Aurelia Butler

Good morning. Jamie Dimon has warned that tensions between the US and China have upended the international order, making it more complex for business than during the cold war. The JPMorgan chair was speaking at a banking conference in Shanghai, as fresh data showed the recovery of the world’s second-largest economy was slowing. Dimon also argued that “uncertainty” caused by Beijing could hit investor confidence.“Hopefully, we can work out all these differences, you know, with China and America and what it is doing to other allies, relationships and things like that,” he said in comments behind closed doors. Dimon’s first visit to mainland China in four years came as a contraction in Chinese manufacturing activity cast doubt over the country’s growth prospects, shaking regional equity markets against the backdrop of worsening relations with the US.Meanwhile, the US-China geopolitical rift continues to impact the financial industry in both nations. Just earlier this week, Goldman Sachs’s private equity business in Asia said she has stopped trying to raise money in the US.Related read: FT reporters detail how China’s economy has made a sluggish recovery six months after authorities began to roll back President Xi Jinping’s tough zero-Covid regime.Here’s what else I’m keeping tabs on today:Nato meeting: Foreign ministers will meet in Oslo to discuss the Ukraine war as recent evidence shows that Kyiv’s long-awaited counter-offensive is about to get under way.Manufacturing data: Purchasing managers’ index figures will be released for Japan, China, the EU and UK. Eurozone inflation: Falling inflation in France and Germany has boosted hopes that today’s eurozone inflation figures will show cooling prices. Brics meeting: Foreign ministers will gather in Cape Town for geopolitical discussions. Ministers will also review applications of at least 20 nations as they consider increasing the size of the group. (The Japan Times) Five more top stories1. US House Speaker Kevin McCarthy predicted a bill to avert a damaging default would “overwhelmingly” clear a vote in the lower chamber of Congress as he raced to secure backing for the bipartisan deal. The vote today will mark a crucial moment for McCarthy and whether the US will hit the debt ceiling. Go deeper: This helpful explainer details what is in the debt ceiling deal.2. Bank of Japan policy shift risks causing eurozone bond turmoil, the European Central Bank has warned. If the BoJ ends its ultra-loose monetary policy Eurozone bond markets are at risk of a sell-off caused by a sudden retreat of Japanese investors, the ECB said.3. A federal trial over Beijing’s alleged attempts to forcibly repatriate citizens began in Brooklyn on Wednesday. The case centres on a former New York police officer and two Chinese nationals accused of attempting to intimidate a Chinese dissident and his family in the US. Read the full story.4. A Chinese fighter jet performed an “unnecessarily aggressive manoeuvre” near a US military aircraft that was flying over the South China Sea last week, the Pentagon said. Video footage of the incident — the latest in a number of similar encounters — was released as US defence secretary Lloyd Austin was en route to visit Japan, Singapore and India. 5. A failed North Korean satellite launch triggered air raid sirens and an evacuation order in Seoul yesterday, but the order was retracted about 10 minutes later after South Korean authorities admitted it was a “false alarm”.Deep dive

Fearing a potential conflict in Asia, western companies are looking to move production out of Taiwan, but turning away from the self-ruled island will come at a high price for manufacturers. Explore how Taiwan became an indispensable economy for the production of everything from Chinese smartphones to US fighter jets in this visual story.We’re also reading . . . AI and the climate trap: The failures of global co-ordination on climate change offer lessons on artificial intelligence, writes Pilita Clark.Chinese private equity: State-backed investors have poured money into western companies even as the political mood has shifted.Into the bunker: A series of assaults has highlighted Russia’s vulnerability to blowback from its war on Ukraine.Chart of the day

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Just as Singapore Airlines was giving employees an eight-month salary bonus after record profits, Hong Kong was giving away more than 4,400 free tickets for regional rival Cathay Pacific. Their financial divergence reflects Singapore’s post-pandemic success as Hong Kong struggles to recover.Take a break from the news. . . and meet the woman dressing Gen Z. Sofia Prantera created streetwear label Aries as a move into denim with a more high-fashion offering. In this excellent profile of Prantera, fashion writer Kate Finnigan explains how Aries gained a cult following with young people. Additional contributions by Amy Bell and Tee Zhuo More

