Daybreak Weekend: Jobs Report, Jay Powell Speaks, Government Spending

This is Bloomberg day Break Weekend, our global look at 0:00:05.440 --> 0:00:07.640 the top stories in the coming week from our day 0:00:07.640 --> 0:00:10.360 Break anchors all around the world. It's straight ahead on 0:00:10.400 --> 0:00:13.000 the program, a look at the US labor market with 0:00:13.119 --> 0:00:14.880 the February jobs report. 0:00:15.120 --> 0:00:16.840 I'm Tom Busby in New York. 0:00:16.960 --> 0:00:19.040 I'm Stephen Carol in London, where we're looking ahead to 0:00:19.079 --> 0:00:22.400 the UK government's budget announcement and a key political moment 0:00:22.560 --> 0:00:23.360 ahead of the elections. 0:00:23.360 --> 0:00:24.360 To you later this year. 0:00:24.480 --> 0:00:26.840 I'm Brian Curtis in Hong Kong. We look ahead to 0:00:26.920 --> 0:00:30.479 the National People's Congress meetings in Beijing next week. What 0:00:30.600 --> 0:00:34.240 sort of prescriptions will they have to fix the Chinese ECONORESS. 0:00:37.200 --> 0:00:40.320 That's all straight ahead on Bloomberg Daybreak Weekend. 0:00:40.600 --> 0:00:42.800 The business news you need to wrap up. 0:00:42.680 --> 0:00:46.800 Your week, Available on Apple, Spotify, the Bloomberg Business Happen 0:00:47.000 --> 0:00:48.760 everywhere you get your podcasts. 0:00:53.560 --> 0:00:54.960 Good day to you. I'm Tom Busby. 0:00:55.040 --> 0:00:57.080 We begin today's program with a look ahead to the 0:00:57.160 --> 0:01:00.600 February jobs report here in the US and the state 0:01:00.760 --> 0:01:02.240 of the US labor market. 0:01:02.280 --> 0:01:03.640 For a preview, We're joined by. 0:01:03.480 --> 0:01:08.280 Michael McKee, Bloomberg International Economics and Policy Correspondence. All Right, 0:01:08.280 --> 0:01:11.960 well after a big upside surprise in January, three hundred 0:01:12.000 --> 0:01:14.880 and fifty three thousand jobs added. What are you expecting 0:01:14.920 --> 0:01:16.800 to see for February. 0:01:16.680 --> 0:01:19.800 Sort of a return to what was considered somewhat normal. 0:01:20.640 --> 0:01:23.880 The forecast at this point is for one hundred and 0:01:23.920 --> 0:01:27.399 eighty thousand jobs. That may change ten twenty thousand either 0:01:27.440 --> 0:01:30.959 way as we get more data in between now and 0:01:31.120 --> 0:01:35.080 next Friday, but basically that's roughly where we have been 0:01:35.280 --> 0:01:38.800 for the past year two years. The revisions hired to 0:01:38.880 --> 0:01:43.839 December and January were quite a surprise, and nobody thinks 0:01:43.880 --> 0:01:47.600 that that can be sustained. But if it can, you 0:01:47.800 --> 0:01:49.800 watch the bond markets move. 0:01:50.520 --> 0:01:53.240 But the unemployment rate expected to hold steady three point 0:01:53.240 --> 0:01:56.880 seven percent. That would be about two years under four percent. 0:01:57.120 --> 0:01:59.080 It would be one month over two years. Yes, two 0:01:59.120 --> 0:02:03.680 hours a month, and that is probably well, it's close 0:02:03.760 --> 0:02:06.840 to a record nineteen sixty eight. I think when half 0:02:06.880 --> 0:02:10.200 of American men were serving in Vietnam, so there weren't 0:02:10.200 --> 0:02:13.720 as many people to work. That was the last time 0:02:13.760 --> 0:02:17.160 we saw anything like this. The question is is if 0:02:17.200 --> 0:02:21.400 the unemployment rate stays that low, do we see any 0:02:21.480 --> 0:02:25.280 inflationary impact from that? So we'll be looking at average 0:02:25.280 --> 0:02:28.720 hourly earnings very closely. They were up six tenths of 0:02:28.800 --> 0:02:31.560 a percent in January. Now that there may have been 0:02:31.600 --> 0:02:35.040 some distortions in the data that led to that, but 0:02:35.080 --> 0:02:37.560 they're only expected to be up two tenths of a percent. 0:02:37.919 --> 0:02:40.760 So if that's the case for February, then we can 0:02:40.880 --> 0:02:43.440 have big job gains and the FED isn't going to 0:02:43.480 --> 0:02:44.120 worry about it. 0:02:44.840 --> 0:02:47.760 And I mean, let's face it, there are challenges right 0:02:47.800 --> 0:02:50.840 now to the labor market, not just AI jobs and 0:02:50.880 --> 0:02:54.480 automation jobs, but we've seen a lot of corporate layoffs 0:02:54.520 --> 0:02:58.040 being announced. Big ones Cisco Systems that's four thousand jobs, 0:02:58.080 --> 0:03:01.840 as to Lord three, one hundred, Nike, Expedia. I mean, 0:03:02.280 --> 0:03:05.399 none of these or most of them are not tech companies. 0:03:05.880 --> 0:03:07.760 So there is a change going on. 0:03:08.320 --> 0:03:10.960 Well, there's a change going on, but it is not 0:03:11.240 --> 0:03:13.960 going to be as bad as it appears. If we 0:03:14.000 --> 0:03:17.760 see a huge wave of layoffs, that would be one thing. 0:03:17.800 --> 0:03:20.880 But what we're seeing is a lot of companies sort 0:03:20.880 --> 0:03:24.560 of right sizing what they think they need for the 0:03:25.000 --> 0:03:30.079 months going forward. And what happens is that companies always 0:03:30.200 --> 0:03:35.760 announce layoffs either in a press release or they do 0:03:35.800 --> 0:03:38.960 it as part of their earnings, but they don't announce hirings. 0:03:39.680 --> 0:03:44.080 And so when you look at what happens, there are 0:03:44.160 --> 0:03:47.320 millions of jobs lost every month and there are millions 0:03:47.360 --> 0:03:50.960 of jobs gained every month, and the number that we 0:03:51.080 --> 0:03:56.400 report is the net difference between the two. So, yes, 0:03:56.560 --> 0:04:00.160 there will be a lot of layoffs going in to 0:04:00.400 --> 0:04:03.760 the data. But is it significantly more than usually happens. 0:04:04.080 --> 0:04:06.520 That's going to be the question going forward. 0:04:06.560 --> 0:04:07.480 Well, it's sort of like Apple. 0:04:07.480 --> 0:04:10.920 They're going to eliminate their EV unit, no electric cars, 0:04:11.040 --> 0:04:13.320 but two thousand workers will just work on AI. 0:04:13.720 --> 0:04:14.680 We're going to shift right over. 0:04:14.800 --> 0:04:18.000 And a lot of the jobs that companies cut are 0:04:18.720 --> 0:04:22.920 cut through attrition anyway, so they're not affecting the unemployment 0:04:23.000 --> 0:04:26.960 rate because people are not all of a sudden unemployed. 0:04:27.320 --> 0:04:27.680 Gotcha. 0:04:28.680 --> 0:04:31.080 Another big event this week you want to talk about, 0:04:31.120 --> 0:04:34.240 and that is FED Chairman Jerome Powell is going to 0:04:34.240 --> 0:04:35.039 be on Capitol Hill. 0:04:35.520 --> 0:04:38.880 That's always a big deal for Wall Street. The chairman 0:04:39.040 --> 0:04:43.359 is the one who sets the agenda. Powell basically says 0:04:43.400 --> 0:04:48.040 he's not driving the agenda the way that Alan Greenspan 0:04:48.200 --> 0:04:51.960 did say or Ben bernanke. He's much more collaborative, but 0:04:52.400 --> 0:04:55.800 it is still the Chairman to whom everybody defers, And 0:04:55.880 --> 0:04:58.080 so what Powell says about the economy is going to 0:04:58.120 --> 0:04:59.760 be worth a lot more than what any of these 0:04:59.760 --> 0:05:03.280 other Fed officials, as important and as smart as they are, 0:05:03.400 --> 0:05:07.880 have to say. So you're going to have everybody tuning in, 0:05:07.960 --> 0:05:11.400 particularly to his opening statement, to see if he makes 0:05:11.520 --> 0:05:14.200 any kind of reference to when or by how much 0:05:14.480 --> 0:05:18.680 they might cut And then they'll be listening for Q 0:05:18.839 --> 0:05:21.599 and A for his reaction to things like layoffs and 0:05:22.400 --> 0:05:25.520 how strong the labor market is, and whether they think 0:05:26.200 --> 0:05:32.320 the January inflation numbers, whether CPIPPI or the PCE really 0:05:32.360 --> 0:05:35.279 reflect what's going on with the strength that they showed. 