US Retail Sales, Netflix Preview

Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.360 --> 0:00:11.840 This is Bloomberg day Break Weekend, our global look at 0:00:11.840 --> 0:00:14.240 the top stories in the coming week from our Daybreak 0:00:14.240 --> 0:00:16.880 anchors all around the world, and straight ahead on the program, 0:00:16.880 --> 0:00:19.640 a look at US retail sales and what that data 0:00:19.680 --> 0:00:23.680 point may mean for Federal reserve policy moving forward. I'm 0:00:23.720 --> 0:00:24.960 Tom Busby in New York. 0:00:25.280 --> 0:00:27.400 I'm Stephen Carolyn London. But we're looking ahead to the 0:00:27.480 --> 0:00:30.600 UK's new Prime minister hosting his neighbors for a meeting 0:00:30.760 --> 0:00:32.559 of the European political community. 0:00:32.840 --> 0:00:35.280 And I'm Brian Curtis in Hong Kong. We look ahead 0:00:35.320 --> 0:00:38.159 to China's Third Plan of and whether it's steady as 0:00:38.159 --> 0:00:42.040 she goes on policy or surprising new developments. 0:00:42.440 --> 0:00:46.440 That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 0:00:46.479 --> 0:00:50.280 Eleve Them three Own New York, Bloomberg ninety nine to one, Washington, DC, 0:00:50.600 --> 0:00:54.600 Bloomberg one O six one, Boston, Bloomberg nine sixty, San Francisco, 0:00:54.880 --> 0:00:59.080 DAB Digital Radio, London, Sirius XM one nineteen and around 0:00:59.160 --> 0:01:01.800 the world on Bloemberg Radio dot com and via the 0:01:01.840 --> 0:01:03.000 Bloomberg Business App. 0:01:06.840 --> 0:01:09.319 Good day to you. I'm Tom Busby, and we begin 0:01:09.400 --> 0:01:12.920 today's program with US retail sales for June. That data 0:01:13.000 --> 0:01:15.959 out on Tuesday morning, eight thirty am Wall Street Time. 0:01:16.120 --> 0:01:19.440 And after more signs that inflation is cooling, how might 0:01:19.520 --> 0:01:22.320 that move the needle for FED policy going forward? Well, 0:01:22.360 --> 0:01:28.000 for more, we're joined by Estello, us economist with Bloomberg Economics. Well, Estelle, 0:01:28.040 --> 0:01:31.759 after two months in a row of pretty lackluster retail spending, 0:01:32.240 --> 0:01:35.000 what is your outlook for retail sales in June. 0:01:35.800 --> 0:01:40.280 We're actually expecting another month of very weak retail sales 0:01:40.319 --> 0:01:44.880 for June. We're expecting the headline retails print to print 0:01:45.000 --> 0:01:49.560 at negative zero point three percent. We're expecting the more 0:01:49.960 --> 0:01:54.320 important control group retail sales figure, that's the retail sales 0:01:54.480 --> 0:01:58.360 figure that strips out more of the volatile components of 0:01:58.720 --> 0:02:02.760 the retail sales data, to print at zero percent. So 0:02:02.800 --> 0:02:08.040 that's flat reading of retail sales. Now, the negative zero 0:02:08.120 --> 0:02:12.600 point three percent headline retail sales reading we're expecting partially 0:02:12.680 --> 0:02:16.840 reflects a really sharp decline in auto sales in the 0:02:16.840 --> 0:02:20.360 month of June. Now, part of this is reflective of 0:02:20.400 --> 0:02:22.880 the fact that a lot of auto dealers in the 0:02:22.880 --> 0:02:26.960 month of June saw a cyber attack on the software 0:02:27.040 --> 0:02:30.880 that they use to process sales, so that affected the 0:02:30.919 --> 0:02:34.559 top line sales figures we saw in June for automobiles 0:02:34.919 --> 0:02:37.800 and may not actually be reflective of a sharp pullback 0:02:37.840 --> 0:02:40.240 in consumer spending, but that's in the data. So that's 0:02:40.240 --> 0:02:43.960 why we're forecasting a negative numbering you mentioned that we've 0:02:44.000 --> 0:02:48.080 already had two consecutive months of week retail sales prints. 0:02:48.440 --> 0:02:52.600 If our forecast for the June retail sales is correct, 0:02:52.919 --> 0:02:56.040 it's going to show that consumer spending is very much 0:02:56.120 --> 0:02:59.720 a slowing trend. And what that mainly is reflecting is 0:02:59.720 --> 0:03:03.680 that consumers are very much feeling the pressure from the 0:03:03.680 --> 0:03:06.959 Federal Reserve's high interest rates. The Fed is very much 0:03:07.080 --> 0:03:10.240 waiting to have more confidence that inflation is going towards 0:03:10.280 --> 0:03:13.760 this two percent target. And how consumer spending plays into 0:03:13.800 --> 0:03:17.280 that is that as we see consumers being stressed about 0:03:17.560 --> 0:03:20.760 by high interest rates, they're pulling back spending and a 0:03:20.760 --> 0:03:24.040 lot of retailers are reacting to that by lowering prices. 0:03:24.160 --> 0:03:25.960 Why don't we talk about the prices, because we have 0:03:26.040 --> 0:03:29.000 seen airfares go down, we have seen used car prices 0:03:29.040 --> 0:03:32.720 go down. Auto insurance of course still you know significantly higher, 0:03:33.480 --> 0:03:36.320 but we did see there is some hope for consumers. 0:03:36.440 --> 0:03:39.640 We saw a significant slow down in inflation in June. 0:03:39.680 --> 0:03:41.600 Now most of that on housing costs and rents, but 0:03:41.640 --> 0:03:44.360 that's a big part of household budgets. How will that 0:03:44.440 --> 0:03:46.120 impact people spending? 0:03:46.520 --> 0:03:48.880 As health process come down, that's going to free up 0:03:48.880 --> 0:03:52.920 a little more disposable income for consumers. It's going to 0:03:52.960 --> 0:03:56.160 ease off the pressure on consumers, but overall, it's not 0:03:56.200 --> 0:03:59.640 going to change the fact that consumers are feeling a 0:03:59.680 --> 0:04:03.720 little less flushed compared to prior to the pandemic. So 0:04:04.240 --> 0:04:07.120 over the past you know, six months, consumers have been 0:04:07.240 --> 0:04:11.720 spending more than their incomes have been growing. And as 0:04:12.000 --> 0:04:15.440 the label market cools further, we're expected to consumers to 0:04:15.480 --> 0:04:18.520 feel a little more cautious about their spending, even if 0:04:18.600 --> 0:04:20.560 their other household costs are coming down. 0:04:20.800 --> 0:04:22.159 But at least there is hope. 0:04:22.240 --> 0:04:24.240 There is hope and a lot of talk now, especially 0:04:24.279 --> 0:04:28.320 after last week's inflation data, that in September, when we 0:04:28.360 --> 0:04:30.400 have a lot of back to schools spending, we have 0:04:30.480 --> 0:04:34.400 a lot of new cars coming on dealership lots that 0:04:34.520 --> 0:04:37.160 if there is a rate cut from the FED, and 0:04:37.440 --> 0:04:40.520 it was a pretty dubbish tone last week in annual 0:04:40.560 --> 0:04:43.920 testimony by Chairman Powell to Congress that we really could 0:04:44.200 --> 0:04:46.320 you know, signal a real boost for the US consumer 0:04:46.640 --> 0:04:47.840 through the end of this year. 0:04:47.920 --> 0:04:51.359 Though, well, that's not how we're looking at things right now. 0:04:51.440 --> 0:04:56.039 So basically we still have expectations for our VET cut 0:04:56.480 --> 0:05:00.799 in September. But usually if you look at his historical data, 0:05:00.960 --> 0:05:04.680 it takes time for consumers to feel confident again. If 0:05:04.680 --> 0:05:08.760 you look at the underlying drivers of consumer spending, consumers 0:05:08.839 --> 0:05:12.200 usually spend when they feel like their income can support it, 0:05:12.600 --> 0:05:16.120 and income growth is supported by a strong labor market. 