HMBR and Co.

On Monday a judge in California will sentence a navy sailor who pleaded guilty to passing secrets to Chinese intelligence in exchange for bribes worth nearly $15,000. Wenheng “Thomas” Zhao, a petty officer at a base in Ventura County, could spend 20 years in prison. The Chinese-born American citizen admitted in October to handing over information about a military exercise in the Pacific and blueprints for a radar system in Japan, among other things.

The case, one of two involving naval servicemen, is further evidence of the scale and breadth of Chinese espionage in America, with China seeking not only military secrets but wholesale information about Western technology. In October the FBI hosted the counter-intelligence chiefs of the Five Eyes—America, Australia, Britain, Canada and New Zealand—in Silicon Valley to highlight the theft of intellectual property, describing China as the “defining threat of this generation”.

It is a bad time to be a German manufacturer. International demand is sluggish. Germany’s biggest export—cars—is under threat from cheaper Chinese EVs and American protectionism. Higher interest rates are hitting investment spending, which lowers demand for machinery (Germany’s second-biggest export). And domestic energy prices are too high to competitively produce certain chemicals: the third-largest export.

The latest data on German trade and manufacturing for November, published on Monday, are set to be suitably cheerless. They will probably show that imports have kept falling faster than exports, though both are declining. That, ironically, improves the trade balance—but it is a sign of weakness in the German economy. Manufacturing orders are below their level of 2015, after a post-pandemic boom. One bright spot is that surveys indicate that the decline in new orders for industrial goods is slowing. But it will be some time before Germany’s industry and trade are a source of strength again.

Last year America’s Congress only passed 27 bills that became law—making 2023 its least productive year this decade. When the Senate returns on Monday it will have lots to do, and limited capacity for doing it.

A bipartisan group of senators has spent months negotiating to provide aid for Ukraine and other American allies in exchange for tightening border security. They hope to share an outline of a deal this week. As well as persuading other senators, they will also have to win over the House, which is controlled by a paper-thin Republican majority. It has recently sounded more hawkish on the issue. Mike Johnson, the speaker, could face rebellion if he accepts terms unpopular with his party’s right wing.

At least congressional leaders reached a deal on Sunday to fund the federal government in 2024, to the tune of $1.66trn. They are racing against the clock: a first tranche of funding for government operations expires on January 19th, and the rest runs out on February 2nd. But the agreement is sure to be a tough sell in the House. Previously asked about the chances of avoiding a partial government shutdown, the White House budget director had declared herself “not optimistic”.

Britain’s Parliament also returns from its Christmas recess on Monday. It has a heap of legislation to work through, including proposed laws on regulating digital markets, residential properties and a highly controversial scheme to deport asylum-seekers to Rwanda.

But all attention will be elsewhere: on the long campaign for the general election, which Rishi Sunak, the prime minister, has indicated will be held in the second half of the year. That will be a gruelling slog for Conservative politicians, who are trailing by up to 20 points in opinion polls. And other tests of the government’s popularity will come sooner. By-elections are slated for Wellingborough and Blackpool South, triggered by the misconduct of two Tory MPs. A third awaits in Kingswood: Chris Skidmore, a leading figure in the Conservative environmental caucus, resigned from Parliament on January 5th in protest over legislation which would permit new oil and gas exploration. The Labour Party are well-poised to take all three.

In America, college football is big business. The country’s universities train the athletes that are drafted into the National Football League, the world’s most lucrative sports competition. On Monday night the final of the national College Football Playoff will determine which institution has the best team in the country. The Washington Huskies play the Michigan Wolverines at the NRG Stadium in Houston, Texas, in front of a sold-out crowd of more than 70,000.

According to analysis by Sportico, an analytics company, Washington reported revenue in excess of $130m in 2021-22, while Michigan raked in $91m. Such earnings are comparable with those of established clubs in the English Premier League, the world’s richest soccer competition. And the future for college football finances looks bright: the current four-team playoff tournament is expanding to 12 from next season, which is all but certain to ensure a big jump in broadcasting revenue.

Greenhouse-gas emissions by heavy industry, which along with the power sector is the biggest global net emitter, have so far escaped serious regulation. That is because industry is difficult and expensive to decarbonise. But in 2024 the first shots of a “brown-to-green” revolution will be fired.

There are several reasons for the shift. First, technology is improving. Cement, for instance, can now be made with less “clinker” (a carbon-intensive input). Second is policy: 2024 will reveal if the EU’s effort to impose carbon border adjustment taxes will take hold. If it does, America may introduce a similar system. This would encourage companies around the world to decarbonise in order to retain access to big markets. Finally, there has been a shift in global finance. Many investors, in reaction to the excesses of “ESG” activism, which called on them to spurn legacy industries, are shifting to a more pragmatic approach. The decarbonisation of heavy industry will require trillions of dollars, but the wheels are turning at last.

