FirstFT: Biden to warn Beijing against aggressive activity in South China Sea

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Good morning. President Joe Biden will warn China about its increasingly aggressive activity in the South China Sea this week during summits with Japanese Prime Minister Fumio Kishida and Philippines President Ferdinand Marcos Jr.

Two senior US officials said Biden would express serious concern about the situation around the Second Thomas Shoal, a submerged reef in the Spratly Islands where the Chinese coast guard has used water cannons to prevent the Philippines from resupplying marines on the Sierra Madre, a rusting ship that has been lodged on the reef for 25 years.

Biden will stress that the US-Philippines Mutual Defense Treaty applies to the Sierra Madre, said the officials, adding that he expressed “deep concern” when he spoke to President Xi Jinping on Monday.

“China is underestimating the potential for escalation. We’ve tried to make that clear in a series of conversations . . . that our mutual defence treaty covers Philippine sailors and ships and by extension . . . the Sierra Madre,” one official told the FT.

Demetri Sevastopulo has more on the tensions around the disputed reef. We also have news today on the Aukus security pact’s possible expansion, plus the latest from Janet Yellen’s China visit:

Aukus weighs expansion: The US, UK and Australia are to begin talks on bringing new members into Aukus as Washington pushes for Japan to be involved in the security pact aimed as a deterrent against China.
Yellen warns China: The US has warned of “significant consequences” if Chinese companies provide support for Moscow’s war against Ukraine in one of the sharpest messages it has yet delivered to Beijing.

And here’s what else I’m keeping tabs on today:

Monetary policy: The central bank of the Philippines has its monetary policy meeting and decision.
HSBC Global Investment Summit in Hong Kong: The inaugural event will be hosted by HSBC chair Mark Tucker and CEO Noel Quinn, with speakers including Microsoft CEO Satya Nadella and Hong Kong chief executive John Lee.

Five more top stories

1. Top executives at China’s biggest brokerages have had their pay slashed in the past two years against a backdrop of struggling financial markets and Beijing’s efforts to reduce inequality. Financial disclosures show nine of the top 10 brokerages by revenue recorded a fall in remuneration last year for their best-paid employees.

2. Brazil’s attorney-general has demanded “urgent regulation” of social media sites after Elon Musk threatened to disobey a court order banning certain profiles on his X platform and then called for a Supreme Court justice to “resign or be impeached”. Here’s more on the clash between Musk and the Brazil’s top court.

More Latin America news: Ecuador is facing a tide of condemnation over a late-night raid on the Mexican embassy in its capital Quito when the Andean nation’s former vice-president was captured and a diplomatic crisis between the two countries was precipitated.

3. Israel says it has withdrawn its troops from Khan Younis in southern Gaza in order to prepare for operations in Rafah, Hamas’s last stronghold, despite US warnings that a big ground offensive on the town would be a mistake. The move to pull out of Khan Younis came as Israel and Hamas sent teams to Egypt for more talks on a potential ceasefire in the six-month war. Here are more details.

4. Pro-Russia candidate Peter Pellegrini has been elected president of Slovakia, consolidating the grip of the ruling coalition led by Robert Fico and tilting the country further towards Moscow. Pellegrini, a partner in Fico’s coalition, defeated former foreign minister Ivan Korčok by winning 53 per cent of the votes in Saturday’s run-off election.

5. Australian mining billionaire Andrew Forrest has called on China to demand higher environmental standards from its global supply chain, particularly its companies conducting nickel processing in Indonesia, an industry he accused of “complete environmental irresponsibility”. Read the full interview with the Fortescue Metals Group founder.

Ukraine military briefing

A soldier standing in front of a destroyed railway station in Kostiantynivka — The railway station in Kostiantynivka was destroyed by Russian aerial shelling

The Russian air force is stepping up its use of Soviet-era weapons that have been retrofitted for 21st-century warfare and are pounding Ukrainian forces, pulverising towns and giving Moscow an advantage on the battlefield. These “glide bombs” can be launched by Russian bombers deep behind the front line and out of reach of Ukraine’s air-defence systems. The FT’s Christopher Miller reports how Russia modernised the former “dumb bombs” into a “very scary, very lethal” weapon.

We’re also reading . . .

The price of peace is stagnation: As well as being the worst thing our species does, war is a creative spur, writes Janan Ganesh.
The loneliness cure: Former Tinder CEO Renate Nyborg thinks an AI chatbot that coaches users through their real-world relationships can help.
Cillian Murphy interview: The Oscar-winning actor discusses his 28-year career and being the most “awkward person on the internet” with HTSI editor Jo Ellison.

Chart of the day

Food inflation across rich nations has dropped to its lowest level since before Russia’s full-scale invasion of Ukraine. A slowdown in price growth easing pressure on millions of households hit by the two-year surge in food costs.