0:05:16.440 --> 0:05:19.320 Right now, even if the FED cuts in September, we're 0:05:19.360 --> 0:05:22.400 still expecting labor market to slow and consumers to not 0:05:22.520 --> 0:05:27.120 feel at support from a FED cut until late twenty. 0:05:26.880 --> 0:05:30.360 Okay, Well, June retail sales data out Tuesday morning. That's 0:05:30.360 --> 0:05:33.359 ahead of Wall Street's opening bell and our thanks to Estello, 0:05:33.839 --> 0:05:37.680 us economist with Bloomberg Economics. All right, we move next 0:05:37.680 --> 0:05:41.719 to corporate earnings and streaming giant Netflix posting its latest 0:05:41.800 --> 0:05:45.159 quarterly results this Thursday. Key for investors how the companies 0:05:45.480 --> 0:05:49.400 multiple growth levers like live comedy shows, live sporting events. 0:05:49.440 --> 0:05:53.400 It's ad supported tier and subscription price hikes has impacted 0:05:53.440 --> 0:05:55.840 revenue and for all that and more. We're joined by 0:05:55.839 --> 0:06:00.760 Githa ragenathin Bloomberg Intelligence analyst on US media. Well, getha, 0:06:00.920 --> 0:06:03.160 what are you expecting to see from Netflix? 0:06:03.560 --> 0:06:03.839 Tom? 0:06:03.920 --> 0:06:06.880 We are really expecting a blockbuster quarter. So if you 0:06:07.040 --> 0:06:10.240 just look at Netflix's performance over the past few months, 0:06:10.680 --> 0:06:13.560 I would say Netflix is firing on all cylinders. The 0:06:13.600 --> 0:06:17.080 company is in the strongest position that it's ever been, 0:06:18.160 --> 0:06:21.960 I think fundamentally, I think competitively as well as financially. 0:06:22.680 --> 0:06:26.760 We continue to see very good subscriber momentum. Remember they 0:06:26.800 --> 0:06:30.479 added something like nine point three million subscribers in the 0:06:30.520 --> 0:06:34.919 first quarter. Obviously, we don't expect the same level of 0:06:34.920 --> 0:06:37.560 subscriber gains in the second quarter, but we think it's 0:06:37.560 --> 0:06:39.080 going to be fairly strong. We think it's going to 0:06:39.120 --> 0:06:41.240 be close to almost six million. And that's on the 0:06:41.279 --> 0:06:43.839 back of a lot of initiatives that the company has introduced. 0:06:43.880 --> 0:06:47.720 So they have this widespread password crackdown, and of course 0:06:47.760 --> 0:06:50.880 they have this new ad supported tier, which we think 0:06:50.880 --> 0:06:52.640 has been working really well for them. 0:06:52.800 --> 0:06:56.040 And are the subscriber adds global? How are they doing 0:06:56.040 --> 0:06:57.920 in the US and how are they doing elsewhere? 0:06:58.680 --> 0:07:02.719 They're actually surprisingly strong tom in the US. And remember 0:07:02.720 --> 0:07:05.719 the US is a fairly saturated market, and we're still 0:07:05.760 --> 0:07:10.360 seeing pretty pretty good growth. Remember Netflix now actually at 0:07:10.400 --> 0:07:14.760 about eighty million subscribers, actually has more subscribers than the 0:07:14.800 --> 0:07:19.280 traditional TV bundles. So Netflix has very much become the 0:07:19.480 --> 0:07:22.680 go to option, and if you're thinking about TV viewing, 0:07:22.760 --> 0:07:25.760 Netflix really is the first choice and is the anchor 0:07:25.880 --> 0:07:29.280 I would say for most consumers when it comes to 0:07:29.280 --> 0:07:31.640 the living room. So we're seeing very good growth in 0:07:31.680 --> 0:07:33.960 the US, given that it's a saturated market, but obviously 0:07:34.080 --> 0:07:37.720 majority of the growth still comes from the international markets. 0:07:38.560 --> 0:07:42.200 And let's talk about some of these newer initiatives from Netflix. 0:07:42.560 --> 0:07:44.720 Christmas Day may never be the same again, right with 0:07:45.160 --> 0:07:49.680 this deal to stream live NFL games, And we saw 0:07:49.720 --> 0:07:53.600 this John Mulaney, Everyone's in LA five or six live shows, 0:07:53.600 --> 0:07:58.240 comedy shows. It's all about something Netflix has never done before, right, 0:07:58.400 --> 0:07:59.720 Advertising revenue. 0:08:00.640 --> 0:08:04.680 Oh absolutely, I mean this is where I think investors 0:08:04.680 --> 0:08:08.280 are getting really really excited about the future potential for 0:08:08.360 --> 0:08:12.000 this company, because we know subscription growth, we know they've 0:08:12.040 --> 0:08:16.160 really kind of delivered on subscription growth, but advertising is 0:08:16.200 --> 0:08:19.040 a whole new area for them, and they are really 0:08:19.120 --> 0:08:22.560 doing things to kind of really boost that revenue. So 0:08:23.200 --> 0:08:26.200 they've moved into live event sports programming. 0:08:25.720 --> 0:08:27.960 In a huge way, obviously with this NFL deal. 0:08:28.560 --> 0:08:32.640 Obviously that's going to be something very very attractive to advertisers, 0:08:32.760 --> 0:08:38.760 especially since the advertising subscription tier is priced very economically, 0:08:38.840 --> 0:08:41.040 very competitively at seven dollars a month, So we think 0:08:41.080 --> 0:08:43.480 a lot of people will sign on. And they're doing 0:08:43.480 --> 0:08:45.360 lots of different things, as you just pointed out, obviously 0:08:45.400 --> 0:08:46.160 the comedy shows. 0:08:46.160 --> 0:08:47.560 You had the Tom Brady roast. 0:08:48.320 --> 0:08:51.200 You know, we have a Mike Tyson Versus Jake Paul 0:08:51.280 --> 0:08:53.840 event that is coming up sometime in November. So they're 0:08:53.880 --> 0:08:57.079 doing a lot of things in terms of content, really 0:08:57.120 --> 0:09:01.120 kind of broadening their content appeal quite aggressively. 0:09:01.800 --> 0:09:03.960 And when I turn on Netflix, which I have at home, 0:09:04.080 --> 0:09:07.200 I see a lot more international shows and some of 0:09:07.200 --> 0:09:10.080 them have been tremendous hits here in the US, whatever 0:09:10.160 --> 0:09:14.959 language they're in. It's incredible how this growth is everywhere. 0:09:16.160 --> 0:09:20.240 Oh absolutely, And you know that is translating into revenue growth, 0:09:20.240 --> 0:09:23.600 that is translating into subscriber growth, but most importantly, Tom, 0:09:23.920 --> 0:09:27.280 that is translating into engagement. And really this is something 0:09:27.320 --> 0:09:30.120 that Netflix has been driving home now for so many quarters, 0:09:30.120 --> 0:09:33.040 so many years. They want to see people come to 0:09:33.120 --> 0:09:36.080 their platform and then never leave the platform, because that 0:09:36.240 --> 0:09:39.280 is how they can get to upsell so many more 0:09:39.559 --> 0:09:43.040 you know, new products, whether it's gaming, whether it's advertising, 0:09:43.559 --> 0:09:45.760 as they kind of expand into new categories. And we're 0:09:45.760 --> 0:09:49.000 seeing that engagement is very very strong for Netflix, and 0:09:49.040 --> 0:09:52.280 of course a lot of local language content is definitely helping. 0:09:52.320 --> 0:09:55.320 So just in the second quarter, we saw you know, 0:09:55.360 --> 0:09:58.520 of course, Bridgerton was the most watched show, but we 0:09:58.559 --> 0:10:01.240 also saw some of you know, the Korean language dramas 0:10:01.320 --> 0:10:05.400 Queen of Tears for instance, performing very very well, and 0:10:05.440 --> 0:10:07.520 we're probably going to see more of that as Quid Game. 0:10:07.559 --> 0:10:09.560 The second season of Squid Game comes out a little 0:10:09.600 --> 0:10:10.440 bit later this year. 0:10:11.200 --> 0:10:13.840 Now, also, Netflix, the success of all these shows, the 0:10:14.000 --> 0:10:17.000 success you know, the revenue streams they have, it has 0:10:17.080 --> 0:10:21.319 forced other streamers to look for partnerships just to compete 0:10:21.840 --> 0:10:23.880 even close to the level of Netflix. 