US and China attempt to calm tensions

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  • Saudi Arabia and Russia, the two most powerful members of the Opec+ cartel, announced new cuts to oil production in a renewed effort to boost the price of crude.

  • Currency speculators have boosted bullish bets on the pound to the highest level for nine years despite signs that sterling’s recent rally is flagging. Markets now think the Bank of England will have to raise interest rates further just as other big central banks are nearing the end of their tightening cycles, pushing the interest rate-sensitive two-year UK government bond yield to a 15-year high.

  • UK drivers are paying more for fuel because of weakening competition between petrol station owners, the country’s competition watchdog warned. The CMA also called for a government-backed scheme to give motorists access to real-time pump prices for ease of comparison.

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Good evening.

The second visit of a high-ranking US official to Beijing in just a fortnight and a Chinese charm offensive on US business highlight increasing efforts between the two countries to fix a relationship in its worst state since the establishment of diplomatic ties in 1979.

The US Treasury department confirmed yesterday that Janet Yellen would visit the Chinese capital later this week. Her visit follows the delayed trip by secretary of state Antony Blinken last month and aims to improve US-Sino relations, which have been damaged by rising trade and military tensions this year.

Yellen’s visit aimed to “deepen and increase the frequency of communication between our countries moving forward and to stabilise the relationship to avoid miscommunication and expand collaboration where we can”, said a Treasury official.

The US rhetoric of “decoupling” may have been replaced by “de-risking” but this too was criticised by China last week as a “politicisation of economic issues”. The situation had not been helped by US president Joe Biden referring to his Chinese counterpart Xi Jinping as a “dictator”.

Beijing, meanwhile, has passed a new foreign relations law that deepens Xi’s control, making it easier to enact “countermeasures” against western threats to national and economic security, following earlier crackdowns on foreign consultancies.

At the same time, China has been making overtures to US business leaders, including Tesla’s Elon Musk and Apple’s Tim Cook, as its economic recovery falters. At the weekend, it appointed a western-trained risk firefighter to lead the People’s Bank of China, a move expected to provide some certainty to markets. 

It is also determined to ramp up its exports, led by a huge assault on Europe’s car market, as it utilises a quarter-of-a-century’s expertise in electric vehicles. China dominates the production of almost every resource, material and component used to make them.

Many global businesses nevertheless are looking to pivot from China and de-risk their supply chains.

Countries such as Vietnam are beginning to emerge as part of a “China plus one” strategy, where production is being supplemented with expansion in other nearby countries. World Trade Organization director-general Ngozi Okonjo-Iweala said last week there was evidence that investment was shifting.

China is also facing increased hostility from other countries following the lead of the US and Japan in imposing tough curbs on tech exports. The latest example comes from the Dutch government, which has placed restrictions on ASML chipmaking machines to prevent them being used for “advanced military applications”. China, in turn, hit back today with restrictions on exports of two key metals used in chipmaking and communications equipment.

But with a meeting between Xi and Biden on the cards for later this year, the delicate dance between their two countries looks set to continue, as Washington’s security concerns vie with Beijing’s attempt to show that the country is open for business.

Need to know: UK and European economy

The UK is to take action over banks blacklisting customers who hold controversial views after leading Brexiter Nigel Farage claimed his account had been shut down without explanation. 

Upbeat trading updates from UK clothing chains have confounded policymakers who have been trying to tame inflation by lifting interest rates. Summer clothes, shorter breaks and occasional treats are in but household appliances are out. FT writers analyse where embattled consumers are spending their money.

Ukraine’s finance minister Serhiy Marchenko in a Financial Times interview urged the US and other powers to follow the EU’s four-year €50bn aid pledge to fund his country’s recovery and reform plans. The FT revealed that the EU was considering allowing a sanctioned Russian bank to reconnect to the global financial network to safeguard the Black Sea grain deal.

Sanctions have left Belarus ever more reliant on Russia’s economy. Our Big Read examines President Alexander Lukashenko’s claim that he can be loyal to Moscow while staying independent.

Need to know: global economy

Pimco, the world’s largest active bond fund manager, said markets are too optimistic about central banks’ ability to dodge a recession as they battle inflation in the US and Europe and should prepare for a “harder landing”.

This October, after a three-year break, 27mn Americans with student debt will once again have payments due, the effects of which are likely to ripple through the US economy.

There are several ways of measuring a country’s success other than gross domestic product. Life expectancy is the simplest and most directly comparable, argues columnist Sarah O’Connor.

Need to know: business

Apple has been hit by manufacturing problems involving its Vision Pro headsets, which were unveiled just last month after seven years in development.

Blue Origin, the rocket company owned by Amazon founder Jeff Bezos, is on the hunt for a site where it can build an international launch facility as it looks to compete with Elon Musk’s SpaceX.

The crisis at Thames Water could deter foreign investment in the UK, ministers and industry figures warned, as the company tries to raise at least £1bn to shore up its finances. Columnist Helen Thomas says the financial problems of water companies are largely to do with private equity rather than private ownership. 

Japan hopes a $6.4bn government-backed deal will strengthen its arsenal in the global chip wars. JSR, the Tokyo-based company that controls a critical link in the global semiconductor supply chain, last week accepted an unexpected buyout offer from JIC — a fund overseen by Japan’s powerful Ministry of Economy, Trade and Industry.

Netflix is revamping its advertising strategy as it seeks to boost revenues, including the introduction of “episodic” ad campaigns, which would avoid the common complaint from customers that they are shown the same ad multiple times.

The world of work

The shift to remote working has brought many changes to office life, including limiting the face-to-face experience of summer internships and frustrating those hoping that a placement at a big bank, law firm or accountancy group will lead to a lucrative City career.

Voiceover and performance artists are facing a threat to their livelihoods as generative AI developments make voice cloning more accurate, leading to an erosion of their work and rights, and leaving them in effect competing with themselves.

Categorising people into age-related groups such as “snowflake millennial narcissists” and “greedy boomer technophobes” can feed real generational hostility in the workplace, argues columnist Pilita Clark.

Some good news

New images from the James Webb Space Telescope capture much more detail of Saturn’s shining rings as well as three of its moons, Dione, Tethys and Enceladus.

A new image of Saturn and three of its moons, captured by the James Webb Space Telescope
A new image of Saturn and three of its moons, captured by the James Webb Space Telescope © AP

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