Daybreak Weekend: IMF Meetings, Scholz in China, China Data Dump

Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.720 --> 0:00:12.280 This is Bloomberg day Break Weekend, our global look at 0:00:12.280 --> 0:00:15.040 the top stories and becoming week from our Daybreak anchors 0:00:15.040 --> 0:00:17.599 all around the world. Straight Ahead on the program, we'll 0:00:17.600 --> 0:00:20.119 look at what to expect from the spring meetings of 0:00:20.200 --> 0:00:24.360 the International Monetary Fund and World Bank. I'm Tom Busby 0:00:24.400 --> 0:00:25.000 in New York. 0:00:25.360 --> 0:00:28.720 I'm Stephen Carolyn London. We're looking ahead to German Chancellor 0:00:28.760 --> 0:00:32.720 Olaf Schultz's trip to China amid trade tensions with the EU. 0:00:33.200 --> 0:00:35.440 I'm Brian Curtis in Hong Kong. We look ahead to 0:00:35.479 --> 0:00:38.320 a ton of eco data in China, and as usual, 0:00:38.400 --> 0:00:40.640 we hunt for a catalyst that might fire up the 0:00:40.720 --> 0:00:42.000 Chinese economic kitchen. 0:00:42.479 --> 0:00:46.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg, 0:00:46.479 --> 0:00:48.960 E Loove the three Own, New York, Bloomberg ninety nine 0:00:49.000 --> 0:00:52.400 to one, Washington, DC, Bloomberg one O six one, Boston, 0:00:52.479 --> 0:00:57.280 Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 0:00:57.400 --> 0:01:00.280 XM one nineteen and around the world on Blue Bomberg 0:01:00.400 --> 0:01:03.040 Radio dot com and via the Bloomberg Business App. 0:01:07.040 --> 0:01:09.000 Good day to you. I'm Tom Busby, and we begin 0:01:09.040 --> 0:01:13.040 today's program with the Spring meetings of the International Monetary Fund, 0:01:13.120 --> 0:01:16.959 the IMF and the World Bank. This coming week, central 0:01:17.000 --> 0:01:19.959 bank leaders and finance ministers from around the world gather 0:01:20.040 --> 0:01:24.120 in Washington, d C. To discuss interest rates, monetary policy, 0:01:24.240 --> 0:01:27.040 and other issues of global concern. For more on what 0:01:27.120 --> 0:01:31.080 to expect, we're joined by Michael McKee Bloomberg International Economics 0:01:31.160 --> 0:01:34.280 and Policy correspondent Well Michael. In a written statement to 0:01:34.319 --> 0:01:37.479 be delivered this week, the Managing director of the IMF 0:01:37.560 --> 0:01:42.600 says it'll push its global growth forecast slightly higher, up 0:01:42.680 --> 0:01:45.560 one notch to three point two percent in twenty twenty five. 0:01:45.880 --> 0:01:50.560 That's despite stubbornly high inflation massive debt loads. What's behind 0:01:50.600 --> 0:01:52.600 that rather upbeat assessment. 0:01:52.880 --> 0:01:56.560 The fact that the economy of the United States in particular, 0:01:56.640 --> 0:01:58.680 but other economies around the world have been able to 0:01:58.720 --> 0:02:02.680 grow faster than people anticipated coming out of the recession. Now, 0:02:02.760 --> 0:02:05.480 we've talked many, many times about the weirdness of this 0:02:06.400 --> 0:02:10.680 pandemic recession and how it has upended all kinds of 0:02:10.760 --> 0:02:15.359 economic ideas and forecasts, and the IMF is just reflecting 0:02:15.880 --> 0:02:20.040 what reality is that, whether we understand it or not, 0:02:20.240 --> 0:02:22.600 things are better than we had thought. 0:02:22.560 --> 0:02:25.360 Well, the IMF predicting US growth this year two point 0:02:25.360 --> 0:02:27.600 one percent. It's not going to blow anyone away, but 0:02:27.639 --> 0:02:30.680 it's pretty steady and actually a drop in twenty twenty 0:02:30.680 --> 0:02:32.200 five one point seven percent. 0:02:32.240 --> 0:02:34.920 Why is that there's a feeling that we can't sustain 0:02:35.040 --> 0:02:37.239 this growth level? But I don't think there's a whole 0:02:37.280 --> 0:02:40.679 lot of confidence behind that prediction. The other thing that's 0:02:40.680 --> 0:02:45.360 important to realize about the world economic outlook, which is 0:02:45.400 --> 0:02:48.440 what the IMF will be putting out next week with 0:02:48.600 --> 0:02:54.400 actual numbers. And basically nobody pays any attention to the 0:02:54.480 --> 0:02:58.760 numbers they generate for the US and the European Union 0:02:58.880 --> 0:03:04.600 and the United Kingdom, Japan, China, because there are people, 0:03:04.680 --> 0:03:06.919 thousands of people paid around the world to do that. 0:03:07.280 --> 0:03:11.160 Where the IMF does get some interest is especially people 0:03:11.200 --> 0:03:15.400 who trade in emerging markets because those aren't covered as well, 0:03:15.600 --> 0:03:19.760 and they really do have the depth of information about 0:03:19.800 --> 0:03:22.359 what's going on in those countries. Is not a lot 0:03:22.360 --> 0:03:23.919 of value add to say the US is going to 0:03:23.960 --> 0:03:26.040 grow two point one percent when the FED is already 0:03:26.040 --> 0:03:28.200 saying it's going to grow two point one percent, and 0:03:28.240 --> 0:03:30.960 everybody on Wall Street is weighing in how much it's 0:03:30.960 --> 0:03:31.480 going to grow. 0:03:31.919 --> 0:03:34.760 So it's those sleeper countries, like you said, not Japan, 0:03:34.840 --> 0:03:39.160 not the Eurozone, not China, but the ones maybe on 0:03:39.280 --> 0:03:40.320 the back burner. 0:03:40.240 --> 0:03:42.640 Right, yeah, frontier markets, emerging markets. 0:03:42.920 --> 0:03:47.280 Okay, now, China forecasting pretty solid growth. That's not exactly 0:03:47.320 --> 0:03:49.640 a sluggish economy, is it. It's just not what we're 0:03:49.760 --> 0:03:51.200 used to seeing in China. 0:03:51.680 --> 0:03:54.360 Right They've started to run into the law of large 0:03:54.440 --> 0:03:57.680 numbers that it's really hard to keep improving at the 0:03:57.760 --> 0:04:00.360 same rate when you start to get as large as 0:04:00.400 --> 0:04:04.680 their economy is right now. They're also going through something 0:04:04.720 --> 0:04:08.920 of a recession there and real credit issue problems, so 0:04:10.160 --> 0:04:13.160 we don't know. There isn't a lot of faith put 0:04:13.200 --> 0:04:16.680 it that way in Chinese economic data, so we don't 0:04:16.720 --> 0:04:20.160 know for sure how fast they're growing, And it is 0:04:20.240 --> 0:04:24.360 interesting to see what the IMF will say because there 0:04:24.400 --> 0:04:27.599 are a lot of private sector economists who think China's 0:04:27.600 --> 0:04:30.320 growing a lot more slowly than the numbers that China 0:04:30.400 --> 0:04:35.240 will put out. So the only odd thing about it, 0:04:35.360 --> 0:04:37.560 or not odd thing about it, but the only thing 0:04:37.640 --> 0:04:40.719 is it's really hard to invest in China, so it's 0:04:40.760 --> 0:04:43.839 not like you're going to be using a lot of 0:04:43.880 --> 0:04:47.680 these numbers just to readjust your portfolio. 