Daybreak Weekend: Bank Earnings, UK Property Market, China Trade

Bloomberg Audio Studios, Podcasts, radio news.
This is Bloomberg Daybreak Weekend, our global look at the
top stories in the coming week from our Daybreak anchors
all around the world. Straight Ahead on the program, I'll
look ahead to keyan fleetionin data in the US and
earnings from some of Wall Street's biggest banks. I'm Nathan
Hager in Washington.
I'm Caroline Hetke in London. When we're asking if the
UK's property market can survive an exodus of the country's
wealthiest individuals.
I'm Doug Krisner looking at the changing trade dynamics for China.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
eleven three YEO, New York, Bloomberg ninety nine to one, Washington, DC,
Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, Syria,
XM one twenty one, and around the world on Bloomberg Radio,
dot Com and the Bloomberg Business App.
Good day to you. I'm Nathan Hager, and we begin
today's program with some key economic data in the US.
The December Consumer Price Index is do out this Tuesday
at eight thirty am. Wall Street Time for more on
how the inflation data could impact FED policy moving forward.
We're joined by Michael McKee, Bloomberg's international economics and policy correspondent.
Thanks for being here with us, Mike. Are we expecting
many distortions from this inflation data given that we've just
come out or recently come out of a government shutdown.
Let me sound like an economists and say yes.
And no, thank you two handed.
The problem is, we didn't get any October data, and
the BLS just assumed all the numbers were zero, and
then in November we didn't get a month over month
number because there was no October number, And so basically
we're going to have distortions built into the data going
into any month for several months. So yes, there will
be distortions in the December data. However, what we will
get is a full report on prices in December. It's
the comparisons and how much has changed over the month
that we're going to have a little trouble parsing out.
But we will get complete tables for all of what
the BLS surveys in terms of prices for the month.
So our first non Swiss cheese consumer price index since
the shutdown so what is the expectation as far as
what we're going to see when it comes to price
pressures here, Well.
The expectations and because of what I just said, there's
not a lot of wide confidence banned around this one,
but people are thinking we're going to see about a
three tenth increase in both the headline and the core,
which is a little hot, but it doesn't really move
the year over year. On the headline stays at two
point seven percent. Core moves up to two point seven
percent in the economists consensus forecast from two point six
And even if we do see distortions, the bottom line
there is it's not going in the right direction and
that's what would matter to the Fed. And you combine
that with the jobs report we got on Friday, which
showed week job creation and the unemployment rate going down.
It all would make the case that the Fed doesn't
need to cut rates again.
You know, it's interesting because you know, coming ahead of
this consumer price report, we heard just this past week
from FED Governor Stephen Myron on Bloomberg Radio and Television
saying he sees underlying inflation pretty low compared to where
we've seen it on the consumer price data at two
point three percent. What's his rationale for that? Does it
make sense?
His rationale is there are several aspects to it, one
of which is that we're seeing a big productivity gain
and that should mean that there's less inflation, and that
if you take out the effect of tariffs, you have
less inflation. That's like the old if you don't go
food or energy. So there are a number of things
that he argues that are maybe plausible, but don't make
sense at the same time because it doesn't seem to
reflect the real world. It seems to reflect a world
that he is hoping would happen, but the numbers haven't
proven that out yet.
So where are we seeing price pressures at this point.
We're seeing prices go down in most areas, but there
are sort of the fearsome five, as Steven Stanley of
Santanader calls them. That includes things like airfares, rents, medical insurance,
car insurance, that sort of thing that fly under the radar.
But see prices going up on a regular basis. We've
seen a food prices. They're continuing to rise, but at
a lower rate. It's just that because prices went up
a lot people see every day that they're paid expensive
amount for groceries, and that's one reason that they're unhappy,
even if the inflation rate isn't going up as much.
One of the things that moves around a lot is
used car prices, and the feeling is used car prices
from those who track the wholesale numbers might come in
a little bit lower and that might hold down some
of the inflation, but you just never know.
Of course, this is a holiday month as well. Are
we expecting much holiday impact around what we could see
on price pressures.
It is certainly possible because we saw this in November
with because you had the Black Friday sales weekend at
the end of the month that we saw prices go
down as retailers were discounting, and that shows up in
the data for consumer goods, toys, things like that, and
so there's a very good chance that we would see
something like that again in December. But that happens every year.