0:05:35.960 --> 0:05:38.760 Well, I know you'll be listening and you can hear 0:05:38.960 --> 0:05:43.560 Chairman Palace testimony Wednesday and Thursday live right here on 0:05:43.600 --> 0:05:47.280 Bloomberg Radio. Well, our thanks to Michael McKee, Bloomberg International 0:05:47.320 --> 0:05:51.240 Economics and Policy Correspondent. And now we moved to the 0:05:51.360 --> 0:05:54.479 US retail sector and a closely watched fourth quarter earnings 0:05:54.480 --> 0:05:57.960 report out on Tuesday from Target, whether it may give 0:05:58.000 --> 0:05:59.680 us a more clear picture on the health of the 0:05:59.760 --> 0:06:04.160 US consumer and how stubbornly high inflation may be affecting spending. 0:06:04.240 --> 0:06:06.680 Now for a preview. We're joined by John Edwards. He's 0:06:06.720 --> 0:06:09.160 Bloomberg News US Consumer team leader. 0:06:09.240 --> 0:06:10.320 John. Thank you for joining us. 0:06:10.440 --> 0:06:11.120 Great to be here. 0:06:11.480 --> 0:06:14.000 Well, let's start with what you expect the headline numbers 0:06:14.000 --> 0:06:16.720 to be from Target in this what's the holiday quarter 0:06:16.800 --> 0:06:18.000 an all important one? 0:06:18.279 --> 0:06:21.640 Yeah, Well, what we're looking for is continued decline in 0:06:21.880 --> 0:06:26.680 same story sales from Target, and they have, you know, 0:06:27.240 --> 0:06:32.000 had that figure going down for some time now. The 0:06:32.040 --> 0:06:37.360 previous quarters report did excite the market, largely because of 0:06:37.480 --> 0:06:40.880 improvements in inventory management. So we'll be watching to see 0:06:40.880 --> 0:06:44.000 if that continues. But you know, the stock is up 0:06:44.040 --> 0:06:49.800 pretty significantly since that report, so expectations are fairly high, 0:06:49.920 --> 0:06:53.719 even though the business continues in some areas to struggle, 0:06:53.760 --> 0:06:56.880 you know, So we do expect those same store sales 0:06:56.880 --> 0:06:59.720 to be down once again, but you know, we'll be 0:06:59.720 --> 0:07:01.920 looking for the trend what they say about, you know, 0:07:02.000 --> 0:07:05.560 what they're seeing in terms of continued consumer strength. That 0:07:05.680 --> 0:07:07.880 was you know, certainly something that Walmart pointed to in 0:07:07.920 --> 0:07:09.320 their results recently. 0:07:09.560 --> 0:07:12.200 Yeah, the same source sales drop, not just Target, not 0:07:12.320 --> 0:07:14.440 just discounters, it's across the board. 0:07:14.280 --> 0:07:16.320 Is yeah, yeah, I mean, yeah, we're you know, we're 0:07:16.400 --> 0:07:20.240 we're seeing some some retailers managed to uh to bring 0:07:20.240 --> 0:07:23.080 those sales up a little bit. But but yeah, it's uh, 0:07:23.200 --> 0:07:27.360 you know, the consumer is resilient. But but picky is 0:07:27.360 --> 0:07:30.040 is what we're seeing. You know, people are being very 0:07:30.200 --> 0:07:33.320 uh the way Walmart put it was you know, choiceful 0:07:33.840 --> 0:07:34.440 in Uh. 0:07:34.840 --> 0:07:36.840 That's that's a new one. Choiceful wow. 0:07:36.960 --> 0:07:40.680 Yeah, in in how they approach their their spending. So 0:07:41.080 --> 0:07:44.520 you know they uh, you know, employment remains robust, so 0:07:44.600 --> 0:07:48.600 that's that's a support. But uh, you know, inflation, even 0:07:48.600 --> 0:07:52.920 though it's moderated, remains you know, elevated from you know, 0:07:53.080 --> 0:07:55.840 pre pandemic and people remember what things you know, used 0:07:55.840 --> 0:07:57.880 to cost only you know, three or four years ago. 0:07:58.480 --> 0:08:01.360 So so that's sort of of you know, reins in 0:08:01.440 --> 0:08:05.080 spending a little bit and has people you know, continuing 0:08:05.120 --> 0:08:08.520 to spend but being picky about it. So given that 0:08:08.600 --> 0:08:12.840 target is pretty exposed to you know, those discretionary items, 0:08:13.640 --> 0:08:16.480 you know, the sort of general merchandise, that's part of 0:08:16.520 --> 0:08:19.400 where their struggle comes from in terms of bringing those 0:08:19.400 --> 0:08:20.440 same store sales up. 0:08:20.600 --> 0:08:22.640 Yeah, and they know their customers though. They are a 0:08:22.800 --> 0:08:26.320 nimble retailer, and just last week they announced a new 0:08:26.440 --> 0:08:30.000 springtime clothing collection yep, with most prices under fifty bucks. 0:08:30.040 --> 0:08:32.240 Who is it, Diane von Furstenberg. 0:08:32.280 --> 0:08:32.760 There you go. 0:08:32.960 --> 0:08:36.600 So, yes, they've had that tradition for some time of 0:08:36.960 --> 0:08:42.320 you know, enlisting major designers for capsule collections, and that 0:08:42.360 --> 0:08:43.600 has done pretty well for them. 0:08:43.679 --> 0:08:44.239 Yeah. 0:08:44.280 --> 0:08:48.040 They also have a new in house brand called deal Worthy. Yeah, 0:08:48.080 --> 0:08:51.560 and that is hundreds of items, some as low as 0:08:51.559 --> 0:08:52.200 a dollar each. 0:08:52.800 --> 0:08:53.199 Yeah. 0:08:53.440 --> 0:08:57.599 Yeah, so you know, they do have that value proposition 0:08:57.679 --> 0:09:00.120 as well. You know, so they certainly try to be 0:09:00.520 --> 0:09:05.679 you know, sort of current and somewhat fashionable, but always 0:09:05.720 --> 0:09:09.199 mindful of, you know, keeping those prices relatively low. Yeah. 0:09:09.280 --> 0:09:12.439 Now, let me ask you about Macy's announcing that over 0:09:12.440 --> 0:09:14.400 the next few years it's going to close one hundred 0:09:14.400 --> 0:09:17.480 and fifty stores, and they're obviously pivoting toward a more 0:09:17.640 --> 0:09:22.160 upscale consumer, right with Bloomy Dale's Blue Mercury. Are discounters 0:09:22.200 --> 0:09:26.640 like Target Walmart going to be the beneficiary of those closing. 0:09:27.320 --> 0:09:29.720 You know, to some extent, But you know, a lot 0:09:29.760 --> 0:09:32.760 of it depends on, you know, really the mix of 0:09:32.800 --> 0:09:36.520 retail in a given area. It's often there isn't a 0:09:36.880 --> 0:09:39.200 sort of one to one exchange between a you know, 0:09:39.240 --> 0:09:43.400 a big traditional department store like a Macy's and you know, 0:09:43.480 --> 0:09:46.640 more of a discount model like a Target or a Walmart. 0:09:47.040 --> 0:09:50.440 But yeah, certainly, you know, they can expect to see 0:09:50.840 --> 0:09:54.120 some pick up from from some of those lost shoppers, 0:09:54.520 --> 0:09:56.520 but a lot of it and a lot of why 0:09:56.760 --> 0:09:58.720 those stores are closing in the first place is you know, 0:09:58.760 --> 0:10:01.160 a lot of it will just shift on line. And 0:10:01.600 --> 0:10:04.120 you know, and and certainly you know, Target, Walmart and 0:10:04.120 --> 0:10:07.199 others will hope that some of those online sales they 0:10:07.200 --> 0:10:09.400 pick up as well, but a lot of them will 0:10:09.400 --> 0:10:12.200 continue to go to Amazon. And you know, as as 0:10:12.200 --> 0:10:13.920 we've as we've seen before. 