0:04:48.040 --> 0:04:48.400 Got it. 0:04:48.720 --> 0:04:50.680 Well, one thing that we know is going to be 0:04:50.680 --> 0:04:54.200 talked about in that is interest rates. We saw Christine 0:04:54.240 --> 0:04:57.360 Legard from the ECB just this week holding steady. We 0:04:57.400 --> 0:04:59.640 know here we're in sort of a holding pattern in 0:04:59.680 --> 0:05:01.760 the USA US on interest rates at least maybe eve 0:05:01.800 --> 0:05:04.520 until later in the year. What's going to be the 0:05:04.520 --> 0:05:06.240 big discussion, Well. 0:05:06.120 --> 0:05:08.600 You know, when they were meeting last fall, there was 0:05:08.640 --> 0:05:11.559 a lot of talk about interest rates eventually coming down 0:05:11.680 --> 0:05:15.800 because we've sort of gotten through the recession and we've 0:05:15.920 --> 0:05:19.080 sort of gotten through inflation and things were getting better. 0:05:19.120 --> 0:05:22.320 And now the conversation is going to be different because 0:05:22.560 --> 0:05:27.760 the major central banks are all stepping back from the 0:05:27.800 --> 0:05:31.400 precipice of rate cuts, with the exception of the ECB, 0:05:31.600 --> 0:05:36.040 because they're at this point still worried about the possibility 0:05:36.040 --> 0:05:40.680 of inflation resurging. The conversations at the IMF meetings World 0:05:40.720 --> 0:05:45.680 bank meetings will be basically around the idea of synchronicity. 0:05:45.720 --> 0:05:49.800 Will everybody be moving at once or will somebody move 0:05:49.960 --> 0:05:54.000 much faster than everyone else? And in her news conference 0:05:54.120 --> 0:05:57.000 last week, Christin Laguard was asked about that because what 0:05:57.040 --> 0:06:00.480 happens is if you cut your interest rate and others don't, 0:06:00.960 --> 0:06:05.960 then your currency is going to fall and it's just 0:06:06.000 --> 0:06:09.160 more attractive to invest in the higher rate countries. She 0:06:09.240 --> 0:06:11.320 did not want to comment on that, but you can 0:06:11.360 --> 0:06:13.640 bet that's going to be one of the discussion points 0:06:13.680 --> 0:06:16.839 behind closed doors at the meetings. 0:06:16.960 --> 0:06:20.000 And another one because of all this geopolitical risk out 0:06:20.040 --> 0:06:22.839 there in the Middle East, Ukraine and Russia. I mean, 0:06:23.120 --> 0:06:25.480 that has got to be also forefront on the agenda. 0:06:25.720 --> 0:06:27.240 What to do and when to do it. 0:06:27.640 --> 0:06:30.719 Well, this is an opportunity for a lot of discussions 0:06:30.800 --> 0:06:34.760 because the finance and foreign ministers from all over the 0:06:34.839 --> 0:06:38.839 world come and attend along with central bankers these meetings, 0:06:38.839 --> 0:06:42.200 and they have a lot of meetings together, and so 0:06:42.480 --> 0:06:45.880 that sort of thing will get discussed. You just can't 0:06:45.920 --> 0:06:52.000 expect any kind of answers or conclusions about what should 0:06:52.000 --> 0:06:54.840 be done, because if they haven't got it right now, 0:06:55.040 --> 0:06:58.160 just a few more meetings in Washington next week are 0:06:58.320 --> 0:06:59.640 going to make a difference. 0:07:00.279 --> 0:07:03.599 And the meetings are here. What role does the US 0:07:03.720 --> 0:07:07.120 play in these meetings and in the World Bank, in 0:07:07.160 --> 0:07:08.239 the IMF. 0:07:08.040 --> 0:07:10.440 Well, the US is the host. We're the biggest economy 0:07:10.480 --> 0:07:14.840 in the world, and we have perhaps the best infrastructure 0:07:14.960 --> 0:07:17.760 for bringing all of these people together from the disparate 0:07:18.480 --> 0:07:23.040 countries of the world. And so twice a year they 0:07:23.040 --> 0:07:25.760 come to the US and they hold the IMF and 0:07:25.800 --> 0:07:28.840 World Bank meetings. We're the headquarters for the IMF and 0:07:28.920 --> 0:07:32.400 the World Bank, so this is the place where they 0:07:32.480 --> 0:07:33.600 can get things done. 0:07:34.000 --> 0:07:36.080 Well, it's a lot to look forward to our thanks 0:07:36.080 --> 0:07:40.960 to Michael McKee, Bloomberg International Economics and Policy Correspondent. Next 0:07:40.960 --> 0:07:43.120 week we get a sense of how cautious consumers are 0:07:43.160 --> 0:07:46.000 being with their money. We get US retail sales data 0:07:46.040 --> 0:07:49.400 for March that's out on Monday. Also, how could this 0:07:49.520 --> 0:07:52.680 possibly impact FED policy going forward? And for more we're 0:07:52.720 --> 0:07:57.440 joined by Anawong, Bloomberg Chief US Economists. So Anna, what 0:07:57.480 --> 0:08:00.520 are you expecting to see in the March retail sales number? 0:08:00.960 --> 0:08:04.880 Right, we are expecting to see tapped number. I think 0:08:04.880 --> 0:08:09.360 there are various signs pointing to consumers being exhausted by 0:08:09.400 --> 0:08:12.760 the price increases over the past two years. We saw 0:08:12.800 --> 0:08:17.960 that a March purchases of cars has fallen sharply, and 0:08:18.040 --> 0:08:22.640 that was following a rebound in February after another slump 0:08:22.720 --> 0:08:26.080 in January. But if you smooth over the first three 0:08:26.160 --> 0:08:29.600 months of the year. It is clearly showing a slowdown 0:08:30.000 --> 0:08:33.439 and that's consistent with what we're seeing and also auto 0:08:33.440 --> 0:08:38.720 loans rejections. It's harder to get financing to auto loans 0:08:39.000 --> 0:08:43.080 given that auto loan rates are still pretty high. And 0:08:43.200 --> 0:08:46.520 for the category of retail that directly go into Q 0:08:46.600 --> 0:08:51.800 one GDP, it's the control groups sales which excludes vehicles, gasoline, 0:08:51.840 --> 0:08:56.800 food service, and building materials. We are expecting a tappit 0:08:57.000 --> 0:09:01.160 zero point two percent gains that's versus zero percent in 0:09:01.200 --> 0:09:04.880 the previous month. I think that overall the US consumption 0:09:05.000 --> 0:09:07.880 will be growing at about the two percent pace in 0:09:08.000 --> 0:09:11.280 the first quarter, and that's a slow down from the 0:09:11.320 --> 0:09:14.120 more than three percent in the fourth quarter. And I 0:09:14.160 --> 0:09:17.040 think that as we go into the year, to slow 0:09:17.080 --> 0:09:19.080 down will further be more evident. And by the end 0:09:19.160 --> 0:09:21.880 of the year, we're only expecting a one percent quarterly 0:09:21.920 --> 0:09:24.439 growth in PCE spending, so. 0:09:24.480 --> 0:09:28.720 A steady decline in spending. Do you attribute this mostly 0:09:28.760 --> 0:09:32.520 to inflation? I mean everywhere you go everything costs more. 0:09:32.559 --> 0:09:34.600 Every time you go to the store, you go out 0:09:34.640 --> 0:09:38.000 to dinner, you look at a sticker on a car, everything. 0:09:38.320 --> 0:09:43.599 Yeah, it's both a combination of inflation and also increasing 0:09:43.920 --> 0:09:48.760 job in security layoffs announcements have risen in news headlines 0:09:49.000 --> 0:09:52.280 and that naturally could make people more cautious, and that 0:09:52.360 --> 0:09:56.160 would how that translate to spending behavior is that people 0:09:56.200 --> 0:09:57.960 would think, Okay, I don't know if I'm on the 0:09:58.000 --> 0:10:01.719 chopping block next, I better spend as much and so 0:10:01.920 --> 0:10:05.760 saving rates should overall increase as a result of this caution. 