0:10:24.480 --> 0:10:27.960 Yeah, and that actually works so well for for Netflix, 0:10:28.040 --> 0:10:31.920 tom because you know, obviously, originally they were investing very 0:10:32.000 --> 0:10:34.679 very heavily in you know, their own content, with what 0:10:34.720 --> 0:10:37.640 we call original content. But now we're seeing a much 0:10:37.720 --> 0:10:40.600 more kind of balanced mix, and when they go for 0:10:40.720 --> 0:10:44.160 more licensed content, we see the effects in terms of 0:10:44.640 --> 0:10:47.960 the bottom line because it's it's much cheaper, you know, 0:10:48.040 --> 0:10:50.240 it's it's content that kind of travels well. It is 0:10:50.280 --> 0:10:54.400 time tested content, and obviously we're seeing free cash flow 0:10:54.520 --> 0:10:57.960 and operating profit get a huge boost from them being 0:10:58.080 --> 0:11:01.720 far more rational when it comes to content costs. So 0:11:01.800 --> 0:11:03.960 it's really kind of not only helping them kind of 0:11:04.000 --> 0:11:07.760 build their competitive mode getting all these content titles from 0:11:07.840 --> 0:11:10.960 other producers of content, but it is also kind of 0:11:11.040 --> 0:11:13.440 helping them actually strengthen their bottom line. 0:11:14.160 --> 0:11:16.600 It's big in a bottom line. Those shares of Netflix 0:11:16.679 --> 0:11:19.520 up about forty percent so far this year. Where do 0:11:19.559 --> 0:11:22.320 you think it heads for the remainder of twenty twenty four. 0:11:23.120 --> 0:11:26.160 So I think, you know, we're going to see continued 0:11:26.200 --> 0:11:27.800 momentum and we're seeing. 0:11:27.520 --> 0:11:29.280 That with on the subscriber side. 0:11:29.320 --> 0:11:32.520 But I think the real big catalyst that could potentially 0:11:32.640 --> 0:11:35.400 happen in the second half of the year is a 0:11:35.440 --> 0:11:38.360 price increase. So we have not seen Netflix increase their 0:11:38.400 --> 0:11:42.199 prices on the standard tier, which is the fifteen dollars 0:11:42.240 --> 0:11:45.880 fifty cent standard product that they offer in the United States. 0:11:45.920 --> 0:11:47.960 We haven't seen them increased prices on that tier now 0:11:48.000 --> 0:11:50.640 for almost about two years, so they're definitely due for 0:11:50.679 --> 0:11:53.600 a price increase. And we've seen price increases across the board. 0:11:53.600 --> 0:11:56.200 We've seen it at Spotify, We've seen it, you know, 0:11:56.240 --> 0:11:59.559 at Max, a lot of the rival services are increasing 0:12:00.120 --> 0:12:04.040 you know, prices. So just kind of given Netflix's low 0:12:04.160 --> 0:12:07.160 rates of churn, we definitely think that they are going 0:12:07.200 --> 0:12:09.840 to raise their prices very soon. And as we see 0:12:09.880 --> 0:12:12.480 you know, those price increases returned to kind of the 0:12:12.520 --> 0:12:16.720 normal cadence. Netflix obviously then has ample room to sustain 0:12:16.960 --> 0:12:21.280 double digit annual revenue growth and obviously huge levels of 0:12:21.320 --> 0:12:22.560 operating margin expansion. 0:12:22.880 --> 0:12:23.240 Well. 0:12:23.600 --> 0:12:27.079 Earnings for second quarter out this Thursday for Netflix. Our 0:12:27.080 --> 0:12:31.800 thanks to Getha raghanoffin Bloomberg Intelligence analysts on US media. 0:12:31.920 --> 0:12:34.160 Coming up on Bloomberg day Break weekend, we look ahead 0:12:34.160 --> 0:12:37.560 to the UK's new Prime Minister hosting his neighbors for 0:12:37.600 --> 0:12:41.000 a meeting of the European political community. I'm Tom Busby, 0:12:41.120 --> 0:12:55.400 and this is Bloomberg. This is Bloomberg day Break Weekend, 0:12:55.480 --> 0:12:57.960 our global look ahead at the top stories for investors 0:12:58.000 --> 0:13:00.600 in the coming week. I'm Tom Busby in New York. 0:13:01.000 --> 0:13:02.960 Up later on our program, we look ahead to a 0:13:03.040 --> 0:13:06.520 major policy meeting for top officials in China, but first, 0:13:06.880 --> 0:13:10.200 the European Political Community Meeting takes place in the UK 0:13:10.320 --> 0:13:13.560 this week, as Keir Starmer, the country's newly elected Prime Minister, 0:13:14.160 --> 0:13:17.360 brings dozens of high level lawmakers from across Europe together 0:13:17.440 --> 0:13:22.000 discussing shared challenges like Russia's war against Ukraine illegal immigration, 0:13:22.280 --> 0:13:25.960 even as many of those leaders face political challenges in 0:13:26.000 --> 0:13:28.679 their own countries. For more, let's go to London and 0:13:28.720 --> 0:13:31.640 bring in Bloomberg Daybreak Europe anchor Stephen Carroll. 0:13:32.160 --> 0:13:34.800 Tom In only his second week as Prime Minister, Keir 0:13:34.840 --> 0:13:37.960 Starmer will host European leaders at Blenham Palace for the 0:13:38.040 --> 0:13:41.880 fourth European Political Community Meeting. The EPCs a forum for 0:13:41.920 --> 0:13:45.280 European Union countries and their neighbors to meet. It's twice 0:13:45.360 --> 0:13:48.400 yearly gatherings are hosted alternately by a country that's in 0:13:48.480 --> 0:13:51.880 the EU and one that isn't. Choosing the Oxfordshire stately 0:13:51.960 --> 0:13:54.800 home as the backdrop for these discussions may itself be 0:13:54.800 --> 0:13:58.079 an indication of Starmer's in tensions. Known as the birthplace 0:13:58.120 --> 0:14:00.520 of Winston Churchill, the Prime Minister may be hoping to 0:14:00.600 --> 0:14:04.960 draw inspiration from Britain's revered wartime leader. The plight of 0:14:05.080 --> 0:14:07.880 Ukraine is likely to be high on the agenda in discussions, 0:14:07.960 --> 0:14:11.440 especially following the Russian bombing of a children's hospital in Kiev, 0:14:11.960 --> 0:14:15.360 but domestic tensions in other countries may overshadow these talks. 0:14:15.400 --> 0:14:18.800 In France, President Macron remains in a vulnerable position after 0:14:18.840 --> 0:14:22.280 his Centrist alliance lost its relative majority in the country's 0:14:22.320 --> 0:14:26.200 recent parliamentary elections. In Germany, Chancellor Olaf Schultz's position has 0:14:26.240 --> 0:14:29.240 been weakened by a bruising defeat in last months European 0:14:29.320 --> 0:14:32.760 Parliament vote. In fact, Kirs Starmer cuts a rare figure 0:14:32.760 --> 0:14:35.040 in Europe as a leader with a clear mandate and 0:14:35.240 --> 0:14:39.120 majority ready to implement his agenda. The UK Prime Minister's 0:14:39.120 --> 0:14:41.480 approach to foreign and defense policy is something that we've 0:14:41.480 --> 0:14:45.120 been discussing with Jamie She, associate fellow at Chatham House 0:14:45.160 --> 0:14:48.280 and a former NATO official. He started by offering his 0:14:48.400 --> 0:14:51.960 thoughts on Kiir Starmer's assertion that Ukraine can use British 0:14:52.000 --> 0:14:54.480 missiles to strike targets inside Russia. 0:14:54.840 --> 0:14:57.840 Well, I think it's obviously good news for President's Vilenski 0:14:57.920 --> 0:15:01.080 because clearly at the time when Theussians have been massing 0:15:01.080 --> 0:15:04.000 their forces just on their side of the border for 0:15:04.440 --> 0:15:07.400 their offensives which have been taking place as you can 0:15:07.440 --> 0:15:11.360 see in the Dombas region up near Kharkiv. If Ukraine 0:15:11.400 --> 0:15:13.600 is going to really be able to defend itself, it 0:15:13.640 --> 0:15:16.360 has to be able to strike the Russian fuel dumps, 0:15:16.760 --> 0:15:20.520 the Russian storage facilities, their command and control, their communications, 0:15:20.840 --> 0:15:25.880 their headquarters on Russian territory to disrupt their offensive preparations. 