0:10:13.840 --> 0:10:17.560 As we see in our own homes, now that that 0:10:17.960 --> 0:10:21.520 Target has made a big push online, it's also a 0:10:21.559 --> 0:10:25.880 subscription based plan like Amazon Prime, like Walmart Plus. 0:10:25.920 --> 0:10:27.080 What what's the status on that? 0:10:27.280 --> 0:10:29.920 Yeah, well, listen to here if we get any update 0:10:29.960 --> 0:10:33.960 on that. You know, our reporter Jaywon Kang broke the 0:10:34.000 --> 0:10:39.720 news that Target is considering a membership program along those lines, 0:10:39.880 --> 0:10:42.560 which could launch as soon as this year. We're not 0:10:42.600 --> 0:10:45.960 sure exactly when, but you know, and they're somewhat you know, 0:10:46.080 --> 0:10:49.600 late getting into that market, given that you know, Prime 0:10:49.720 --> 0:10:52.920 is well established and Walmart Plus seems to be doing 0:10:52.920 --> 0:10:56.680 pretty well. But you know it's another way to you know, 0:10:56.760 --> 0:11:00.240 get shoppers to be stickier, keep coming back to your 0:11:00.679 --> 0:11:03.319 locations looking for those membership points. 0:11:03.640 --> 0:11:05.440 Well, that's great, a lot to look forward to. 0:11:05.480 --> 0:11:05.600 Well. 0:11:05.600 --> 0:11:09.840 Our thanks to John Edwards, Bloomberg News US Consumer team Leader, 0:11:10.040 --> 0:11:12.280 and coming up on Bloomberg day Break weekend to look 0:11:12.280 --> 0:11:15.320 ahead to the UK's tax and spending plans for the 0:11:15.320 --> 0:11:28.600 coming year. I'm Tom Busby and this is Bloomberg. This 0:11:28.640 --> 0:11:31.080 is Bloomberg day Break weekend, our global look ahead at 0:11:31.080 --> 0:11:33.200 the top stories for investors in the coming week. 0:11:33.320 --> 0:11:34.880 I'm Tom Busby in New York. 0:11:35.320 --> 0:11:37.120 Up later on our program we look ahead to a 0:11:37.120 --> 0:11:41.080 gathering of China's top political advisory body and legislature. But 0:11:41.200 --> 0:11:44.400 first in the UK, the government preparing to present its 0:11:44.440 --> 0:11:44.920 tax and. 0:11:44.880 --> 0:11:46.520 Spending plans for the coming year. 0:11:46.960 --> 0:11:50.440 It could be the Chancellor, Jeremy Hunt's last chance to 0:11:50.480 --> 0:11:54.480 announce big policy changes before a general election do this year, 0:11:54.800 --> 0:11:57.840 but will economic headwinds prevent him from making his mark? 0:11:58.160 --> 0:12:01.880 The key question everyone wants answered, but will he prioritize 0:12:01.880 --> 0:12:05.440 cutting taxes over bolstering public services and for more, Let's 0:12:05.440 --> 0:12:09.199 go to London and bring in Bloomberg Daybreak anchor Stephen Carroll. 0:12:09.200 --> 0:12:12.840 Tom The ceremonial red box used to carry the Chancellor's 0:12:12.880 --> 0:12:16.520 budget speech is being dusted off and speculation is rife 0:12:16.559 --> 0:12:20.199 about its contents. Jeremy Hunt and Prime Minister Rici Soonak 0:12:20.240 --> 0:12:23.400 have been at pains to paint themselves as responsible stewards 0:12:23.400 --> 0:12:27.040 of the UK's public finances, especially after the previous Conservative 0:12:27.040 --> 0:12:29.520 government sparked a crisis in the guilt markets with their 0:12:29.640 --> 0:12:33.040 tax and spending plans. During the Chancellor's last big announcement 0:12:33.080 --> 0:12:35.920 in November, he promised measures to back British business and 0:12:36.040 --> 0:12:39.160 soothe the cost of living crisis. This time around, things 0:12:39.240 --> 0:12:42.240 might be working out in his favor. The UK's fiscal watchdog, 0:12:42.280 --> 0:12:45.240 responsible for checking the plans, has disclosed its preparing forecast, 0:12:45.360 --> 0:12:49.040 using data that will potentially improve the public finances and 0:12:49.080 --> 0:12:51.959 create more room for things like tax cuts. But Jeremy 0:12:52.000 --> 0:12:54.280 Hunt will still have to balance steps that might please 0:12:54.360 --> 0:12:57.439 voters ahead of an election expected later this year and 0:12:57.679 --> 0:13:01.040 being fiscally responsible ahead of the lobby groups have been 0:13:01.040 --> 0:13:03.360 lining up with their shopping list for the Chancellor. On 0:13:03.400 --> 0:13:06.239 the Bloomberg UK Politics podcast, we spoke to the manufacturing 0:13:06.280 --> 0:13:09.040 group Make UK. They've laid out a plan for radical 0:13:09.120 --> 0:13:12.160 changes to how the British economy is managed, including splitting 0:13:12.200 --> 0:13:15.960 up the Treasury into separate Economy and Finance ministers. Here's 0:13:16.000 --> 0:13:18.760 some of what make UK's chief operating officer, Ben Fletcher 0:13:18.800 --> 0:13:21.160 told us about what they want to hear from the Chancellor. 0:13:21.480 --> 0:13:24.880 We are still one of the ten biggest manufacturing nations 0:13:24.920 --> 0:13:27.439 on Earth, and in the last twelve months we've actually 0:13:27.520 --> 0:13:30.160 overtaken France to move from ninth to eighth in the 0:13:30.160 --> 0:13:33.960 Global League table. So British manufacturing is strong, it's healthy, 0:13:34.640 --> 0:13:38.880 and it's a sector that is in a position where 0:13:38.920 --> 0:13:41.400 it can start to grow. What we're looking for, I 0:13:41.440 --> 0:13:45.520 think is a recognition from government that we're a huge 0:13:45.520 --> 0:13:48.480 part of the economy, that there is real potential there, 0:13:48.880 --> 0:13:52.080 and we are making some fairly radical requests of government 0:13:52.120 --> 0:13:54.440 and indeed, in what's likely to be an election year 0:13:54.760 --> 0:13:57.640 the opposition parties as well, because what we're saying is 0:13:57.720 --> 0:14:00.000 there's a kind of hidden gem here within the economy. 0:14:00.440 --> 0:14:03.680 It could deliver you some really substantial growth. It would 0:14:03.720 --> 0:14:07.440 support a huge number of new businesses and growing businesses. 0:14:07.760 --> 0:14:10.559 It would lead to growth in other considery and related sectors. 0:14:10.600 --> 0:14:13.520 Like logistics and so on. But what we do need, 0:14:13.600 --> 0:14:16.360 I think, is a bold vision for manufacturing and a 0:14:16.400 --> 0:14:20.040 policy agenda that reflects, that responds to that and really 0:14:20.040 --> 0:14:22.320 seizes the opportunity that we're presented with today. 0:14:23.080 --> 0:14:25.720 Is this essentially about just wanting more money from the government. 0:14:25.880 --> 0:14:27.760 I mean, if you're looking for more defense spending, that's 0:14:27.800 --> 0:14:31.119 one way of funneling money into the sector that you represent. 