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China and the EU are rushing to meet a year-end deadline to seal a long-awaited investment deal, in a sign of the bloc’s push to build strategic ties with Beijing, even as it revives relations with the US.

The likelihood of the accord being settled soon is rising despite the disruption caused by the coronavirus crisis, officials from both sides have told the Financial Times. Beijing’s shift in the important area of market access has given the process additional momentum, EU officials said.

The EU has long yearned for an agreement to allow its companies wider entry to China’s market, and the two sides last year agreed it should be concluded by the end of 2020.

Securing a deal would be a diplomatic coup for both powers. It would come weeks before the inauguration of US president-elect Joe Biden, which has the potential to foster improved transatlantic trade ties after tensions with the Trump administration. 

Meanwhile, the US Treasury department is attempting to water down an executive order from Donald Trump that bars Americans from investing in Chinese companies with suspected ties to Beijing’s military, as a dispute heats up over one of the last big anti-Beijing policies of the Trump era. (FT)

Coronavirus digest

  • New Zealands “go hard and early” Covid-19 policy is reaping economic rewards.

  • China plans to vaccinate 50m people ahead of the Lunar New Year.

  • Japan is set to receive Pfizer’s application for approval of its Covid-19 vaccine on Friday.

  • Moderna’s Covid-19 vaccine was approved by a Food and Drug Administration advisory committee, setting it up to be the second vaccine approved in the US.

  • French president Emmanuel Macron has tested positive for Covid-19. (FT, WaPo)

Covid-19 economic recovery

Do you pine for lost office rituals — or prefer the new normal? Join the discussion in the comments of our story. Follow our live coronavirus blog for the latest.

In the news

US cyber hack: ‘grave risk’ to critical infrastructure US cyber officials warned that the SolarWinds hack was continuing to affect the government, critical infrastructure and private sector. The US nuclear weapons agency is also thought to be included in the breach. Separately, Washington banned utilities supplying defence facilities from buying Chinese power grid items, citing cyber security concerns. (FT, Politico, Reuters)

Cyber security experts are trying to determine the extent of the damage caused by the breach, which continued for months © Arek

Australia’s China diplomacy sets business on edge This week marks the fifth anniversary of the pair’s free trade deal, which has boosted trade by A$100bn a year. But no one is celebrating in Canberra amid a breakdown in bilateral relations, which has sparked debate about Australian diplomacy and whether Canberra’s approach is hurting the economy. (FT)

Brexit trade talks hit by fresh dispute A row over Brussels’ €750bn Covid-19 recovery package has become a sticking point as UK trade talks go to the wire, after Boris Johnson, UK prime minister, warned that EU-level spending should not be exempt from state-aid restrictions in a post-Brexit agreement. The uncertainty surrounding a possible deal has left employers in limbo. (FT)

Google antitrust cases mount A bipartisan group of 38 attorneys-general took aim at what it claimed were deliberate moves by the company to block rival specialised search services from reaching users. The case came a day after 10 Republican state attorneys-general filed their own lawsuit accusing Google of monopolising adverts and fixing prices to suit itself. (FT)

Luckin Coffee settles in accounting fraud case US regulators have hit the chain with a $180m penalty after finding that the scandal-plagued Chinese group altered bank records and set up a fake database as part of an effort to fabricate its accounts. (FT)

Luckin Coffee was delisted from Nasdaq earlier this year © Bloomberg

Switzerland charges Credit Suisse for money laundering In an indictment put before the country’s Federal Criminal Court on Thursday, investigators said the bank had processed more than SFr140m ($158m) of transactions for a clan of mafiosi and former top-level wrestlers, earned from smuggling tonnes of cocaine into Europe and other illegal activities. (FT)

Toshiba management-investor clash Effissimo, a secretive Singapore fund and Toshiba’s largest investor, called for an extraordinary general meeting and an independent investigation into allegations that a knife-edge shareholder vote was conducted unfairly. Meanwhile, a global chip shortage threatens production of laptops and smartphones. (FT, Reuters)

Toshiba’s chief executive Nobuaki Kurumatani survived a vote on his reappointment with just 58% support © Toru Hanai/Reuters

Bankers enjoy bumper fees from Chinese groups Investment bankers are close to earning record fees from equity deals involving Chinese companies in 2020, underscoring global finance’s growing dependency on the country even as geopolitical tensions rise. (FT)

The days ahead

Interest rate decisions The Bank of Japan announces its policy decision on Friday, with rates likely to stay unchanged. The bank is also set to extend special pandemic support measures for businesses. Russia, meanwhile, has kept the market divided on whether it will cut again or hold on Friday.