0:10:06.360 --> 0:10:10.880 So in the March CPI report that was released last week, 0:10:11.080 --> 0:10:16.199 we saw that a few consumer categories prices fall. So 0:10:16.240 --> 0:10:22.079 for example, recreational goods and consumer electronics, where two categories 0:10:22.160 --> 0:10:25.320 in the core goods category. That's a very sharp decline 0:10:25.360 --> 0:10:29.800 and prices, and I think that reflects that the discretionary 0:10:29.920 --> 0:10:34.240 component of consumer budget is being slimmed down because they 0:10:34.240 --> 0:10:37.880 have to pay you know, twenty percent higher for auto insurance, 0:10:37.920 --> 0:10:42.120 and auto insurance is non negotiable. It's a big part 0:10:42.240 --> 0:10:45.520 of consumer spending because everybody needs to drive a car. 0:10:45.960 --> 0:10:48.240 And as a result, what we are seeing is less 0:10:48.240 --> 0:10:51.440 spending on things that could be cut and that will 0:10:51.480 --> 0:10:53.600 show up in the retail as well. That I think 0:10:53.679 --> 0:10:59.239 the retail goods component discretionary good spending, we'll see a decline, 0:10:59.440 --> 0:11:03.280 whereas most of spending is coming from services and which 0:11:03.320 --> 0:11:07.880 is benefiting from the stock rally in the past couple months, 0:11:07.960 --> 0:11:12.200 and people who are primarily spending and services are they 0:11:12.559 --> 0:11:15.959 are the people who are benefiting from the market rally, 0:11:15.960 --> 0:11:19.959 which they tend to be older people baby boomers though 0:11:20.360 --> 0:11:22.240 that's a two track economy for you. 0:11:22.679 --> 0:11:24.600 Well, another thing I want to talk to you about, 0:11:24.640 --> 0:11:27.520 non discretionary is the price at the gas pump, which 0:11:27.559 --> 0:11:29.960 has been going up steadily since the start of the year, 0:11:30.080 --> 0:11:33.320 triple A predicting gas will average four bucks a gallon 0:11:33.559 --> 0:11:36.800 by the summer. How will that affect budgets and spending? 0:11:37.200 --> 0:11:41.040 So, gasoline and food, especially for the lower income household, 0:11:41.080 --> 0:11:44.320 account for more than a fifth of their budget, so 0:11:44.760 --> 0:11:47.960 it will definitely squeeze the budget. It's not a very 0:11:47.960 --> 0:11:51.800 comforting thing for a household. The only thing that could 0:11:51.880 --> 0:11:56.079 offset that somewhat is the hike and minimum wage across 0:11:56.120 --> 0:12:00.400 many states early in the year. So in California we 0:12:00.559 --> 0:12:04.240 just saw early this month in April that fast food 0:12:04.840 --> 0:12:09.360 workers minimum wage have been increased by by almost twenty percent. 0:12:09.800 --> 0:12:13.320 And in Florida, for example, early this year, the state 0:12:14.080 --> 0:12:17.800 hiked minimum wage by seventeen percent, So there's still hope 0:12:17.800 --> 0:12:21.520 for the lower income household who could see you know, 0:12:21.760 --> 0:12:24.360 ten to twenty percent jump in their wages. 0:12:24.960 --> 0:12:27.880 March retail sales data out on Monday, and our thanks 0:12:27.920 --> 0:12:32.320 to Anawong Bloomberg Chief US economist, coming up on Bloomberg 0:12:32.400 --> 0:12:35.800 day Break weekend. Why Germany's chancellor is heading to China. 0:12:36.200 --> 0:12:50.720 I'm Tom Busby and this is Bloomberg. This is Bloomberg 0:12:50.760 --> 0:12:52.880 day Break weekend, our global look ahead at the top 0:12:52.920 --> 0:12:55.959 stories for investors in the coming week. I'm Tom Busby 0:12:55.960 --> 0:12:58.480 in New York. Up later in our program a look 0:12:58.480 --> 0:13:01.720 at some key economic data come out of China. But first, 0:13:01.880 --> 0:13:06.400 as China's economy struggles to recover, diplomatic relations become more 0:13:06.400 --> 0:13:09.920 crucial on the heels of US Treasury Secretary Janet Yellen's 0:13:10.000 --> 0:13:14.000 visit to Beijing last week. German Chancellor Olaf Schultz set 0:13:14.000 --> 0:13:16.560 to visit the region in the coming days. For more, 0:13:16.640 --> 0:13:19.000 Let's go to London and bring in Bloomberg Daybreak Europe 0:13:19.000 --> 0:13:20.439 Banker Stephen. 0:13:20.120 --> 0:13:23.520 Carroll Tom Janet Yellen went to China with the message 0:13:23.559 --> 0:13:27.439 that Beijing's manufacturing drive is a threat to other economies. 0:13:27.679 --> 0:13:31.400 Her comments at times strongly worded, we're respectfully received by 0:13:31.400 --> 0:13:34.480 her hosts, but aren't likely to result in a policy shift. 0:13:34.880 --> 0:13:37.959 So as Germany's Chancellor Olaf Schultz makes the trip to Beijing, 0:13:38.040 --> 0:13:41.160 can he hope for any more? European countries have taken 0:13:41.200 --> 0:13:43.920 a different approach to their relationship with China versus what 0:13:43.960 --> 0:13:47.280 the United States is doing. EU commissioned President our Slavanderlin 0:13:47.320 --> 0:13:51.319 has described the strategy as de risking rather than decoupling. 0:13:51.840 --> 0:13:55.080 That hasn't stopped the EU launching a competition investigation into 0:13:55.160 --> 0:13:58.800 Chinese subsidies for green industries. Olaf Schultz will be conscious 0:13:58.800 --> 0:14:02.320 that German companies are a major exporter to China, so 0:14:02.400 --> 0:14:05.520 he must be cautious. A recent survey by the German 0:14:05.600 --> 0:14:08.760 Chamber of Commerce in China highlighted the challenges that many 0:14:08.760 --> 0:14:13.240 Western firms have mentioned before. Two thirds of those operating 0:14:13.280 --> 0:14:16.320 in the country say they face unfair competition in the market, 0:14:16.600 --> 0:14:19.160 a problem that threatens to push up their costs and 0:14:19.280 --> 0:14:22.640 a road profit margins. Schultz's discussions in China will also 0:14:22.680 --> 0:14:26.560 be set against a backdrop of geopolitical unrest. Continue. Tensions 0:14:26.560 --> 0:14:29.320 in the Middle East and Russia's invasion of Ukraine are 0:14:29.320 --> 0:14:32.680 set to feature heavily during the upcoming G seven Foreign 0:14:32.720 --> 0:14:35.880 Ministers meeting in Italy. I've been discussing the implication of 0:14:35.920 --> 0:14:39.160 Schultz's visit to China and that meeting with Bloomberg's EMEA 0:14:39.160 --> 0:14:42.560 and THES director Rosalind Matheson. I started by asking her 0:14:42.760 --> 0:14:46.320 how different Scholtz's time in China will be to that 0:14:46.560 --> 0:14:49.240 of the trip by US Treasury Secretary Janet Yellen. 