Aurelia Butler

The writer is director of Penumbra Analysis, a consultancy specialising in geopolitical risk and emerging technologiesThe UK’s move to ban Huawei from its 5G telecoms networks has brought the debate about the security threat from Chinese equipment into the mainstream. There are increasing concerns about western exposure to potentially risky technology: only last month, British MPs and peers called on the government to crack down on the use of surveillance equipment from two Chinese companies, Hikvision and Dahua, which have already been blacklisted by Washington. However, there is one threat that has gone under the radar: the tiny components made by Chinese companies in devices connected by the Internet of Things.IoT products, which are fitted with data-transmitting sensors and connected over WiFi networks, have evolved from niche industrial applications to being ubiquitous in homes, offices and some vehicles. They are also a critical component of our national infrastructure. This is the technology that will automatically turn our lights on when it gets dark, or power domestic surveillance cameras capable of facial and object recognition. But the same data collected and used by IoT devices — on individuals’ movements, for instance — could easily be used by a hostile state such as China to influence, pressure or threaten an adversary, company or individual. All these connected functions are enabled by tiny cellular IoT modules. Unlike semiconductors or 5G base stations, they are rarely marketed as complete products, which goes some way to explaining why the risk appears to have been lost on London and Washington. In a clear parallel with the market domination of telecoms suppliers such as Huawei and ZTE, three Chinese manufacturers hold over 50 per cent of the global market share of cellular IoT modules. Between them Quectel, Fibocom, and China Mobile provide modules to a number of Chinese companies including Huawei, Hikvision and DJI, which have been linked to the repression of Uyghurs in Xinjiang (although the three companies have disputed these ties). While the products of these latter three companies are already either under scrutiny or actively restricted in either the US, UK, or Europe, the same underlying cellular IoT modules are also used by western producers including Tesla, Intel, Dell and Parrot.This is of concern because we are interacting with IoT devices increasingly regularly: the smart plug on your coffee machine comes on just before you wake up in the morning, and the power usage is collected and quantified by your smart meter. The lighting and heating systems in your office adapt to the presence of workers or changes in the weather. Taken separately, these are relatively innocuous episodes in your day. But collectively, and over a longer period of time, this data provides a rich and deep impression of your lifestyle that could be highly lucrative to a private company, or a powerful tool for the Chinese government seeking to shape the behaviour of its overseas diaspora, blackmail espionage targets, or to exert influence.Some IoT devices are increasingly being shown to be insecure, not necessarily by design, but by dint of poor manufacture. Recently, CISA, the US cyber security agency, warned of critical vulnerabilities in Chinese-made GPS-enabled IoT devices in cars and motorcycles. They were found to contain hard-coded admin passwords and other flaws that would not only allow Chinese suppliers to monitor the location of these devices remotely, but to potentially cut off the fuel supply while vehicles were in motion. We in the west are beginning to rely on technology that at best fails to live up to our high cyber security standards and at worst has been intentionally designed with “bug doors” through which manufacturers can gain access if they want to. When challenged over poor coding or product quality, the response from Chinese companies is often conciliatory. Promises are made of improvements and investment in training to ensure that the problems are fixed. But, as reports from the UK’s Huawei Cyber Security Evaluation Centre show, these changes are often slow in coming and rarely solve the underlying issues. Individuals should educate themselves about how their data can be used, where it is stored and processed and who has access to it. Governments in the US, UK and Europe should take action. The use of these devices and the data they can collect poses a clear risk to national and economic security — and threatens to undermine the commitment to human rights and privacy that we hold dear. More