0:14:31.320 --> 0:14:32.920 But the UK is never really going to be able 0:14:32.960 --> 0:14:35.479 to compete with it spending from the likes of the US. 0:14:36.000 --> 0:14:38.600 It isn't just about money. I think what our central 0:14:38.640 --> 0:14:41.400 ask is for quite some time now and today really 0:14:41.920 --> 0:14:44.600 distills this and brings it together on the back of 0:14:44.600 --> 0:14:47.880 our big national conference. What we're saying is that we 0:14:47.960 --> 0:14:51.600 need a plan, and unlike most of our big competitor 0:14:51.680 --> 0:14:55.200 nations around the world, Britain doesn't have an industrial strategy 0:14:55.240 --> 0:14:58.800 and it doesn't really have a clear plan. Government expenditure 0:14:58.840 --> 0:15:03.120 is always important, and when we think about defense, very 0:15:03.120 --> 0:15:07.680 importantly for our sector, big infrastructure projects as well. Government 0:15:07.680 --> 0:15:12.400 expenditure is vitally important for triggering private sector investment. But 0:15:12.520 --> 0:15:15.120 the really big message of today is that if we're 0:15:15.120 --> 0:15:17.720 going to grow, if we're going to deal with the 0:15:17.840 --> 0:15:21.080 very threatening landscape that we face if we're going to 0:15:21.080 --> 0:15:24.880 continue to be a major manufacturing power. The thing that 0:15:24.920 --> 0:15:27.880 we're going to need from the government, and the message 0:15:27.920 --> 0:15:31.080 that we're sending to the opposition parties is very consistent. 0:15:31.440 --> 0:15:34.960 We really need a plan because the nations that we're 0:15:35.000 --> 0:15:38.960 competing with do have much clearer plans. That's very important 0:15:38.960 --> 0:15:41.840 for triggering in with investment. It's really important at the 0:15:41.880 --> 0:15:45.080 moment for triggering confidence. And when we think about both 0:15:45.120 --> 0:15:48.440 defense and infrastructure, we think about the challenge of net 0:15:48.520 --> 0:15:52.720 zero and moving our car industry in a massively different direction, 0:15:53.200 --> 0:15:55.640 We're going to need to have really clear skills policies. 0:15:55.680 --> 0:15:58.080 We're going to need a massive investment in people leaving 0:15:58.120 --> 0:16:00.840 school and college the right kind of skills and the 0:16:00.920 --> 0:16:04.720 right kind of qualifications. So whatever set of issues we 0:16:04.720 --> 0:16:07.720 look at, whether it be defense, whether it be challenging 0:16:07.720 --> 0:16:10.120 that zero, whether we think about some of the big 0:16:10.200 --> 0:16:12.760 challenges of automation and digitization, which are going to be 0:16:13.360 --> 0:16:17.320 absolute game changes in British manufacturing, what we need are 0:16:17.680 --> 0:16:21.040 a series of decisions by government that can enable us 0:16:21.120 --> 0:16:23.200 to have the workforce of the future, to allow the 0:16:23.320 --> 0:16:27.560 current workforce to transform but really importantly set a very 0:16:27.600 --> 0:16:31.120 clear message to the big private sector businesses that they 0:16:31.160 --> 0:16:33.720 can have the confidence to invest because if we get 0:16:33.720 --> 0:16:36.480 government spending right, the thing that will absolutely dwarf that 0:16:36.600 --> 0:16:39.000 is private sector investment and we need the right landscape 0:16:39.040 --> 0:16:39.160 for that. 0:16:39.480 --> 0:16:42.200 So that would make UK's Chief Operating Officer Ben Fletcher, 0:16:42.280 --> 0:16:44.120 speaking of Lizzie Birden and I in the Bloomberg UK 0:16:44.200 --> 0:16:46.640 Politics podcast. To help us look ahead to what to 0:16:46.720 --> 0:16:49.280 expect from the budget is our UK Government reporter Joel 0:16:49.320 --> 0:16:51.680 May's Joe, great to have you with us. First of all, 0:16:51.920 --> 0:16:54.440 how much do we know about how much money Jeremy 0:16:54.480 --> 0:16:56.000 Hunt has to play with in the budgets? 0:16:56.320 --> 0:16:59.200 So we have latest forecasts that the OBI has been 0:16:59.240 --> 0:17:01.600 giving Jeremy Hudh and our latest understanding is that he 0:17:01.640 --> 0:17:04.399 has about thirteen billion pounds to play with. Now that 0:17:04.560 --> 0:17:07.040 is much less than he had at the autumn statement 0:17:07.040 --> 0:17:09.600 in November, and it's near an historic low. So he 0:17:09.720 --> 0:17:12.600 really is starting from a weak position compared to chancellors 0:17:12.640 --> 0:17:15.440 in the past, and that's the framework that he's having 0:17:15.520 --> 0:17:17.159 to wrestle with when coming up with his tax and 0:17:17.200 --> 0:17:17.880 spend decisions. 0:17:18.280 --> 0:17:19.520 Yeah, so the. 0:17:19.640 --> 0:17:22.240 Fiscal rules here are very important. Because there's sort of 0:17:22.240 --> 0:17:26.000 a guideline for how governments have to make these decisions. 0:17:26.160 --> 0:17:28.760 How important is it that he comes in under that 0:17:28.880 --> 0:17:29.719 thirteen billion. 0:17:30.200 --> 0:17:31.919 Yeah, So the fiscal rule is that you need to 0:17:31.960 --> 0:17:35.120 have national debts falling as a share of the size 0:17:35.119 --> 0:17:38.399 of the economy within five years. It's self imposed rule, 0:17:38.480 --> 0:17:41.080 but markets like it, and it seemed to be the 0:17:41.119 --> 0:17:43.400 test that you need to pass to maintain in credibility 0:17:43.440 --> 0:17:46.399 with markets to respect that rule. And he's at thirteen 0:17:46.400 --> 0:17:48.600 billion now. He would like to do things like cut 0:17:48.640 --> 0:17:50.720 income tax and cut NASH insurance, but each of those 0:17:50.760 --> 0:17:54.040 measures takes him closer and closer to breaking the rule, 0:17:54.359 --> 0:17:56.879 so he has to be careful about that, and we 0:17:56.960 --> 0:17:59.200 think that he's likely to want to maintain a buffer 0:17:59.240 --> 0:18:01.520 of say six billion. You always want to you always 0:18:01.520 --> 0:18:05.479 want to keep something above that that that that zero figure, 0:18:05.840 --> 0:18:08.320 just in case there are sharks, just in case things 0:18:08.520 --> 0:18:11.040 go turn for the worse. So that's why we think 0:18:11.040 --> 0:18:13.359 he'd like to end up. Obviously, the other thing to 0:18:13.359 --> 0:18:15.440 add is that he can boost the headroom, and that's 0:18:15.480 --> 0:18:18.760 what you can do through spending decisions. For example, you 0:18:18.800 --> 0:18:21.280 could say, let's not spend as much in the future 0:18:21.480 --> 0:18:23.040 gives us more money to play with. Now there'll be 0:18:23.080 --> 0:18:24.920 a polity controversial thing to do, but it could boost 0:18:24.920 --> 0:18:27.959 the headroom so he can manipulate that headroom figure. But 0:18:28.280 --> 0:18:29.840 there are difficult choices, and. 0:18:29.840 --> 0:18:33.159 Instantly you've actually put these difficult choices into a game 0:18:33.240 --> 0:18:35.920 that people can go on the Bloomberg website and play 0:18:36.160 --> 0:18:39.119 and decide how exactly if they were a chancellor for 0:18:39.160 --> 0:18:40.840 the day they do it. Just talk us through how 0:18:40.840 --> 0:18:41.480 the game works. 0:18:41.680 --> 0:18:43.920 So yeah, it took me what thirty seconds a minute 0:18:43.960 --> 0:18:45.399 to explain that nature of. 0:18:45.400 --> 0:18:47.320 The physical a so now you can try. 0:18:47.400 --> 0:18:50.399 Yeah, So I thought, what better way could we do this? Well, 0:18:50.440 --> 0:18:52.400 let's make a game where you just are thrown into 0:18:52.400 --> 0:18:55.399 the scenario yourself and you have that headroom given to you, 0:18:55.440 --> 0:18:56.840 and you have to make choices. So you're right, We 0:18:56.840 --> 0:18:59.520 have this budget game on bloombog dot com where you 0:18:59.560 --> 0:19:02.400 can decide will you cut income tax, will you cutlash insurance, 0:19:02.680 --> 0:19:04.560 will you cut inheritance tax. You have all these tax 0:19:04.600 --> 0:19:07.080 and spend choices, and at the end of it, you're 0:19:07.080 --> 0:19:09.760 given a result. How would markets react, how would voters 0:19:09.800 --> 0:19:13.520 react to your choices? We use our best kind of 0:19:13.600 --> 0:19:16.119 estimates of what's like to happen and you get a result. 