0:14:49.720 --> 0:14:52.680 Well, it'll be similar, but also a bit different, as 0:14:52.720 --> 0:14:56.640 you say, because the relationship between China and Germany is 0:14:56.680 --> 0:14:59.920 a bit different to the relationship between China and the US, 0:15:00.360 --> 0:15:03.480 although there are similarities in terms of the challenges around 0:15:03.920 --> 0:15:06.240 the business environment, and so you can expect that the 0:15:06.280 --> 0:15:10.240 German Chancellor Olive Schultz will be echoing some of what 0:15:10.360 --> 0:15:14.520 Janet Yellen was saying on her recent trip, the challenges 0:15:14.680 --> 0:15:19.080 for German companies operating their clarity around that business environment, 0:15:19.560 --> 0:15:23.360 certain tier around supply chains specifically, though for him, the 0:15:23.440 --> 0:15:26.560 issue of electric vehicles will probably come up again, and 0:15:26.600 --> 0:15:31.000 the tensions over Chinese support for their companies and the 0:15:31.040 --> 0:15:35.000 broader EU probe that's going on into that support. So 0:15:35.080 --> 0:15:38.560 there'll be some similarities around the messaging that's going to 0:15:38.560 --> 0:15:42.600 come from Olive Schultz, but also Germany's tended to take 0:15:43.080 --> 0:15:46.760 a slightly more careful line about the overall relationship. The 0:15:46.840 --> 0:15:51.640 US has been willing to criticize China more overtly on 0:15:51.680 --> 0:15:55.680 the human rights front, for example, and over what they 0:15:55.680 --> 0:15:58.960 see is its militarization of areas like the South China 0:15:59.000 --> 0:16:03.160 Sea with Taiwan. That doesn't mean that Olave Schultz won't 0:16:03.480 --> 0:16:08.200 bring those things up, but Germany is traditionally has just 0:16:08.320 --> 0:16:11.240 been a bit more cautious about some of their rhetoric 0:16:11.320 --> 0:16:16.040 because they really need the economic relationship with China to work. 0:16:16.280 --> 0:16:18.120 Yeah, I mean, the President of the European Commissioners used 0:16:18.120 --> 0:16:20.880 this expression de risking, not decoupling when it comes to 0:16:20.920 --> 0:16:25.600 the relationship with China is I'll love Schultz likely to 0:16:25.640 --> 0:16:29.000 step outside of that in his comments as he's muting officials. 0:16:29.400 --> 0:16:32.400 Well, so far, he's really maintained by and large the 0:16:32.840 --> 0:16:35.960 sort of the tone taken by his predecessor, Angela Merkle, 0:16:36.680 --> 0:16:38.840 and she was very much about, you know, similarly with 0:16:38.880 --> 0:16:42.200 other countries like Russia, I would add, keeping the dialogue going, 0:16:42.400 --> 0:16:47.080 keeping the conversation going, preserving the economic and trade relationship 0:16:47.160 --> 0:16:50.480 out of the view that if you bind yourselves economically 0:16:50.960 --> 0:16:53.760 and through investment and trade, then you're more likely to 0:16:53.760 --> 0:16:55.640 be able to behave better with each. 0:16:55.480 --> 0:16:57.080 Other on the political side. 0:16:57.200 --> 0:16:59.280 And that's very much the sort of the tone and 0:16:59.320 --> 0:17:03.000 philosophy adopted by Olaf Schultz since he came to power, 0:17:03.040 --> 0:17:04.840 and of course as someone who is very much part 0:17:04.920 --> 0:17:08.640 of the Merkele era himself, he has gotten a bit harder, 0:17:08.680 --> 0:17:11.520 i would say, than Angelo Merkele did on the political front. 0:17:11.960 --> 0:17:15.199 But that's also because Germany is under pressure within Europe 0:17:15.240 --> 0:17:16.480 to take that harder ligne. 0:17:16.520 --> 0:17:19.520 You see France, you see the UK, you see the 0:17:19.560 --> 0:17:20.240 EU as a. 0:17:20.200 --> 0:17:24.639 Whole, pressing China quite heavily on its behavior over trade, 0:17:24.840 --> 0:17:29.120 over market access, over its tech companies, and over its 0:17:29.160 --> 0:17:31.800 behavior around things like human rights, and Germany has been 0:17:31.840 --> 0:17:34.200 seen as a bit of an outlier, so he's been 0:17:34.200 --> 0:17:37.159 pushed quite heavily by his French counterpart Emmanual Macron to 0:17:37.200 --> 0:17:37.520 do that. 0:17:37.600 --> 0:17:39.720 So you might see that slightly harder. 0:17:39.520 --> 0:17:43.600 Tone, but generally he's been consistent with his predecessor's policy. 0:17:43.680 --> 0:17:45.639 Because part of this trip will involve a love Schultz 0:17:45.680 --> 0:17:48.840 also visiting German companies that operate in China, survey from 0:17:48.840 --> 0:17:50.960 the German Chamber of Commerce and China found that two 0:17:51.119 --> 0:17:53.720 thirds of German companies that operate in the country, so 0:17:53.800 --> 0:17:57.120 they face unfair competition in the market. I mean, realistically, 0:17:57.119 --> 0:17:59.399 does Olof Schultz have any leverage attack or something like that, 0:17:59.560 --> 0:18:02.119 given the you know, even Janet Yellen seemed of difficulty 0:18:02.200 --> 0:18:03.800 in getting any actual movement. 0:18:04.440 --> 0:18:05.120 Very unlikely. 0:18:05.640 --> 0:18:08.080 If Johanet Yellen can't succeed, I wouldn't imagine that all 0:18:08.080 --> 0:18:13.040 Love Schultz will. I mean, those surveys that show that companies, 0:18:13.119 --> 0:18:16.360 you know, German companies or British companies or American companies 0:18:16.800 --> 0:18:20.520 are complaining about the environment in China are very very common, 0:18:21.119 --> 0:18:23.920 and that sort of figure is not surprising because those 0:18:24.000 --> 0:18:28.160 concerns are longstanding about the ability to have clarity around 0:18:28.240 --> 0:18:31.320 market access and Chinese support for their own industry and 0:18:31.400 --> 0:18:34.280 so on. So that's not going to I think affect 0:18:34.400 --> 0:18:36.800 ol Love Schultz on his trip, although it does sort 0:18:36.800 --> 0:18:40.000 of show again the need to really be showing that 0:18:40.080 --> 0:18:44.120 he's listening to those concerns. But as a Chinese leadership 0:18:44.240 --> 0:18:47.440 going to take their cues from Germany, probably not. What 0:18:47.600 --> 0:18:51.119 they are interested potentially doing is bifurcating a bit, because 0:18:51.600 --> 0:18:53.719 China's quite good at trying to play countries a bit 0:18:53.800 --> 0:18:56.080 against each other. And what they might do is, you know, 0:18:56.400 --> 0:18:58.600 they'll have a certain tone with Germany that they won't 0:18:58.640 --> 0:19:01.200 have with the US for exams. They'll be keen to 0:19:01.359 --> 0:19:04.919 keep Germany probably closer in the tent right now, because 0:19:05.359 --> 0:19:08.480 that's to their advantage to have that kind of sense 0:19:08.520 --> 0:19:11.639 of potential disunity in Europe over a China policy. So 0:19:11.840 --> 0:19:15.000 it's all about playing those kind of games really, and 0:19:15.200 --> 0:19:18.360 so they're not going to change their policy simply because 0:19:18.440 --> 0:19:21.359 Olave Scholtz asks them to. They certainly wouldn't do it 0:19:21.400 --> 0:19:24.200 even if Janet Yellen asks them to, because they're really 0:19:24.240 --> 0:19:28.120 playing their own game there. It'll be interesting to see, how, 0:19:28.440 --> 0:19:31.560 you know, whether they try and keep Germany peeled off 0:19:31.600 --> 0:19:33.240 from the rest of the pack, because. 0:19:32.960 --> 0:19:35.639 I mean, there is something in common that China and 0:19:35.760 --> 0:19:38.359 Germany have is weakness in their economies as well for 0:19:38.480 --> 0:19:41.399 slightly different reasons. Are there matters of common ground that 0:19:41.480 --> 0:19:45.640 we could see sort of flagship announcements or issues where 0:19:46.000 --> 0:19:47.800 they emerge at some positive cooperation. 0:19:48.480 --> 0:19:50.520 Well, certainly it's not just a one way street. 