Fed stress tests The US Federal Reserve on Friday will release an unprecedented second set of test results for the country’s largest banks, which will show how well they are equipped to deal with the economic downturn brought on by the pandemic.

US coronavirus aid relief Congressional leaders vowed they would soon complete negotiations on a $900bn fiscal stimulus deal to bolster the country’s economy, although talks could stretch into the weekend to resolve the last sticking points. (FT)

What else we’re reading

MindGeek: the owner of Pornhub and RedTube In the internet era, porn is everywhere. But very little is known about the new group of operators whose pockets are being lined by insatiable demand. No entity exemplifies this more than MindGeek — the owner of Pornhub, RedTube and YouPorn — whose owner’s identity was a secret before this FT investigation. (FT)

Porn pioneered elements of the global online advertising industry such as targeted advertising, pay-per-click and email marketing and is today a substantial part of the internet economy © Dreamstime/FT montage

How this stock market rally differs from past cycles The higher starting valuations in this bear market, the lack of room for interest rates and bond yields to fall and a much higher debt burden compared with the decade after the financial crisis, suggest that over the medium term, returns will be lower, writes Peter Oppenheimer, chief global equity strategist at Goldman Sachs. (FT)

Xi sees Alibaba and Tencent as rising threats The politburo has gone on a crusade against the “disorderly expansion of capital” emanating from the two tech giants. Meanwhile, as Beijing used facial recognition software to track Uighur people, Alibaba has shown customers that its software can do the same. (NAR, NYT)

Simon Schama on John le Carré The spy fiction master ventured well beyond the shadows of espionage to become one of the most perceptive and enduring writers of his age, Simon Schama writes. Until le Carré came along, no writer had nailed nuance with such lethal accuracy. (FT)

© Greg Funnell/Camera Press | John le Carré

The impact of the FinCEN Files Earlier this year, BuzzFeed News and the International Consortium of Investigative Journalists published a report that rocked the financial world: it claimed dirty money was pouring into the world’s most powerful banks in plain view. Here is a look at legislative, regulatory and investigative action that has followed. (BuzzFeed News)

Grandma’s lessons from the shop floor Post-pandemic, jobs in retail could be particularly vulnerable to automation “on steroids”. But recommendations to herd an army of mostly female workers from the high street into the care home, where jobs are in demand, is as shocking as it is well-meaning, Miranda Green writes. (FT)

The challenges of covering 2020 FT columnist Simon Kuper assesses the methods, biases and blind spots that he brought to his commentary of 2020 — the “most dystopian and utopian” period he has lived through: “Readers rightly accuse me of bias against Trump and Brexit. Both movements offend my cosmopolitan instincts.” (FT)

© Harry Haysom

Podcast of the day

The best and worst of 2020 Gideon Rachman talks to Roula Khalaf, FT editor, and Martin Wolf, chief economics commentator, about the extraordinary events of 2020, including Covid-19, the US election and signs of reconciliation between Israel and Gulf states. (FT)

Thank you for reading. Send your recommendations and feedback to firstft@ft.com



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Emerging Markets

Regulators close ranks on crypto

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Regulators are continuing to step up their scrutiny of cryptocurrencies, with central banks and South Korea’s tax authorities demonstrating fresh concerns.

In a report published on Wednesday, the Bank for International Settlements, the global body for central banks, argues that digital tokens such as bitcoin have few redeeming features and “work against the public good”. It also dismissed stablecoins — a link between crypto and conventional assets — as an “appendage” to traditional money.

Perhaps unsurprisingly, the BIS did endorse the development of digital currencies backed by central banks, saying they could be a tool to achieve greater financial inclusion and lower the high costs of payments. “Central bank digital currencies . . . offer in digital form the unique advantages of central bank money: settlement finality, liquidity and integrity,” it said.

In contrast, bitcoin wasted energy and cryptocurrencies were “speculative assets rather than money, and in many cases are used to facilitate money laundering, ransomware attacks and other financial crimes”.

South Korea has acted against the financial crime of tax evasion, with more than Won53bn ($47m) of bitcoin, ethereum and other cryptoassets confiscated from 12,000 people. Officials said it was the largest “cryptocurrency seizure for back taxes in Korean history” and noted that local exchanges had allegedly been used to conceal assets because they did not collect the resident registration numbers of account holders. Many of South Korea’s 60 crypto exchanges are battling to meet regulatory conditions to operate beyond September.