So the BLS would use seasonal adjustment figures to try
to take any distortions out of the numbers. The problem
is is that the seasonal adjustment numbers were distorted by
the fact that we didn't have any government reports for
a month and a half, so it is possible we
see something.
Appreciate this Mike as always, that's Michael McKee, international economics
and Policy correspondent for Bloomberg News. Let's turn our attention
to earnings now, because fourth quarter reporting season kicks off
in a big way next week when we hear from
some of Wall Street's biggest banks. It all starts with
JP Morgan Chase Tuesday. Then we'll hear from Bank of America,
Wells Fargo, and City Group on Wednesday. Herman Chan covers
all these banks. He's senior banks analysts for Bloomberg Intelligence
for banks in the US. Herman jog my memory here,
But it feels like the biggest financial firms on Wall
Street keep delivering quarter in and quarter out. Is that
the case? And is that what we're expecting in the
fourth quarter?
Yeah, that's right. The big banks have really driven a
lot of the top line revenue growth for the industry,
particularly not only in fee areas like trading, investment banking,
but they're growing their balance sheet faster too, So all
of that's really driven the outperformance for the biggest banks
relative to regional banks and smaller community banks. That are
publicly traded, So we're talking about the biggest banks. The
KPW index up about sixteen percent over the past three months,
so a lot of enthusiasm for bank shares heading into
fourth quarter reporting.
I have to think that a lot of that enthusiasm
is driven as well by the way Wall Street ended
twenty twenty five a pretty strong rally in the fourth quarter.
How could that be reflected in the results that we
get from these banks next week?
Yeah, that's right. So recently at an investor conference, the
biggest banks like JPM Morgan Bank of America talked up
their trading prowess and for JP Morgan for example, talking
about trading up routines year over year. Bank of America
up high single digits year every year, and so that
really bodes well for top line performance. And on the
investment banking side, we're seeing more of the same up
low single digits for GPM Morgan, flat to modest decline
for Bank of America. So really strong results on the
capital market side, and looking at industry indicators, long growth continues.
We're seeing some healthy activity across some commercial lending to
businesses and large corporate clients, and really the biggest driver
for lending in the fourth corridor will be cards, which
is seasonally strong, and also lending to non banks, which
has been a growth for the industry throughout twenty twenty five.
So really positive results on the lending side and also
trading investment banking.
Of course, we're in an environment where the FED has
started cutting interest rates again, coming off three straight interest
rate cuts to end twenty twenty five. What could that
mean for net interest income for these banks?
Yeah, that's right, that's something that should be helpful. Right,
So two areas two aspects for a lower rate environment
that should be helpful for banks. One, banks are lowering
their deposit costs, their funding costs that help support the
balance sheet. So we're seeing on average about you know,
fifty percent of the FED rate cuts are passed on
to your depositors. So that hurts you and me when
we have savings at a bank, But that's helpful for
banks and how they generate net interest income. Secondarily, we're
seeing a steeper ye curve after the rate cuts, so
particularly within the belly of the curve. So with the
five year versus the short term interest rates, that's actually
positive after a long period of negative negative yell curve
on that front. So that's helpful for when banks reprise
some of their fixed rate assets, and just big picture,
that's that's helpful for their net interest margins, and we'll
see that trickle higher in the fourth quarter in twenty
twenty six.
And just to hone in on the banks individually, let's
talk about JP Morgan Chase, because we've heard recently from
CEO Jamie Diamond talking about cockroaches in the credit markets.
How are we thinking about JP Morgan's asset quality right now?
Yeah, sure, that's a great question. So the cockroach concern
was really within their exposure to Tricolor, which was a
subprime lender to in autos, and they really stub their
toe on that one in the third quarter. What's helpful
is that overall the economy is really strong and try
Color is a very small exposure relative to the trillion
dollar asset size that JP Morgan wheel, So it's really,
in our view, an idiosyncratic, one off type issue for
jpm Morgan. That's really in the rear view, and commentary
from the bank in the fourth quarter seems to indicate
that credit quality has been fairly strong, with consumer continued
to transact and spend, so healthy consumer activity and really
boats well for credit quality for the fourth quarter.