0:15:26.320 --> 0:15:30.600 Ukraine has also had some success in attacking Russian airfields, 0:15:30.880 --> 0:15:35.000 taking out some Russian strategic bombers very far away from 0:15:35.000 --> 0:15:38.320 the Russian Ukraine border, and also those Russian fuel and 0:15:38.440 --> 0:15:41.600 energy facilities that I was referring to earlier. So I 0:15:41.600 --> 0:15:44.680 think Kairstarma has given President of Lanski a shot of 0:15:44.720 --> 0:15:47.160 the arms to the extent and obviously, if Russia believes 0:15:47.200 --> 0:15:49.960 it has full license from Russia to attack anything it 0:15:50.080 --> 0:15:53.160 likes in Ukraine, the Ukrainian's cause of self defense have 0:15:53.240 --> 0:15:56.360 to be able to strike back against the significant Russian 0:15:56.360 --> 0:15:59.280 military targets, but obviously not Russian civilian targets. I think 0:15:59.400 --> 0:16:02.520 Kiyostarma and other NATO leaders will draw a redline on 0:16:02.600 --> 0:16:06.000 that the strikes have to be against the genuine military targets. 0:16:06.800 --> 0:16:09.480 Does this though, on the question of striking military targets 0:16:09.520 --> 0:16:12.480 open up divisions between the US and what France and 0:16:12.520 --> 0:16:14.960 the UK are now saying about the use of weapons 0:16:15.000 --> 0:16:17.080 to strike military targets inside Russia. 0:16:18.280 --> 0:16:21.080 Well, since the beginning of the war, the Europeans have 0:16:21.160 --> 0:16:24.960 often been out ahead of the United States in minery space. 0:16:25.040 --> 0:16:29.400 For example, they decided the UK to provide tanks first, 0:16:29.480 --> 0:16:32.560 a long time before the United States decided to do 0:16:32.600 --> 0:16:35.440 the same. Similarly, with these long range artillery, these cruise 0:16:35.480 --> 0:16:39.440 missilesy storm Shadows or the French scalps that we're talking 0:16:39.480 --> 0:16:43.920 about now, the Europeans, with the Dutch and Danes, were 0:16:43.920 --> 0:16:45.720 the first two across the Rubican when it came to 0:16:45.840 --> 0:16:49.280 S sixteen aircraft, and the United States followed. So there 0:16:49.320 --> 0:16:52.200 is often in NATO perception that it's always the Americans 0:16:52.200 --> 0:16:54.360 who are out in front and the Europeans sort of 0:16:54.400 --> 0:16:58.280 follow willy nilly sooner or later. But this time it 0:16:58.320 --> 0:17:00.840 is the other way. But the fact of the matter 0:17:00.920 --> 0:17:03.120 is that Biden has also recently shown a little bit 0:17:03.120 --> 0:17:08.480 of flexibility, allowing the Ukrainians to use the long range 0:17:08.800 --> 0:17:13.040 US attackers artillery shells against the targets on Russian territory, 0:17:13.160 --> 0:17:15.080 but Biden has said that he doesn't want these to 0:17:15.119 --> 0:17:17.720 go too deep into Russia. He wants them really to 0:17:17.800 --> 0:17:21.560 be restricted to places like Crimea and just those Russian 0:17:21.560 --> 0:17:25.480 facilities over the border preparing for the offensive which I 0:17:25.520 --> 0:17:27.760 was referring to earlier. So the United States is sort 0:17:27.760 --> 0:17:30.080 of halfway there, but it tends to sort of follow 0:17:30.080 --> 0:17:31.560 where the Europeans lead on this. 0:17:31.480 --> 0:17:34.960 One, right, So the big takeaway so far is that 0:17:35.000 --> 0:17:38.160 these NATA allies have promised those five long range air 0:17:38.160 --> 0:17:42.480 defense systems for Ukraine. But is NATO actually doing enough 0:17:42.560 --> 0:17:43.760 for Ukraine to win the war? 0:17:45.840 --> 0:17:50.440 Well, maybe not enough in the past, because the effort 0:17:50.640 --> 0:17:56.879 was largely left to individual allies acting bilaterally, signing bilateral 0:17:56.920 --> 0:18:00.679 agreements with Ukraine like the one that Rishie sunakas very 0:18:00.720 --> 0:18:04.640 early on with a Kiev and basically giving the Ukrainians 0:18:04.680 --> 0:18:06.720 what they have in their stocks, not always what the 0:18:06.840 --> 0:18:09.720 Ukrainians need on a priority basis. But NATO is now 0:18:09.760 --> 0:18:12.000 stepping up, and I think the big headline from this 0:18:12.200 --> 0:18:15.960 Washington summit is that maybe too late, but still NATO 0:18:16.119 --> 0:18:18.440 is now going to set up a command in Wisbaden 0:18:18.520 --> 0:18:22.320 in Germany with about eight hundred NATO military planners whose 0:18:22.400 --> 0:18:24.920 job it will be now to make this a much 0:18:24.960 --> 0:18:29.320 more coordinated, organized, planned effort. For example, Ukraine is currently 0:18:29.359 --> 0:18:31.960 operating about one hundred and forty different types of weapons 0:18:31.960 --> 0:18:35.280 systems supplied by the West. This doesn't make sense because 0:18:35.320 --> 0:18:38.400 it means one hundred and forty different supply chains, maintenance 0:18:38.440 --> 0:18:41.399 systems and so on doesn't help the Ukrainian war effort. 0:18:41.480 --> 0:18:43.520 So I think what NATO is going to do now 0:18:43.680 --> 0:18:46.600 is organized this better in terms of what Ukraine needs, 0:18:47.080 --> 0:18:50.160 ensure that the delivery is more timely and more consistent, 0:18:50.480 --> 0:18:52.880 reduced these one hundred and forty different systems to say 0:18:52.880 --> 0:18:56.280 twenty or thirty which Ukraine could actually maintain and operate. 0:18:56.600 --> 0:18:58.960 And what NATO says also is that this effort is 0:18:59.000 --> 0:19:02.200 going to be a bridge to a future Ukrainian membership 0:19:02.240 --> 0:19:04.240 of the Alliance, because it's not just going to be 0:19:04.240 --> 0:19:07.280 about the short term provision of weapons to Ukraine. It's 0:19:07.320 --> 0:19:09.800 going to also be about the long term restructuring of 0:19:09.840 --> 0:19:12.600 the Ukrainian army to look less like an old Soviet 0:19:12.720 --> 0:19:15.960 army and more like a modern Western army able to 0:19:16.080 --> 0:19:19.040 integrate into NATO in the fullness of time. 0:19:19.600 --> 0:19:22.399 That was Jamie shaef Fro Chatham House speaking to Jamani 0:19:22.440 --> 0:19:25.399 Brassacci and me on Bloomberg Radio. So what's in store 0:19:25.440 --> 0:19:28.440 at this upcoming European political community meeting and will ker 0:19:28.480 --> 0:19:32.000 Starmer be able to charm his EU counterparts into a 0:19:32.080 --> 0:19:35.520 closer relationship. I've been discussing this and more with Bloomberg's 0:19:35.600 --> 0:19:38.880 UK Politics editor Alex morales. I started by asking him 0:19:38.880 --> 0:19:42.159 what Kir Starmer may be hoping to achieve during this event. 0:19:42.960 --> 0:19:45.320 Well, mindful that he's just coming back from the NATO 0:19:45.320 --> 0:19:47.080 summit where he's met a lot of the same people. 