0:19:50.600 --> 0:19:53.159 And that's a really important point that you make I mean, 0:19:53.200 --> 0:19:58.200 obviously Germany in the US need China economically and for business, 0:19:58.280 --> 0:20:02.000 but China also needs them for business. The Chinese economy 0:20:02.119 --> 0:20:05.000 has been quite weak of late. It's showing a few 0:20:05.119 --> 0:20:08.000 green shoots at the moment, but certainly it's nowhere on 0:20:08.119 --> 0:20:11.000 the level that it was some years ago pre pandemic, 0:20:11.280 --> 0:20:14.320 and Cgping is very consciously aware of that. He does 0:20:14.480 --> 0:20:17.399 need his economy to be stable, and so there are 0:20:17.520 --> 0:20:20.440 some mutual interests there. You can imagine there'll be lots 0:20:20.480 --> 0:20:22.840 of positive rhetoric in a way like there was with 0:20:22.960 --> 0:20:27.320 Janet Yellen, also about the relationship about being open for business, 0:20:27.440 --> 0:20:32.360 about China being ready to engage with these companies that obviously, 0:20:32.600 --> 0:20:35.720 you know, doesn't necessarily reflect reality, but there'll be that 0:20:35.880 --> 0:20:38.680 rhetoric and that sense of mutual need. You can also 0:20:38.760 --> 0:20:42.520 imagine there'll be conversations around areas of mutual interest globally 0:20:42.800 --> 0:20:45.960 between Germany and China. And one key one there obviously 0:20:46.080 --> 0:20:49.520 is Russia's actions in Ukraine with the war there. You 0:20:49.560 --> 0:20:52.000 can imagine there big conversation around that. There'll beg conversation 0:20:52.600 --> 0:20:55.000 around the Middle East and the war in Gaza, There'll 0:20:55.000 --> 0:20:58.080 be conversations around disruptions to shipping and global supply chains. 0:20:58.400 --> 0:21:00.680 So some of those broader topics will definite they come up. 0:21:00.640 --> 0:21:02.560 Of course, and some of those issues are also going 0:21:02.600 --> 0:21:04.879 to feature with the other big geopolitical event in the 0:21:04.920 --> 0:21:07.680 coming days, which is the G seven Foreign Minister's meeting 0:21:07.760 --> 0:21:11.320 that's happening in Italy. What are we likely to hear 0:21:11.440 --> 0:21:13.960 on things like Russia Ukraine at that meeting. 0:21:14.800 --> 0:21:19.000 We'll certainly going to expect general expressions of support for Ukraine, 0:21:19.040 --> 0:21:21.880 of unity because the G seven has been very unified 0:21:21.920 --> 0:21:25.560 in general around the need to keep supporting Ukraine, and 0:21:25.640 --> 0:21:29.000 what you may see, of course is disagreements over in 0:21:29.119 --> 0:21:32.000 what way to keep supporting Ukraine, because of course the 0:21:32.119 --> 0:21:34.640 US is sitting on a very very big aid package 0:21:34.720 --> 0:21:37.920 for months that's unlikely to be unlocked anytime soon, in 0:21:38.000 --> 0:21:40.400 a sense that maybe Europe is left holding the can 0:21:41.440 --> 0:21:45.080 more than they did previously for military and financial support 0:21:45.560 --> 0:21:47.919 for Ukraine. So that's definitely going to be one topic 0:21:48.080 --> 0:21:51.080 for conversation, is that they all need to be pulling 0:21:51.119 --> 0:21:53.280 their weight when it comes to that. There'll probably be 0:21:53.400 --> 0:21:56.840 conversations with Ukraine on the table in terms of the 0:21:56.960 --> 0:21:59.159 future of the war. Is there a need at some 0:21:59.359 --> 0:22:02.959 point to crack open the door to negotiations with Russia. 0:22:03.160 --> 0:22:06.200 Does there have to be some sense of getting a 0:22:06.320 --> 0:22:10.000 deal as this war goes on and Ukraine certainly is 0:22:10.320 --> 0:22:11.920 on the back foot a bit at least on the 0:22:12.000 --> 0:22:15.760 ground inside Ukraine itself, So that will probably be the 0:22:15.840 --> 0:22:18.720 two major topics when it comes to Ukraine. And then 0:22:18.800 --> 0:22:21.240 that broord a conversation around how Europe can beef up 0:22:21.280 --> 0:22:23.359 its own defense and its own defense spending. 0:22:23.920 --> 0:22:27.040 That's our EMEA News director Roslind Mathieson knows Roz was 0:22:27.040 --> 0:22:29.320 telling us geopolitical tensions high on the agenda at the 0:22:29.400 --> 0:22:33.240 G seven meeting. The wars in Ukraine and Gaza led 0:22:33.240 --> 0:22:36.400 to calls for countries to increase defense spending, and Bloomberg 0:22:36.440 --> 0:22:39.840 Economics recently estimated that an increase to four percent of 0:22:39.960 --> 0:22:43.080 GDP soort by some would cost governments of G seven 0:22:43.119 --> 0:22:47.040 countries more than ten million dollars per year over the 0:22:47.119 --> 0:22:51.040 next decade. Global economist to Bargabi Schuchtoweale joined us on 0:22:51.119 --> 0:22:53.679 Bloomberg Daybreak Europe to discuss their forecasts. 0:22:54.200 --> 0:22:57.280 We looked at two specific scenarios for defense spending, one 0:22:57.320 --> 0:22:59.280 in the US and has partners spent at least two 0:22:59.280 --> 0:23:02.440 percent of their day of their GDP on defense, and 0:23:02.560 --> 0:23:04.920 then we lost at a more extreme scenario which emulates 0:23:04.960 --> 0:23:07.200 the Cold War levels. So if they raise defense spending 0:23:07.240 --> 0:23:10.480 to four percent, for countries like Germany and Canada with 0:23:10.680 --> 0:23:13.600 relatively low levels of forecast to debt and physcal headroom 0:23:14.040 --> 0:23:16.880 is higher, spending may be painful, but it's actually feasible. 0:23:17.359 --> 0:23:20.080 But for a lot of governments, especially Japan, Italy and 0:23:20.160 --> 0:23:22.439 maybe even France, it's they kind of struggle a lot 0:23:22.520 --> 0:23:26.520 to increase defense spending substantially without there being additional spending 0:23:26.600 --> 0:23:30.240 cuts somewhere higher taxes, additional debt, or some combination of 0:23:30.320 --> 0:23:34.200 the lot. France, Italy and Spain would be particularly exposed 0:23:34.240 --> 0:23:38.040 if if the extra funding spending is funded by borrowing, 0:23:38.359 --> 0:23:40.399 which Italy is public debt jumping to one hundred and 0:23:40.440 --> 0:23:42.680 seventy nine percent of output by twenty thirty four f 0:23:42.680 --> 0:23:45.200 one hundred and forty four percent this year. For the US, 0:23:45.200 --> 0:23:47.879 which is already spending three point three percent on defense, 0:23:48.320 --> 0:23:50.239 debt could still increase to one hundred and thirty one 0:23:50.240 --> 0:23:53.360 percent from ninety nine percent this year over the next decade. 0:23:53.760 --> 0:23:56.560 If we pushed up military spending to four percent. That's 0:23:56.600 --> 0:23:59.280 where we get potentrally indolar numbers from the US and 0:23:59.359 --> 0:24:02.119 major allies together. If they were to reach such levels, 0:24:02.560 --> 0:24:03.760 that's going to be a large number. 