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Telecommunications company NTT and leading newspaper Yomiuri to issue manifesto calling for new laws to restrain generative AI

TOKYO—Japan’s largest telecommunications company and the country’s biggest newspaper called for speedy legislation to restrain generative artificial intelligence, saying democracy and social order could collapse if AI is left unchecked.

Nippon Telegraph and Telephone, or NTT, and Yomiuri Shimbun Group Holdings made the proposal in an AI manifesto to be released Monday. Combined with a law passed in March by the European Parliament restricting some uses of AI, the manifesto points to rising concern among American allies about the AI programs U.S.-based companies have been at the forefront of developing.

The Japanese companies’ manifesto, while pointing to the potential benefits of generative AI in improving productivity, took a generally skeptical view of the technology. Without giving specifics, it said AI tools have already begun to damage human dignity because the tools are sometimes designed to seize users’ attention without regard to morals or accuracy.

Unless AI is restrained, “in the worst-case scenario, democracy and social order could collapse, resulting in wars,” the manifesto said.

It said Japan should take measures immediately in response, including laws to protect elections and national security from abuse of generative AI.

A global push is under way to regulate AI, with the European Union at the forefront. The EU’s new law calls on makers of the most powerful AI models to put them through safety evaluations and notify regulators of serious incidents. It also is set to ban the use of emotion-recognition AI in schools and workplaces.

The Biden administration is also stepping up oversight, invoking emergency federal powers last October to compel major AI companies to notify the government when developing systems that pose a serious risk to national security. The U.S., U.K. and Japan have each set up government-led AI safety institutes to help develop AI guidelines.

Still, governments of democratic nations are struggling to figure out how to regulate AI-powered speech, such as social-media activity, given constitutional and other protections for free speech.

NTT and Yomiuri said their manifesto was motivated by concern over public discourse. The two companies are among Japan’s most influential in policy. The government still owns about one-third of NTT, formerly the state-controlled phone monopoly.

Yomiuri Shimbun, which has a morning circulation of about six million copies according to industry figures, is Japan’s most widely-read newspaper. Under the late Prime Minister Shinzo Abe and his successors, the newspaper’s conservative editorial line has been influential in pushing the ruling Liberal Democratic Party to expand military spending and deepen the nation’s alliance with the U.S.

The two companies said their executives have been examining the impact of generative AI since last year in a study group guided by Keio University researchers.

The Yomiuri’s news pages and editorials frequently highlight concerns about artificial intelligence. An editorial in December, noting the rush of new AI products coming from U.S. tech companies, said “AI models could teach people how to make weapons or spread discriminatory ideas.” It cited risks from sophisticated fake videos purporting to show politicians speaking.

NTT is active in AI research, and its units offer generative AI products to business customers. In March, it started offering these customers a large-language model it calls “tsuzumi” which is akin to OpenAI’s ChatGPT but is designed to use less computing power and work better in Japanese-language contexts.

An NTT spokesman said the company works with U.S. tech giants and believes generative AI has valuable uses, but he said the company believes the technology has particular risks if it is used maliciously to manipulate public opinion.

Shimao said it would “vigorously” oppose the petition

Shimao Group shares fell sharply after a Chinese state-run bank, in a rare case, filed a liquidation petition against the heavily indebted developer in Hong Kong, adding uncertainty to a proposed restructuring of billions of dollars of offshore debt.

Shares were 14% lower at 39 Hong Kong cents after Shimao said Monday that Construction Bank (Asia) Corp. filed a winding-up petition with a Hong Kong court on April 5 related to a financial obligation of around HK$1.58 billion (US$201.8 million). Shimao said it would “vigorously” oppose the petition and continue working on plans proposed last month to restructure more than $11 billion of offshore debt.

A hearing in the case is set for June 26, Hong Kong court records showed.

Shanghai-based Shimao’s shares have fallen 40% this year and 91% over the past 12 months amid continued losses, debt concerns and a slowdown in the Chinese property sector.

The company posted net losses of 21.03 billion yuan (US$2.91 billion) in 2023 and CNY21.49 billion in 2022, while total equity and total liabilities stood at CNY51.25 billion and CNY492.00 billion, respectively, at the end of last year.

China is in the midst of a protracted slump in the property sector, historically a major driver of the country’s economic growth.

Property giant China Evergrande was ordered to liquidate earlier this year in the face of mounting operational and debt stresses, a process that was started by overseas creditors. A number of other companies are awaiting outcomes of liquidation petitions.

Western countries’ push to strengthen Ukraine’s military has sent demand for ammunition soaring

European defence contractors have warned that reliance on Chinese cotton used in gunpowder for ammunition threatens their ability to expand output as western countries race to bolster Ukraine’s overstretched military.