0:19:47.280 --> 0:19:50.840 I mean, this really is about sort of meeting a 0:19:50.840 --> 0:19:52.679 lot of the European leaders who will be working with 0:19:52.760 --> 0:19:54.720 he hopes for the next five or ten years, but 0:19:54.880 --> 0:19:57.520 head to head, face to face, discussing some of the 0:19:57.560 --> 0:19:59.719 issues that they have in common, so you know, some 0:19:59.760 --> 0:20:02.480 of their points of divergence. And he really wants to 0:20:02.560 --> 0:20:05.560 change the tone in the way that the UK develops 0:20:05.600 --> 0:20:08.679 its relationship with the European Union and other more wider 0:20:08.960 --> 0:20:09.760 European countries. 0:20:09.880 --> 0:20:11.639 How much of a test there's going to be for 0:20:11.760 --> 0:20:14.119 him in his new job as Prime Minister it's his 0:20:14.119 --> 0:20:16.800 first time hosting such an international summer and it's quite 0:20:16.840 --> 0:20:19.320 a lot of you know, as you say, friends and neighbors, it's. 0:20:19.280 --> 0:20:20.840 Quite a lot of leaders. But it's also a sort 0:20:20.840 --> 0:20:24.320 of quite fairly informal summit. They don't have a set 0:20:24.359 --> 0:20:26.840 communicate that they want to agree, so he doesn't have 0:20:26.840 --> 0:20:28.359 a piece of paper that he needs to achieve by 0:20:28.359 --> 0:20:29.040 the end of it. 0:20:29.040 --> 0:20:30.160 It really is just. 0:20:30.119 --> 0:20:32.560 About, you know, getting that time to speak face to 0:20:32.560 --> 0:20:35.480 face with other leaders and to discuss all these different 0:20:35.520 --> 0:20:36.800 issues that they need to address. 0:20:36.920 --> 0:20:38.320 And this is one of the things that of course 0:20:38.320 --> 0:20:40.280 we know as a priority for the new Labor government. 0:20:40.320 --> 0:20:43.359 They want better ties with the European Union versus what 0:20:43.400 --> 0:20:46.680 there was under the Conservatives. Does this perhaps provide an 0:20:46.680 --> 0:20:49.760 opening for care Starmor to make progress on some key issues. 0:20:49.920 --> 0:20:51.840 Yeah, I mean definitely think. I don't think we'll be 0:20:51.880 --> 0:20:53.760 getting any sort of firm agreements out of it, but 0:20:54.240 --> 0:20:56.320 clearly so one of the big things he wants to 0:20:56.359 --> 0:20:58.359 talk about. We know that he's going there with this 0:20:58.400 --> 0:21:01.320 sort of proposal for fence and security packed with the 0:21:01.359 --> 0:21:04.639 European Union, so yes, he wants to tighten those ties. 0:21:04.640 --> 0:21:06.639 But obviously there are a lot of issues like immigration 0:21:07.640 --> 0:21:10.199 he wants to talk about. It's not free movement, but 0:21:10.320 --> 0:21:14.720 he wants to help, for instance, British performing artists to 0:21:14.800 --> 0:21:16.840 be able to tour more freely in Europe. There are 0:21:16.880 --> 0:21:19.600 all these sort of issues which have risen up since 0:21:19.640 --> 0:21:23.000 Brexit where the relationship could just be a lot easier 0:21:23.359 --> 0:21:24.159 and better flowing. 0:21:24.480 --> 0:21:27.639 And how much does there has there been sort of 0:21:27.640 --> 0:21:29.560 a tone shift or could there be a tone shift 0:21:29.640 --> 0:21:32.720 from the other side of the channel from the closer 0:21:32.760 --> 0:21:36.119 European partners towards a new government given that it is 0:21:36.240 --> 0:21:40.080 a different party and sort of a fairly significant step 0:21:40.119 --> 0:21:41.480 on from Braxit as well. 0:21:41.880 --> 0:21:45.840 I mean, it's a tough question because certainly Kissed Arm 0:21:46.040 --> 0:21:48.240 wants to set this different tone and I'm sure his 0:21:48.320 --> 0:21:51.639 European counterparts will welcome that change of tone. But at 0:21:51.680 --> 0:21:53.760 the same time Starmer is going to face the same 0:21:53.800 --> 0:21:57.119 issues that the outgoing Conservative government did, which is, for instance, 0:21:57.160 --> 0:21:58.840 one of the things he wants is a veterany agreement 0:21:58.880 --> 0:22:02.040 to ease the flow of fresh foods across the borders. 0:22:02.640 --> 0:22:05.879 You might still insist on the oversight of the European 0:22:05.920 --> 0:22:09.720 Court Justice over the regulations underpinning that, so you know, 0:22:09.760 --> 0:22:12.240 there are these things which have come to be seen 0:22:12.280 --> 0:22:14.840 as toxic in the UK which he will have to 0:22:14.880 --> 0:22:16.760 overcome and try and work out a compromise. 0:22:17.000 --> 0:22:18.640 And whether the EU. 0:22:18.520 --> 0:22:20.400 Is willing to give him more than they were willing 0:22:20.440 --> 0:22:24.320 to give the previous Conservative government. You know, it's an open. 0:22:24.720 --> 0:22:27.040 An open question. Indeed, the review of the Trade and 0:22:27.080 --> 0:22:29.920 Cooperation Agreement, the Post brags that trade deal not due 0:22:30.000 --> 0:22:32.280 until twenty twenty six, so this would be sort of 0:22:32.320 --> 0:22:34.800 a speeding up of that process if they were able 0:22:34.840 --> 0:22:38.600 to make these these side agreements. The European political community 0:22:38.640 --> 0:22:41.080 itself was an interesting idea, was something that was a 0:22:41.080 --> 0:22:44.320 brainchild of Emmanuel Macron in France. It's only been around 0:22:44.320 --> 0:22:46.240 since twenty twenty two, and it was sort of meant 0:22:46.280 --> 0:22:49.440 to bridge the gap in relations with countries like the UK, 0:22:49.800 --> 0:22:52.280 the nearest neighbors in the community as well. I mean, 0:22:52.320 --> 0:22:54.640 what are the other sorts of things that are expected 0:22:54.680 --> 0:22:56.800 to be under discussion at this event, apart from kars 0:22:56.880 --> 0:22:58.159 Armor trying to make new friends. 0:22:58.440 --> 0:23:00.800 Well, I mean, so we've mentioned security defense that seems 0:23:00.800 --> 0:23:02.159 to be the main thing that the government wants to 0:23:02.200 --> 0:23:05.280 talk about. I would imagine immigration would come up. I'd 0:23:05.320 --> 0:23:08.200 be very surprised if it didn't, because it's a shared problem. 0:23:08.280 --> 0:23:10.400 You know, you've got these sort of flows of immigrants 0:23:10.440 --> 0:23:13.399 moving across the continent, and you know, in the UK's 0:23:13.400 --> 0:23:15.320 case they come from France, but obviously they've got to 0:23:15.359 --> 0:23:20.119 France somehow through other countries. So immigration's a big topic 0:23:20.160 --> 0:23:23.440 of discussion. Ukraine is clearly a matter of huge importance 0:23:23.440 --> 0:23:26.480 to the continent and how they cooperate on those things, 0:23:26.880 --> 0:23:31.080 and then shared problems like energy, security, cybersecurity, climate change, 0:23:31.440 --> 0:23:32.919 you know, all of those issues I'm sure will. 0:23:32.760 --> 0:23:35.480 Come up and high level discussions on that as well. 0:23:36.000 --> 0:23:38.560 This is also going to be a test of care 0:23:38.640 --> 0:23:41.879 Starmery's government's foreign policy too. It's so first, you know, 0:23:42.040 --> 0:23:44.040 so the second doubting after the nature, so much for 0:23:44.080 --> 0:23:45.679 them to have a chance to talk about that and 0:23:45.840 --> 0:23:49.280 perhaps in a range of subjects broader than just defense 0:23:49.400 --> 0:23:52.439 and security as well. What else do we know as 0:23:52.480 --> 0:23:55.040 a priority for the new UK government when it comes 0:23:55.080 --> 0:23:57.120 to foreign policy, Well. 0:23:56.920 --> 0:23:59.320 I would say that the main one is climate change 0:23:59.320 --> 0:24:02.360 that they want to change tone on. So I think 0:24:02.440 --> 0:24:05.360 there's a there's a perception, and I don't know how 0:24:05.359 --> 0:24:08.359 international this perception is that the UK sort of