China’s economic rebound is faltering and Jamie Dimon, the JPMorgan chair, is not the only one concerned. Dimon, who spoke at a Shanghai banking conference on Wednesday, called youth unemployment rates in China “scary”. He added that economic uncertainty had been “somewhat caused” by the Chinese government.The latest signs of slowing are found in high-frequency economic data. But the structural challenges that the Chinese economy faces are much deeper and more long term. The decades of “reform and opening” that drove a trade and investment bonanza are giving way to a phase of security and control led by President Xi Jinping.Xi’s concept of “comprehensive national security” — which defines 16 broad arenas including the economy, society and culture as matters of national security — has replaced the pro-growth doctrine that used to animate Beijing’s administration. Some analysts suggest we are entering the era of “plateau China”: an extended period in which growth settles into the low single-digit range, down from 2023’s official target of “around 5 per cent”.There are good reasons to think it could indeed be China’s fate to become a low-productivity superpower. By dint of its sheer size it would still contribute to global economic expansion, but it would fall progressively short of the 35 per cent contribution to global growth that the IMF predicts for this year.Such a scenario would have profound global implications. Most obvious would be to reduce China’s role as locomotive of the Asia-Pacific region, which the IMF forecasts will contribute 67.4 per cent of global growth this year. A slower growing China, coupled with efforts to increase domestic ownership of its industries, could also deal a blow to western multinationals that have become dependent on sales there.With so much at stake, it is important to assess how deep-seated China’s economic frailties are. A big part of the drag emanates from a weak property market and the related distress of thousands of local government financing vehicles, which over the past decade have provided the main impetus behind China’s investment-driven growth.Reviving the property sector is not straightforward. In April, sales of property by area and investment in building new homes were down significantly from the same month a year earlier. This, in turn, hits the incomes of local governments, which depend to a significant extent on selling land to property developers. Some city government entities, such as in Kunming and Wuhan, have scrambled in recent weeks to repay maturing debts. Unless Beijing provides some form of debt support to local government financing vehicles, which according to the IMF have some Rmb66tn ($9.3tn) in debts, such episodes of distress are likely to persist.So it is incumbent on Beijing to start a comprehensive programme to restructure local government finances. This should not be a simple bailout but a transparent programme to recapitalise LGFV balance sheets partly by selling off local assets. Such a course may encounter local resistance. But without it, China may be consigned to a generation of sub-par growth.China also needs to reinvigorate its private sector, in particular the tech companies that have suffered a regulatory barrage in recent years, to help generate jobs for the 18- to 24-year-old urban cohort, some 20 per cent of whom are unemployed. Taking even just these measures should help Beijing put its economy on track for more sustainable growth. Failure to do so could smother China’s economic renaissance under the weight of growing state control. More

