China keeps peeling off Taiwan’s allies

This is an audio transcript of the FT News Briefing podcast episode: ‘China keeps peeling off Taiwan’s allies’

Sonja Hutson
Good morning from the Financial Times. Today’s Friday, October 7th. And this is your FT News Briefing.

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Sonja Hutson
Ukrainian forces are continuing their counter-offensive in the southern part of the country. China is continuing to try to peel off Taiwan’s remaining allies. And today we’ll get an important update on the health of the US economy. I’m Sonja Hutson in for Mark Filippino. And here’s the news you need to start your day.

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Sonja Hutson
The Federal Reserve’s interest rate increases may be sinking in. Today the US government releases its latest jobs numbers and they’re expected to show the world’s largest economy is cooling a bit. Forecasts show there were just 260,000 jobs added last month. Here’s the FT’s Colby Smith.

Colby Smith
That’s a step down from what we saw in August and well below July’s increase. But historically, that’s still a robust pace. So ultimately, I think what this number is really going to drive home is that the Fed’s efforts to cool down the economy are starting to have an impact. But there’s still quite a long way for the Fed to go in order to see sufficient cooling for inflation to be coming closer back down to target.

Sonja Hutson
So, Colby, how would you describe the state of the US economy right now?

Colby Smith
So it’s a, it’s really a mixed bag. I mean, on the one hand, on these on key aggregate measures, the economy looks very, very strong. The unemployment rate is still near historic lows and inflation is running just too high. But for, for all those signs of strength and resilience, you also are starting to see cracks form in the housing market. You’re also seeing some early signs of financial market stress as investors and traders digest, you know, these rapid interest rate increases from the Federal Reserve. This is exactly what the Fed wants to see. They want to see a downturn in a lot of these activity figures and they’re not going to stop raising interest rates until that happens.

Sonja Hutson
Colby Smith is the FT’s US economics editor.

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Sonja Hutson
This week, Ukrainian troops gained more ground in their southern counter-offensive against Russia. And for the first time, Russia acknowledged it had retreated from the Kherson region. That’s less than a week after Vladimir Putin claimed he’d annexed it. Here’s the FT’s John Paul Rathbone.

John Paul Rathbone
So for Russia to lose Kherson, I wouldn’t know if embarrassment is the right word, but it’s certainly ironic that an area that’s just been annexed because with over 90 per cent of inhabitants supposedly voting to become part of Russia, suddenly becomes liberated by Ukrainians. And also, there’s a lot of partisan activity inside Kherson so it all, you know, sort of makes a joke of and makes the annexation process even more absurd.

Sonja Hutson
JP, how has Vladimir Putin responded to Ukraine’s push into these territories that he has just annexed and in his view, are part of Russia?

John Paul Rathbone
Well, the Russian response was: we are not firm and clear about where the borders of the annexed territories are. From the Russian point of view, annexing these territories provided two, sort of two rationales. One was a supposedly, then it becomes Russian territory, and any attack on Russian territory can lead to Russian retaliation use of nuclear tactical weapons. The other one is that Russia can then start conscripting people in these territories, Ukrainians, to fight on their side. Obviously not willing recruits, but that’s been the pattern then in the Donbas, in Luhansk and Donetsk. And quite often these even put more poorly equipped troops are sent to the frontline as cannon fodder. And in fact, Ukrainian or Russian separatists from those areas were at the frontline in Kherson region, and they were creamed.

Sonja Hutson
How much concern is there that the further Ukraine pushes into these annexed regions, the more likely Putin is to use nuclear weapons?

John Paul Rathbone
Whether he will or not is, I mean, nobody knows. It’s a risk. You have to take it seriously, but nobody seems to think it’s likely for multiple reasons. One of them, the obvious one in this case is why would he set off a nuclear bomb in an area that he’s claimed wants to be Russian and moreover, one where Russian troops are mobilised and they’re poorly equipped and they don’t have the equipment to deal with nuclear fallout. I think it’s really important to remember that there are two theatres of war here. There’s one which is in Ukraine, and there’s the battlefield there. And then there’s also the West. We are the focus now of Russian hybrid war, which includes energy threats. It includes threats to food supply. It includes spreading fear through the use of potential threat of nuclear weapons. Putin is a past master at intimidation. And so this all plays to his playbook to try and weaken Western support and resolve for the support that it hitherto provided to Ukraine.

Sonja Hutson
John Paul Rathbone is the FT’s defence and security correspondent.

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Sonja Hutson
Paraguay’s president last month called on Taiwan to invest $1bn in his country if it wants to remain allies. Paraguay is under pressure from Beijing to switch its diplomatic allegiance to China. It’s part of Beijing’s efforts to isolate Taiwan diplomatically. And over the last five years, China has made significant inroads into Latin America. It’s persuaded Panama, El Salvador and Nicaragua, among other countries, to switch their allegiance. Here’s the FT’s Greater China correspondent Kathrin Hille.

Kathrin Hille
Taking these allies away is obviously a means of political and psychological pressure China can employ towards Taiwan. And for the rest of the world, clearly, especially for the US, I think it would matter because China would gain influence in some key regions Western countries care about. So one is Latin America and the other one where Taiwan still has a few diplomatic allies is the Pacific islands, which is the sea itself, where China and the US would face off in some potential future conflicts.

Sonja Hutson
So how has China been luring countries over to its side?

Kathrin Hille
Well, the default approach is that Chinese companies, some of them privately owned, most of them state companies, make proposals for big infrastructure development projects, export manufacturing zones, ports. And then there are also often attempts at basically just buying the elite. Bribery and all the rest of it. And to be fair, this is not only happening from the Chinese side, but the same kind of tactics has been happening from the Taiwanese side over the years as well.

Sonja Hutson
Can Taiwan turn the tide here? Can it keep the few allies that it has left?

Kathrin Hille
Well, in fact, Taiwan has somewhat changed tack and the importance of these countries that diplomatically recognised Taiwan has actually decreased. And that is because due to China’s deteriorating image, Taiwan has quite significantly managed to expand relations with countries that do not diplomatically recognise it. But so-called unofficial relations have expanded quite a lot and arguably that is much more important for Taiwan’s economic interests and also for Taiwan’s national security overall.

Sonja Hutson
Kathrin Hille is the FT’s Greater China correspondent. Thanks, Kathrin.

Kathrin Hille
Thank you.

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Sonja Hutson
Before we go. Shares in Porsche have risen since the luxury sports car brand listed on the Frankfurt Stock Exchange last week. And as of yesterday, Porsche became the most valuable carmaker in Europe by market cap. It’s even more valuable than its parent company, Volkswagen. But don’t take out your violins. This is exactly what VW wanted. It’s a vindication of Porsche’s value as a luxury brand.

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Sonja Hutson
You can read more on all these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back next week for the latest business news. The FT News Briefing is produced by Fiona Simon, Mark Filippino and me Sonja Hutson. Our editor is Jess Smith. We had help this week from David da Silva, Michael Lello and Gavin Kallmann. Our executive producer is Topher Forhecz. Cheryl Brumley is the FT’s global head of audio. And our theme song is by Metaphor Music.

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This transcript has been automatically generated. If by any chance there is an error please send the details for a correction to: typo@ft.com. We will do our best to make the amendment as soon as possible.