0:19:16.160 --> 0:19:18.600 So yeah, I encourage all our listeners to play the game. 0:19:18.920 --> 0:19:22.480 I mean, it's a really interesting exercise because you essentially 0:19:22.840 --> 0:19:25.040 it's because it's yes or no choices, do you want 0:19:25.080 --> 0:19:27.080 to do this? And then you know when you get 0:19:27.119 --> 0:19:28.680 to the end, it decides whether or not you've crashed 0:19:28.680 --> 0:19:30.280 the economy. I think on our team we have about 0:19:30.280 --> 0:19:32.320 a fifty to fifty rate of who's crashed the economy 0:19:32.359 --> 0:19:36.160 and who hasn't, which I think is probably almost I'm 0:19:36.200 --> 0:19:39.760 not going to make a parallel to previous chancellors and 0:19:39.800 --> 0:19:42.840 how they've performed on this as well, but it says 0:19:42.880 --> 0:19:46.480 it lays out the difficult balance that has to be 0:19:46.560 --> 0:19:49.520 struck at a moment like this. We're also in an 0:19:49.520 --> 0:19:51.840 election year in the UK, so that means that also 0:19:51.880 --> 0:19:54.520 the Chancellor has one eye on what's going to win votes. 0:19:54.960 --> 0:19:57.000 Talk us through some of the measures that we do 0:19:57.080 --> 0:20:00.119 think he's going to take when he gets up to 0:20:00.119 --> 0:20:01.080 make that budget speach. 0:20:01.359 --> 0:20:03.439 So we think it's very likely you get to prioritize 0:20:03.440 --> 0:20:05.720 personal tax cuts because those are the tax cuts that 0:20:05.760 --> 0:20:08.639 are likely to have most impacts on the popularity of 0:20:08.640 --> 0:20:11.000 the Conservative Party and help them to win the next election, 0:20:11.320 --> 0:20:13.320 and so that will take the form of we expect 0:20:13.560 --> 0:20:16.760 an income tax cut of at least one percentage point 0:20:16.800 --> 0:20:19.239 on the basic rate. That would save people about two 0:20:19.320 --> 0:20:22.359 hundred pounds a year for an average earner. He'd like 0:20:22.400 --> 0:20:24.160 to go further. He would like to do say two 0:20:24.160 --> 0:20:27.440 p off income tax, but it all comes down to 0:20:27.480 --> 0:20:29.879 that headline question we've just been talking about. He also 0:20:30.280 --> 0:20:32.919 might cut national insurance, which is a payroll tax, and 0:20:33.240 --> 0:20:35.760 he already reduced NASH insurance by two pence in the 0:20:35.760 --> 0:20:38.560 pounds in the Ausome statement. He might do that again 0:20:38.640 --> 0:20:42.200 because he sees it as a measure which also incentivizes 0:20:42.520 --> 0:20:44.480 people to return to the labor markets. It makes work 0:20:44.520 --> 0:20:47.159 more attractive and that can boost growth as well. He's 0:20:47.160 --> 0:20:49.800 always trying to look at measures that will boost boost 0:20:49.800 --> 0:20:51.320 growth in the economy. That helps his numbers from the 0:20:51.359 --> 0:20:53.479 AVR as well. But then there's also a list of 0:20:53.560 --> 0:20:56.800 things that are kind of on the table but might 0:20:56.840 --> 0:20:59.359 not happen, but might happen. So for example, reporting that 0:20:59.400 --> 0:21:02.040 the non tax status that might be abolished, because that 0:21:02.080 --> 0:21:04.840 would be a move that would raise revenue, it would 0:21:04.880 --> 0:21:07.840 also jam labor to a certain extent because labor are 0:21:08.119 --> 0:21:11.359 assuming that they could use the revenues from scrapping London 0:21:11.960 --> 0:21:13.760 tax status to fund some of their own policies. 0:21:13.800 --> 0:21:15.680 So this was the policy that Labor had been talking 0:21:15.680 --> 0:21:16.760 about for quite a long time. 0:21:16.920 --> 0:21:17.240 Exactly. 0:21:17.240 --> 0:21:21.359 Special status applied to typically very wealthy individuals who have 0:21:21.440 --> 0:21:23.680 earnings coming from outside the UK and they're able to 0:21:23.720 --> 0:21:26.560 benefit from a tax advantage, and closing this loophole as Actually, 0:21:26.680 --> 0:21:29.400 when you ask Labor politicians as you and I do frequently, 0:21:29.440 --> 0:21:31.600 what they're going to do if they win the next election, 0:21:31.720 --> 0:21:33.360 it comes up quite frequently is one of the things 0:21:33.359 --> 0:21:35.600 they're going to do to boost tax revenues. So the 0:21:35.640 --> 0:21:37.880 potential that the Conservators could decide to do it before 0:21:37.960 --> 0:21:40.560 them an interesting consideration. 0:21:40.200 --> 0:21:43.200 Yes, exactly, because Labor have repeatedly been saying, oh, we 0:21:43.240 --> 0:21:45.480 would fund you know, more doctors and lots of nice 0:21:45.520 --> 0:21:48.879 things with the revenue raised from scrapping the Nordmon tax status. 0:21:49.040 --> 0:21:50.560 But if the Toys have already done that and have 0:21:50.600 --> 0:21:53.000 spent that money themselves on a tax cir elsewhere, then 0:21:53.040 --> 0:21:54.680 Labor have lost that. So that's why you can see 0:21:54.680 --> 0:21:56.119 there's that there will be a piscal advantage for the 0:21:56.200 --> 0:22:01.200 Tories if they discrap the no on tax status and yeah. 0:22:00.800 --> 0:22:03.560 And the other dilemma here is also the question of 0:22:03.560 --> 0:22:06.360 public services. There's an awful lot of discussion about how 0:22:06.359 --> 0:22:09.440 public services are under pressure, particularly the health service here 0:22:09.480 --> 0:22:11.879 in the UK, and the question of how much money 0:22:11.920 --> 0:22:15.200 these services need also comes into the budget play. And 0:22:15.520 --> 0:22:17.840 boys you mentioned you know the Chancellor can choose to 0:22:17.880 --> 0:22:20.960 pull back on some spending decisions, that that's something that 0:22:21.000 --> 0:22:22.360 could prove very controversial. 0:22:22.840 --> 0:22:27.679 Yes, And the situation Hunt already has is an autumn 0:22:27.680 --> 0:22:30.920 statement where he baked in spending plans that were already 0:22:31.000 --> 0:22:35.720 seen as rather unlikely and criticized by economists, and the 0:22:35.800 --> 0:22:39.520 argument being, look, you're perhaps unlikely to ever have to 0:22:39.720 --> 0:22:41.720 implement those plans if you don't win the next election, 0:22:41.760 --> 0:22:44.280 So there's a very little cost to you to having 0:22:44.440 --> 0:22:47.399 an implausibly low assumption for future public spending. But then 0:22:47.440 --> 0:22:50.119 you use that what's been described by the ABI and 0:22:50.119 --> 0:22:53.360 others as a fiction, use that fiction to create revenue 0:22:53.560 --> 0:22:55.399 now that you can spend on tax cuds. 0:22:55.560 --> 0:22:56.080 Let's talk a. 0:22:56.080 --> 0:22:58.120 Little bit about the politics that comes behind this, because 0:22:58.119 --> 0:23:00.960 even within the Conservative Party, see there's a lot of 0:23:01.000 --> 0:23:05.520 debate over where the Chancellor should apportion his limited choices, 0:23:05.560 --> 0:23:08.960 as we've been discussing, even within his own supporters. 