stepped 0:24:08.400 --> 0:24:11.400 back a bit from its climate change policies under Rishi 0:24:11.440 --> 0:24:15.479 Sunax administration, and the incoming Labor government want to change that, 0:24:15.760 --> 0:24:17.400 and so they want to say the UK is back 0:24:17.440 --> 0:24:20.439 at the table. You know, we're going to be leading 0:24:20.440 --> 0:24:23.440 on this for the next years and decades to come. 0:24:24.320 --> 0:24:26.320 So cutting emissions is obviously going to be one of 0:24:26.359 --> 0:24:27.440 the big things that he brings to. 0:24:27.920 --> 0:24:30.280 Yeah, and look, it's this is also a chance to 0:24:30.480 --> 0:24:33.760 for as you say, there's more face to face conversations 0:24:33.760 --> 0:24:36.240 with some of those European counterparts perhaps and as you 0:24:36.280 --> 0:24:38.560 pointed out, a less structured way than we would have 0:24:38.600 --> 0:24:40.960 seen it the likes of the NATO some blen And 0:24:41.000 --> 0:24:43.520 Palace being chosen as the venue for this event as well. 0:24:43.520 --> 0:24:45.200 It's of course where the AI s it was too. 0:24:45.320 --> 0:24:47.840 Is this, you know, a chance for those those very 0:24:47.960 --> 0:24:50.480 chummy sort of conversations and corridors as well. 0:24:50.720 --> 0:24:53.000 Yeah, I mean it's it's obviously a nice sort of 0:24:53.000 --> 0:24:56.560 country house setting. I think it's also a very unsubtle 0:24:56.680 --> 0:24:59.840 message that that security is big. It's Winston Winston Church's 0:24:59.840 --> 0:25:03.159 birth place, so that's perhaps a message to putin of 0:25:03.520 --> 0:25:05.560 you know, here at these forty seven countries We're all 0:25:05.560 --> 0:25:10.600 discussing security and Ukraine and all these matters. This country 0:25:10.600 --> 0:25:11.800 has all this history attached to it. 0:25:12.080 --> 0:25:15.560 Thanks to Bloomberg's UK Politics editor Alex Morales, We'll have 0:25:15.600 --> 0:25:18.800 more coverage of the European political community meeting on Bloomberg 0:25:18.880 --> 0:25:22.040 Radio and television in the coming days. I'm Stephen Carroll 0:25:22.080 --> 0:25:24.400 in London. You can catch us every weekday morning here 0:25:24.400 --> 0:25:27.240 for Bloomberg Daybreak Europe, beginning at six am in London 0:25:27.320 --> 0:25:29.439 and one am on Wall Street. Tom. 0:25:29.760 --> 0:25:32.479 Thank you, Stephen, And coming up on Bloomberg day Break weekend, 0:25:32.520 --> 0:25:35.440 we look ahead to a major policy meeting for China's 0:25:35.480 --> 0:25:50.040 top officials. I'm Tom Busby, and this is Bloomberg. I'm 0:25:50.080 --> 0:25:52.120 Tom Busby in New York with your global look ahead 0:25:52.119 --> 0:25:54.280 at the top stories for investors in the coming week. 0:25:54.720 --> 0:25:57.679 Top officials in China gathering this week for a major 0:25:57.720 --> 0:26:01.520 policy meeting known as the Third Play For more, let's 0:26:01.520 --> 0:26:05.560 get to Bloomberg Daybreak Asia hosts Brian Curtis and Doug Krisner. 0:26:05.880 --> 0:26:08.359 Tom. The Third Plenum is a chance for China to 0:26:08.480 --> 0:26:12.760 enact far reaching and pivotal policy actions. I think Dungshaoping's 0:26:12.760 --> 0:26:16.000 reform and opening up back in nineteen seventy eight. That's 0:26:16.000 --> 0:26:19.159 when China essentially opened up to the outside world. 0:26:19.280 --> 0:26:22.680 This time, though, it's more likely the party re embraces 0:26:22.720 --> 0:26:26.560 the recent policy guidelines of Chiechen Ping, and specifically his 0:26:26.720 --> 0:26:29.000 call for new productive forces. 0:26:29.119 --> 0:26:32.119 At the core of that strategy are high tech industries 0:26:32.160 --> 0:26:35.760 and high end manufacturing. We're expecting to learn more about 0:26:35.800 --> 0:26:39.680 how China plans to cultivate new long term growth drivers. 0:26:39.800 --> 0:26:42.880 So how does the government implement more stimulus and how 0:26:42.880 --> 0:26:46.920 does it address the country's major challenges, challenges that include 0:26:47.240 --> 0:26:51.280 a property crisis, access to foreign markets, and demographics. 0:26:51.520 --> 0:26:55.280 We approached a number of leading economists and policy advisors 0:26:55.280 --> 0:26:57.800 for their thoughts on what comes next. 0:26:57.520 --> 0:27:00.879 For the wishless within is basically more or like market 0:27:00.960 --> 0:27:05.960 friendly or market biases policies, for example, like if they 0:27:06.000 --> 0:27:12.480 could further elevation the role of the market for allocate resources, 0:27:12.920 --> 0:27:17.080 or to emphasize the importance of more supported policies for 0:27:17.160 --> 0:27:18.200 the private sectors. 0:27:18.359 --> 0:27:20.480 It's kind of a consensus right now. I think the 0:27:20.520 --> 0:27:24.359 major problem in the economy is low sentiment, a loss 0:27:24.359 --> 0:27:27.960 of animal spirit. So I think the third planet first 0:27:28.040 --> 0:27:32.000 and foremost provided government a rare opportunity to tackle the 0:27:32.119 --> 0:27:36.080 lack of confidence by rekindling the gross friendly. 0:27:35.800 --> 0:27:40.800 Reforms, there's not much of expectation going into the third Planum. 0:27:41.160 --> 0:27:43.960 If you look at the title of the Third Planum, 0:27:44.200 --> 0:27:48.960 it has this continuation sort of in it furthering reforms, 0:27:49.040 --> 0:27:51.960 but it's a continuation of the things the party has 0:27:52.000 --> 0:27:55.679 already told us, whether it's on the technology front or 0:27:55.800 --> 0:28:00.239 some of the balancing the local government finances. 0:28:00.240 --> 0:28:03.800 The start of Planum. I think in enterprise business they 0:28:03.800 --> 0:28:07.240 hope the government could actually start to reprotize the economic 0:28:07.280 --> 0:28:10.480 growth because over the past several years, the government actually 0:28:10.480 --> 0:28:13.119 come into a new policy region where they try to 0:28:13.160 --> 0:28:16.240 balance multiple policy goals, right, so it's no longer just 0:28:16.280 --> 0:28:20.720 about economic growth, but also about financial stability, security, a 0:28:20.720 --> 0:28:23.560 bunch of other objectives. But on the other hand, I 0:28:23.560 --> 0:28:26.800 think the private sector they are really looking for the 0:28:26.840 --> 0:28:30.760 government to they could actually reprodize economic growths or at 0:28:30.800 --> 0:28:34.080 a list step away from some of the regulatory titaning. 0:28:34.119 --> 0:28:38.360 Gracetam there from BNP, parabol Wealth Management, Ding Schwang at 0:28:38.400 --> 0:28:42.480 Standard Chartered Bank, Hoi Shan from Goldman Sachs, and Xian 0:28:42.560 --> 0:28:45.840 Wang from the Vanguard Group for more. Now we're joined 0:28:45.840 --> 0:28:49.120 in our studios by Rebecca Choan Wilkins, Bloomberg Asia Government 0:28:49.160 --> 0:28:52.760 and Politics correspondent and Jenny Marsh, Bloomberg Team Leader on 0:28:52.880 --> 0:28:57.000 Economics and Government. Rebecca, let me go to you first. 0:28:57.240 --> 0:29:01.720 A common theme there is it cantinuation of She's productive 0:29:01.760 --> 0:29:06.760 forces and then also hopes for improving prospects for the 0:29:06.800 --> 0:29:10.480 private sector. I'd say the former is likely. The latter, well, 0:29:10.480 --> 0:29:11.840 what a bit of hope. 0:29:11.680 --> 0:29:17.520 Maybe, I think there will be something for the markets. 