This is an audio transcript of the FT News Briefing podcast episode: ‘The leftwing stuns France’
Kasia Broussalian
Good morning from the Financial Times. Today is Monday, July 8th, and this is your FT News Briefing.
[MUSIC PLAYING]
A leftwing surge in France has slammed the brakes on the far right. And markets are giving the Labour government two thumbs up, at least for now. Plus, China was hoping that a big shopping centre near Taiwan could help bring in investment.
William Langley
But nowadays Taiwanese businesspeople just don’t wanna come and a lot of people have left and packed up.
Kasia Broussalian
I’m Kasia Broussalian and here’s the news you need to start your day.
[MUSIC PLAYING]
Centrists and leftwing supporters in France let off a huge amount of steam last night.
[CLIP OF PEOPLE AT A RALLY PLAYING]
Candidates from both groups were able to block the far right National Rally or RN party from gaining a majority in a high stakes parliamentary election yesterday.
[NEWS CLIP PLAYING]
The FT’s Leila Abboud has been covering the results and explains how voters took to the polls.
Leila Abboud
Voters delivered a narrow win for this leftwing alliance, called the Nouveau Front Populaire, and President Macron’s centrist alliance came in second. And the far right, which we had all been expecting to kind of, you know, win big, ended up in third place. Essentially, the left and the centre teamed up to push the RN out or sort of block the RN. What they did was they tactically dropped out a lot of their candidates from the second round, and as a result, they managed to beat back the RN in a sort of spectacular way.
Kasia Broussalian
But while the strategy worked, none of the three main blocs will have enough seats in Parliament to actually form a government, which means France is in limbo at the moment and it could be right back in the same position in the near future.
Leila Abboud
You basically have this sort of kaleidoscope, fractured beast of a National Assembly, which is less clear than it was when you started. And you’re gonna have sort of a very strange period of horse trading in the next couple of weeks to see if any of them want to team up. And also, don’t forget the looming sort of date of 2027, when President Macron cannot run again and the far right remains very strong. Marine Le Pen feels as if her party was robbed in this election, because essentially the left and the centre teamed up to keep her out. There is a chance that her voters will feel the same way, and they’ll feel disenfranchised and angry, and they might only come back stronger in 2027.
Kasia Broussalian
Leila Abboud is the FT’s Paris bureau chief.
[MUSIC PLAYING]
And now over to the UK. It’s only been a few days since the country held its own important election. You probably heard that Labour won by a lot. And the pound, it’s actually looking pretty good. So are stocks and bonds. Markets, in fact, have seen steady gains ever since the snap contest was called a few weeks ago. Here to talk to me about what’s behind the good news is my colleague, Mary McDougall. She covers bonds and currencies for the FT. Hey, Mary.
Mary McDougall
Hey.
Kasia Broussalian
So I know it’s still early days here, but can you give me some of the details about how markets in the UK have responded to Thursday’s election?
Mary McDougall
Yeah, so they were pretty buoyant on Friday. Stocks, bonds and sterling were all up on the day. You know investors have been getting ready for the Labour government for a while now and UK markets have performed well. Sterling’s the only group of ten major currency to rise against the dollar this year. So I’d say there’s optimism that is coming from a pretty low base. You know, the UK has only recently pulled itself out of a recession. And the Bank of England forecast growth will be a paltry 0.5 per cent this year. So the Labour party has got quite a job on its hands to turn that around.
Kasia Broussalian
Yeah. So given that low base that you mentioned, walk me through why investors and analysts are just so pumped about a Labour government in particular.
Mary McDougall
Well, I think the first thing is that investors are looking forward to an era of political stability in the UK. We’ve had five prime ministers and seven chancellors since the UK voted to leave the EU in 2016. So Labour’s won 411 seats of the UK parliament’s 650 seats. So that’s a very solid majority for policy implementation. The second is the mandate that prime minister Keir Starmer has once governed on. He and his chancellor, Rachel Reeves, were very focused on emphasising financial stability and fiscal responsibility. And the third point, I think there is real hope that they’ll deliver some supply-side reforms to help stimulate investment and boost growth. You know, Starmer’s said after the election he wants to hit the ground running and get Britain building again.
Kasia Broussalian
Got it. But how long do you think that market optimism here can really last? I mean, you even hinted at it earlier, Labour is coming into power with a huge to-do list and not really a lot of headroom to do it with.
Mary McDougall
As you said, they’re in a really tight spot. Tax revenues and public debt as a proportion of GDP in the UK are both at their highest levels since the second world war at the minute. There’s not much scope for them to raise money on either side. There’s very little growth. So the hope is that they can make these supply-side reforms to stimulate investment. Reeves has already said that she’ll stick to the previous government’s fiscal rules of ensuring that debt to GDP is forecast to fall over a five-year period. It sounds like we’ll get a clearer idea in the coming days of what the plans are. The first indicators are possibly when the Office for Budget Responsibility, which is the UK’s fiscal watchdog, what their forecast looks like in the autumn that will come out alongside the budget.