0:23:09.480 --> 0:23:11.320 Yes, there is. I mean there are those on the 0:23:11.400 --> 0:23:15.280 right of the Conservative Party, those backs of Liz Trusts, 0:23:15.560 --> 0:23:17.720 who would say that you should do things like cut 0:23:17.720 --> 0:23:20.240 inheritance tax for example. That's they say that would be 0:23:20.400 --> 0:23:23.359 a widely popular measure. They also want to go and 0:23:23.440 --> 0:23:26.000 be more aggressive on things like corporation tax and cutting 0:23:26.000 --> 0:23:28.359 that and do more for business and so on. But 0:23:28.520 --> 0:23:30.800 it feels like those in more the center of the party, 0:23:30.800 --> 0:23:33.879 those closes to Hunt are more conscious of the electro 0:23:34.000 --> 0:23:37.359 dynamics and thinking that personal tax cuts, that which you 0:23:37.400 --> 0:23:41.400 can sell to your average voter, are perhaps more preferable 0:23:41.400 --> 0:23:42.960 at this time, and therefore we should do that. So 0:23:43.000 --> 0:23:45.840 there are splits within the Tory camp and Hunters decide 0:23:45.840 --> 0:23:46.520 who he's going to go with. 0:23:46.560 --> 0:23:48.400 Okay, we should make for a very interesting budget today. 0:23:48.440 --> 0:23:50.320 Joe May is our UK government reporter. Thank you very 0:23:50.400 --> 0:23:52.119 much for joining us with the details of that, and 0:23:52.160 --> 0:23:54.960 of course we will have full coverage of the budgets 0:23:55.040 --> 0:23:58.680 here on Bloomberg. I'm Stephen Carroll in London. You can 0:23:58.720 --> 0:24:01.439 catch us every weekday winning here for Bloomberg Daybreak. Here 0:24:01.440 --> 0:24:04.040 at beginning at six am in London and one am 0:24:04.160 --> 0:24:04.959 on Wall Streets. 0:24:05.160 --> 0:24:08.000 Tom, thank you, Steven, And coming up on Bloomberg day 0:24:08.040 --> 0:24:10.480 Break weekend, we look ahead to a gathering of China's 0:24:10.520 --> 0:24:15.080 top political advisory body and legislature. I'm Tom Busby and 0:24:15.200 --> 0:24:28.600 this is Bloomberg. I'm Tom Busby in New York with 0:24:28.640 --> 0:24:31.000 your global look ahead at the top stories for investors 0:24:31.000 --> 0:24:34.159 in the coming week. China's top political advisory body and 0:24:34.240 --> 0:24:38.600 legislature gathering for their annual two sessions. What should we 0:24:38.680 --> 0:24:41.160 be watching for during the eight day meeting For more, 0:24:41.320 --> 0:24:43.919 Let's go to Hong Kong and Bloomberg Daybreak Asia hosts 0:24:43.920 --> 0:24:45.920 Brian Curtis and Doug Krisner. 0:24:46.280 --> 0:24:49.640 Tom, we look forward to the annual meetings of China's parliament, 0:24:49.680 --> 0:24:53.280 the National People's Congress, next week. The NPC will set 0:24:53.320 --> 0:24:56.240 policies that will guide the economy over the next year. 0:24:56.600 --> 0:24:59.560 It's an opportunity for policymakers to do a kind of 0:24:59.640 --> 0:25:04.760 research to shore up confidence in consumers, in businesses and investors. 0:25:04.840 --> 0:25:08.000 Now, in terms of what to expect, Bloomberg Intelligence thinks 0:25:08.040 --> 0:25:11.640 the NPC will announce a larger budget deficit for the government. 0:25:11.760 --> 0:25:15.240 That means more fiscal spending. In addition, our economists are 0:25:15.280 --> 0:25:19.560 expecting more supportive monetary policy along with additional efforts to 0:25:19.640 --> 0:25:22.280 smooth out the correction of the property market. 0:25:23.000 --> 0:25:26.160 And then, as we heard from Catherine Jung at Fidelity, 0:25:26.440 --> 0:25:27.760 there's also messaging. 0:25:28.520 --> 0:25:30.520 There's definitely a messaging that seems to be coming from 0:25:30.560 --> 0:25:33.840 the regulators about what they're going to say at the NPC, 0:25:34.480 --> 0:25:37.600 But in reality it's probably going to be this continuation 0:25:37.880 --> 0:25:42.280 of tweaking of accommodative measures. So areas of the economy 0:25:42.359 --> 0:25:45.359 that needs support, such as property, are likely to be 0:25:45.480 --> 0:25:48.720 key in terms of their focus, but really is about 0:25:48.720 --> 0:25:51.520 restoring confidence, especially with the consumer. And then the knock 0:25:51.560 --> 0:25:54.080 on effect would obviously be an impact on corporates in 0:25:54.119 --> 0:25:54.919 the overall market. 0:25:55.080 --> 0:25:58.560 That is Katherine Jung at Fidelity, And as we mentioned earlier, 0:25:58.600 --> 0:26:02.600 restoring confidence may require more deficit spending by the government. 0:26:02.960 --> 0:26:06.199 Bloomberg's Jill Diese says that will be key in showing 0:26:06.240 --> 0:26:09.840 how far policymakers are willing to go to revive the economy. 0:26:10.400 --> 0:26:13.080 I think what we'd be looking for out of this 0:26:13.200 --> 0:26:15.280 meeting is, you know what they're going to be setting 0:26:15.320 --> 0:26:18.680 that budget at? How much in sovereign debt they plan 0:26:18.720 --> 0:26:21.680 on issuing this year. What exactly that level of calculation 0:26:21.760 --> 0:26:24.680 looks like, because as we know, China is still dealing 0:26:24.760 --> 0:26:27.400 with a lot of serious economic pressures that don't really 0:26:27.400 --> 0:26:28.960 seem to be going away, and they've got to kind 0:26:28.960 --> 0:26:31.560 of manage what that recovery and growth structory looks like. 0:26:32.240 --> 0:26:34.760 In the run up to the NPC meeting, the economy 0:26:34.800 --> 0:26:38.840 did actually see a modest reprieve of late consumption picking 0:26:38.960 --> 0:26:41.960 up slightly during the Lunar New Year holidays. The CSI 0:26:42.040 --> 0:26:45.119 three hundred has bounced about ten to twelve percent, and 0:26:45.160 --> 0:26:48.640 while property is still soft, it weakened in January at 0:26:48.640 --> 0:26:51.800 a slower pace than in December. Well, joining us now 0:26:51.800 --> 0:26:54.680 for a deeper look at the NPC meetings is Jenny 0:26:54.720 --> 0:26:59.520 Marsh Bloomberg, team leader for Greater China ECO GOV. So, Jenny, 0:26:59.560 --> 0:27:02.320 let's delve right into a couple of specific items first 0:27:02.400 --> 0:27:04.600 before we get to some of the sort of broader 0:27:04.640 --> 0:27:08.120 takeaways from the meetings, the setting of a growth target, 0:27:08.359 --> 0:27:11.399 what that might be, and then also what sort of 0:27:11.480 --> 0:27:14.320 level of deficit spending might we see as a percentage 0:27:14.359 --> 0:27:16.120 of GDP What can we expect. 0:27:16.400 --> 0:27:19.639 So the consensus among most economists right now is that 0:27:19.640 --> 0:27:23.200 they're going to maintain the target of around five percent, 0:27:24.080 --> 0:27:26.440 so it's not going to be below five I think 0:27:26.520 --> 0:27:30.439 is what most people are expecting. The caveat there is that, 0:27:30.520 --> 0:27:32.359 you know, it's going to be much harder to achieve 0:27:32.400 --> 0:27:35.639 this year because twenty twenty three had the benefit of 0:27:35.680 --> 0:27:38.719 the low base of you know, previous year when the 0:27:38.760 --> 0:27:44.200 COVID restrictions really impacted activity. So I think it's important 0:27:44.240 --> 0:27:46.919 that the government does keep this around five percent, not 0:27:46.920 --> 0:27:50.520 below five percent, because it's going to be all about confidence. 0:27:50.560 --> 0:27:50.720 You know. 0:27:50.760 --> 0:27:53.440 One of the biggest things that plague the Chinese economy 0:27:53.520 --> 0:27:58.080 last year was a crisis in confidence among investors, you know, 0:27:58.160 --> 0:28:00.880 foreign business people and consumers. So they've got to come 0:28:00.880 --> 0:28:03.160 out with a positive message. But at the same time, 0:28:03.560 --> 0:28:06.080 it does have to be realistic because it's going to 0:28:06.080 --> 0:28:08.320 be a lot of work and sort of careful policymaking 0:28:08.359 --> 0:28:10.679 this year to make sure they don't under shoot their 0:28:10.720 --> 0:28:11.320 own target. 