In 2024 China will become the world’s largest car exporter for the first time. Its lead in battery-making is crucial. Countries are promoting sales of electric vehicles and trying to eliminate carbon-dioxide-spewing combustion engines.

China’s government has been supporting electric-vehicle manufacturing and adoption for longer than its rivals. The majority of battery factories, existing and planned, are in China. Although China’s market share will drop slightly by 2030, Benchmark Mineral Intelligence, a firm of analysts, estimates that China will still have 69% of global battery-production capacity (enough to make 90m cars a year).

This is compared with just 14% (19m cars) each for Europe and America, which have only recently started to catch up thanks to new support from their governments. Subsidies mean they will probably have sufficient battery-production capacity to cover domestic demand for EVs by 2030. But no matter how much America and Europe spend, China’s battery dominance will last for the foreseeable future.

In 2024 expect companies outside the technology sector to start adopting generative AI with the aim of cutting costs and boosting productivity. There are three reasons why AI will go mainstream.

First, large companies spent much of 2023 experimenting with generative AI. Plenty of firms are using it to write the first drafts of documents, from legal contracts to marketing material. Now they are planning to deploy it on a larger scale. Second, more AI products will hit the market. In 2023 venture-capital investors poured some $36bn into generative AI, more than twice as much as in 2022. The third reason is talent. Although AI gurus are still in high demand, the market is easing. A survey by McKinsey, a consultancy, reported that firms are finding it easier to hire for AI-related roles. But using the technology is not without risks. Managers worry about valuable data leaking out through AI tools. It will be data-savvy firms that benefit first.

The most eagerly awaited gadget of 2024 is Apple’s Vision Pro, a sleek headset that combines virtual reality with “mixed reality”. It uses front-mounted cameras to show the user a live video-feed of the outside world, onto which computer graphics can be superimposed. Apple calls it the most ambitious product it has ever made. It will be competing for consumers’ attention with various rivals, chief among them Quest 3, a far cheaper headset sold by Meta.

But don’t expect any headset to take the world by storm just yet. Worldwide sales of video headgear will grow by a third in 2024, but will total only 18m units, forecasts Omdia, a market-research company. (Smartphone sales will exceed 1bn.) The thing to watch in 2024 is what developers find to do with the devices. Most people still have no strong reason to use headsets, which appeal mostly to gamers. But as programmers begin to play around with the Vision Pro, that could change.

This week we are looking ahead to next year’s big stories. Today, what will shape Asia?

Next spring, India will hold a general election. Opinion polls suggest a victory for the ruling Bharatiya Janata Party. But the BJP, led by Narendra Modi, has struggled in richer southern states. It also faces a concerted challenge after 26 opposition parties, including Congress, formed a coalition.

Since Mr Modi became prime minister in 2014, India has grown from the world’s tenth-largest economy to its fifth. But opponents say Mr Modi muzzles critics and encourages discrimination against Muslims.

Western countries have been reluctant to criticise Mr Modi. America, in particular, sees India as a counterbalance to China. But they are worried about his failure to protect democratic values. America and Canada both accuse India of plotting to assassinate Sikh separatists on their soil (in Canada’s case, Hardeep Singh Nijjar was indeed killed). Mr Modi promises that by 2047, the centenary of independence, India will be a developed country. The question is not just how developed it will be—but how democratic.

This week we are looking ahead to next year’s big stories. Today, what will shape Asia?

On January 13th Taiwan will elect a new president. The stakes are high: the winner may have to determine the island’s strategy to stop China invading. The ruling, pro-independence Democratic Progressive Party favours strengthening relations with the West while building military deterrence. The opposition, pro-unification Kuomintang promises to reopen dialogue with China on the basis that they belong to one country.

Over eight years of DPP rule, China has increased its “grey-zone” activity, which falls short of warfare but probes Taiwan’s defences. If William Lai, the DPP’s candidate, wins, China may ramp up aggression. A KMT victory could reduce tensions in the short run. But China’s military build-up at home would continue—as would its determination to take Taiwan by force if it does not surrender peacefully.

Taiwan’s current president, Tsai Ing-wen of the DPP, has had a different message for her people: in order to prevent war, they must unite and prepare for it. The election will show whether they are ready to do so.

This week we are looking ahead to next year’s big stories. Today, what will shape Asia?

Next year Xi Jinping, China’s leader, will seek to rally countries that are sceptical of an American-dominated world order. But he will also present China as a defender of global unity. With global growth slowing, China’s government will charge rich Western countries with erecting protectionist barriers to free trade. It will also say it is a defender of the “basic principles” of the existing world order, as enshrined in the United Nations Charter—selective reading of which emphasises the inviolability of sovereign states.