TOKYO (Reuters) – With a cabinet reshuffle out of the way, Prime Minister Fumio Kishida’s search for the next Bank of Japan (BOJ) governor will intensify in coming months with a small but possible chance of a dark horse getting the job.Kishida gave some key posts to lawmakers loyal to deceased premier Shinzo Abe in Wednesday’s reshuffled cabinet, a sign he is not turning his back on proponents of aggressive monetary easing that was a key pillar of Abe’s “Abenomics” stimulus policies.However, as years of ultra-low interest rates strain bank profits and limit scope for further easing, Kishida likely won’t chose an advocate of radical stimulus. Instead, he is seen opting for a safe pair of hands who can engineer an orderly exit, if any, from massive stimulus, analysts say.That leaves former BOJ deputy governor Hiroshi Nakaso and incumbent deputy Masayoshi Amamiya as strong candidates to replace Governor Haruhiko Kuroda when his second, five-year term ends in April, analysts say.With Finance Minister Shunichi Suzuki having retained his post, many analysts say the cabinet reshuffle won’t alter the dominant market view that those two remain closest to the BOJ helm.”Looking at his personnel decisions, Kishida continues to pay heed to conservatives and proponents of Abe’s policies,” said Toru Suehiro, chief economist at Daiwa Securities.”His priority is to strike a balance among ruling party factions. If this trend were to continue, Amamiya or Nakaso will remain top candidates as next BOJ governor,” he said.But there is a small chance, which is increasingly talked about in political and financial circles, that Kishida may choose a dark horse to distance himself from Abenomics, which has failed to produce solid, sustainable growth in the world’s third-largest economy.”Amamiya and Nakaso both served under Kuroda, and so might find it hard to reverse the BOJ’s current massive stimulus,” said a source familiar with the selection process.”Someone from outside the BOJ might be better placed to overhaul yield curve control (in the bond market),” the official said, a view echoed by another source close to the administration.If so, former finance ministry officials are seen as possible candidates. Having ex-finance bureaucrats at the top or deputy posts will help the BOJ work closely with the ministry, which is in charge of debt issuance, to avoid any damaging spike in long-term interest rates, the sources said.Kuroda is among former finance ministry officials who became BOJ governor with experience in currency diplomacy and tax affairs.Former top finance ministry bureaucrat Toshiro Muto, who had expertise in budget drafting and was armed with strong ties with politicians, also served as deputy BOJ governor from 2003 to 2008. He informally served as a bridge between the central bank and government on economic policy affairs.Former top currency diplomat Masatsugu Asakawa, who is currently head of the Asian Development Bank, is considered as among candidates. He has the strong backing of former finance minister Taro Aso who, as vice president of the ruling party, retains strong influence over Kishida’s personnel choices.There is also a chance Kishida could choose a woman to head the BOJ, or to fill one of the two deputy posts opening up in March, to infuse diversity in the male-dominated institution, say two sources with connections to the administration.Names floated in markets include Yuri Okina, who heads a private think tank and served on several government panels, and former BOJ board member Sayuri Shirai, they said.While Shirai stressed the benefits of maintaining current easy policy, Okina criticised the BOJ’s yield cap policy as causing a “negative spiral” of yen declines in a recent Reuters interview.Unlike during Abe’s rein where reflationist-minded academics influenced choices, the finance ministry is likely to hold huge sway over short-listing candidates given its close relation with Kishida’s administration, government officials say.Crafting of the list will intensify in coming months and be finalised by year-end, with Kishida having the final say in who becomes next governor, they say.Regardless of who gets the top BOJ post, any exit from its stimulus will be gradual given the need to protect the fragile economy and curb the cost of financing Japan’s massive and growing public debt.”If public anger over rising living costs heightens, Kishida may choose someone more keen to tweak the BOJ’s ultra-loose policy” and prevent further yen declines from pushing up import prices, said Izuru Kato, chief economist at Totan Research.”Even so, Japan’s huge public debt leaves BOJ policy under fiscal dominance. Any exit will be an extremely narrow path.” More

The brokerage expects India’s growth to average 7% for 2022-2023 and contribute 28% and 22% to Asian and global growth, respectively.Morgan Stanley’s projection comes as Asia’s third-largest economy grew 9.2% in the fiscal year 2022, a sharp recovery from a 6.6% contraction in the previous year as COVID-19 lockdowns took a severe toll on its economy. The country now expects GDP growth for 2022-2023 at 8%-8.5%.”Lower corporate taxes, the production-linked incentive (PLI) scheme and India as a potential beneficiary of supply chain diversification will catalyse and sustain domestic demand, especially in investment,” the economists said in a note dated Tuesday.In 2019, India had cut corporate tax rates to woo manufacturers and revive private investment, and launched the PLI scheme in 2020 to aid domestic manufacturing. (https://reut.rs/3QCZl5v)(https://reut.rs/3SFeRzp)The brokerage sees risks related to higher energy prices, spurred by the Ukraine war and supply constraints, to remain, but added that they have begun to recede.Morgan Stanley’s outlook also comes as developed economies paint a glum picture, with business activity in the United States and eurozone contracting in July, as per their PMI data.”The economy is set for its best run in over a decade as pent-up demand is being unleashed,” the brokerage said, adding that “healthy” corporate balance sheets and business confidence bodes well for India’s investment outlook.While India, like other economies, raised interest rates to battle inflation, Morgan Stanley said the country’s 39.45 trillion rupee ($529.7 billion) budget for the current fiscal year has continued to tilt towards lifting public investment.It expects domestic consumption to pick up and services exports to hold up better than goods exports. More

The People’s Bank of China said it will strive to achieve best possible results in economic operations, while balancing economic growth and price stability, in its quarterly policy implementation report.The central bank said it will also closely monitor domestic and external inflation changes, and that it expects domestic consumer inflation to exceed 3% in some months in the second half of 2022. More