0:28:11.760 --> 0:28:14.280 So maybe we can agree that up until this point, 0:28:14.440 --> 0:28:18.400 Beijing has been fairly restrained in trying to provide additional 0:28:18.440 --> 0:28:20.920 stimulus to get the economy going. The question is whether 0:28:21.040 --> 0:28:23.919 or not we begin to see a pivot point at 0:28:23.960 --> 0:28:28.480 the NPC where things are modulated maybe to a higher 0:28:28.600 --> 0:28:30.480 rate than what we have seen in the past. Do 0:28:30.480 --> 0:28:31.320 you think that's likely. 0:28:32.040 --> 0:28:34.560 I think they're going to continue on the same course. 0:28:34.760 --> 0:28:34.919 You know. 0:28:34.960 --> 0:28:37.760 I think Premier Le Chang was very clear when he 0:28:37.800 --> 0:28:41.520 was speaking at Davos in January saying, you know, they'd 0:28:41.560 --> 0:28:44.040 reached five point two percent. He front run that number 0:28:44.080 --> 0:28:47.320 for last year, saying they've done it without stimulus. You know, 0:28:47.360 --> 0:28:49.840 he seemed very proud of this. So I think, you know, 0:28:50.080 --> 0:28:52.920 that's a very clear signal that they're not going to 0:28:52.920 --> 0:28:54.800 go back to sort of the old playbook of using 0:28:54.800 --> 0:28:57.560 sort of really big broad stimulus. But I think what 0:28:57.600 --> 0:29:01.160 we might see is more targeted help for sectors that 0:29:01.280 --> 0:29:04.520 really need it, so such as property, you know, support 0:29:04.520 --> 0:29:08.400 for local governments by sort of shifting debt from local 0:29:08.440 --> 0:29:13.080 provinces onto the central government's balance sheet. Whether that comes 0:29:13.480 --> 0:29:17.520 in the actual official fiscal deficit target or if they 0:29:17.520 --> 0:29:19.360 do what they did last year where they sort of 0:29:19.480 --> 0:29:22.560 tweak it during the year to sort of put more 0:29:22.560 --> 0:29:25.680 spending on the on the central government's budget remains to 0:29:25.720 --> 0:29:26.080 be seen. 0:29:26.360 --> 0:29:29.040 Yeah, there has been a kind of an incremental move 0:29:29.160 --> 0:29:31.120 up in the level of deficit spending used to be 0:29:31.200 --> 0:29:33.800 three percent with the target then three point two, and 0:29:33.920 --> 0:29:36.000 you hear about three and a half percent or maybe 0:29:36.080 --> 0:29:39.360 even more. I'm curious whether or not our team at 0:29:39.360 --> 0:29:42.280 Bloomberry Economics thinks that it would Would it send a 0:29:42.280 --> 0:29:44.760 bad message if it was, say raised to four percent 0:29:44.920 --> 0:29:45.640 or something like that. 0:29:46.840 --> 0:29:50.400 I think four percent would be quite dramatic. Yeah, So 0:29:51.000 --> 0:29:53.200 I don't know if that would send a bad message. 0:29:54.280 --> 0:29:56.360 You know, it would send a signal for sure that 0:29:56.360 --> 0:29:58.200 the government's willing to take on more debt. I mean, 0:29:58.240 --> 0:30:03.160 three percent is extremely low deficit ratio target anyway, for 0:30:03.360 --> 0:30:04.840 an economy the size of China's. 0:30:05.200 --> 0:30:07.320 When it comes to growth, one of the themes that 0:30:07.360 --> 0:30:10.040 we have heard in the past is high quality development, 0:30:10.080 --> 0:30:13.160 and I suspect that we're going to hear that theme reiterated. 0:30:13.280 --> 0:30:17.640 And as we know, there have been instances where regulators 0:30:17.640 --> 0:30:20.560 have really been able to kind of clamp down on 0:30:20.800 --> 0:30:23.880 a lot of the entrepreneurial spirit as it relates to 0:30:23.960 --> 0:30:27.320 high tech, particularly, and I'm wondering whether we're going to 0:30:27.400 --> 0:30:32.440 see some acknowledgment of overreach maybe and also an admission 0:30:32.520 --> 0:30:37.600 that regulators and authorities need to embrace the entrepreneurial class, 0:30:37.680 --> 0:30:40.920 and this is a really powerful way of driving growth 0:30:40.960 --> 0:30:41.600 going forward. 0:30:42.440 --> 0:30:44.440 A high quality development, I think is one of the 0:30:44.520 --> 0:30:47.560 key things sort of to be watching out for. Shi 0:30:47.640 --> 0:30:51.480 Jimping like increased his mentions of the slogan last year, 0:30:51.480 --> 0:30:53.600 I think to one hundred and thirty eight times, which 0:30:53.640 --> 0:30:56.080 was sort of double the previous year, so they're really 0:30:56.160 --> 0:30:58.640 ramping up. But yeah, it's still this kind of fuzzy 0:30:58.800 --> 0:31:02.040 sort of phrase that people don't fully understand what it means. 0:31:01.840 --> 0:31:05.040 It sort of broadly seems to mean that they're okay 0:31:05.120 --> 0:31:09.840 with not prioritizing chasing sort of growth, and they want 0:31:09.840 --> 0:31:13.200 to prioritize slower growth if it's more sustainable and you 0:31:13.240 --> 0:31:15.880 know it isn't going to sort of saddle the country 0:31:15.920 --> 0:31:19.320 with more debt through things like stimulus. I think that 0:31:19.440 --> 0:31:22.040 sort of will leaders to sort of look at for 0:31:22.080 --> 0:31:27.120 signals on you know, green innovation, perhaps evs, more support 0:31:27.160 --> 0:31:31.000 for that supply chain resilience. There's also another phrase I 0:31:31.000 --> 0:31:32.800 think people are going to be watching out for within 0:31:32.840 --> 0:31:36.479 that umbrella, which is new productive forces. And that's a 0:31:36.600 --> 0:31:39.640 saying that she introduced during a trip to Halo Jean 0:31:40.360 --> 0:31:42.040 at the end of last year and then sort of 0:31:42.080 --> 0:31:45.720 since was mentioned in a polyp beer study session, another broad, 0:31:45.960 --> 0:31:48.600 fuzzy phrase, it's sort of hard to pin down. So 0:31:48.640 --> 0:31:50.960 I think any meat that they put on the bone 0:31:51.560 --> 0:31:53.680 within the work report and various other documents that are 0:31:53.680 --> 0:31:57.080 published will be something investors are very very key to 0:31:57.160 --> 0:31:58.719 sort of get information on. 0:31:59.000 --> 0:32:00.800 So we talked a couple of times here in this 0:32:00.840 --> 0:32:04.120 discussion about the possibility of more debt. So we're curious 0:32:04.120 --> 0:32:06.720 whether or not that would be at the national or 0:32:06.720 --> 0:32:10.160 the provincial level. We put that question earlier to Bloomberg's 0:32:10.240 --> 0:32:12.760 Jill desis about getting the balance right. 0:32:13.320 --> 0:32:15.240 The line that China has to walk this year is 0:32:15.280 --> 0:32:18.920 that they're really concerned about local governments in particular taking 0:32:18.960 --> 0:32:21.160 on more debt than you know, they're able to afford. 0:32:21.200 --> 0:32:23.600 There's been a lot of chatter about whether or not 0:32:23.640 --> 0:32:26.560 the central government needs to take a larger role in 0:32:26.640 --> 0:32:28.680 terms of, you know, taking on some of that debt 0:32:28.680 --> 0:32:31.120 and alleviating some of those burdens among local governments. 