Know someone who would like this newsletter? Forward it to them.
The World
China’s president Xi Jinping is not planning to attend the G20 summit in New Delhi next weekend, officials said, in a blow to a forum of leading nations already beset by deep divisions. Xi’s move to skip a gathering of G20 leaders for the first time comes after he dominated last week’s Brics summit, where he oversaw plans to expand the developing nations club that Beijing sees as a rival to US-led western groupings. Xi’s absence is likely to be seen as a setback for the government of Prime Minister Narendra Modi, which has been using its occupancy of the rotating G20 presidency as a showcase for India’s expanding economy and growing geopolitical clout. (Financial Times)
China’s Disinformation Fuels Anger Over Fukushima Water Release. In Guangdong Province, on China’s southern coast, a woman posted a photo of a boxed-up Japanese-brand air-conditioner that she planned to return in protest. In southwest China, the owner of a Japanese pub posted a video of himself ripping down anime posters and smashing bottles, saying he planned to reopen the business as a Chinese bistro. In many social media posts like these, the phrase “nuclear-contaminated wastewater” has appeared — the same wording used by the Chinese government and state media to refer to Japan’s release into the ocean of treated radioactive water from the ruined Fukushima Daiichi nuclear power plant. Even before Japan started pumping out the first tranche of more than a million tons of wastewater last week, China had mounted a coordinated campaign to spread disinformation about the safety of the release, stirring up anger and fear among millions of Chinese. The water discharge, 12 years after the nuclear plant was wrecked by a massive earthquake and tsunami, spurred China to fall back on its old playbook of fomenting diplomatic mayhem with its Asian rival. In 2012, Chinese demonstrators, apparently escorted by the police, attacked sushi restaurants after Japanese activists landed on an island that both China and Japan claim as their own. (New York Times)
Ukrainian forces have penetrated the main Russian defensive line in their country’s southeast, raising hopes of a breakthrough that would reinvigorate the slow-moving counteroffensive. Describing the advance, the Ukrainian officer held up three fingers representing lines of attack through entrenched Russian positions on the western flank of Verbove, an agricultural village of some 1,000 residents before the war. The significance of the advance is that it marks the first time Ukraine has penetrated the main Russian defensive line, an extensive system of minefields, trenches and antitank obstacles covered by artillery. (Wall Street Journal)
Putin Moves to Seize Control Of Wagner’s Mercenary Empire. Russian President Vladimir Putin is moving swiftly to take control of Wagner mercenary chief Yevgeny Prigozhin’s sprawling operations in Africa and the Middle East, days after his renegade ex-protege died in a mysterious plane crash. A Defense Ministry-affiliated armed contractor is poised to assume charge of Wagner’s operations in the Central African Republic, said a person close to the Defense Ministry and two others close to the private military firm, who spoke on condition of anonymity. (Bloomberg)
Russia and North Korea ‘actively advancing’ in arms deal negotiations, says US. Russia and North Korea are “actively advancing” their negotiations over a potential arms deal that would provide significant ammunition for different types of weapons systems, including artillery, in the latest indication that the Kremlin is desperate to obtain further materiel for its faltering invasion of Ukraine, according to newly released US intelligence. The news of the potential deal comes despite North Korea’s public claims to the contrary. The Biden administration said Wednesday that they remain concerned that the two pariah states are in the middle of arms negotiations and that, following Russian Defense Minister Sergei Shoigu’s trip to North Korea last month, a second delegation of Russian officials have visited Pyongyang for further discussions on a potential deal. (CNN)
McConnell Releases Letter Declaring Him ‘Medically Clear’ to Work After Episode: Senator Mitch McConnell, the minority leader, on Thursday released a letter from the attending physician of Congress pronouncing him “medically clear” to continue his schedule as planned, a day after the Kentucky Republican froze up suddenly at a news conference in what appeared to be a medical episode similar to one he had on camera last month. “I have consulted with Leader McConnell and conferred with his neurology team,” Dr. Brian P. Monahan said in a brief statement on his letterhead that was made public by Mr. McConnell’s office on Thursday afternoon. “After evaluating yesterday’s incident, I have informed Leader McConnell that he is medically clear to continue with his schedule as planned.” (New York Times)