Good morning. It was the first time in American history that the FBI had searched a former president’s home. Now Donald Trump’s backers, challengers and officials from both the Republican and Democratic party are demanding answers. The Department of Justice and FBI have yet to comment on the probe of Trump’s Florida residence. The White House said it “did not have advance notice” of the FBI’s plans to storm his home. But people close to Trump said the search on Monday night concerned the former president’s removal of classified materials from the White House after leaving office. Focus is now turning to what this means for his ambitions to run again for the presidency in 2024. The raid on Mar-a-Lago quickly morphed into a political campaigning card, with Trump releasing an ad-style video in the wake of the operation. Republican candidates sent fundraising emails to supporters citing the FBI search in attempts to rally the party’s base ahead of midterm elections. Although Trump was quick to denounce the raid — calling it “an assault which could only take place in broken, Third-World countries” — experts say he is treading on thin ice, as multiple legal challenges trail the former president. Go deeper: How big are Trump’s legal troubles?Thank you for spending part of your morning with FirstFT Americas — Georgina. Five more stories in the news1. Elon Musk sells $7bn of Tesla stock ahead of court fight with Twitter The SpaceX chief executive took advantage of a recent rebound in Tesla’s stock price to offload $6.9bn worth of shares in the electric car maker since the end of last week, according to a series of regulatory filings yesterday.2. Carlyle boss quits after being denied $300mn pay package Ousted chief executive Kewsong Lee resigned from the US private equity group after its co-founders refused to discuss his request for a package worth up to $300mn over five years, people with knowledge of the matter said.3. Joe Biden tax proposals fall short of OECD standards for minimum rate Washington’s application of a global tax deal proposed by the OECD last October — in particular, a minimum corporate tax floor of 15 per cent — is at odds with how the agreement is likely to work elsewhere. Where does Biden’s Inflation Reduction Act fall short?4. Investors watch for cracks in US consumer loan market US household debt levels have skyrocketed this year as Americans borrow more to pay for increasingly expensive homes and cars. As the Federal Reserve tries to rein in price growth by lifting interest rates, analysts and economists are getting worried. 5. Foxconn stake in Chinese chipmaker under scrutiny Taiwanese national security officials want to force the Apple supplier to unwind an $800mn investment in Tsinghua Unigroup as Taipei seeks to align itself more closely with the US in the face of escalating threats from Beijing.Cross-Strait relations: Taipei’s foreign minister warned that China could use military drills to impede shipping and air traffic and deny access to the US.The day aheadInflation data All eyes will be on a crucial US inflation report coming at 8:30am Eastern Time which could influence the path ahead for the Federal Reserve’s monetary policy. US July headline consumer prices are expected to have risen 0.2 per cent from June, while its annual gain is forecast to moderate to 8.7 per cent, according to economists polled by Reuters. Core inflation — stripping out food and energy costs — is projected to have risen 0.5 per cent in July.These numbers would mark a slight easing of inflation compared with the 9.1 per cent annual increase and the 1.3 per cent monthly rise recorded in June.Chicago Fed president Charles Evans and Minneapolis Fed president Neel Kashkari are due to make comments later at separate events. Monthly retail sales in Brazil are expected to have dropped 1 per cent in June, according to economists polled by Refinitiv, as persistently high inflation may have caused consumers to pull back spending.Corporate earnings Walt Disney is expected to post a rise in third-quarter revenue. The company has been buoyed by steady subscriber growth on its streaming platforms coupled with the return of theme park goers. Disney shares have fallen more than 30 per cent over the past year. Investors are questioning the stability of the streaming market after seeing Netflix subscriber counts drop in the past two quarters. Media company Fox and fast-food chain Wendy’s are reporting before the bell. The dating app Bumble is reporting after the bell. A full list is in our Week Ahead. Sign up here to receive the newsletter in your inbox every Sunday.Rishi Sunak BBC interview The former UK chancellor and Conservative party leadership contender will be interviewed by Nick Robinson. Opponent Liz Truss has a clear lead in the betting market.What else we’re reading‘Painstaking’ work to help mitigate California wildfires In the Napa Valley, private groups and local businesses are doing what they can to protect the land from catastrophic fires. In California, a state with 33mn acres of forest that has been in drought for much of this century, the past two years have seen fires reach unprecedented levels, according to Cal Fire.Netflix seeks to become a big player in the gaming sphere The group’s plans to release more video games comes at a precarious moment for the company, writes Tom Faber. Are these game offerings just a desperate attempt to retain dominance in an increasingly competitive streaming market?Rich and poor should mingle more New research suggests that children from low-income families who are friends with wealthier peers will earn more later in life. “Economic connectedness” — in short, having rich acquaintances — can be a valuable early rung on the economic ladder, writes Anjana Ahuja.Lessons from Irish history on the famine in Somalia The UN has warned that following a drought that killed 3mn animals and caused crops to fail, parts of Somalia could face full-blown famine next month. Looking back to Ireland in 1846 in the midst of a potato famine gives insight into the potential scale of the devastation, writes Jude Webber.Europe can withstand a winter recession There is virtually no way to escape a Europe-wide recession after Russia tightened natural gas supplies, but it need be neither deep nor prolonged. Substitution, solidarity and conversation can help overcome a gas embargo, writes Chris Giles.SportTennis star Serena Williams will retire after the US Open tournament. Her achievement of 23 Grand Slam singles titles stands alone but Williams’ tennis legacy goes far beyond statistics. Writing in Vogue, she reflects on how coming to this crossroads has highlighted what she hopes has been her enduring message for women athletes: “They can wear what they want and say what they want and kick butt and be proud of it all.”FT Globetrotter: Up your game with these 10 intriguing tennis gadgets.

Serena Williams’ quest to break Margaret Court’s record of 24 career Grand Slam titles has made her a consistent television ratings and ticket sales draw at tournaments around the world © Chris Symes/Photosport/AP More