0:29:17.600 --> 0:29:22.840 I would caution any sense of, you know, reforms that 0:29:22.920 --> 0:29:26.840 go into reviving animal spirits. As one of those economists referenced, 0:29:26.880 --> 0:29:29.480 I think there is a desire to sort of use 0:29:29.560 --> 0:29:33.720 the private sector, use the entrepreneurial class to advance some 0:29:33.840 --> 0:29:37.680 of those key objectives in under the so called New Three, 0:29:38.040 --> 0:29:42.200 for example, high tech domains, advanced technology. They want to 0:29:42.200 --> 0:29:45.320 be able to use the private sector to achieve those goals. 0:29:45.720 --> 0:29:48.160 I don't really see any signals that they want to 0:29:48.200 --> 0:29:52.720 actually unleash animal spirits, either among the entrepreneurial class or 0:29:52.800 --> 0:29:57.560 among markets to sort of fire power that transition. And 0:29:57.640 --> 0:29:59.680 we also have seen over the years it sort of 0:29:59.720 --> 0:30:03.680 hes since from she warnings over quote unquote barbaric capital, 0:30:03.960 --> 0:30:08.400 disorderly capital There is quite still this emphasis on having 0:30:08.480 --> 0:30:12.800 capital markets be quite ordered and structured in China today. 0:30:13.240 --> 0:30:16.400 So, Jenny, it would appear then if we do not 0:30:16.520 --> 0:30:18.800 get kind of a big bang initiative, there's going to 0:30:18.800 --> 0:30:20.040 be a lot of disappointment. 0:30:20.400 --> 0:30:22.960 Yeah, And you know, I think disappointment is sort of 0:30:23.080 --> 0:30:26.680 priced in. You know, leading up to the planet we've 0:30:26.680 --> 0:30:29.400 been hearing from investors and economists that they actually don't 0:30:29.440 --> 0:30:33.520 have high expectations for this, And there's a tradition actually 0:30:33.560 --> 0:30:36.440 for Chinese sucks to sort of react to sort of 0:30:36.560 --> 0:30:39.360 quite mutedly after a third penant, like it isn't something 0:30:39.360 --> 0:30:42.320 which historically has sort of really had like a big 0:30:42.360 --> 0:30:45.880 sort of positive effect afterwards. I think it's important to 0:30:45.880 --> 0:30:47.360 bear in mind that, you know, she's going to be 0:30:47.440 --> 0:30:50.200 speaking from sort of a thirty thousand foot view at 0:30:50.200 --> 0:30:52.440 this event, and the communicator get afterwards isn't going to 0:30:52.520 --> 0:30:55.720 have policy specifics, but it's going to have sort of 0:30:55.880 --> 0:30:57.840 language which gives you an idea of the kind of 0:30:57.880 --> 0:31:01.080 policies that she wants to see the bodies and organizations 0:31:01.160 --> 0:31:03.680 underneath him and the Central Committee sort of roll out 0:31:03.680 --> 0:31:04.520 in the months to come. 0:31:04.960 --> 0:31:08.000 It's always the case in China, it seems that social 0:31:08.080 --> 0:31:12.400 and political objectives come first, their positioned ahead of business. 0:31:12.840 --> 0:31:17.680 That's actually probably true in most countries. However, the lines 0:31:17.720 --> 0:31:20.440 are drawn slightly differently in China. It seems much more 0:31:20.480 --> 0:31:22.040 palpable in China journey. 0:31:22.120 --> 0:31:24.680 Why, I think because of the way that the government 0:31:24.720 --> 0:31:26.640 is set up, and you know, I think what's interesting 0:31:26.640 --> 0:31:29.360 about the third Panem is this is the first one 0:31:29.400 --> 0:31:32.120 of these sort of major, you know, twice a decade 0:31:32.360 --> 0:31:37.040 events on reform since she consolidated power in twenty twenty two. Previously, 0:31:37.080 --> 0:31:38.760 when he went into these events, he was sort of 0:31:38.800 --> 0:31:41.680 having much more sort of balanced different factions, and you know, 0:31:41.680 --> 0:31:44.120 at the beginning, when he had his first plane in 0:31:44.120 --> 0:31:46.840 twenty thirteen, he was sort of, you know, the first 0:31:46.880 --> 0:31:49.600 among equals on the standing committee. He goes into this 0:31:49.640 --> 0:31:53.040 event having consolidated power, and now maybe what will be 0:31:53.080 --> 0:31:55.000 different about this event is that we will see what 0:31:55.040 --> 0:31:57.920 she's sort of raw vision for the economy is when 0:31:57.920 --> 0:31:59.840 he gets to do exactly what he wants to do. 0:32:00.320 --> 0:32:02.080 So I think, you know, that's something that we might 0:32:02.120 --> 0:32:04.400 see differently because of how the balance of power in 0:32:04.480 --> 0:32:07.640 China has shifted even more in recent years towards she 0:32:07.880 --> 0:32:10.480 sort of personalizing power around his rule. 0:32:10.800 --> 0:32:14.280 Rebecca, what about measures to reduce things like inequality and 0:32:14.320 --> 0:32:17.920 tackle even the demographic challenges that we've been talking about 0:32:17.960 --> 0:32:19.360 with respect to China. 0:32:19.640 --> 0:32:21.440 Yeah, I think that's a really important one that people 0:32:21.440 --> 0:32:23.280 are looking out for. You know, we hear a lot 0:32:23.320 --> 0:32:26.400 of stories about people on the ground worried about sort 0:32:26.400 --> 0:32:29.480 of financial security, worried about job cuts, pay cuts. We 0:32:29.600 --> 0:32:32.920 hear anecdotes about, you know, civil servants having to repay 0:32:32.960 --> 0:32:35.800 their bonuses that they were given from the past five years. 0:32:35.840 --> 0:32:39.040 So for some in China, you know, prospects are looking 0:32:39.080 --> 0:32:42.320 pretty grim. And while incomes are still growing, they're growing 0:32:42.320 --> 0:32:45.720 at their slowest pace under she Jimping since the late 0:32:45.800 --> 0:32:50.960 nineteen eighties, So the landscape has really changed quite fundamentally. 0:32:51.360 --> 0:32:53.920 I don't think there are enormous expectations though, that we 0:32:53.960 --> 0:32:56.680 are going to see sort of some kind of grand reform. 0:32:57.000 --> 0:32:59.800 I do think there is some expectation we might see 0:32:59.800 --> 0:33:03.360 something in, for example, reform for the welfare system, something 0:33:03.960 --> 0:33:07.920 in the Hookoh registration system, something in public services to 0:33:07.960 --> 0:33:12.480 help local governments improve their public services. But in terms 0:33:12.480 --> 0:33:15.920 of sort of big bang changes that address or of 0:33:15.960 --> 0:33:20.360 fundamental issues of social inequality. I think probably expectations are 0:33:20.400 --> 0:33:25.760 relatively muted. It's a really interesting survey released by CSIS 0:33:26.120 --> 0:33:29.400 as well as academics from Harvard and Stanford recently that 0:33:29.560 --> 0:33:33.960 show in twenty twenty three, essentially more people are attributing 0:33:34.360 --> 0:33:38.200 declines in the ability to get rich or in fact 0:33:38.240 --> 0:33:40.960 the reasons to get poor in sort of economic structural reasons. 0:33:40.960 --> 0:33:42.440 So they put it down to things like you can 0:33:42.480 --> 0:33:44.680 get rich if you come from a wealthy family or 0:33:44.680 --> 0:33:48.240 if you have connections. That's a big change from two 0:33:48.280 --> 0:33:51.680 decades ago, when the emphasis was more on your talent, 0:33:51.760 --> 0:33:54.560 your ability, and a higher education. So we've seen that 0:33:54.600 --> 0:33:58.719 actual sort of perception of inequality and who's to blame 0:33:59.000 --> 0:34:00.960 really change over the past thirty years. 0:34:00.960 --> 0:34:01.440 In China. 