As Migrant Crisis Worsens, New York Leaders Pressure Biden to Do More: After months of mostly working behind the scenes, a force of municipal, business and labor leaders in New York has begun a public campaign to highlight how they believe Washington has failed to adequately address the migrant crisis that has overwhelmed the city in recent months. As part of that effort, Mayor Eric Adams staged a rally and called on federal officials to expedite work authorization for asylum seekers. The day before, Gov. Kathy Hochul met with White House officials to push the Biden administration for more support, days after she shifted tactics and began to publicly call on Mr. Biden to speed work authorizations. (New York Times)
New Jersey governor says state can’t handle NYC migrants. (Politico)
Families crossing U.S. border illegally reached all-time high in August: At least 91,000 migrants crossing in a family group were arrested in August, an influx that may return immigration to the spotlight for the 2024 election. (Washington Post)
Economy
Five of China's biggest banks cut interest rates on a range of deposits in a coordinated effort to ease pressure on their shrinking margins as lenders move to lower mortgage rates to prop up a struggling property sector and a faltering economy. The banks, including Industrial and Commercial Bank of China, China Construction Bank Corp and Agricultural Bank of China cut their deposit rates by between five and 25 basis points, websites from each bank showed. (Reuters)
How Evergrande’s downfall signaled China’s property crisis. In the beginning, Hui Ka Yan followed a simple formula. Borrow to buy land. Sell homes on the site before they are built. Use the cash to pay lenders and finance the next real estate project. For two decades, starting in the mid-1990s, this approach was enormously lucrative as Chinese home prices soared. It transformed Hui, a former steel industry employee from a rural village, into China’s richest man. And it turned his company, China Evergrande Group (3333.HK), into a vast real-estate empire. But as Evergrande grew increasingly laden with debt, the company resorted to ever-more unorthodox strategies to generate funds. By 2016, at least one Evergrande subsidiary was encouraging some staff to buy financial products from the group’s wealth-management unit, which helped fund property development, according to a former employee and a company document reviewed by Reuters. The former employee said some people were asked to spend up to half of their salaries on such products. (Reuters)
Europe’s economy looks to be heading for trouble. Europe’s summer was a strange mixture of heavy rainfall and wildfires. The continent’s economy was also plagued by extremes. Inflation remained hot: prices rose by 5.3% in August compared with a year earlier. And officials are increasingly worried by the cloudy growth outlook. A recent drop in the purchasing managers’ index (pmi) suggests the bloc is facing recession. Ahead of the next meeting of the European Central Bank (ecb) on September 14th, policymakers will be worried by the possible emergence of stagflation (a situation in which low growth is paired with entrenched inflation). Christine Lagarde, the central bank’s president, recently reiterated her commitment to bringing down inflation and setting interest rates at “sufficiently restrictive levels for as long as necessary to achieve a timely return of inflation to our 2% medium-term target”. (The Economist)
Fed’s preferred inflation gauge shows a modest rise in latest sign of slowing price increases. The U.S. economy expanded at a 2.1% annual pace from April through June, showing continued resilience in the face of higher borrowing costs for consumers and businesses, the government said in a downgrade from its initial estimate. The government had previously estimated that the economy expanded at a 2.4% annual rate last quarter. (Associated Press)
US applications for jobless claims inch back down as companies hold on to their employees. U.S. applications for unemployment benefits fell slightly last week as companies held on to employees in an economy that has largely withstood rapidly rising interest rates, intended to cool hiring and spending, for more than a year. The number of Americans applying for jobless benefits last fell week by 4,000, to 228,000 the week ending August 26, the Labor Department reported Thursday. The four-week moving average of claims, which evens out some of the weekly volatility, rose by 250 to 237,500. Jobless claim applications are seen as representative of the number of layoffs in a given week. (Associated Press)
