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The awkward truth of von der Leyen’s re-election ‘campaign’

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.”