When it comes to banks like a Bank of America
and City Group, we think of them often is pretty
closely tied to the consumer. What are we thinking when
it turned when it comes to the health of the
consumer right now, what we could learn from those banks?
Yeah, I would echo what I just said about jpm Morgan,
where for Bank of America CEO has been on Bloomberg
TV and has said that the consumer is really strong.
I think that that's really reflective of who they bank,
where it's not the customer that's more on the subprime level,
where they're more affluent, high networth type clients on the
on the loan side, right, So there's not a lot
of subprime loan exposure for these large, large across the spectrum.
And so despite the prognostications of a K shaped economy,
the actual credit exposure is on the higher end of
the consumer. So that really bodes well.
I really appreciate this Herman ahead of a really busy
week for you.
I know for sure.
That's Hermann Chan, senior US Banks analyst for Bloomberg Intelligence.
Coming up on Bloomberg day Break weekend, we'll discuss whether
the UK's property market can survive the country's wealthiest individuals leaving.
I'm Nathan Hager, and this is Bloomberg. This is Bloomberg
Daybreak weekend, our global look ahead at the top stories
for investors in the coming week. I'm Nathan Hager in Washington.
Up later in the program we'll look ahead to the
latest trade figures in China. But first in the coming days,
new data will shed light on the state of the
UK's housing market, with rising living costs and a proposed
new tax to contend with, how will the country's property
sector fare in twenty twenty six and the years to come?
For more, Let's go to London and bring in Bloomberg
Daybreak euro banker Caroline Hebger Nathan.
Twenty twenty five was filled with headlines about the ultra
wealthy leaving London and other parts of the UK, fleeing wealth,
taxes and broader policy changes. High profile exits included those
of checkout dot com founder Guillumpuzaz and Egypt's second richest man,
Nassev Sariris. The measure that has pushed many to seek
new horizons was the Labour Government's scrapping of the preferential
tax regime for non domiciled residents that had for years
allowed them to avoid UK taxes on their overseas earnings
for as long as fifteen years. In the wake of
a range of tax changes in Britain since early twenty
twenty four, London's property market has slumped. Deals for homes
in the capital valued at five million pounds that's six
point seven million dollars or more fell by more than
thirty five percent between August twenty twenty four and August
twenty twenty five, according to researcher Lnrez. In October last year,
sales of UK homes worth at least two million pounds
plunged thirteen percent year on year, according to data from
the property website right Move. Clementine Munro is private office
advisor at the real estate broker Allsop and Allsop, and
told Bloomberg that the country's super rich are losing patients
with the constantly shifting agenda.
There is a real sense of fatigue amongst the wealthy
in the UK. They're used to tax planning, they're used
to planning for their futures and this constant environment that
we've had of uncertainty is certainly having a knock on
effect as people start to look to desterling their portfolios
and move some of that wealth into landscapes like to
buy where it's much easier to forecast for the future
and the tax landscape is so clear.
That was Clarentine Monroe from real estate broker Alsop and
Alsop speaking to Bloomberg's Jumana Bissecci. So we'll wealthy Brits
continue to depart their native shores and what could the
lasting impact of their decisions be on the UK's property sector.
I've been speaking to Bloomberg's real estate reporter Damien Shepherd
and our ultra wealth reporter Ben Stupples.
Jamie, can I just.
Start with you on the data, what we're expecting in
terms of UK house prices and what the story I
guess has been so far.
Yes, We've got some data coming next week from RIX.
We basically get the sentiment from property professionals in the
UK around the temperature of the UK housing market. Now,
they were pretty gloomy last year, particularly in the lead
up to the budget, where all of the kite flying
and speculation essentially led to people putting their house moves
on ice, so it will be really interesting to see
how they view the prosper the UK housing market in
twenty twenty six. Now we've finally passed that long wait
for the budget, my expectation this year is that prices
across the country won't move dramatically. I think what we'll
see is a big divide in the prospects of London
and the rest of the UK, a North South divide
where those living in the North might see their values
actually grow a little. What we did see in the
budget was a mansion tax on homes valued at two
million pounds or more. Now what we could see this
year in London is a repricing of up to five
percent of those homes in terms of value. So those
sitting on property worth two million pounds or more might
see sort of a quick repricing across this year in
London and then see things settle down again. But the
prospects for London look far gloomier than the rest of
the UK, which I'm sure Ben will tell us a
lot more about later on.