This balancing act will be complicated by the war in Ukraine and the presidential election in America. China will claim neutrality over Ukraine, but blame high food and energy prices on Western sanctions. It will also deepen ties with Russia. Meanwhile the race for the White House presents dangers, as candidates vie to out-hawk one another on China. Mr Xi’s best hope is that American democracy looks terrible, but that China does not dominate headlines. Xi-era statecraft is not known for its subtlety; 2024 poses an exquisite test.

This week we are looking ahead to next year’s big stories. Today, what will shape Asia?

In 2024 burgeoning energy linkages could rewrite the way Asia deals with itself. Take the fast-growing economies of South-East Asia. Their energy demand is expected to increase by a third by 2050; they have also promised to cut carbon emissions. Yet doing that will be tricky, since renewables account for a mere 15% of Asia’s power generation.

A better-connected South-East Asian grid, currently non-existent, could slash clean-energy prices. Rolling one out could also foster co-operation. A series of interconnection agreements were signed in August at a regional summit in Bali, Indonesia.

Energy projects can also provide valuable counterweights to China. Australia has ambitions to be a renewable-energy hub. Japan and South Korea are interested in taking hydrogen and ammonia (a way to store hydrogen in a more portable form). America’s allies are also trying to loosen China’s grip on rare earths and critical minerals. For now China is the biggest solar-panel exporter, electric-vehicle-battery supplier and critical-minerals processor. But the transition offers welcome new options for Asian countries to come out of China’s shadow.

The main culprit behind the greenhouse-gas emissions driving up global temperatures has long been known: burning fossil fuels. But in almost three decades of international diplomacy, countries have never managed to forge an agreement that addresses the source of the problem directly. That changed on Wednesday morning at COP28 in Dubai when—within sight of the largest oil plant on the planet—the UN’s climate summit concluded with a commitment to “transition away from fossil fuels in energy systems” in “this critical decade”.

The deal came after protracted days and nights of fighting. Big oil-producing states such as Saudi Arabia staunchly opposed an earlier attempt to “phase out” oil, coal and gas, as did some smaller nations which argued that they simply could not afford to overhaul their economies without much more financial help. Disfiguring compromises were made. Several countries—including many small island states—were left angered by minimal progress on adaptation and, they claimed, underhand tactics used in the negotiations as well as a “litany of loopholes”. Sultan Al Jaber, the Emirati president of COP28, hailed the outcome as “historic”. It was, but it came at a heavy cost.

As early as Wednesday Republicans in the House of Representatives will vote to formalise their impeachment inquiry into Joe Biden. Three House committees have been investigating the president since September, with little to show for it. According to James Comer, the chairman of the House Oversight committee, a formal inquiry would strengthen its hand in court against “anyone who refuses” a subpoena.

That is a reference to Hunter Biden, the president’s son. In November Mr Comer’s committee issued a subpoena to Hunter, demanding he testify at a closed-door deposition. Hunter countered with an offer to appear at a public hearing, which Republicans rejected. They hope to show that the president profited from his son’s foreign business dealings. Hunter was recently charged with failing to pay $1.4m in taxes (a claim his lawyer suggested was politically motivated) and may face further investigation. Still, Mr Comer is far from building a case against what he has called the “Biden crime family”.

A tense series of meetings start in Brussels on Wednesday with a summit featuring leaders from the EU and Western Balkans. The regular gathering was long an exercise in justifying why countries including Serbia and North Macedonia were making little progress in their two-decade quest to join the bloc. But prospects for enlargement have improved since Russia’s full-scale invasion of Ukraine. The war has made members keener to bring its neighbours into the club to fend off Russian interference.

That enthusiasm will be tested again on Thursday and Friday when EU leaders meet for their last summit of the year. Diplomats from the bloc’s 27 members had hoped to open formal negotiations over Ukraine’s accession, and to sign off on a €50bn ($54bn) aid package for the country over four years. But both are being held up by Viktor Orban, Hungary’s autocratic prime minister, partly because of his enduring willingness to appreciate the Kremlin’s point of view.

The handover of power was no less bitter than the years of political brawling that preceded it. After a disappointing result in an election in October, Poland’s Law and Justice (PiS) party lost a vote of confidence on Monday. Parliament then backed Donald Tusk of the Civic Coalition as prime minister. The leader of PiS, Jaroslaw Kaczynski, accused Mr Tusk of being a “German agent”—an insinuation that stems from his friendly relations with European leaders.

Mr Tusk, who was sworn into office on Wednesday, has promised to mend Poland’s relations with the EU after years of disquiet over PiS’s undermining of the rule of law. By Thursday he will be in Brussels for a leaders’ summit. As a former president of the European Council he can expect a warm welcome. But to restore his country to the bloc’s good graces (and unlock billions of euros in funds) he will need to depoliticise Poland’s courts and media.