Today’s top storiesScandal-hit UK business lobby group the CBI will recruit a new president as part of a governance overhaul as it battles for survival ahead of a crunch members’ meeting next week. Western countries are increasing pressure on Turkey to admit Sweden to Nato, as Stockholm makes a final push to overcome Ankara’s opposition to its membership.Some good news for the London Stock Exchange, which has been struggling to attract new listings, as WE Soda, the world’s largest producer of natural soda ash, announced plans for a $7.5bn IPO.For up-to-the-minute news updates, visit our live blogGood evening.Uncertainty around China’s economy and its relations with the west cranked up a notch today as western business leaders warned of the hit to investor confidence and fresh data confirmed the country’s recovery was faltering.JPMorgan chief Jamie Dimon said at a conference in Shanghai that China’s crackdown on consultants and tech businesses would not only damage foreign direct investment in the country but also exacerbate the growing tensions between Washington and Beijing. Yesterday it was the turn of Tesla boss Elon Musk who (according to the Chinese foreign ministry) called for “stable and constructive” ties between the “conjoined twins” of the US and China as he met foreign minister Qin Gang. US-China tensions are also causing great anxiety in Taiwan as western businesses look to extract themselves under the fear of invasion from their larger neighbour, which, in the words of one industry executive, would leave the tech and electronics industry worldwide “basically screwed”. Another casualty of the growing tensions was highlighted yesterday by the head of Goldman Sachs’s private equity business in Asia, who said they had led her to stop raising money in the US.Meanwhile the steady drip of disappointing news on the Chinese economy continues. New data today showed factory activity shrank in May, denting global stocks and raising the prospect of a government stimulus package. It follows worse than expected reports on industrial production and profits, property sales and credit growth that have sapped confidence in near term economic prospects as well as denting commodity and currency markets. Dimon also highlighted “scary” youth unemployment of more than 20 per cent amid concerns about the country’s broader demographic challenge, which could rival similar crises in Japan and Italy.On the positive side, the US and China have made tentative efforts to stabilise the situation with trade ministers holding talks. And despite the recent tech tussles, Chinese companies are still keen on opening factories in the US. Washington needs to grasp any opportunity to steady the situation, argues Evan Medeiros, who served in the US National Security Council, and who characterises the process as one of “reconnection” rather than “detente”.One thing that definitely needs to be addressed, according to FT contributing editor Ruchir Sharma, is the series of inflated expectations from Wall Street about a “booming” Chinese economy. A growth model dependent on stimulus and debt was always going to be unsustainable, he argues, and now it has run out of steam.“Boomy” chatter has let to investors losing hundred of billions of dollars in China over the past few months, Sharma writes. And global growth in 2023 may be weaker than expected as hopes fade that an American downturn will be countered by a strong Chinese recovery, which may never come. “It is time to expose this charade before the fallout gets worse,” he concludes.Need to know: UK and Europe economyUK prime minister Rishi Sunak visits the US next week but a trade deal between the two countries is not on the agenda. Retail industry data showed UK shop price inflation reached its highest rate for at least 18 years in May, despite the pace of food price growth marginally easing. The UK’s most vulnerable parts of society are suffering the most.Welcome news on falling inflation in Germany, France and Spain has boosted hopes that the European Central Bank might stop increasing interest rates by July.Brussels said it would extend EU single market benefits to western Balkan countries waiting their turn to enter the bloc. The would-be members could benefit in areas such as ecommerce or cyber security as well as easier trade in goods and payments.Need to know: Global economyThe bipartisan deal to raise the US debt ceiling cleared its first big hurdle in Congress and is set for a make-or-break vote in the full House. US national editor Edward Luce says it’s game, set and almost match to Joe Biden. Read our explainer on the deal.US business leaders are starting to seek alternatives to Donald Trump and Ron DeSantis for the Republican presidential nomination without the former’s unpredictability and the latter’s culture-war fervour.India’s economy grew by a greater-than-expected 7.2 per cent in the year to March, confirming the country’s status as one of the world’s fastest growing.Need to know: businessNvidia became the first chipmaker with a $1tn valuation as investors flocked to benefit from AI developments. The company on Monday launched a new supercomputer and announced a string of new AI alliances.Rising interest rates have set back European bank mergers and acquisitions by at least two years, dealmakers warned, as accounting rules mean assets being revalued at significantly lower levels.Philip Morris chief Jacek Olczak said the tobacco company’s move away from cigarettes and towards less harmful vaping alternatives meant it should now qualify as an ethical stock. US retailers are warning of a surge in thefts, costing some of them hundreds of millions of dollars as they try to outwit organised criminals with extra security and surveillance.An FT Big Read does a deep dive into Centerview, the Wall Street boutique bank involved in a bitter lawsuit over the departure of a company founder. Read how a self-made Chinese billionaire has come to dominate a key component of electric car batteries, with plans to further his country’s lead in the market.The World of WorkThe FT rounds up the views of bosses about “the right to disconnect” and how they view legislation to protect workers’ time.White-collar jobs seem to expand to fill the available time, whatever the progress of technology, writes columnist Sarah O’Connor. Formal pre-pandemic workwear doesn’t feel quite right anymore, but what should we choose instead? FT fashion experts offer some tips for updating your look in the new Working It podcast. Do say: I loved The Diplomat! Don’t say: Hey, who’s the muscular guy with the sunglasses following you everywhere? Columnist Stephen Bush offers some tips on how to make small talk at a diplomatic function. Some good newsThe York groundsel, a flower that became extinct in 1991 thanks to excessive use of weedkiller, has been resurrected in the city of its name in Britain’s first ever “de-extinction event”. More

Turmoil among US banks has depleted the government-backed fund that protects depositors, giving it the least firepower in almost a decade to cover losses from future lender failures.The federal Deposit Insurance Fund contained $116bn in assets at the end of the first quarter, down from $128bn at the end of 2022, according to data released on Wednesday. The ratio of assets to insured deposits in the US banking system fell to 1.1 per cent, the lowest since 2015 and less than the minimum of 1.35 per cent required by law. The deposit fund’s depleted finances follow a period of turmoil for US regional lenders. The failures of Silicon Valley Bank and Signature Bank in March cost the fund $20bn. The first-quarter figures do not reflect the subsequent failure of First Republic, which cost the fund another $13bn, and would make the fund’s finances look even worse.The number of banks on the Federal Deposit Insurance Corporation’s so-called problem list stood at 43 at the end of the first quarter, up from 39 at the end of the year, the agency said as it released the data. The FDIC discloses the number of banks on its problem list, but not the names.The FDIC reported the updated fund data as part of its quarterly banking profile. The agency also confirmed that total profits of US banks neared $80bn, an all-time high, in the quarter as the Financial Times reported earlier this month. Deposits at US banks dropped by nearly $500bn in the quarter. That was the largest decline in almost four decades, on an absolute basis, but represented just 2 per cent of the nearly $17tn in US deposits.“Despite the recent period of stress, the banking industry has proven to be quite resilient,” said the FDIC chair Martin Gruenberg in a statement. “However, these results, especially for earnings, include the effects of only a few weeks of the industry’s stress than began in early March, rather than the course of the entire quarter.”The data also showed a slight improvement in the bond portfolios of banks, which have been hit by rising interest rates. US banks would collectively face as much as $515bn in losses if they were forced to liquidate those portfolios as of the end of March, down from unrealised losses of $617bn at the end of 2022. However, unrealised losses were still higher than a year ago, when they amounted to about $300bn, or at the end of 2021 when they were close to zero. The FDIC said the improvement was the result of a drop in the interest rates of longer-term bonds mostly in the month of March. The insurance fund ratio first fell below the statutory requirement of 1.35 per cent in 2020. US law gives the fund eight years to return to the minimum ratio. The FDIC reiterated that it is still on track to meet the required level by the end of 2028.This article has been updated to correctly describe the scale of the decline in deposits at US banks in the first quarter. More