Yeah, absolutely, well, I'll bring you in at this point, Ben,
just because we're focused on the property market also, as
a result of all of the discussion and the concern
about the number of people actually leaving the UK, especially
on the kind of higher end, how do you think
that kind of ties together, I suppose property and the
number of people actually leaving the UK. What do we know?
It's a really interesting question because anecdotally I can say
that the non doms and actually the sources I've lost
to amid the UK wealth termoil, they're not often selling
their property. I mean it turns from a great place
to live in central London into actually a pretty good
asset to own your global portfolio. Right if an Ulgehi
net worth owning a bit of London property that often
you've coveted for a long time and you've probably still
got a lot of your stuff there. Actually you don't
want to sell it, especially actually is because the market's
pretty subdued. What is interesting is I've seen a couple
of billionaires, I mean, these are multi billionaires. They are
exporting a large part of their households. We actually found
one mple where one of the guys who owns one
of the Premier League football clubs, Nasif Sawiris, he turned
in previous years he imported artwork, paintings, books, you know.
Imagine that, you know, the top billionaire elite, what you
would have at your disposal, and it's all being exported
in twenty twenty five as he builds a new life
in abby dabi and in Italy having lived here for
mess a decade. So I think that's maybe a good
case study of what we're seeing is Okay, they're not
selling their homes. It's a great asset to have, but
actually the homes themselves are probably going to be looked
pretty different, look very different going forward, and actually it
raises questions in the ancillary services that you have. Is
a big homes you know, you have staff, you probably
have a gardener, you probably have I don't know, a driver.
Now there. I think what we will see more examples
of this year is the spillover effects into maybe more
normal types of London's economy that serves that sort of
segment we often don't think of. But actually these are
normal people and I'm going to be very interested to
see how that can sort of continues to play out
this year.
I mean, I suppose it's perhaps Damian a little bit
hard also to feel sorry maybe for people who have
homes that are out of the reach of most the
majority of sort of ordinary Londoners or Brits. But as
we're sort of saying, how important is the luxury end
of the market actually to the UK economy, I suppose
why should we care about those those sorts of properties.
It's a great question, and people ask me that question
a lot when they see my stories, you know. But
I think wealth creation is so important for the UK,
and with the Labor government, you know, having been seen
to be pushing a lot of wealthy individuals away, the
more knock on effects that taxation has on these people
and their status in the UK will eventually build up
pressure on the government in the long term in terms
of the economic advantages that they bring to Great Britain.
So I mean what Ben mentioned there about how these
people aren't actually selling but just moving away for a
little while while they see how the picture in the
UK pans out. It's kind of similar from the perspective
of buy to let investors as well. They're under all
sorts of pressure from taxation, new regulation. But because the
market is so weak in terms of buyers, even if
these people did want to sell their property, they'd be
selling at such a huge discount that it's keeping transactions
low and we're not actually seeing this exodus in terms
of sales of these homes that some might think. So
in some ways, you know, the fact that the market
has been so weak has prevented us from seeing some
of these homes sell that perhaps would have in different circumstances.
Look, historically, it's not unusual for the UK to see
boom and bus cycles in the housing market. So I'm
kind of curious that with all of the pressures that
you've both mentioned that actually you kind of see quite
a bit of stagnation. Is there even an upside maybe
that as very sort of inflating You know, a lot
of people would see them as inflated property prices in
the southeast of England. If they start to come down overall,
that there's a positive story there because actually for younger
people or others, they maybe can get on that ladder.
Is that another part of the story.
Well, it's a difficult one because you know, as somebody
who just about still considers myself young, house prices are
just so high that it makes it incredibly difficult to
see any light at the end of the tunnel, even
when mortgage rates do come down, but if we're looking
at it from a positive perspective, mortgage rates are lower
than they were for the past couple of years. The
damage that we saw in the years after the Mini budget,
we're really quite catastrophic on the mortgage market. We were
back to the levels that we were seeing about fifteen
years ago. So mortgage rates have come down, affordability is improving,
and if you're looking to buy a property, you know
in the north of England where the market's looking, you
know a lot stronger. People are happier up there when
they're viewing their housing portfolios the potential for their values
to increase. So there is some light at the end
of the tunnel in terms of mortgage rates coming down,
but we really need to see the actual prices of
these homes come down for first time buyers to really
shake off that frustration that they have in getting on
the housing ladder.
