five countries on Wednesday. “Either the European Commission will agree to develop common regulations that will extend this ban, or we will do it ourselves,” Morawiecki told a news conference in Warsaw. “We will be tough, determined and we will certainly defend the Polish farmers.”Russia’s decision this week to end its Black Sea grain deal puts further pressure on Ukraine to find other ways to export its huge cereals output. The EU and the US have condemned Russia’s exit from the deal as a dangerous decision that threatens world food security, particularly in poorer countries in the southern hemisphere. Poland and the other EU countries close to Ukraine say that Brussels has failed to guarantee that Ukrainian food exports would be sent to Africa and the Middle East rather than flooding domestic markets. Since May, Polish farmers have continued to call on their government to extend restrictions to strawberries and other seasonal foodstuffs that are grown more cheaply in Ukraine and have also reduced prices in the EU.

The five countries also say the EU should be more flexible to allow individual member states to add items to the list of banned Ukrainian exports. They will raise their concerns at a meeting of agricultural ministers in Brussels on Tuesday and want an extension of their existing cereal restrictions until the end of this year.An EU official said the border states still had “significant stocks” of Ukraine grain but the “solidarity lane” scheme introduced in May was “easing the situation”.Several other countries told a meeting of member states last week that Ukrainian imports were “putting pressure” on their farmers, the official said. There have been significant imports of poultry and eggs, reducing prices.A European Commission spokesperson said it was “working intensively with the five frontline member states, Ukraine and Moldova to solve logistical problems and increase the capacity of the solidarity lanes”. More

The unexpected drop in UK consumer price growth last month has led to cautious predictions that the country’s inflation crisis has reached a turning point. The news that annual inflation declined to 7.9 per cent in June from 8.7 per cent in May also made the UK look less like an outlier among advanced economies. “While one swallow doesn’t make a summer, there will be real hopes that this marks a turning point for UK inflation,” said Nicholas Hyett, investment manager, at the investment service company Wealth Club.

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The figures came after months of disappointing inflation data and strong wage growth that pushed up interest rate expectations and created turbulence in the mortgage markets.While the drop was largely driven by motor fuels, which were down by an annual rate of 22.7 per cent, there were broad-based downward pressures among most goods and services. Core and services inflation, both closely watched measures of underlying and domestic price pressures, also started to ease after hitting a three-decade high in May.

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The data also prompted markets to reassess their estimates of how high the Bank of England will need to raise interest rates to stamp down on inflationary pressures and return the headline rate to its 2 per cent target.Markets are now predicting that the central bank will raise rates from the current 5 per cent to 5.25 per cent at its Monetary Policy Committee meeting next month, and expect rates to peak between 5.75 per cent and 6 per cent. The scale of the fall in headline inflation could give relief to the thousands of UK households bracing for increases in their mortgage payments in the coming year. It “will ease pressure on mortgages and wages, with the BoE less likely to keep interest rates higher for longer, and Britain’s latest 18-month pay squeeze coming to an end”, said James Smith, research director at the Resolution Foundation think-tank. While some economists warned there have been recent false dawns on interest rates, most analysts expect inflation to continue to decline in the months ahead. The ONS data revealed that producers’ price inputs — such as parts and raw materials — contracted in June for the first time since November 2020, which could lower price pressures on business. With the government’s energy price cap dropping in July, the direct contribution of electricity and natural gas prices to the headline inflation rate will also fall — and will drop further in October. Added to this are falling consumer inflation expectations, rising unemployment and declining job vacancies, and impact of the BoE’s monetary policy tightening over the past two years. “If these trends all continue, inflation should fall fast over coming months towards a 4-5 per cent rate by the end of the year and to within the 2-3 per cent range by the middle of next year,” said Kallum Pickering, economist at the investment bank Berenberg.UK price growth remains the fastest among the G7 countries and the third highest among OECD advanced countries, however. This is in part due to the UK energy regulator’s price mechanism, which slows the rate at which the decline in wholesale gas prices passes through to household energy bills.

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The UK is also experiencing a surge in job inactivity since the pandemic that has not been seen in most other advanced countries, adding to domestic price pressures. A larger reliance on food imports in the UK than in other countries is also resulting in stronger food price pressures; British food inflation slowed to 17.3 per cent in June, still nearly three times higher than in the US. But the larger-than-expected fall in inflation reduced the difference with other advanced economies and put Britain on the same disinflationary path as most other countries. “The UK still has one of the highest inflation rates of any advanced economy, but after today it merely looks bad rather than a basket case,” said Smith. More