The UK Biobank, a British repository of medical data, holds a conference in London on Wednesday. Experts will talk about the role of genomics in predicting disease, as well as the latest research on dementia. Around 55m people worldwide have the condition. Yet up to 40% of cases could be prevented or delayed by tackling environmental and behavioural factors that heighten the risk of developing dementia. Biological changes begin many years before noticeable symptoms prompt a visit to the doctor.

The Biobank recently released its largest genomic dataset yet for global researchers to analyse. It includes whole genome sequences from half a million volunteers, as well as information from the past two decades on their lifestyle and health. Such comprehensive data could improve understanding of conditions like dementia. It should also enable detailed analyses of how genes interact with the environment—and contribute to the risk of future disease.

After almost three weeks of ground fighting, Israel now has control of the area north of Wadi Gaza, a riverbed that bisects the 45km-long Gaza Strip. This heralds the end of one phase of the war against Hamas. Israeli forces have dislodged the militant group from power in this part of the enclave. The group that has controlled Gaza since 2007 is scattered and reeling.

Yet Israel has still to find Hamas’s leader in Gaza, Yahya Sinwar, and its military chief, Muhammad Deif. Both are thought to be hiding in the maze of tunnels beneath the enclave. Israeli troops will spend the coming weeks blowing up the entrances to those tunnels and scouring the north for arms and militants. Inevitably, some Hamas fighters will have fled to southern Gaza, along with civilians. At some point, therefore, Israel will have to turn its attention south. How much it will be able to do there, however, will depend on domestic politics and diplomatic pressure.

China’s biggest shopping day, Singles’ Day, which falls on November 11th, was something of a flop this year. E-commerce sales declined by 1% year on year. That is in keeping with this year’s sluggish trend in consumer demand. It is not good news for Alibaba, which has the biggest share of the e-commerce market.

Investors got a sense of just how bad things are on Thursday. Alibaba posted a quarterly net income of 27.7 billion yuan ($3.8 billion), an improvement on the net loss it made for the same period last year but lower than expected. Worse still, the company called off plans to spin-off its cloud computing business into a separate company, blaming American export controls on computer chips. The move throws into doubt the rest of the company’s ambitious restructuring plan of splitting itself into six separate businesses, announced in March. Alibaba shares fell after the news. The company’s Single’s Day was poor, but its break-up is going even worse.

As early as Thursday Joe Biden is set to sign into law a bill that averts a government shutdown. The news is welcome—if perplexing. In September Republican Kevin McCarthy, then the speaker of America’s House of Representatives, defied hardliners in his party and relied on Democratic votes to pass a short-term funding bill to avoid a shutdown. He was summarily defenestrated. Six weeks later, Mike Johnson, his replacement (pictured), did largely the same thing. Yet, for now, his job is safe.

Mr Johnson, knowing that Republicans would get the blame for a shutdown, needed a short-term solution. Though the bill lacked military aid for Israel or Ukraine, it was acceptable to Democrats because it included no spending cuts. Some members of the far-right House Freedom Caucus voted against it, but following the weeks-long scramble to replace Mr McCarthy, even they were not keen on more chaos. Overall, Republicans are giving Mr Johnson “a longer leash”, as one pundit put it, than the divisive Mr McCarthy.

Naomi Campbell wore it first. A small pin on the lapel of an angular, pinstriped blazer intrigued onlookers at a fashion show in September. It was no mere decorative accessory. Instead it was a device intended to make handheld smartphones obsolete. On Thursday the AI Pin will be available for early orders in America.

Created by Humane, a startup staffed by former Apple employees, the AI Pin is a smart-assistant that attaches to clothing using a magnet. It differs from conventional smartphones by having no screen. Nevertheless, it takes photos, can access the internet, make phone calls, and project text onto surfaces (using lasers).

Generous funding of $240m from Microsoft, OpenAI and others has generated huge expectations in the tech market. Critics worry that a wearable device powered by generative artificial intelligence poses challenges for data protection. Using the pin will also require a substantial behavioural shift. Liberating the world from its smartphone addiction may yet require more technology.

An exhibition that has precious little to do with art, but much to say about the cultural enthusiasms of Giorgia Meloni, the Italian prime minister, and her hard-right Brothers of Italy party, opens to the public on Thursday at the National Gallery of Modern and Contemporary Art in Rome.

The show is devoted to the British writer J.R.R. Tolkien, author of “The Hobbit” and “The Lord of the Rings”. Exhibits include manuscripts and letters, first editions of his books and art works inspired by his tales. Tolkien’s fantasy sagas, embraced by hippies in the 1960s, found a radically different set of admirers in Italy where they became the favoured reading of young neo-fascists. Ms Meloni, who once belonged to the neo-fascist youth movement, attended its “Hobbit Camps”. She has since often quoted from Tolkien’s works. Why Tolkien? For her culture minister, Gennaro Sangiuliano, his writings reflect “opposition to the most controversial and dehumanising aspects of modern times”.