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This is an audio transcript of the FT News Briefing podcast episode: China’s game-changing hypersonic technology

Joanna S Kao
Good morning for the Financial Times. Today is Tuesday, September 23rd, and this is your FT News Briefing.

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US president Joe Biden has nominated Federal Reserve chair Jay Powell for a second term. Our US economics editor Colby Smith will talk about that decision. And our US-China correspondent Demetri Sevastopulo will talk about his latest scoop on China’s hypersonic missile technology.

Demetri Sevastopulo
What’s really interesting here is it’s not clear if the US is able to do this kind of technology. In that sense, it’s almost more of a “Sputnik moment”.

Joanna S Kao
I’m Joanna Kao, in for Marc Filippino, and here’s the news you need to start your day.

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US president Joe Biden has renominated Jay Powell for a second term as chair of the Federal Reserve. The move is a vote for continuity at a delicate time for the Fed and the US economy. It comes despite harsh criticism from progressive Democrats, notably Senator Elizabeth Warren. She called Powell a dangerous man for not being tough enough on banks. Our US economics editor Colby Smith says that didn’t end up being a factor in Biden’s decision.

Colby Smith
Just because Jay Powell’s tenure at the Fed during his first term was seen as so successful. So, yes, on the regulatory front, there was a very gradual scaling back of some of those post global financial crisis regulations. But in fact, I think people in assessing Powell’s time at the Fed, pointed to his success in navigating the US economy through one of the worst contractions, really since the Great Depression during the Covid crisis last year. And even throughout this point now in the US recovery, he’s really been seen as this kind of steady hand guiding the economic recovery through this elevated period of inflation. And I think in a lot of ways, that continuity really did overshadow any kind of criticism that was lobbed his way on the regulatory side of things.

Joanna S Kao
So Colby, with Powell remaining at the helm, what does that mean for monetary policy?

Colby Smith
Well, the Fed is at a really interesting juncture. We’re seeing this very slow and subtle policy pivot from them in a way. Over the summer months, you know, you constantly were hearing that inflation is transitory. You are also hearing that the Fed was going to approach any kind of policy normalisation or move towards that in any way, shape or form in an extremely slow fashion. Now, we haven’t seen a complete divergence from that approach. But on the margins, the comments that you’re hearing from various senior officials is definitely giving the impression that they are taking inflation a bit more seriously, a bit more sensitive to the current economic backdrop.

Joanna S Kao
So another thing Biden did was to nominate Lael Brainard as vice-chair. What’s the calculation behind that move? And was it in a way, an attempt to provide some balance to Chair Powell?

Colby Smith
Well, Lael Brainard was always seen as one of the Democratic party’s most accomplished economic policymakers in a way. Also within the Fed, she’s seen as a leader in her own right as well, so I think she was always seen as someone that would be elevated to a senior position within the institution. And she was really even a top contender for Powell’s position as well. Certainly on the regulatory front, she is seen as a balance to Powell. So during her tenure as governor, she came out against many of the reforms and adjustments to banking regulations that the previous vice-chair of supervision Randal Quarles spearheaded. And those were changes that Powell had endorsed as chair of the Fed as well. What Brainard did really was she dissented on many of those decisions, so she wrote kind of formal opposition to some of those adjustments. And I think in a lot of ways that won her a lot of plaudits from progressive lawmakers who were critical of Powell’s stance on regulation and his bent towards deregulation in a way. So I think Brainard’s nomination to vice-chair is definitely a signal that the Biden administration wants to take regulatory matters a bit more seriously.

Joanna S Kao
Colby Smith is the FT’s US economics editor.

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The FT has new details on China’s hypersonic weapons test this past summer. It included a technological advance that enabled it to fire a missile as it approaches target, travelling at least five times the speed of sound. No other countries are known to have done this. And Pentagon scientists were caught off guard. I’m joined now by our US-China correspondent Demetri Sevastopulo. He’s been breaking the news. Hi, Demetri.

Demetri Sevastopulo
Hi.

Joanna S Kao
So what is the significance of this latest development?

Demetri Sevastopulo
Well, I think you need to kind of step back and put it in the context of what China did on July 27th. It did several really significant things. First, it launched what’s called the hypersonic glide vehicle into space. Now that sounds very technical, but it’s basically a kind of spacecraft that’s not unlike the space shuttle that flies it over five times the speed of sound. So on July 27th, China launched this HGV on a rocket system that’s able to approach the US over the South Pole. And that’s really significant because most of the US missile defence systems are actually focused on the North Pole. So this means that China can now deliver a nuclear weapon to anywhere in the US. But really, the most significant part of this test was what you just described, which was the hypersonic weapon flew around the earth, and as it was coming over the South China Sea, it fired a missile during flight. And that’s the capability that no nation has ever mastered, and it is incredibly difficult to do that at such high speeds. And that’s why the Pentagon is kind of scratching its head, were trying to work out how did China do this? And they don’t, I think, know the answer yet.