When the former US president Donald Trump was found liable of the sexual abuse of journalist E Jean Carroll last month, some observers might have hoped this would make him less appealing to American voters. Not so. If you look at a Quinnipiac poll released in late May, Trump now has the backing of 56 per cent of Republicans for the 2024 race, over twice that of his nearest rival, Florida governor Ron DeSantis. Admittedly, some 56 per cent of the voters surveyed say they disapprove of Trump, but a similar proportion also disapprove of President Joe Biden. A Pew survey also suggests that 56 per cent of Americans currently think that the US cannot solve its own problems, up from 41 per cent last June. To top it off, the survey finds that “roughly three-quarters of the public say they have little or no confidence in the wisdom of the American people in making political decisions, up from 62 per cent in 2021”.What explains this level of dysfunction? We’re often told that US politics is in the grip of dark forces fed by political manipulation and Big Tech as misinformation undermines democracy. That may be partly true. However, for another view it is worth pondering some of the ideas advanced by Peter Turchin, a biologist and complexity scientist who employs Big Data to study ecosystems. Applying those methods to analyse the rise and fall of complex societies is an approach he’s dubbed “cliodynamics”. Clio was the Greek muse of history.Turchin uses reams of economic and sociological information from history to explore the cycles of political economies over thousands of years around the world. This led him to the conclusion that there is a fundamental pattern: an elite grabs power, then over time tries to protect that by grabbing more and more resources. That inevitably ends up leaving poor people even poorer (“popular immiseration”) and spawning an “over-production of the elite” — too many elites chasing too few roles — which, in turn, leads to extreme frustration, anxiety and in-fighting.The result is usually a social explosion and political disintegration, with Turchin’s models suggesting that such structural shifts typically occur about every 100 years in complex societies. Even before Trump’s election in 2016, he predicted that the US and western Europe were destined for a “turbulent Twenties”.Turchin’s ideas are controversial. Twenty years ago his theory of empires, outlined in the book Historical Dynamics, provoked pushback from historians. “Sophisticated mathematics will not improve naive social theories,” argued one critic. But with Trump trying to stage a return, Turchin is back too. His new book, The End Times: Elites, Counter-Elites and the Path of Political Disintegration, argues that the dynamics he predicted previously are only intensifying. Decades of falling real wages have had an impact, he says, as shown by the declining life expectancy data of poor Americans. Meanwhile, elite overproduction is surging, as the number of graduates explodes and competition for jobs gets ever more intense, fuelling insecurity and resentment at the 1 per cent, even among the top tier.Indeed, when Turchin runs a cliodynamic model based on the past 60 years of economic and sociological US trends, his results suggest — even without factoring in other details about Trump and Biden — that “by 2020 both immiseration and elite overproduction . . . reach very high levels [in America]. The radicalisation curve starts to grow after 2010 and literally explodes during the 2020s. So does political violence.” In this world, events such as the January 6 insurrection could just be foreshocks.In plain English, this suggests that a figure such as Trump is a symptom, rather than the cause of the US’s turmoil. The only way to shift this trajectory, based on the data, is to replay the New Deal policies of the 1930s and the immediate postwar years in the US, using redistribution to reduce inequality. In the 1950s, for example, the top rates of federal income tax in the US jumped to 90 per cent, compared with 7 per cent in 1913 or 37 per cent today. Such calls would horrify many American elites, so much so that they might reject these forecasts out of hand or point out that relying on mechanistic models is dangerous. But Turchin is not the only contemporary Cassandra; even hedge-fund billionaire Ray Dalio, another believer in cyclical shifts, is warning that rising inequality could create social explosions.So it would be foolish for US leaders to ignore Turchin. If nothing else, the concept of elite overproduction is a good way to explain why elite US education is now so costly, competitive and damaging for would-be elite kids and adults alike.Follow Gillian on Twitter @gilliantett and email her at [email protected] @FTMag on Twitter to find out about our latest stories first More