0:24:04.200 --> 0:24:07.760 Is an increase of defense spending to two percent, which 0:24:07.840 --> 0:24:10.920 is the sort of NATI goal. Would that be enough 0:24:11.160 --> 0:24:14.359 to meet the challenges? What's the sort of thinking behind that? 0:24:14.880 --> 0:24:17.879 In Europe, there's been this particularly in this need to 0:24:18.000 --> 0:24:20.560 catch up because the industry has been shrinking at the 0:24:20.680 --> 0:24:23.600 years of low spending on defense, particularly like we've been 0:24:23.640 --> 0:24:26.399 see seeing these new style of wars in Ukraine with 0:24:26.560 --> 0:24:30.120 a lot more focus on air defense, and allies will 0:24:30.160 --> 0:24:32.639 need to invest in more on that in air defense 0:24:32.680 --> 0:24:35.000 and ammunition. And there's also these plants for NATTER to 0:24:35.040 --> 0:24:37.800 put as many as three hundred thousand troops on higher readiness, 0:24:38.000 --> 0:24:39.600 and all of that is going to cost a lot 0:24:39.680 --> 0:24:42.000 of money. And there's also promise of aid to keep 0:24:42.320 --> 0:24:45.440 which needs to happen. And some officials are pointing to 0:24:45.480 --> 0:24:47.760 Cold War levels where native allies spent about three to 0:24:47.840 --> 0:24:50.280 four percent on defense as what may be needed to deal. 0:24:50.160 --> 0:24:50.720 With these sets. 0:24:50.880 --> 0:24:54.080 That was global economist at Bloomberg Economics Pargavi shops Well, 0:24:54.119 --> 0:24:57.639 speaking to myself and Caroline Hepger. I'm Stephen Carroll in London. 0:24:57.720 --> 0:24:59.960 You can catch us every weekday morning here for bloom 0:25:00.280 --> 0:25:02.480 day Break. Here at begetting at six am in London 0:25:02.800 --> 0:25:05.880 and one am on Wall Streets. Tom, Thank you, Steven, 0:25:05.920 --> 0:25:08.320 and coming up on Bloomberg day Break weekend to look 0:25:08.359 --> 0:25:12.000 ahead at some key economic data in China. Could there 0:25:12.080 --> 0:25:15.720 be signs of recovery for the slumping Chinese economy? I'm 0:25:15.800 --> 0:25:17.760 Tom Busby and this is Bloomberg. 0:25:28.640 --> 0:25:30.679 I'm Tom Busby in New York with your global look 0:25:30.720 --> 0:25:33.120 ahead at the top stories for investors. In the coming week. 0:25:33.280 --> 0:25:35.440 We'll be getting a slow of economic data out of 0:25:35.560 --> 0:25:40.520 China this week, including GDP, industrial production and retail sales data. 0:25:40.880 --> 0:25:43.800 Let's get to Bloomberg Daybreak Asia hosts Brian Curtis and 0:25:43.960 --> 0:25:46.879 Doug Krisner as we look for signs of recovery in 0:25:46.960 --> 0:25:48.000 the Chinese economy. 0:25:48.320 --> 0:25:51.080 Tom, China may be close to turning the corner on 0:25:51.160 --> 0:25:55.200 its economic recovery, but the jury is still out. Manufacturing 0:25:55.280 --> 0:25:58.119 picked up in March and risk assets have seen a 0:25:58.200 --> 0:26:01.080 bounce of late, but consumer activity has lagged. 0:26:01.200 --> 0:26:04.160 And in the coming week we'll get retail sales numbers 0:26:04.359 --> 0:26:07.120 along with data on home prices that would be both 0:26:07.240 --> 0:26:10.080 new and used. These data could give us some insight 0:26:10.280 --> 0:26:12.080 into the health of the Chinese consumer. 0:26:12.440 --> 0:26:16.200 Can consumers emerge from the doldrums and get the economy 0:26:16.280 --> 0:26:20.040 going again? We put that question to Mark Conan at AIA. 0:26:20.160 --> 0:26:24.720 Coming out of the pandemic and then uncertainty around policy, 0:26:24.960 --> 0:26:29.760 the confusion around geopolitics, the weakness on the currency, the deflation, 0:26:29.960 --> 0:26:33.960 the cut in rates, all of these have compounded upon sentiment, 0:26:34.119 --> 0:26:36.080 and I think it's going to take a little bit 0:26:36.160 --> 0:26:38.679 longer for people to recover from that and for us 0:26:38.720 --> 0:26:42.680 to see a significant improvement within consumption. That's at an 0:26:42.760 --> 0:26:45.879 aggregate level. But of course within that picture there are 0:26:45.920 --> 0:26:49.320 those that are prospering, that are able to offer a 0:26:49.400 --> 0:26:52.840 relative advantage and are continuing to make progress well. 0:26:52.960 --> 0:26:55.520 Joining us now to discuss the plight of the Chinese 0:26:55.600 --> 0:26:59.640 consumer is Eric ju Bloomberg economists covering China and Hong Kong, 0:27:00.040 --> 0:27:03.120 and Jenny Marsh, team leader for a Greater China Eco Goz. 0:27:03.320 --> 0:27:05.439 Welcome to you both. We're glad you can help us 0:27:05.560 --> 0:27:08.520 take a look at what's happening with the Chinese domestic economy. 0:27:08.600 --> 0:27:11.240 A moment ago Markcnin mentioned that there have been some 0:27:11.520 --> 0:27:15.080 winners of late. Two areas of the economy seeing a 0:27:15.160 --> 0:27:17.960 pickup are manufacturing and exports. 0:27:18.440 --> 0:27:21.480 Exports so far this year have surprised on the upside 0:27:21.560 --> 0:27:23.639 for China. As we've say in the rest of the 0:27:23.680 --> 0:27:27.920 world has perhaps continued to grow more vigorously than was expected. 0:27:28.000 --> 0:27:31.880 China has benefited from that, but that transition towards more 0:27:31.920 --> 0:27:34.800 of a domestic focus for the economy is certainly a 0:27:34.920 --> 0:27:36.200 long term policy. 0:27:36.720 --> 0:27:40.399 That's Mark Conan at AIA talking about both internal and 0:27:40.680 --> 0:27:43.920 external inputs into Chinese growth. We thought for the discussion 0:27:44.040 --> 0:27:46.680 today that we would focus a little bit more on 0:27:46.920 --> 0:27:51.560 domestic consumption and what it takes to get consumers going again. Jenny, 0:27:51.960 --> 0:27:55.400 how important is it for the Chinese economy to see 0:27:55.480 --> 0:27:58.840 some sort of turn up in consumption and is it coming. 0:27:59.240 --> 0:28:03.120 It's absolutely crucial that they see turn up and upswinging 0:28:03.200 --> 0:28:06.879 consumption because they cannot rely on the factory floor alone 0:28:07.000 --> 0:28:09.840 to sort of turn the economy around. This year, there 0:28:09.920 --> 0:28:12.640 have been some green shoots, you know, over the recent 0:28:12.760 --> 0:28:17.080 Chingan holiday, torres spent more per trip than any time 0:28:17.200 --> 0:28:20.920 since twenty nineteen, so you know that was encouraging, but 0:28:21.040 --> 0:28:23.600 you know, outside these sort of big holiday events where 0:28:23.680 --> 0:28:26.439 pent up demand is being released, there's still a lot 0:28:26.480 --> 0:28:29.840 of pressures on people and the sort of the general household. 0:28:30.240 --> 0:28:31.600 You know, the property crisis is. 0:28:31.600 --> 0:28:35.200 Still weighing on confidence, you know, and you can see 0:28:35.920 --> 0:28:38.880 that the CPI is sort of a reflection of that 0:28:38.960 --> 0:28:41.280 week demand. You know that people are not buying enough 0:28:41.360 --> 0:28:44.760 and there before prices are continuing to sort of feel 0:28:44.800 --> 0:28:46.400 these deflationary pressures at the moment. 0:28:46.760 --> 0:28:49.640 Eric, the service's economy is a very broad category. 0:28:49.760 --> 0:28:50.200 We know that. 0:28:50.480 --> 0:28:52.280 But when you look at the sentiment vis A VIV, 0:28:52.280 --> 0:28:55.640 the official PMI data, what do we know about business 0:28:55.760 --> 0:28:57.840 centiment in the services industries? 