FirstFT: Chinese ship spotted where Baltic Sea cables were cut

In today’s newsletter:

• Chinese ship spotted where Baltic Sea cables were severed

• Starmer refuses to condemn Hong Kong crackdown

• Ukraine strikes Russia with US-made missiles

Good morning. Investigators of two severed data cables in the Baltic Sea are looking at the movements of a Chinese bulk carrier, amid rising jitters in Europe over potential acts of sabotage.

The Yi Peng 3 was travelling from Russia to Egypt and passed close to both the Swedish-Lithuanian and Finnish-German cables around the time each was cut on Sunday and Monday, according to data provided by maritime tracking group Marine Traffic.

Sweden has opened an investigation into both incidents, and is examining what role the Yi Peng 3 might have played, said people familiar with the probe.

Germany’s defence minister Boris Pistorius said the severing of two fibre optic cables in 24 hours was likely to have been sabotage and was an act of “hybrid” warfare. He said it was unclear who was responsible for the incident but added: “No one believes that these cables were cut accidentally.”

Yi Peng 3 is owned by Ningbo Yipeng Shipping, a company that owns only one other vessel and is based near the eastern Chinese port city of Ningbo. It was not immediately possible to contact the company. China’s embassy in Stockholm said: “We do not have information on this issue.”

Read the full story here — and see more China news below:

• EU-China relations: Brussels is planning to force Chinese companies to transfer intellectual property to European businesses in return for EU subsidies as part of a tougher trade regime for clean technologies.

• China and Trump: Beijing’s ambassador to the US has been rushing to connect with potential Trump administration officials after several years of struggling to get meetings with Republicans.

• Chinese economy: Goldman Sachs’ chief executive has warned that global investors are still “predominantly on the sidelines” over deploying capital in China.

Here’s what else we’re keeping tabs on today:

• Economic data: Japan reports its October trade balance and South Korea publishes the producer price index for the month.

• Monetary policy: China and Indonesia announce decisions on lending rates.

• Nvidia: The AI chipmaker and investor darling reports quarterly results.

Five more top stories

1. Keir Starmer has refused to publicly condemn the sentencing of 45 pro-democracy activists in Hong Kong for up to a decade in prison, as the UK prime minister seeks to forge a “closer economic partnership” with China. Starmer said he had “frank” private discussions with Chinese President Xi Jinping at this week’s G20 summit but declined to air his criticism publicly when asked by the FT.

• The FT View: The UK needs to develop a clear China strategy, writes the editorial board. Most important will be deciding where its “red lines” with Beijing lie.

2. Ukraine has struck a military target inside Russia using US-made long-range Atacms missiles for the first time since Joe Biden’s administration lifted restrictions on their use, according to Ukrainian officials. The missiles hit a large weapons arsenal in Russia’s Bryansk region yesterday, more than 115km from the Ukrainian border.

3. Donald Trump has said he will nominate Wall Street investor and campaign donor Howard Lutnick to run his commerce department, putting the billionaire in charge of imposing the sweeping tariffs the president-elect pitched to voters. Lutnick, who is the co-chair of Trump’s transition team, had also been a contender to lead the Treasury department in the new administration.

• More US news: Trump has dispatched JD Vance to Washington to shore up support for Matt Gaetz, the president-elect’s choice for attorney-general who faces accusations about his alleged sexual misconduct and drug use.

4. One of Bangladesh’s biggest businessmen has claimed his status as a Singaporean citizen offers protection against a “campaign of intimidation” being waged by the country’s central banker against his conglomerate. Mohammed Saiful Alam, founder and chair of industrial group S Alam, is considering international arbitration proceedings against Bangladesh over accusations he siphoned money out of the banking sector.

5. Elliott Management has become one of the three biggest shareholders in Tokyo Gas. The US activist investor, whose 5 per cent stake was made public yesterday, plans to push the Japanese utility to focus on its energy business and scale back a property portfolio that Elliot estimates could be worth as much as $9bn.

The Big Read

KPMG’s UK unit, second only to its US business in size, employs 18,000 people and checks the books of 22 of the country’s largest listed companies. A series of multiple audit failings, however, has resulted in regulatory fines and hit its reputation. Jon Holt, who took the reins in 2021, has since been able to engineer a successful turnaround. But some worry the company is still losing ground to rivals.

We’re also reading . . . 

Chart of the day

Asia’s arms makers and naval shipbuilders are leading a global surge in defence stocks this year as investors bet that the region’s companies are primed to lead a rearmament boom. US allies are bracing for Donald Trump’s second presidency to push them to pay more for their own defence.

Take a break from the news

For most grown-ups, karaoke requires alcohol — and lots of it. But what about food? These upscale karaoke clubs are bringing an elevated snack menu to the singalong.