Cotton linters, a byproduct and a primary ingredient needed to produce nitrocellulose, are used in artillery shells and other explosives.

Demand for ammunition has soared with Ukraine consuming shells at high rates in its war against Russia. But defence contractors have struggled to scale up output because of supply chain constraints of various inputs, including nitrocellulose, also known as “guncotton”.

Leading arms producers, including Sweden’s Saab and Germany’s Rheinmetall, warned that Europe was overly dependent on linters from China, which accounts for just under half of the global trade.

Armin Papperger, chief executive of Rheinmetall, a leading ammunition producer, told the Financial Times that Europe relied on China for “more than 70 per cent” of its cotton linters.

“There is a risk [that China could withhold linters for geopolitical reasons]. And that is the reason why we buy as much as possible to fill our stocks,” he said.

The EU aims to increase production of Nato-standard 155mm shells to 1.4mn annually to replenish member states’ stocks, which have been depleted to help Ukrainian armed forces in the face of superior Russian production capacities. It has launched a €2bn fund to boost European explosives production.

“There is a huge undersupply of [nitrocellulose], which is causing difficulties elsewhere within the industry,” said another industry executive.

“The shortage just highlights the need to strengthen the responsiveness and ability of the European Union’s defence industry to ensure the timely supply of ammunition and missiles in Europe.”

European leaders have highlighted the gunpowder shortage. “We have all become aware of the need to face up to the scarcity of some components, especially gunpowders,” French President Emmanuel Macron said in March after a meeting of Ukraine’s main backers.

China accounts for almost half of cotton linters pulp traded globally, according to the International Trade Centre. The largest importers of the material include Germany, Sweden and Belgium.

The companies warned that it would be difficult to rapidly scale up production of explosives while being dependent on Chinese sources and there was a danger that China could restrict exports of the material if relations worsened.

Saab said that “[the reliance on China] can pose an increased future risk as we and the industry ramp up capacity and production in Europe”, while stressing that there were no current supply chain issues.

Concerns about cotton linters supplies come as Germany and other European nations look to diversify and “de-risk” their supply of critical materials away from China, which for decades was a low-cost, reliable outsourcing destination.

Russia, which also has been boosting its ammunition output, has increased imports of nitrocellulose from China in the past two years. Its purchases from China jumped from $3.4mn in 2022 to $7.18mn in the first 10 months of 2023, according to import data examined by the UK’s Royal United Services Institute.

Saab said that in the long run, companies might have to consider alternative ways of manufacturing critical materials to secure Europe’s “ammunition ecosystem”. While work was ongoing on making cellulose from wood, the company said this was not yet in production.

The Swedish group’s chief Micael Johansson recently told the FT that nitrocellulose was an example of how defence companies would have to build new supply chains in a “multipolar world” where “not only the western rules-based order will be present”.

He added: “We have to think about like-minded countries and who can we work with in the long term, who can we trust.”

Britain’s BAE Systems, which supplies the UK’s armed forces with ammunition, said that while there were sufficient inventories of raw materials for its munitions production, it was “aware of potential concerns relating to the future availability of nitrocellulose” and was actively engaging with its partners to ensure future supplies.

Rheinmetall, whose subsidiary Nitrochemie produces nitrocellulose, confirmed that it was considering setting up a linters production unit in Lower Saxony as part of a new ammunition manufacturing site.

Papperger said the company had amassed a three-year stockpile of linters after Russia’s full-scale invasion of Ukraine, and deliveries continued “every month from China”.

“But the point is Europe should be independent in the long term,” he added.

Christian Mölling, the German Council of Foreign Relations lead for security and defence, said nitrocellulose was a “cheap chemical product”, and the production of one of its key ingredients had long been outsourced to places like China.

“If you want to scale ammunition production, it’s not just about raw materials, it’s also about building new production sites, which depending on standards can take between six months and two years.”

Energy trader’s earnings mean another year of large payouts for senior partners

Vitol, the world’s largest independent commodity trader, earned profits far in excess of its rivals for the second year running, consolidating its position as one of the most powerful players in global energy markets.

The privately owned group, whose chief executive is based in London, made $13bn of net profit in 2023, according to people with knowledge of the company’s results.

Although down from the record $15.1bn Vitol made in 2022, the net profit figure is more than three times higher than the $4bn it reported in 2021, illustrating how much Vitol has benefited from disruption to energy markets in the past two years.

Russia’s invasion of Ukraine in February 2022 sent energy prices soaring as the west responded with sanctions, leading to one of the biggest shifts in global commodity flows in history. Price volatility eased in 2022 but the volatility in energy markets has continued.