Joanna S Kao
Yeah, I mean, you write in your story that they fired a missile as it was approaching its target, travelling at least five times the speed of sound. Like I can’t even get my mind around the idea of five times the speed of sound. So how would you describe that to somebody?

Demetri Sevastopulo
Well, what’s amazing is that to fire a missile from another weapon, you have to kind of open a bomb bay or a missile bay and fire something out. But when you’re travelling in those kind of speeds, the constraints of physics, you know, the aeronautical constraints are very, very difficult to overcome. So when you open a bay that’s going to fire a missile, that in itself has a huge impact on the flight of your weapon. So the fact that they were able to master that and shoot something out is baffling. And it’s not clear if it was what the Pentagon would call an air-to-air missile or some people in the Pentagon think it’s designed to fire down and take out US missile defence systems that are positioned on ships in the western Pacific. So the Pentagon is still trying to work out exactly what it is, but the capability itself is what they’d think is just stunning.

Joanna S Kao
And is the significance really that because it’s so quick, there is another country that would be able to neutralise it when they detect it going off?

Demetri Sevastopulo
Well, it’s actually less the speed. So when people hear five times the speed of sound, they go, wow, and it is quick. But an intercontinental ballistic missile goes much quicker than that. The difference is a hypersonic missile is manoeuvrable so it can evade targets, it can change its trajectory, makes it much harder to track and makes it much harder to shoot down. So it’s a combination of it being pretty fast and the fact that it can fly, you know, like a fast aeroplane, which makes it very, very potent.

Joanna S Kao
So what are your sources saying now, how distraught are the US military officials and how much of a “Sputnik moment” is this?

Demetri Sevastopulo
Well, recently General Mark Milley, who is the top US military officer, said it was very close to a “Sputnik moment”, and that sparked a lot of controversy. But at the time, people didn’t realise that he was really referring to the hypersonic weapon firing the missile. That was the kind of the key technology. And I think if you think back to 1957, when the Soviet Union put a Sputnik satellite into space, you know, they demonstrated a capability that no one else had done so far, even though the US, probably at the time, could have done it. What’s really interesting here is it’s not clear if the US is able to do this kind of technology. In that sense, it’s almost more of a “Sputnik moment”.

Joanna S Kao
So is the US planning any kind of response now?

Demetri Sevastopulo
Well, I don’t think there will be an immediate response to what China has done because frankly, you know, both countries are consistently and over time developing testing new kinds of weapons. But what I think it does do is reinforce the concerns in the Pentagon that the Chinese military is expanding rapidly and making huge technological advances and in some areas has pulled ahead of the US. So I think, you know, on Capitol Hill lawmakers are going to pay attention to this. And people who say the US is not investing enough to counter China will use this as one example why they need more money to develop new kinds of weapons. So I think it’ll be part of the debate, but I don’t expect the US to kind of do anything in the near term to respond to this test itself.

Joanna S Kao
How does this affect US-China relations and particularly the US strategy towards China?

Demetri Sevastopulo
Well, I think it comes at a really interesting time. And I say that because a couple of weeks ago, the Pentagon released a report on the capabilities of the Chinese military, and they revealed in there that China is really building up its nuclear forces. It’s expected to quadruple the number of nuclear warheads it has by the end of the decade. And you’re seeing a big shift and a suggestion that Beijing is, after five decades, abandoning a nuclear posture that’s called “minimum deterrence”. So the combination of the build-up of nuclear forces, these new hypersonic weapons and glide vehicles that can carry nuclear warheads means that the US clearly doesn’t have nuclear superiority over China. And the way that it would have done in the past, and what you have now, is something that the experts call a kind of mutual vulnerability. And some people in the US are very worried about that because what it means is if the US and China entered a conflict over Taiwan, the Chinese could essentially neutralise the ability of the Americans to threaten nuclear weapons as part of that conflict. So it has lots of different strategic implications. But really, the bottom line is it underscores just how quickly China’s military is modernising.

Joanna S Kao
Demetri Sevastopulo is the FT’s US-China correspondent. Thanks, Demetri.

Demetri Sevastopulo
Thank you.

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Joanna S Kao
Before we go, Uber is adding cannabis to the list of items people can order through its Uber Eats app. Though for now, customers still have to pick it up. Nevertheless, it’s the first time Uber is offering direct access to buying the drug. The company claims the move will reduce the illegal market for cannabis and the number of drivers on the road who are under the influence. The service will start on Monday. For now, though, it’s only available to customers in the province of Ontario, Canada. Cannabis is still illegal under US federal law.

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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.

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.

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