Yeah.
Absolutely, you're definitely still young.
I'm sure.
Thank you for then. I think it's also fascinating that
the last two, three, even four budgets have been simply
so important when it comes to sort of dictating the
landscape not just for property but for lots of things
in the UK when you're thinking about your reporting, how
big a factor is the mansion tax, the non dom changes?
How are you thinking about those now?
To take that in order? The mansion tax, Actually, if
you were I mean, if you're a billionaire paying a
few more thousand pounds a year for owning a home
you like living in or you still want to hold
as an asset, that's not such a big deal. And
I spoke to it, actually a UK billionaire, John Cardwell,
on the back of that being announced, and he said, look,
that's fine, I'm a UK taxpayer, happy to pay that.
The non dom stuff, however, including with that billionaire I
just mentioned, that's a big deal both for the UK
billionaires who see actually a lack of maybe an ecosystem,
an ecosystem shrinking from their perspective, their peers aren't here
as long as they would otherwise be previously, and the
non don reforms, I mean, that is the big that
is the big driver. It's twofold one. It's scrapping the
fifteen year regime that we had up until eight prior
twenty twenty five. Now that was long enough. And this
is the key thing. It's the time you could be
previously in the UK for fifteen years enjoy put down
routes here. I think the key thing here why fifteen
years is sort of asking the question why the eighteen
holes on a golf course. I'm not exactly sure why
the UK settled on that time about a decade ago
for a previous reform. The general thinking is that it
allowed you to come here and put your kids through
school and by the time you get to fifteen years,
maybe your kids by then or at a UK university,
maybe in Oxbridge, and they're like, you know what, actually
we quite like life in the UK and what we've
done instead now is bring in a four year regime
and the UK Treasury Rachel Reeve said this makes the
UK more competitive, but there are growing doubts about that
four years. What does that allow you to do?
Really?
Maybe it allows you to take a job. If you're
a top banker, you could maybe take a C suite job,
turn your team around and then go back to wherever
you've came from. But are you able to put down
the same routes you could before? No, you can't. In general,
so the UK people have left because of the non
dom regime and now people are less likely to come
and put down routes here. That's the crucial thing. Some
people are coming, but they're already and this is the
crucial point. They're already thinking about where they're going to
go next. So the UK has gone from being a
permanent global wealth hub for a lot of folks in
the global ultra wealth communit to being what I would
maybe term a stepping stone, and that's a significant change.
Thank you so much for being with me. Bloomberg's Ben
Stupples and Damian Shepherd. Will the UK's housing sector show
shoots of recovery or has an exodus of the wealthy
prompted a longer slump maybe than anticipated. We'll have full
coverage and analysis of all that important market data in
the coming days on Bloomberg platforms. I'm Caroline Hepge here
in London. You can catch us every weekday morning for
Bloomberg Daybreak Europe, beginning at six am in London. That's
one am on Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg day Break weekend,
we'll discuss what we could expect from trade data in China.
I'm Nathan Hager and this is Bloomberg. This is Bloomberg
Daybreak Weekend, our global look ahead at the top stories
for investors in the coming week. I'm Nathan Hager in Washington.
We'll get the latest trade figures for China in the
week ahead. Let's get more on that from Bloomberg's Doug Chrisner,
host of the Daybreak Asia podcast.
Nathan, These trade figures may provide a sense of how
well the Chinese economy is performing, but the more important
question seems to center on what geopolitics will do to
determine China's future trade relations now. That surprise US raid
and capture of Venezuelan President Nicholas Maduro has serious implications
not just for rules based international order, but access to
natural resources and supply chains as well. Now. Venezuela had
boasted an all weather strategic partnership with Beijing, and the
Chinese were quick to frame this raid as an example
of US overreach. For a closer look, I'm joined by
Bloomberg's John Louhi is our chief China correspondent. John joins
from our studios in Beijing. Thank you for being here, John,
and happy New Year. There are so many threads to
this story and hopefully we can touch on each specially
the angle on Venezuela and the reaction from Beijing. I'd
like to begin with the simmering tensions between China and Japan,
since this seemed to be the bigger concern for markets
in Asia over the course of the last week. Now
we know this traces back to late last year, when
newly elected Japanese Prime Minister take Iichi said a Chinese
invasion of Taiwan could be deemed a survival threatening situation,
and now it seems as though there's this low level
economic warfare happening. How would you describe the state of affairs.