0:28:58.000 --> 0:29:00.760 I think if you look to in my you know, 0:29:00.920 --> 0:29:04.760 services in earlier this year, I think it's generally sure 0:29:04.880 --> 0:29:08.960 that they're doing well. They'reing the holiday, but if you 0:29:09.240 --> 0:29:12.440 look at peers outside of a holiday, you know, those consumption, 0:29:12.800 --> 0:29:16.200 those high frequently data actually is show that people are 0:29:16.280 --> 0:29:19.560 not really spending much except for the holiday. And even 0:29:19.600 --> 0:29:21.560 if you look at holiday data, we just got the 0:29:21.640 --> 0:29:25.160 early April holiday and the per day you know, the 0:29:25.440 --> 0:29:29.640 capital spending was still not as strong as before, right, 0:29:29.760 --> 0:29:32.840 so you see, yeah, lots of people are traveling, but 0:29:32.960 --> 0:29:35.920 they're not really spending as much. So some part of 0:29:36.000 --> 0:29:38.680 it can be, you know, some culture shift, right young people, 0:29:39.240 --> 0:29:41.920 they no longer spend lots of money on shopping around. 0:29:42.080 --> 0:29:45.480 They did more value experience, you know, in the travels. 0:29:45.880 --> 0:29:49.360 And we also see similar patterns even in overseas tourism. 0:29:49.480 --> 0:29:53.720 If we look at data from a visitor from China 0:29:53.880 --> 0:29:56.720 in Hong Kong, in Japan, we did some anasis and 0:29:56.960 --> 0:30:01.280 see it's a very similar story. People coming back to 0:30:01.600 --> 0:30:05.520 those tourists vidits, but they're not already spending on the 0:30:05.560 --> 0:30:06.360 mntrets before. 0:30:06.640 --> 0:30:09.120 It seems like housing is at the root of a 0:30:09.160 --> 0:30:11.480 lot of the spending issues. That people just don't feel 0:30:11.520 --> 0:30:14.960 so confident with their overall wealth and about their security 0:30:15.280 --> 0:30:18.400 economically going forward, and so we need to see some 0:30:18.560 --> 0:30:21.920 improvement there. And Eric, let me put a question to 0:30:22.000 --> 0:30:25.280 you that's tied to policy making. And we did see 0:30:25.640 --> 0:30:28.360 a few newspapers talking about this just in the past 0:30:28.400 --> 0:30:31.480 couple of days, about cities removing some of the lower 0:30:31.560 --> 0:30:34.680 limits for mortgage rates on first time home buying and 0:30:34.880 --> 0:30:39.560 generally just loosening the strings a little bit on housing policies. 0:30:40.200 --> 0:30:41.000 Is that going to work? 0:30:41.160 --> 0:30:45.480 I have to say, those incremental, those small steps. It 0:30:45.680 --> 0:30:49.000 has proved that it's not working very well so far. 0:30:49.200 --> 0:30:51.760 I think since the second half of last year, we've 0:30:51.840 --> 0:30:55.560 seeing lots of you know, easing steps from local governments 0:30:55.600 --> 0:31:00.160 and losing mortgage rates and you know, relaxing some home 0:31:00.200 --> 0:31:04.440 purchaser rules. But it's all step steps, small loosening, and 0:31:05.200 --> 0:31:08.400 we haven't seen any you know, big impacts from those policies. 0:31:08.760 --> 0:31:12.720 So that's that suggests you probably need more aggressive, you know, 0:31:12.880 --> 0:31:17.000 more proactive eating steps. Someone would suggest that you should 0:31:17.000 --> 0:31:20.200 have relaxed, removed, just like Hong Kong, remove all the 0:31:20.360 --> 0:31:25.000 home purchasing, you know, relaxed the restrictions especialty in the 0:31:25.080 --> 0:31:26.560 Tier one cities in China. 0:31:26.760 --> 0:31:29.080 Jenny. Last year, I think the government unveiled a plan 0:31:29.160 --> 0:31:33.560 to boost household spending on everything from electric appliances to 0:31:33.680 --> 0:31:37.080 furniture things like that. How is that working. Is it 0:31:37.240 --> 0:31:41.000 been an effective prescription to try to revitalize a bit 0:31:41.040 --> 0:31:41.480 of spending. 0:31:41.960 --> 0:31:42.479 Not so far. 0:31:42.880 --> 0:31:45.440 So this is the sort of cash for clunkers program 0:31:45.520 --> 0:31:47.720 they rolled out, and it's really the government sort of 0:31:47.760 --> 0:31:52.520 big swing at trying to boost consumer spending, essentially raising 0:31:52.600 --> 0:31:55.920 the standards for electronics across a broad range of sectors, 0:31:56.360 --> 0:31:58.520 forcing people to sort of hand in their old goods 0:31:58.560 --> 0:31:59.720 and buy new ones. 0:32:01.200 --> 0:32:02.680 It's very I think that it's going to. 0:32:02.680 --> 0:32:04.640 Be rolled out sort of in a piecemeal way, province 0:32:04.720 --> 0:32:07.760 by province, and we've been monitoring closely to sort of 0:32:08.000 --> 0:32:10.120 watch for the beginning of this program, and we haven't 0:32:10.160 --> 0:32:12.600 yet seen signs that it has sort of been put 0:32:12.640 --> 0:32:15.480 into effect. But you know, the rollout has been quite 0:32:15.480 --> 0:32:17.520 slow so far, so we're not going to see the 0:32:17.520 --> 0:32:19.440 effects of it yet. It was a note this week 0:32:19.480 --> 0:32:22.280 saying it could raise GDP by zero point nine percent 0:32:22.760 --> 0:32:25.320 when you look at the industrial impact of everything that 0:32:25.360 --> 0:32:28.080 would need to be manufactured for the program, so it 0:32:28.160 --> 0:32:30.040 could be significant. But it's going to be rolled out 0:32:30.040 --> 0:32:32.880 over a series of years and it hasn't yet come 0:32:32.920 --> 0:32:33.520 into effect. 0:32:34.160 --> 0:32:38.240 Recently, in a discussion about the latest CPI and PPI data, 0:32:38.280 --> 0:32:40.680 we caught up with way Yaw, chief economist for the 0:32:40.720 --> 0:32:44.080 Asia specific at stop Gen and it was kind of 0:32:44.160 --> 0:32:46.880 interesting because you know, it was a mixed bag. You 0:32:47.000 --> 0:32:50.040 had very negative PPI, but everybody expected that, and it 0:32:50.200 --> 0:32:53.920 was in line consumer prices. As you mentioned earlier, Jenny, 0:32:54.200 --> 0:32:57.840 they did advance, but only just just zero point one percent. 0:32:58.320 --> 0:33:01.920 So what was interesting was I I mentioned to Wai yea, well, 0:33:01.960 --> 0:33:04.080 at least that's a little bit of positive news, and 0:33:04.240 --> 0:33:06.920 we can listen to her answer here. She also started 0:33:06.960 --> 0:33:08.400 to bring in policy in China. 0:33:08.920 --> 0:33:10.680 Maybe it's just a wee bit of good news, but 0:33:10.800 --> 0:33:14.360 I think structurally things haven't really changed much. If you 0:33:14.440 --> 0:33:18.000 look at economic situation in China, it continued to be 0:33:18.680 --> 0:33:21.440 a challenge of not enough do miss the demand and 0:33:21.520 --> 0:33:25.360 a lot of supply so and a policy on the 0:33:25.400 --> 0:33:29.640 policy front, there is not much significant to address this issue. 