This week’s #techAsia newsletter asks whether the death knell is being sounded for cryptocurrencies. That could be the case in China, where it is scaling up tests of its official digital renminbi, and appears serious about stamping out the crypto industry on its soil. Bitcoin fell below $30,000 on Tuesday following the latest regulatory crackdown, but it has recovered to be worth more than $34,000 today.

The Internet of (Five) Things

1. Migrant workers locked up in Taiwan
With Taiwan under pressure to increase manufacturing output to ease global shortages, particularly of semiconductors, electronics groups including Japan’s Canon and Innolux, an affiliate of Apple supplier Foxconn, have been accused of locking up migrant workers amid an outbreak of Covid-19. Some companies have forbidden migrant workers from leaving the dormitories where they live except to go to work.

Daily newsletter

#techFT brings you news, comment and analysis on the big companies, technologies and issues shaping this fastest moving of sectors from specialists based around the world. Click here to get #techFT in your inbox.

2. SoftBank not a ‘one-man show’, says Son
Masayoshi Son has told shareholders that SoftBank will not prioritise short-term trading gains as the company behind the world’s most aggressive technology fund was grilled over governance failures after the collapses of Greensill and Katerra. At its annual shareholder meeting, the 63-year-old billionaire founder defended the Japanese conglomerate’s governance structure, saying the board was not “Masayoshi Son’s one-man show”.

3. Toshiba’s ’dark arts’ and dirty tricks
Today’s Big Read sets the stage for Japan’s most contentious annual shareholder meeting in decades. At its centre is the fate of Osamu Nagayama, the widely respected chair of Toshiba who faces being swept away by a mass shareholder revolt that could — in a single vote on Friday — sack the entire board of one of Japan’s most famous industrial names.

4. ‘Amazon effect’ hits US wages
Companies struggling to find workers as the US economy reopens have blamed higher unemployment benefits, limited immigration, childcare challenges . . . and Amazon. The ecommerce leader recruited aggressively last year, hiring 500,000 people worldwide, while in the US, it paid at least $15 an hour before benefits, double the federal minimum wage. 

Line chart of Average hourly earnings, not seasonally adjusted ($) showing Pandemic demand has boosted warehouse workers' wages

5. US takes down Iranian websites
US authorities have seized dozens of websites linked to Iranian groups, including the Revolutionary Guards, accusing them of spreading misinformation and operating in the country without licences. The Department of Justice said 36 websites had been taken down, 33 of which were operated by the Iranian Islamic Radio and Television Union. 

Tech tools — Brave and Vivaldi push privacy

Pro-privacy browser Brave has launched a global beta of its own-brand search engine Brave Search, reports Techcrunch. The non-tracking search engine is being offered as one of multiple search options that users of the browser can pick from (including Google’s), but Brave says it will make it the default search later this year. Meanwhile, a 4.0 version of Vivaldi, which offers similar browser privacy features, was launched this month. It has now added translation and the options of adding an email client, calendar and RSS reader.

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China bolsters ties with Myanmar junta despite international condemnation

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Trade and diplomatic ties between Myanmar and China are normalising in the face of intense domestic opposition and international condemnation of the military junta that seized power in February.

Beijing has strengthened relations with Myanmar’s military leaders despite a series of violent attacks against Chinese business interests in the country after Aung San Suu Kyi’s government was toppled.

Yun Sun, an expert on Myanmar-China relations with the Stimson Center, a US think-tank, said Beijing had already made a “fundamental assessment” that Myanmar was moving into another prolonged period of military rule.

“I think the Chinese can see that this military coup is successful and is here to stay,” she added.

The resumption of state-level engagements and economic activity signals that Myanmar is reverting to its traditional economic reliance on China. The country has used its larger neighbour as a buffer against international sanctions and divestment by foreign investors, who have announced plans to quit the country or shelved projects.

Since the coup, 875 people have been killed by the junta and 6,242 arrested, according to the Assistance Association of Political Prisoners (Burma), a human rights group. The country’s economy and public services were severely disrupted by mass protests in the three months that followed the putsch, and have only partially recovered.

The resumption of bilateral trade will fuel the widespread suspicion among anti-coup resistance groups that China was prepared to support the new military regime.

The cumulative value of China’s imports from Myanmar for the first five months of the year was $3.38bn, up from $2.43bn in 2020 and $2.56bn in 2019, before the coronavirus pandemic, according to official Chinese customs data.