Yeah, I think China is pulling out all the stops
to express how upset it is with what the Prime
Minister Takeichi said at the end of last year. I
think part of that has to do with that she
is a new prime minister in Japan, that she has
a background of being relatively hawkish when it comes to
relationship with China, and it also comes in this context
of the Chinese economy not doing great, and so I
think that puts more onus on the Chinese government to
be strong when it comes to geopolitical issues. And first
and foremost in that arena is Taiwan for Beijing.
So Beijing is banning exports of what is being termed
dual use items to Japan that could be used for
some sort of military application. What are the economic risk
here if this tension becomes a protracted situation.
I think the spectrum of potential outcomes is quite broad
because of the vague wording that Beijing is using this
dual use technologies, because in some sense almost everything could
potentially be dual use, and so I think it gives
Beijing the room to either be very tight in terms
of how it controls exports or be relatively loose, depending
on how the situation goes. And I think that injects
this uncertainty, which actually right now in the media aftermath,
is probably more troubling for Japanese companies than anything else.
It's very interesting too, because last week, obviously, we had
the visit of South Korean President Lee J M jung
in Beijing. I think it was his first state visit,
although there was a meeting earlier with President Chi in
the Republic of Korea. If I'm not mistaken, talk to
me a little bit about what unfolded in this state
visit and the significance here of closer ties perhaps between
Beijing and Seoul.
Well, from Seoul's perspective, it wants to open up the
Chinese market for many of its products, Electronics from Samson,
chips from high necks, all of these things, but especially
the ability of Korean cultural export so k pop, for example,
Korean TV dramas, for those sorts of things to be
able to again come into the Chinese market to be
sold here, which has been extremely limited for many years,
all the way back to maybe a decade ago when
Korea agreed to put in the THAD missile system from
the United States, and so that was first and foremost
on President Lee's agenda for Shijiping. This was an opportunity
to try and get Korea, to try and get Lee
onto China side. In terms of that dispute over Taiwan
with Japan.
How would you describe the relations between Soul and Tokyo
at the moment and the extent to which South Korean
President Lee has to balance relations with Prime Minister Takeiichi
while at the same time trying to improve relations with
Chinese President Chi.
So Korea and Japan have a difficult relationship as well
because of the World War Two history, Japanese occupation of
Korea during and before World War Two, but since then
the post war World War World. Both countries are important
key allies of the United States in Asia. They both
depend on the United States for security. They both want
to do business with China, but they're both also very
keen to make sure they're not overly dependent on China,
So in that respect they're in the same position, and
so there is a push. There is a motivation for
Korea and Japan to be aligned in terms of how
they deal with China, just because of the pure size
of the Chinese market, the Chinese economy, the Chinese military.
But at the same time, Lee is also cognizant of
how that relationship plays domestically for him in Korea.
And each of those countries Japan, South Korea, and China
are all major oil importers. And that kind of takes
us to the major story of the last week, the
ouster of Nicholas Maduro as leader of Venezuela China, as
we both know, has been the largest buyer of Venezuelan crewed.
So give me a sense of what the economic ties
had been like between these two countries and what we
are likely to see going forward in relations between Venezuela
and China.
So, as you said, Doug, China is the biggest buyer
of Venezuelan crude, but Venezuelan crude as a percentage of
total Chinese oil imports is relatively small, It's about four percent,
and so I think in the immediate aftermath, the implications
are not that great because not only does Venezuela account
for a relatively small portion of Chinese demand, it's actually
been exporting oil that's sitting in tankers off the Chinese
coast or off of the coast of various Asian countries
waiting to be delivered. So there's a bit of an
excess at the moment. I think the more important consideration
for China is what it means for the future, because
Venezuela does have the world's largest reserves of crude, and
so Chinese companies have been very active in Venezuela trying
to secure access to that future potential crude, and so
what this means for their ability to do that, I
think that is the thing Beijing is most concerned about
this moment.