Kasia Broussalian
Mary McDougall covers bonds and currencies for the FT. Thanks, Mary.
Mary McDougall
Thank you.
[MUSIC PLAYING]
Kasia Broussalian
And more worrying news about the state of our planet. Scientists say that this year will likely be the world’s hottest ever on record. For the last 12 months, we’ve blown through the 1.5°C limit to keep global temperatures in check. If you remember, that’s the target that scientists set above the pre-industrial average. But there might be some relief ahead. It looks like we’re starting to transition to La Niña. That’s a weather phenomenon in the Pacific Ocean, and it should help to cool things down.
[MUSIC PLAYING]
There’s a shopping centre in China that was meant to be a model for improving relations with Taiwan. There were people there to help Taiwanese investors get set up with things like tax breaks, answer residency questions, even offer Taiwanese snacks. But now Taiwan Town, as the complex is called, is almost empty. Here to talk to me about why is the FT’s south China correspondent, William Langley. Hey, Will.
William Langley
Hi, great to be here.
Kasia Broussalian
Good to have you. So you recently took a trip out to Taiwan Town, tell me a little bit more about it.
William Langley
So, broadly speaking, I mean, the Taiwan Town development that I visited is a specific development on a kind of rainy sandstone outcrop facing the Taiwan Strait in eastern China called Ping Tan Island. Ping Tan Island is part of Fuzhou city, which is the provincial capital of Fujian. And China would like to set Fujian province up as a kind of model zone for economic development. The Taiwan Town development was a giant part duty-free shopping centre, designed to kind of entice Taiwanese businesses to come over and sell Taiwanese wares. It was all kind of decked out in traditional or mock traditional Chinese architecture, but it was a pretty desolate place. It was hundreds of empty shops. And when I spoke to people working in the shops that were still open, they said there had been shops previously but nowadays Taiwanese business people just don’t wanna come and a lot of people have left and packed up.
Kasia Broussalian
OK, so things haven’t exactly gone to plan, but you mentioned that this shopping centre was set up as a sort of model for cross-strait relations. Has there traditionally been a big connection between this area in China and the island?
William Langley
Yes, Fujian has long been a key zone for Taiwanese investment. In fact, Taiwanese businesses were crucial to building up Fujian province’s manufacturing in the 1980s and 90s and even into the 2000s after China opened its economy. Ten years ago, was a sort of record for Taiwanese investment into both China and Fujian province, in particular. When the narrative around China was still about, you know, an unstoppable economic rise, so too was Taiwanese investment into China. What I think has happened recently is, on top of all the political concerns that Taiwanese investors may have about investing in China, they have the same concerns that everyone else does. We read a lot about China Plus One or diversification and de-risking or China’s slowing growth. I think that’s why you see this real slump last year to, you know, multi-decade lows in terms of that investment.
Kasia Broussalian
And that decline seems to be really threatening the whole idea of Taiwan Town. Now, you mentioned some of the economic reasons for this, but can we go back to the political? I mean, I just have to imagine that something like rising military tensions are part of the problem here, too.
William Langley
That’s been happening over the last few years. And this kind of project has set Fujian up as a zone for model economic integration is very much the carrot to an increasingly kind of coercive stick that China uses or wields to convince Taiwan to unify with it. And it’s become particularly intense since the Taiwanese election in January. The candidate that Taiwan elected, Lai Ching-te, has been labelled by Beijing as a dangerous separatist. China conducted military drills around Taiwan in May. It said those drills were punishment for Lai, who they regard as a troublemaker. So there’s this particular political context in Taiwan on top of all those economic concerns.
Kasia Broussalian
So then I guess I’m wondering, what is the failure of this shopping centre? Tell us about whether there can ever really be a peaceful reunification between Taiwan and China.
William Langley
I think the latest polling from National Zhengzhou University shows that only about 8 per cent of Taiwanese people favour unification with the mainland at some point. So when you bear that in mind, and you consider the fact that China has become to these Taiwanese investors less attractive economically, and the opportunity to benefit from China’s economic rise is, in their eyes, receding, it suddenly makes it less likely that many Taiwanese people are going to turn around and say they would like to unify at an early date.
Kasia Broussalian
William Langley covers business and politics in south China. Thanks, Will.
William Langley
Thanks very much.
[MUSIC PLAYING]
Kasia Broussalian
You can read more on all of these stories for free by checking out the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.