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Who's afraid of Xi Jinping?

Written by Javier Maquieira, senior associate 
Edited by Iain Gibson, associate partner
17 September 2021

Good morning,

Who’s afraid of Xi Jinping?
 
By the looks of things, most of the western world. Yet if the last couple of days are anything to go by, there isn’t quite a united front to counter Beijing’s rising influence.
 
On the contrary.
 
In a historic move, US President Joe Biden, UK prime minister Boris Johnson, and Australian premier Scott Morrison announced a security deal on Wednesday focusing on military capability and technology.
 
Known as Aukus, the partnership will allow Canberra to use technology provided by the US to build nuclear-powered submarines for the first time, amid “growing” concerns in the Asia-Pacific.
 
Although China hasn’t been directly mentioned as the regional superpower the alliance seeks to deter, the country’s foreign ministry spokesman, Zhao Lijian, was quick to condemn the pact as “extremely irresponsible”, adding it “seriously undermines regional peace and stability and intensifies the arms race.”
 
Crucially, Beijing isn’t alone in its outrage at Aukus, albeit for different reasons: the French government has called the deal a “stab in the back”, not least because it means Australia is abandoning a submarine agreement with France worth more than €50bn. Now Paris is intent on fighting the move, having made clear that Australians will “need to tell us how they’re getting out of it”, as the Macron administration cancels diplomatic events with Washington and Canberra.
 
The announcement of the new alliance came a day before the European Commission president gave her annual state of the union speech before the European parliament in Strasbourg. In the speech, Ursula von der Leyen presented the bloc’s long-planned Indo-Pacific policy, heralding a “time for Europe to step up to the next level” when it comes to greater defence cooperation among member states.
 
The former German defence minister added that lack of progress on security and defence was a result of a lack of “political will”, as she announced the Commission’s plans to convene a summit on European defence during France’s presidency of the Council of the EU next year.
 
While an EU-Nato declaration is expected by the end of this year, the Aukus alliance is already alienating President Biden’s allies on the continent. Unless the involved countries manage to convince the bloc that the alliance is in no way adversarial, an uncoordinated or divided western front can only be beneficial for China.
 
Worryingly, an arms race in the Asia-Pacific would not only intensify instability in the region and make a row over Taiwan more likely, but also endanger a deal with Beijing on greenhouse gas emissions ahead of COP26. That is a prospect all the more frightening than Xi Jinping himself.

News

The Scottish government has requested military assistance for the country’s ambulance system amid a series of serious delays. First minister Nicola Sturgeon told MSPs at Holyrood that health services were dealing with the most challenging combination of circumstances in their history due to the Covid-19 pandemic.
 
The UK government is set to cut the number of red list countries by half today, in a simplification of the traffic light system for international travel, whereby the amber list will be scrapped. The move, which will give clearer distinction between “go” and “no go” destinations, is also seen as an incentive to the 10% of those eligible to be vaccinated who have not yet had their first jab.
 
A decision on whether Wales will introduce Covid vaccination passports to enter nightclubs and big events is expected today. While the Conservatives and the Lib Dems in the Senedd have expressed concerns over the scheme, Labour first minister Mark Drakeford has not ruled out a mandatory system, which is planned for Scotland and may still be used in England.

Business and economy

The chancellor of the exchequer is reportedly planning to set out fiscal rules to rein in government borrowing in next month’s budget. Rishi Sunak’s new rules will commit the Treasury to stop borrowing to fund day-to-day spending within three years, amid fears that a rise in interest rates could blow a hole in the UK’s already indebted public finances. (£)
 
Record energy prices have forced two fertiliser plants in the north of England to shut down and brought steel plants to a halt. The energy price shock, which is already engulfing Europe and could deal a blow to the UK’s economic recovery, has triggered calls for ministers to take urgent action to protect households and companies.
 
A study of 107 global businesses working in carbon-intensive sectors has shown “a glaring absence of climate risks in financial reporting”, which researchers warn will dramatically reduce firms’ chances of meeting global emissions targets. The think tank Carbon Tanker has said companies need to be more transparent about the money they are putting into sustainable activities, as well as how they plan to hit sustainability targets.

Columns of note

In the Financial Times, Tim Harford argues that if we want to improve vaccination rates, we should help people who are already halfway to getting it. Beyond honest communication about benefits and risks, messages revolving around antisocial behaviour should instead be reframed to point out that most people are doing the right thing. Harford further posits that vaccine hesitancy is a sign of a more worrying fraying of the social fabric: “while vaccines have proved to be highly effective, one cannot say the same about our governments.” (£)
 
Jess Cartner-Morley writes in the Guardian about the risk the fashion industry faces if it doesn’t start taking sustainability seriously. In an operational context in which responsible production has become the hallmark of a respectable brand, emotional engagement with social justice and the climate emergency has not necessarily turned into action at the speed required. By producing too many clothes, Cartner-Morley concludes, fashion firms are not just harming the climate, but also undermining their own status at the risk of becoming the thing they most dread: uncool.

Cartoon source: The Telegraph

Markets

What happened yesterday?

London stocks closed higher on Thursday ahead of ‘quadruple witching’, the quarterly expiry of equity derivatives on Wall Street that often results in market volatility. The FTSE 100 was up 0.16% at 7,027.48, alongside a gain of 0.85% to 23,632.84 for the FTSE 250.
 
Across the Atlantic, US stocks slipped after stronger-than-expected data on American retail sales. Wall Street’s blue-chip S&P 500 and Dow Jones indices both closed down 0.2%, while the technology-heavy Nasdaq Composite index ended the day up 0.1%.
 
In company news:
 
Ashtead rallied 5.26% after the equipment hire company said its annual performance would beat its previous expectations, as it reported a 53% increase in operating profit for the first quarter.
 
Wickes was up 2.07% after saying it now expects full-year profit towards the upper end of market expectations, as the DIY retailer reported better-than-expected interim profits.
 
Hilton Food advanced 5.12% after the food packaging business increased its interim dividend by 17%, as it reported a strong first half, driven by its Australian operation.
 
Games Workshop was lower as the miniature wargame manufacturer said trading for the three months to 29 August was in line with the board’s expectations and declared a dividend, but warned over pressure on freight costs and currency exchange rates.

What’s happening today?

Interims
Midatech Pharma

AGMs
Accsys Tech
Auto Trader
Baillie Gifford

UK economic announcements
(07:00) Retail Sales

Int. economic announcements
(09:00) Current Account (EU)
(10:00) Consumer Price Index (EU)
(15:00) U. of Michigan Confidence (Prelim) (US)

Source: Financial Times

did you know

Just one Google search requires more processing power than it took to send Apollo 11 to the moon. (Source: @UberFacts.)

Parliamentary highlights

House of Commons

No business scheduled.

House of Lords 

No business scheduled.

Scottish parliament 

No business scheduled.

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