And I'm also curious about what it may mean for
China's attempt to do business not only in Venezuela, but
in other countries in South America, whether you're looking to
extract natural resources, whether China is looking to make major
investments in these countries, or whether China is looking to
market Chinese goods. And I'm thinking of evs and Brazil
for example.
So this is where trade comes into the picture. I
think that because you know, Chinese exports have been booming
in twenty four and twenty five, and they've been booming
as Chinese exports to the United States have been falling
off a cliff. So the Chinese exports to the United
States fell twenty nine percent in November. That was the
eighth consecutive month that they had fallen by double digit figures.
But still China's trade surplus is hitting a new record
in twenty twenty five of more than a trillion dollars.
And that's because China has been exporting all lot more
stuff to Europe, to Africa, to Asia, but also key
here to Latin America. And so I think China is
very keen to keep its access to Latin American markets.
What Venezuela means for that access I think is nuanced
because Venezuela is very different from many of the other markets.
It's very different from Brazil, which China has very very
close relationship with. It's very different from Peru, where China
has a very important deep water port that they've built
in the recent past. And so whether the rest of
Latin America goes the way of Venezuela, I think is
very hard to tell.
The monk. So we're now hearing the Trump administration is
demanding that Venezuela reduce its relationship with China, and I'm
wondering how this may affect the relationship between Washington and Beijing.
These two powerhouses are still involved in many sensitive issues,
whether it's trade or Taiwan, and I'm wondering what this
will do, the incursion by the US into Venezuela and
the removal of Maduro, what this will do to US
China relations.
It's obviously going to inject an additional level of uncertainty.
We've seen the reaction from Beijing. It's been very pointed.
It's been very strong in its condemnation of the actions
in Venezuela. I think that is more Beijing taking advantage
of an opportunity to make itself look like the responsible
superpower on the planet versus the US, which Beijing would
say is the less dependable, more irresponsible player on the
global stage. But what it means for the bilater relationship,
I think there are so many mutual dependencies and mutual needs.
The United States needs China for its rare earth. China
needs the US for its export markets. Even though exports
have been following, still a huge market for Chinese goods,
either to directly from China or secondarily re routed through
other countries. The United States is also a place where
technology is still coming into China. We've had the Nvidia
H two hundred chips approved by the Trump administration for
export to China. And so I think those dependencies, those
mutual needs is they will probably act as a stabilizer
and around that you're going to have marginal tensions, be
it Latin America be at other parts of the world.
So in the coming week, Canadian Prime Minister Mark Karney
will be visiting China. I think it's the first visit
to China by a Canadian Prime minister since twenty seventeen.
What's his objective here? And what is likely to unfold.
Do you think.
I expect that the mister Carney will come here primarily
wanting to talk trade, primarily wanting to open up Chinese
markets for Canadian energy, Canadian agricultural goods. Those relationships have
been really strained. They were especially strained during the Trudeau
administration after Canada arrested the CFO of Huawei at the
behest of the United States. That plunged the relationship between
Canada and China into a really terrible state, and it's
still slowly trying to climb back. And I think the
change in administration in Canada offers an opportunity now that
Prime mister Carney is in place, Prime Minister Trudeau has left,
I think it offers an opportunity for a reset, and
I would expect that both sides, both Canada and China
are looking trying to figure out if they can do that.
Do you think that has the potential to upset the
Trump administration.
I think it certainly has the potential. But I would
expect that Prime mister Carney understands quite clearly where the
minds are in terms of what he might accidentally step
into that sets President Trump off and I think he
will be mary very mindful and careful of avoiding those.
I also do not think in terms of the relationship
that Canada would be open to with China when it
comes to investment, when it comes to the military, when
it comes to sensitive technologies, I would expect Canada's position
to be much more aligned with the United States than
how Venezuela was, for example.
John will leave it there. It's always a pleasure. Thank
you so very much. John lou Is Bloomberg's chief China correspondent.
Joining from our studios in Beijing, and I'm Doug Prisner.
You can catch us weekdays for the Daybreak Asia podcast.
It's available wherever you get your podcast. Nathan, Thanks Doug.
Man. That does it for this edition of Bloomberg Daybreak Weekend.
Join us again Monday morning at five am Wall Street
Time for the latest non markets overseas and the news
you need to start your day. I'm Nathan Hager. Stay
with us. Top stories and global business headlines are coming
up right now.