Exports to Myanmar for the same period have not recovered to the same extent, however. By the end of May, goods valued at $4.28bn had been shipped to Myanmar, compared with $4.56bn and $4.79bn in the two previous years.

In a further sign of strengthening diplomatic relations, Chen Hai, China’s ambassador to Myanmar, met coup leader and military commander-in-chief Min Aung Hlaing in Naypyidaw, the capital, in June. In a subsequent statement, Chen referred to Min Aung Hlaing as the leader of Myanmar.

China was among the countries that abstained in a UN general assembly vote last week calling on the international community to halt the flow of arms to Myanmar and release Aung San Suu Kyi and other political detainees. 

Beijing had good relations with the government of the deposed leader, who is in detention facing multiple criminal charges. However, it has refrained from criticising the military, fanning anger among the mass protest movement that sprang up after the coup. 

Beyond being Myanmar’s biggest trading partner, China also has strategic infrastructure investments in the country, including energy pipelines that give Beijing a critical link to the Indian Ocean.

James Char, a Myanmar expert at the S Rajaratnam School of International Studies in Singapore, said many people in Myanmar still blamed the Chinese government and business interests for complicity in supporting the military’s decades of rule before the transition to democracy.

“The Chinese, themselves, are very clear about [public sentiment in Myanmar],” Char said.

Attacks on China-linked businesses in the wake of the coup culminated in an explosion at a Chinese-backed textile factory west of Yangon on June 11, according to reports from local Myanmar media, as well as junta-controlled information services and Chinese state media.

Beijing’s wariness of inflaming Myanmar protesters would probably slow Chinese direct investments and the resumption of planned larger-scale developments that formed part of President Xi Jinping’s Belt and Road Initiative, analysts said.

Additional reporting by Sherry Fei Ju in Beijing



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Australia calls Great Barrier Reef warning politically motivated

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Australia has labelled a draft decision by the UN’s World Heritage Committee to include the Great Barrier Reef on its “in danger” list as politically motivated.

The committee, which is chaired by Tian Xuejun, China’s vice-minister for education, and selects Unesco World Heritage sites, proposed adding the world’s largest collection of coral reefs to the danger list because of the damaging impact of climate change and coastal development.

The designation could ultimately lead to the reef losing its World Heritage status, although officials said listing was intended to prompt emergency action to safeguard a living structure that stretches 2,300km along Australia’s eastern coast.

But Sussan Ley, Australia’s environment minister, said the government had been “blindsided” by the committee’s finding and alleged there was a lack of consultation and transparency. She added that Canberra would challenge the draft decision.

“When procedures are not followed, when the process is turned on its head five minutes before the draft decision is due to be published, when the assurances my officials received and indeed I did have been upended, what else can you conclude but that it is politics?” she said.

That the World Heritage Committee is chaired by a senior Chinese official has stoked suspicions in Canberra that it had been singled out over its diplomatic and trade clash with Beijing.

China-Australia relations have soured following Canberra’s call last year for an inquiry into the origins of Covid-19 and Beijing’s imposition of tariffs on Australian wine and barley imports.

Ley said she and Marise Payne, Australia’s foreign minister, had already spoken with Audrey Azoulay, Unesco director-general, to complain about the draft decision.

But scientists downplayed the suggestion that the “in danger” listing was politically motivated. Three mass bleaching events in five years demonstrated the need for the government to do more to tackle climate change, they said.

“I’m seeing some press coverage saying this is all a plot by China not to buy wine, lobsters and to screw the Barrier Reef. I think that’s pretty far-fetched given that the draft decision released overnight will be voted on by 21 countries,” said Terry Hughes, professor of marine biology at James Cook University.

The controversy will heap further international pressure on Canberra, which has been pressed by the US, UK and others to commit to a national target of net-zero emissions by 2050.

In a draft decision due to be voted on next month, the committee urged Canberra to “provide clear commitments to address threats from climate change, in conformity with the goals of the 2015 Paris Agreement, and allow to meet water quality targets faster”.

It noted the loss of almost one-third of shallow-water coral cover following a “bleaching” event in 2016 — a process linked to warmer than normal water that can lead to a mass die-off of coral.

The row over the “in danger” listing occurred at a difficult time for Australia’s conservative coalition, which is embroiled in internal squabbling over climate policies.

On Monday, Barnaby Joyce, a climate sceptic and supporter of coal mining, ousted Michael McCormack to become leader of the National party, the junior coalition partner to the Liberal party, and Australia’s deputy prime minister. Joyce is expected to oppose any move to commit to net zero by 2050.

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