0:33:29.960 --> 0:33:32.840 So, Jenny, if we were looking at policy, if we had, 0:33:33.040 --> 0:33:35.200 you know, a wish list of things that we thought 0:33:35.280 --> 0:33:37.600 would be necessary to be done by the policy makers 0:33:38.040 --> 0:33:40.800 to get consumers moving, what would be high on your list? 0:33:41.160 --> 0:33:44.160 I think there are no quick fixes. I mean, they 0:33:44.200 --> 0:33:48.720 could offer consumers sort of direct stimulus, I sort of 0:33:48.720 --> 0:33:51.200 give them cash handouts to be spending. But you know, 0:33:51.280 --> 0:33:54.360 if you do that, the underlyinging structural problems still remain right, 0:33:54.440 --> 0:33:57.960 so you'll still have the property crisis, which is really 0:33:58.080 --> 0:34:00.640 underpending household wealth and sort of the root of a 0:34:00.680 --> 0:34:03.240 lot of the problems. You know, when Janet Yellen came 0:34:03.320 --> 0:34:07.360 to Beijing last week, and she basically advocated sort of 0:34:07.400 --> 0:34:11.600 a rethink of the Chinese economic policy in order to 0:34:11.680 --> 0:34:14.400 boost consumption and rebalance the economy. And the things that 0:34:14.480 --> 0:34:17.840 she was proposing were not short term suggestions. You know, 0:34:17.960 --> 0:34:22.440 she was saying, improve pension security, make education more affordable, 0:34:23.120 --> 0:34:25.359 you know, things that make people feel like they don't 0:34:25.400 --> 0:34:28.200 need to keep saving. Because of this high household saving 0:34:28.280 --> 0:34:32.319 rate in China, the social security net isn't there. If 0:34:32.360 --> 0:34:34.560 something happens and you feel very ill, you know you're 0:34:34.560 --> 0:34:37.000 going to have to pay for your medical care. You 0:34:37.080 --> 0:34:38.920 know you need to say for your retirement because there 0:34:39.000 --> 0:34:43.120 isn't a good state funded pension program. So this is 0:34:43.239 --> 0:34:46.040 all part of the broader framework and there's no easy fix, 0:34:46.480 --> 0:34:49.239 in my opinion, for getting people spending again. Obviously, if 0:34:49.239 --> 0:34:51.279 things improve in the economy looks better, people will feel 0:34:51.600 --> 0:34:54.239 more boyd. But you know, there's some big problems there, 0:34:54.280 --> 0:34:56.320 and these are sort of deep seated spending habits. 0:34:56.520 --> 0:34:58.719 So playing off that, Eric, I'm wondering, if you're a 0:34:58.800 --> 0:35:03.760 policy maker, would you necessarily push banks into reducing deposit 0:35:03.960 --> 0:35:07.760 rates as a way of discouraging savings and maybe forcing 0:35:07.880 --> 0:35:11.680 some more money, more liquidity into the economy. 0:35:11.640 --> 0:35:14.120 That could be helped. But I think the fundamental problem, 0:35:14.280 --> 0:35:18.200 the Postumaker neutral address is the acceptation of the household 0:35:18.400 --> 0:35:19.360 and the business. 0:35:19.640 --> 0:35:19.799 Right. 0:35:19.920 --> 0:35:24.000 So in the past, it's everybody is expecting that economy 0:35:24.040 --> 0:35:27.160 is booming, right, the product market is booming, so I'm 0:35:27.200 --> 0:35:30.200 going to you know, make more money and my property 0:35:30.320 --> 0:35:32.879 is going to work more in the future, so it's 0:35:33.000 --> 0:35:35.640 it's okay for me to you know, spend more now. 0:35:35.800 --> 0:35:38.239 But I think now the expectation is kind of you 0:35:38.360 --> 0:35:42.240 know reverse, right, So everybody was expecting, they're having probably 0:35:42.239 --> 0:35:46.680 a harder time looking forward, especially you know, giving you 0:35:46.760 --> 0:35:50.080 see lots of news about you know, some some financial 0:35:50.160 --> 0:35:54.120 sector they're cutting salaries, right, They're cutting you know, payments. 0:35:54.239 --> 0:35:57.640 So I think that the people's acceptation is not very 0:35:57.800 --> 0:36:00.719 high at this moment with economy slow in with lots 0:36:00.760 --> 0:36:05.440 of restrictive kind of regulation trying to you know, contain 0:36:06.040 --> 0:36:10.120 the income growth, and that's put more pressure on you know, 0:36:10.239 --> 0:36:14.120 people feeling if really my life is going to get better, 0:36:14.280 --> 0:36:17.480 you know, looking forward, so I would probably you know, 0:36:17.920 --> 0:36:21.640 spend save more and now just to prepare for words days. 0:36:21.760 --> 0:36:25.080 There are some technical reasons too, sometimes where people don't spend. 0:36:25.120 --> 0:36:27.959 For instance, the government just asked hotels to accept foreign 0:36:28.000 --> 0:36:32.040 credit cards for people traveling. Could could the Chinese authorities 0:36:32.120 --> 0:36:36.040 do more to to try to really stimulate domestic tourism, 0:36:36.200 --> 0:36:38.680 light a fire there and even encourage people to go 0:36:38.760 --> 0:36:39.680 to maccount. 0:36:39.640 --> 0:36:42.560 I think people are really going there, but I'm not 0:36:42.600 --> 0:36:47.400 sure if they're really spending to the casinos, because they 0:36:48.000 --> 0:36:51.200 really they they're not as you know, as willing to 0:36:51.280 --> 0:36:54.800 spend as before. So it's not only on spending money 0:36:54.840 --> 0:36:57.120 I'm putting in good. It's also applied to, you know, 0:36:57.200 --> 0:36:58.480 spending money around gambling. 0:36:58.760 --> 0:37:01.800 Jenny, I'm curious about out the degree to which the 0:37:01.880 --> 0:37:04.680 story on weak domestic demand is tied to a labor 0:37:04.719 --> 0:37:08.440 market that may be struggling, particularly where young people are concerned. 0:37:08.560 --> 0:37:10.040 Is that a part of the narrative here. 0:37:10.320 --> 0:37:13.920 Yeah. You know, you've got very strong youth unemployment, and 0:37:14.080 --> 0:37:17.400 even the overall employment rate last month erased all the 0:37:17.480 --> 0:37:20.600 gains that had made since the previous six months, so 0:37:20.680 --> 0:37:24.440 you're seeing declined and employment rates overall. So you have 0:37:24.560 --> 0:37:27.360 this weak labor market. So the overall landscape for the 0:37:27.440 --> 0:37:30.520 Chinese consumer is pretty poor. I do think on the 0:37:30.560 --> 0:37:32.600 sort of the sentiment side, the flip of it is 0:37:32.800 --> 0:37:35.920 after three years of COVID, there is pent up demand 0:37:36.280 --> 0:37:39.480 for experiences and people are sort of excited about traveling. 0:37:39.560 --> 0:37:42.000 We're seeing that in the numbers, but they're changing how 0:37:42.040 --> 0:37:44.600 they're spending, so they're preferring to go to third and 0:37:44.680 --> 0:37:49.320 fourth tier cities. It's not as high value spending as before. 0:37:50.000 --> 0:37:51.719 We'll have to leave it there, Jenny, thanks so much 0:37:51.719 --> 0:37:54.479 for joining us. Jenny Marsh, team leader for Greater China 0:37:54.600 --> 0:37:58.960 ecogov at Bloomberg, and Eric ju Bloomberg economists covering China 0:37:59.120 --> 0:38:02.319 and Hong Kong. I'm Brian Curtis here in Hong Kong 0:38:02.400 --> 0:38:05.440 along with Doug Krisner. You can catch us every weekday 0:38:05.560 --> 0:38:08.239 for Bloomberg Daybreak Asia, beginning at eight am in Hong 0:38:08.360 --> 0:38:11.120 Kong and eight pm on Wall Street. Tom. 0:38:11.600 --> 0:38:13.920 Thank you Brian, and thank you Doug. And that does 0:38:13.960 --> 0:38:16.680 it for this edition of Bloomberg day Break Weekend. Join 0:38:16.760 --> 0:38:19.000 us again Monday morning at five am Wall Street time 0:38:19.040 --> 0:38:21.560 for the latest on the market's overseas and the news 0:38:21.640 --> 0:38:24.839 you need to start your day. I'm Tom Buzby. Stay 0:38:24.920 --> 0:38:27.719 with us. Top stories and global business headlines are coming 0:38:27.840 --> 0:38:28.640 up right now.