0:32:32.200 --> 0:32:36.240 Again, Jill deesis from the Bloomberg Eco Government team, So, Jenny, 0:32:36.400 --> 0:32:38.920 what's our thinking. Will we see more at the national 0:32:39.000 --> 0:32:42.000 level or will it fall back down to the provincial level. 0:32:43.120 --> 0:32:44.800 You know, I think the trend that we were seeing 0:32:44.800 --> 0:32:46.880 towards the end of last year was the government was 0:32:46.920 --> 0:32:51.520 shifting to putting at on the national level for the 0:32:51.600 --> 0:32:54.640 reason that, you know, they do not want this problem 0:32:54.680 --> 0:32:57.600 of local governments being in debt and sort of having 0:32:57.600 --> 0:33:01.800 sort of teaching on default to continue. So I think 0:33:01.840 --> 0:33:04.120 that's what most people are expecting. There are sort of 0:33:04.800 --> 0:33:06.640 other risks from that though. I think, you know, we 0:33:06.680 --> 0:33:09.320 wrote last year about the fact that well, that's well 0:33:09.320 --> 0:33:11.400 and good for the government to take on more debt 0:33:11.440 --> 0:33:13.800 to prevent local government sort of going to these hidden 0:33:14.280 --> 0:33:19.640 financing vehicles to finance infrastructure to sort of boost their economies. 0:33:20.120 --> 0:33:23.240 You know, it comes with greater control for the central government. 0:33:23.480 --> 0:33:25.840 So when the government is raising these funds themselves and 0:33:25.880 --> 0:33:28.760 then distributing them out to the provinces, they get to 0:33:28.840 --> 0:33:32.240 decide more who gets what pile of the pot. And 0:33:32.320 --> 0:33:33.880 so there's a risk that when you do that, you 0:33:33.920 --> 0:33:38.400 can disincentivize local officials who no longer you know, have 0:33:38.520 --> 0:33:42.120 this system where if they are working hard and being innovative, 0:33:42.120 --> 0:33:44.640 they're sort of generating their own revenue that perhaps relying 0:33:44.640 --> 0:33:47.560 on handouts from the government. So I think it's a 0:33:47.600 --> 0:33:49.520 good idea in practice, and it's going to sort of 0:33:50.080 --> 0:33:53.280 sort of go some way to sort of address some 0:33:53.360 --> 0:33:56.760 of the risks involved in local government spending. But they 0:33:56.760 --> 0:33:59.760 also have to sort of manage how those funds are 0:33:59.800 --> 0:34:01.960 just out and make sure they keep the local officials 0:34:02.000 --> 0:34:03.000 also motivated. 0:34:03.400 --> 0:34:06.000 So we've talked about the crisis of confidence both among 0:34:06.040 --> 0:34:08.719 consumers and businesses. We know that we know about the 0:34:08.760 --> 0:34:12.520 problem and the property market that's apparent. Chinese stocks have 0:34:13.000 --> 0:34:16.040 been floundering near five year lows, a lot of concern 0:34:16.080 --> 0:34:19.520 about economic growth going forward. We haven't mentioned the deflation 0:34:19.719 --> 0:34:22.680 story that is obviously deep into levels that we haven't 0:34:22.719 --> 0:34:25.960 seen since the global financial crisis. Brian and I were 0:34:26.000 --> 0:34:29.279 talking last week with our own John Liu from our 0:34:29.360 --> 0:34:33.160 bureau in Beijing about whether it's fair to compare what 0:34:33.280 --> 0:34:36.320 China is going through these days with a turmoil that 0:34:36.440 --> 0:34:39.120 was seen back in twenty fifteen. Here's John lu. 0:34:39.239 --> 0:34:41.600 The relationship with the United States is much worse than 0:34:41.640 --> 0:34:44.319 it was in twenty fifteen. That was the Obama administration. 0:34:44.719 --> 0:34:48.160 China hosted the G twenty. Barack Obama and Shiji King 0:34:48.239 --> 0:34:50.720 stood up at the G twenty in Hanjo and announced 0:34:50.760 --> 0:34:52.920 that the US and China we're going to cooperate on 0:34:53.560 --> 0:34:57.400 carbon goals. That period of time has ended. At the 0:34:57.400 --> 0:35:00.400 same time, there are other issues. The population China is 0:35:00.400 --> 0:35:03.560 now shrinking. There's a demographic sort of conundrum that is 0:35:03.640 --> 0:35:06.560 much more pronounced now than it was in twenty fifteen. 0:35:06.960 --> 0:35:10.560 Yeah, that's Sean Liu in Beijing. And it does raise 0:35:10.600 --> 0:35:13.480 a point here at Jenny about if the United States 0:35:13.560 --> 0:35:17.160 relationship with China is really winging on the Chinese economy. 0:35:17.640 --> 0:35:21.480 Yeah, I mean, I think when we've conducted surveys among 0:35:21.560 --> 0:35:24.080 investors and economists, it comes up as sort of one 0:35:24.080 --> 0:35:27.799 of the top concerns the geopolitical swings. I would say 0:35:27.880 --> 0:35:31.200 since since the she Biden meeting, things seem to have 0:35:31.239 --> 0:35:34.160 really leveled off and the relationship has improved. But you know, 0:35:34.320 --> 0:35:37.200 there's a US election looming this year, and one of 0:35:37.239 --> 0:35:42.440 the candidates or presumed candidates, is threatening sixty percent tariffs 0:35:42.880 --> 0:35:47.000 on China. So there's a lot of headwinds in the pipeline. 0:35:47.440 --> 0:35:50.000 And so for US companies in China, they don't know 0:35:50.080 --> 0:35:52.880 at the moment, and you know what sort of trade 0:35:52.920 --> 0:35:55.560 curves are down the road. So I would say it's 0:35:55.800 --> 0:35:58.640 a year full of unknowns. Right now in terms of 0:35:58.640 --> 0:36:00.520 the US China relationship. 0:36:00.200 --> 0:36:02.480 Are we likely to get any guidance on how much 0:36:02.520 --> 0:36:06.520 more the government is willing to spend for its military budget. 0:36:07.160 --> 0:36:07.359 Yeah. 0:36:07.400 --> 0:36:09.279 Absolutely, That's one of the things that we'll be working 0:36:09.360 --> 0:36:12.760 looking out for in the work report, and it tends 0:36:12.800 --> 0:36:15.960 to increase every single year. I think China has the 0:36:16.040 --> 0:36:18.640 second highest military budget in the world after the US, 0:36:19.239 --> 0:36:22.840 so we'll certainly be looking out for that, and also 0:36:22.920 --> 0:36:27.120 sort of any language in any of the reports around Taiwan. 0:36:27.200 --> 0:36:29.640 I think last year it was kind of fairly a 0:36:29.760 --> 0:36:32.600 commodative language that we saw, sort of saying that they 0:36:32.640 --> 0:36:35.000 were looking for like peaceful relationships and to sort of 0:36:35.040 --> 0:36:41.000 improve ties in the toy's economies rather than any warmongering talk. 0:36:41.160 --> 0:36:43.560 So we'll also be on the lookout for that as well. 0:36:43.840 --> 0:36:45.560 Jenny will have to have you back in the week 0:36:45.560 --> 0:36:49.160 ahead when we start to get details of the NPC meeting. 0:36:49.239 --> 0:36:52.320 That is Bloomberg's Jenny Marsh, the team leader for Greater 0:36:52.480 --> 0:36:55.839 China ECO and GOV. I'm Doug Krisner. You can join 0:36:55.880 --> 0:37:00.400 Brian Curtison myself weekdays here for Bloomberg Daybreak Asia at 0:37:00.440 --> 0:37:04.400 nine am in Hong Kong eight pm on Wall Street Tom. 0:37:04.560 --> 0:37:07.160 Our thanks to Brian and Doug. And that does it 0:37:07.239 --> 0:37:09.920 for this edition of Bloomberg day Break Weekend. Join us 0:37:09.920 --> 0:37:12.160 again Monday morning at five am Wall Street time for 0:37:12.200 --> 0:37:14.920 the latest on markets overseas and the news you need 0:37:14.960 --> 0:37:18.000 to start your day. I'm Tom Buzzby. Stay with us. 0:37:18.040 --> 0:37:21.920 Top stories and global business headlines are coming up right now.