This is an audio transcript of the FT News Briefing podcast episode: ‘China’s military spending to outpace economic growth

Marc Filippino
Good morning from the Financial Times. Today is Monday, March 6th, and this is your FT News Briefing.

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China’s National People’s Congress is under way. We’ll look at the key announcement so far. And Israelis are taking to the streets in the biggest protest the country’s seen in years.

James Shotter
The range of people involved is not just left-wingers, you know, it’s former security chiefs, it’s reservists from elite army units, it’s former central bank chiefs.

Marc Filippino
Plus, US president Joe Biden is set to deliver his first presidential veto. I’m Marc Filippino and here’s the news you need to start your day.

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China’s struggling telecoms giant, Huawei, is trying to make a comeback in Malaysia. Kuala Lumpur has a new government and ordered a review of the previous administration’s plans to build a 5G network. The contract was awarded to the Swedish company Ericsson. With the review now underway, Huawei’s jumped in to secure some of the work. The Chinese telecom company has been slammed by US sanctions. Southeast Asia is one of the last regions where Huawei still has influence.

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China’s National People’s Congress kicked off over the weekend with Premier Li Keqiang announcing an economic growth target of around 5 per cent for this year.

News clip
[Li Keqiang speaking in Chinese]

Marc Filippino
That’s the lowest growth target in more than three decades. The FT’s China economics reporter, Sun Yu, describes the number as cautious.

Sun Yu
The market has been expecting 5.5 per cent or even 6 per cent. But in the end, the authority set the target at 5 per cent, which is at the lower end of market forecasts. Plus, the so-called special purpose bonds, that quota is around 3.8tn. It does represent an increase, but it’s far lower than what the market would expect.

Marc Filippino
OK. So another area where Beijing is treading carefully. Sun Yu, you mentioned something called special purpose bonds. Can you remind us what those are?

Sun Yu
So these days, the central government is restricting the local authorities from issuing their own bonds to raise debt. Instead, they have to use the so-called special purpose bonds to invest in infrastructure projects. And these bonds are basically issued by the local government and guaranteed by the central government and with a specific purpose.

Marc Filippino
OK. So this is a major source of funding for infrastructure projects and a way for Beijing to control local government spending, is that right?

Sun Yu
Exactly. So that’s a very major metric for government-backed investment.

Marc Filippino
Got it. That makes sense. So what can you tell us about China’s military spending? Beijing said its defence budget will rise this year to more than 7 per cent. That’s more than its economic growth target.

Sun Yu
The big jump in military spending is not really, it’s not that surprising, but still would raise some kind of a red flag, I think. Li Keqiang said explicitly that the Chinese army must struggle with our rivals at home and abroad, prepare for the war and build a strong army going forward. In the past, Chinese army tend to offer short-term contracts to weapons makers domestically. These days, instead, Chinese army would offer 3 to 5 year long-term contracts. They look at longer term when it comes to upgrading China’s army to get it prepared for a potential war.

Marc Filippino
Sun Yu is the FT’s China economics reporter.

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Israel has been wracked by protests for the past two months. They erupted when Prime Minister Benjamin Netanyahu and his right-wing coalition proposed reforms to the country’s judicial system. Now, record numbers of Israelis have taken to the streets to voice their opposition. And last week, police fired stun grenades into the crowd.

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The FT’s James Shotter has been covering the protests and joins me now. Hey, James.

James Shotter
Hi, hi.

Marc Filippino
James, protests are, they’re pretty normal in Israel. How significant are these? Are these protests different?

James Shotter
Well, they’re definitely significant. I mean, I think one of the most recent protests throughout the whole country, there are about 300,000 people protesting. These protests have been happening every week now for the last couple of months. And I think the other thing that, you know, significant about them is just the range of people involved is not just left-wingers. You know, it’s former security chiefs, it’s reservists from elite army units, there’s former central bank chiefs, senior bankers and even, you know, executives from Israel’s tech sector.

Marc Filippino
What would these proposed judicial reforms do that’s so upsetting to so many people in Israel?

James Shotter
The thrust of the reforms is to curb the power of the judiciary, which people in Netanyahu’s coalition believe has over the years taken on powers that it was never formally granted and then used to push a partisan left-wing agenda. And so the thrust of the reforms is to weaken the high court, Israel’s top court. One, by giving control over the appointment of judges to the government so the government would control the committee that does that. And then secondly, by making it much, much harder for the top court to strike down legislation.

Marc Filippino
Can you spell it out for me, James? How would this hurt the country’s democratic system?

James Shotter
The concern about the reforms themselves is that in the Israeli context, this reining in of the powers of the judiciary would amount to, you know, the evisceration of the one, well one of the most important checks on government actions. So, you know, Israel doesn’t have a second house of parliaments that can review or block legislation. It doesn’t have a president with veto power. And so in that context, the top court is a crucial check on what the government does. And this coalition is seen as the most right-wing in Israeli history. And I think for secular Israelis, the fear is that this coalition could pass laws that would have a wide ranging impact on their lives, both in terms of giving a bigger role to religion in society, which secular Israelis are not particularly keen on. And also, you know, for the Palestinians, this government is contains a lot of ultranationalist settlers in key security posts who want to annexe the West Bank, who want to expand settlements in the West Bank. And those two things, I think, are the two biggest concerns in terms of what the government would be able to do if it was in a position of unchecked power.

Marc Filippino
James, how much do these protesters represent Israel’s population as a whole? You know, Israel has become increasingly conservative over the years.

James Shotter
Now, I mean, it’s definitely true that Israeli society has become more right-wing. I think there’s a poll recently by the IDI, or the Israel Democracy Institute, which suggested that more than 60 per cent of Israelis identified as right-wing. But certainly if you look at polling in terms of the popularity of these particular reforms, they’re very unpopular. I think, you know, there are definitely people on the opposite side of the political spectrum to Netanyahu, who recognise that there are aspects of the judicial system that could be reformed. And most people see that these particular reforms are not sort of serious or regard these reforms as not a serious attempt to address those deficiencies, but instead, you know, a power grab and an attempt to, you know, basically put the government in a position where it’s not restrained by the existing checks and balances.

Marc Filippino
James Shotter is the FT’s Jerusalem correspondent. Thank you, James.

James Shotter
Thanks very much.

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Marc Filippino
In the US, Republican lawmakers recently passed legislation that would prevent state retirement funds from being forced to consider environmental or social factors when making investment decisions. The FT’s deputy Washington bureau chief, Lauren Fedor, says anti-ESG is a big part of Republican messaging.

Lauren Fedor
And I think it’s going to continue to be a pretty central part of their message, not only on Capitol Hill, but with an eye to 2024. Some of these Republicans who are running for president have been either have declared running for president or expected to are already talking about ESG. And they think it’s a winning issue because they think that it’s a cultural message at the end of the day. They say that corporations are pushing “woke” ideology on investors. And that message does appear to be cutting through in some spaces.

Marc Filippino
But the anti-ESG legislation may never see the light of day. President Joe Biden plans to veto it, potentially his first presidential veto. And it would mark a new phase in his presidency.

Lauren Fedor
The first two years, Democrats controlled both houses of Congress. The bills that were sent to the White House for Joe Biden to sign were, you know, coming from his party. Now we see the Republicans flexing their muscles a bit more, given that they control the House of Representatives and in some cases in the Senate, they can get a couple of Democrats to side with them. So this is the first veto, but it’s unlikely to be the last.

Marc Filippino
That’s the FT’s deputy Washington bureau chief, Lauren Fedor.

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You can read more on all of these stories at FT.com. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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