“The scale of this realignment should not be underestimated,” chief executive Russell Hardy said in a statement reporting on the group’s 2023 turnover last month, adding that the rerouting of Russian product and Houthi attacks in the the Red Sea had “resulted in all-time highs of oil products on-water”.

Vitol does not publicly release its financial results, which are only available when its accounts are filed in the Netherlands later in the year. The company declined to comment on the profit figure, which dwarfed its biggest competitors and was larger than some of the world’s biggest oil producers, including Italy’s Eni.

Lower commodity prices meant turnover fell to $400bn from $505bn in 2022 but the total volume of energy products traded by Vitol increased by 4 per cent year-on-year, last month’s statement said.

The growth was driven by gas and liquefied natural gas volumes, which grew by 19 per cent and 24 per cent respectively. The volume of oil and refined petroleum products that the group traded remained roughly flat at 7.3mn barrels per day.

Vitol’s closest rival Trafigura made net profits of $7.2bn in its last financial year, which ended in September, while fellow privately held energy trader Gunvor made $1.3bn, it said last week.

The second consecutive blockbuster year will mean another bumper payout for Vitol’s approximately 450 senior partners spread across the trading hubs in London, Geneva, Singapore and Houston.

It will also add to the cash pile Vitol has available to expand the business. In 2022 the group doubled its shareholder equity to $25.8bn, according to its last set of accounts.

Vitol has already begun spending some of the windfall, launching in January a €1.7bn bid to acquire Italy’s Saras, which owns the biggest single refinery in the Mediterranean on Sardinia. Last year its Turkish subsidiary Petrol Ofisi agreed to acquire BP’s downstream business in Turkey. On completion, Vitol will have invested in about 9,000 petrol stations worldwide, including 3,900 it owns in Africa through Vivo Energy.

In the UK, Vitol owns and operates five power plants through its partially owned subsidiary VPI, making it a bigger power generator than Centrica. VPI also has three more power facilities being built in the region — two in the UK and one in Ireland.

Rusting hulk of Philippines vessel Sierra Madre grounded on disputed reef has become potential US-China flashpoint

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 Financial Times.

“China needs to examine its tactics or risk some serious blowback.”

Admiral John Aquilino, head of US Indo-Pacific command, recently issued a similar warning to a delegation of retired Chinese military officers and Cui Tiankai, China’s former ambassador to the US, according to people familiar with the situation. Indo-Pacom did not comment. The Biden administration has also enlisted other retired US officials to deliver similar private messages to Beijing.

The officials said the US was wary of establishing a “red line” with Beijing. “If you give the Chinese a red line, they will go just short of that and do everything but,” said one official.

The second official said China may think its actions fall below the threshold of the US commitments under the mutual defence treaty.

“The reality of their rules of engagement and the way that responsibility evolves may mean that ultimately they don’t have perfect control over that fact,” the official said. “We would not want to create an artificially clean distinction when they themselves are not fully able to control their own actions.”

Bonnie Glaser, a China expert at the German Marshall Fund, said the “greatest risk of a direct US-China military confrontation today is at Second Thomas Shoal”.

“If Beijing directly attacks Philippine ships or armed forces, Washington would be compelled to respond,” she said. “A major political crisis between the US and China would ensue, and, at worst, a wider military conflict.”

Jose Manuel Romualdez, Philippine ambassador to the US, said the two allies hoped that the treaty would never have to be invoked, but warned, “we will not hesitate to do so” if warranted.

The Second Thomas Shoal is one of many contested features in the Spratly Islands in the South China Sea. The Philippines grounded the Sierra Madre on the reef in 1999 as part of its effort to reinforce its claims to the feature. The Philippines military has stationed marines on the ship who need to be periodically resupplied.

China says Manila is bringing construction materials to the shoal to reinforce the rusty second world war-era ship, which is at risk of disintegrating. It also accuses Manila of reneging on a promise years ago to remove the ship — a claim that the Philippines has rejected.

Dennis Wilder, a former top CIA China analyst, said Beijing was trying to test what the US response would be if China attempted to remove the Philippine marines from the Sierra Madre and destroy the vessel. He said it probably wanted to build a military outpost on the reef as it has done elsewhere in the South China Sea.

“A base closer to the Philippines would both secure China’s claim in the area and provide a forward operating location for combat operations against US forces operating from Philippine territory in a Taiwan Strait conflict,” said Wilder.

Jeff Smith, an Asia expert at the Heritage Foundation, said the US should adopt a tougher stance. “The US should participate in joint resupply missions with Filipino forces and explore options to replace the deteriorating Filipino ship,” he said.

“The US cannot repeat the same mistakes it made in 2012, when China set a terrible precedent by using military coercion to seize control of Scarborough Shoal from the Philippines.”