Technology
Qualcomm banks on AI to get a bigger share of the automotive chip market. Qualcomm is best known for the chips and modems inside Android phones. But in recent years, it’s also started selling a package of hardware chips, sensors and software called Snapdragon Digital Chassis to automakers like GM, Hyundai and Volvo. Now, it’s hoping to capitalize on the hype around generative artificial intelligence to convince automakers to buy more of these chips and build new scenarios around them, such as smart assistants that would help drivers navigate around cities, make reservations and do other daily computing tasks. One example of the company’s presence in cars: GM’s new electric $130,000 Cadillac Escalade IQ SUV uses Qualcomm chips and software to help power the vehicle’s 55-inch dashboard display, as well as lane-keeping and hands-free driving features under GM’s “Ultra Cruise” branding. The SUV also notably does not allow users to mirror their phones to the entertainment system, a feature known as Apple CarPlay or Android Auto, meaning drivers will interact with GM’s chosen software interface, increasing the importance of the in-car computer experience. (CNBC)
A Tangled Mess of Tech: JPMorgan’s Tall Task to Integrate First Republic. In the hours after JPMorgan Chase bought troubled First Republic Bank for $10.6 billion in a government fire sale, its consumer banking chiefs Marianne Lake and Jennifer Piepszak—both potential successors to CEO Jamie Dimon—flew to California. What they found when they arrived the morning of May 1 was startling: The business JPMorgan bought was hamstrung by a tangle of old tech systems that held together a patchwork of hundreds of individual applications enabling basic tasks such as depositing and lending. Since then, JPMorgan has been trying to straighten out First Republic’s tech and migrate an enormous amount of data to integrate the bank, its biggest acquisition since it bought Washington Mutual and Bear Stearns during the financial crisis. JPMorgan hired big-name external consulting firm McKinsey and other consultants to sit within First Republic’s four walls and help integrate the systems by a late 2024 deadline, according to people familiar with the matter. (The Information)
AI Startup Buzz Is Facing a Reality Check. Founders and venture capitalists who flocked to artificial-intelligence startups are learning that turning the chatbot buzz into successful businesses is harder than it seems. Almost a year into the boom ignited by the November launch of ChatGPT, some startups that epitomized the zeal for so-called generative AI are now navigating layoffs and reduced user interest. Investors are unsure whether the new crop of AI startups will be able to survive, especially as tech giants such as Microsoft and Alphabet’s Google solidify their dominance over the technology. There was optimism in the venture world that commercial AI applications “would materialize at light speed,” said Mark Goldberg, a partner at Index Ventures, a longtime backer of AI startups including Cohere, which is building generative AI models for businesses. Now, “there is a shallow trough of disillusionment,” he said. ChatGPT’s release reignited optimism in the startup world after months of industry malaise. Leading voices in Silicon Valley proclaimed that generative AI—the technology underpinning humanlike chatbots—would usher in a new technology era. Venture firms announced splashy new hires and boasted that they were devoting billions of dollars to back the still-unproven sector. (Wall Street Journal)
Disney-owned networks including ESPN and ABC TV local stations went dark for Charter Communications, leaving viewers without access to major events such as the U.S. Open and college football amid a carriage dispute between the companies. In addition to leaving tennis fans without access to ESPN’s ongoing coverage of the U.S. Open, the dispute means college football fans are now unable to watch games as that season begins. Charter’s cable unit, Spectrum, is the major operator in several large cities including New York and Los Angeles and has nearly 15 million subscribers nationwide. (Wall Street Journal)
Smart Links
Hong Kong hunkers down as Super Typhoon Saola approaches. (Reuters)
Toyota to build over 10m vehicles for first time this year. (Nikkei)
This Year’s Startup IPOs Have A Very Mixed Track Record. (Crunchbase)
Microsoft to unbundle Teams from Office, seeks to avert EU antitrust fine. (Reuters)
Nvidia-Backed Cloud Provider Hires Morgan Stanley to Sell $500 Million of Employee Shares. (The Information)
How can American house prices still be rising? (The Economist)