0:34:01.920 --> 0:34:04.240 It's interesting because when we look at the private sector, 0:34:04.440 --> 0:34:09.800 we understand that there's huge competition between or among different 0:34:09.840 --> 0:34:13.240 players there. The competition is ferce in artificial intelligence, for instance, 0:34:13.280 --> 0:34:16.000 we hear that some companies are just not going to 0:34:16.000 --> 0:34:19.200 be able to easily get ahead, even a company like Baidu, 0:34:19.280 --> 0:34:22.160 which is one of the early movers in that space. 0:34:22.880 --> 0:34:25.480 And yet we hear when we talk to economists about, 0:34:25.520 --> 0:34:28.160 you know, trying to stimulate the private sector that people 0:34:28.200 --> 0:34:31.120 are calling for a more level playing field. How do 0:34:31.160 --> 0:34:32.640 we reconcile those two notions. 0:34:32.800 --> 0:34:36.280 Well, I think there is a sort of contradiction here 0:34:36.320 --> 0:34:38.799 in terms of which part of the private sector are 0:34:38.840 --> 0:34:41.759 you really talking about vamping up, right? And I think 0:34:41.880 --> 0:34:46.320 the sort of era where entrepreneurs believe that, you know, 0:34:46.360 --> 0:34:49.920 a whole wider range of opportunities could create wealth and 0:34:49.960 --> 0:34:53.320 in fact that was something desirable has probably that sentiment 0:34:53.400 --> 0:34:56.040 is still really dented by the fallout of the crackdown 0:34:56.360 --> 0:34:59.040 on the tech sector, for example, on the education sector. 0:34:59.400 --> 0:35:03.480 People who crude enormous amounts of wealth, we're essentially targeted 0:35:03.920 --> 0:35:06.040 for that, right, And so that we are sort of 0:35:06.120 --> 0:35:09.400 seeing a shift away from that type of sort of 0:35:09.600 --> 0:35:15.560 entrepreneurialism into these very targeted areas that align with government objectives. 0:35:15.719 --> 0:35:18.160 And in some of those areas, you know things like 0:35:18.280 --> 0:35:22.279 AI as well as evs. More obviously, those green tech 0:35:22.320 --> 0:35:27.040 areas do receive support, extraditional support, policy support, in some 0:35:27.120 --> 0:35:30.240 cases funding support to. 0:35:29.560 --> 0:35:32.200 Grow Jenny, I'm curious when we use the term new 0:35:32.239 --> 0:35:36.360 productive forces, how much of that is reliant on a 0:35:36.520 --> 0:35:39.239 change in the way China has been thinking about research 0:35:39.280 --> 0:35:42.440 and development. Does a lot more energy need to be 0:35:42.480 --> 0:35:43.560 applied into. 0:35:43.520 --> 0:35:43.840 R and D. 0:35:44.280 --> 0:35:46.160 Yeah, I think this is an area where you know, 0:35:46.600 --> 0:35:49.000 she has clearly signaled that he wants China to sort 0:35:49.000 --> 0:35:52.239 of really focus its efforts on and it's allo sort 0:35:52.239 --> 0:35:54.680 of to do with this big sort of rivalry that 0:35:55.239 --> 0:35:58.160 China has now with the US. You know, New Productive 0:35:58.160 --> 0:36:00.799 forces is a big sort of catual term. Essentially, what 0:36:00.880 --> 0:36:03.600 she really wants is for trying to become a huge 0:36:03.640 --> 0:36:06.520 tech superpower which can be self sufficient if it needs to, 0:36:06.560 --> 0:36:09.520 but also lead the world in many of these technologies, 0:36:09.840 --> 0:36:12.640 and they've really been investing in that. You know, they 0:36:12.680 --> 0:36:14.279 have a long way to catch up when it does 0:36:14.320 --> 0:36:17.319 come to some areas like AI. But then you know, 0:36:17.800 --> 0:36:19.440 you have seen how trying to has sort of steamed 0:36:19.440 --> 0:36:22.080 ahead in the EV sector and in terms of you know, 0:36:22.120 --> 0:36:23.879 the way that they have sort of led the world 0:36:23.920 --> 0:36:26.640 really in green technologies. You know, I think the interesting 0:36:26.680 --> 0:36:29.040 thing is how that sort of then affects kind of 0:36:29.120 --> 0:36:32.320 geopolitical relationships and standing in the world, because it seems 0:36:32.320 --> 0:36:34.120 that the farther they do pull ahead in these kind 0:36:34.160 --> 0:36:36.520 of areas, the more they sort of run into frictions 0:36:36.520 --> 0:36:39.240 of their major trading partners, so they have to also 0:36:39.280 --> 0:36:43.280 find sort of new markets for these kinds of innovations 0:36:43.280 --> 0:36:45.759 that they are seeking to find. And also it sort 0:36:45.800 --> 0:36:48.680 of comes back to this idea of all the emphasis 0:36:48.680 --> 0:36:50.880 in the economy right now is on the supply side 0:36:51.120 --> 0:36:52.920 rather than trying to create domestic demand. 0:36:53.560 --> 0:36:56.359 If you want free, willing innovation, don't you sort of 0:36:56.400 --> 0:37:01.320 need more freedom. And also in the the particular predicament 0:37:01.360 --> 0:37:03.800 that they're in now, we wonder whether it's an inflection 0:37:03.880 --> 0:37:08.279 point between this sort of step by step stimulation and 0:37:09.040 --> 0:37:11.200 something that approaches shock and all. 0:37:11.560 --> 0:37:13.640 I think that is a really interesting question because the 0:37:13.680 --> 0:37:16.319 assumption is that if you want innovation yet, you need 0:37:16.360 --> 0:37:19.520 this sort of free kind of environment where people can 0:37:19.560 --> 0:37:22.200 sort of like you know, experiment and everything. But then 0:37:22.400 --> 0:37:24.480 you know, if you look at China and look at 0:37:24.600 --> 0:37:27.560 the green sectors or they have innovated, they've done all 0:37:27.560 --> 0:37:29.759 that within a communist party system, which has just been 0:37:29.800 --> 0:37:32.799 tightening over the past sort of twelve years. I think 0:37:32.880 --> 0:37:34.840 like China actually is sort of the way it is 0:37:34.880 --> 0:37:37.680 innovating is kind of challenging some of those assumptions about 0:37:37.920 --> 0:37:40.680 the kind of environment that you do need to innovate. 0:37:40.719 --> 0:37:42.799 I mean, the Chinese model has been to sort of 0:37:43.400 --> 0:37:45.520 identify the areas you really want to grow, put like 0:37:45.600 --> 0:37:48.440 a ton of government support behind it, let all of 0:37:48.480 --> 0:37:51.640 these companies sort of go out and pile them and 0:37:51.719 --> 0:37:54.000 the strongest will survive and the weakest will die off, 0:37:54.040 --> 0:37:56.800 and you'll be left with really, really strong companies that 0:37:56.840 --> 0:37:59.560 can lead sectors. So it's kind of interesting to see 0:37:59.640 --> 0:38:02.879 China do that and sort of confound some of those 0:38:03.560 --> 0:38:05.560 sort of stereotypes out what you do need to sort 0:38:05.560 --> 0:38:06.080 of innovate. 0:38:06.360 --> 0:38:08.560 Thanks to the two of you for helping us preview 0:38:08.600 --> 0:38:12.760 the third Planum, which gets underway next week. Rebecca Chung Wilkins, 0:38:12.760 --> 0:38:16.960 Bloomberg Asia Government and Politics correspondent and Bloomberg's Jenny Marsh, 0:38:17.120 --> 0:38:20.680 team leader for Greater China ECO GOV. I'm Doug Krisner 0:38:20.719 --> 0:38:23.200 along with Brian Curtis in Hong Kong. You can catch 0:38:23.239 --> 0:38:26.279 us weekdays here for Bloomberg Daybreak Asia beginning at eight 0:38:26.320 --> 0:38:29.120 am in Hong Kong eight pm on Wall Street. 0:38:29.160 --> 0:38:29.520 Tom. 0:38:29.840 --> 0:38:32.359 Thank you, Doug, and thank you Brian. And that does 0:38:32.440 --> 0:38:35.120 it for this edition of Bloomberg day Break Weekend. Join 0:38:35.200 --> 0:38:37.440 us again Monday morning at five am Wall Street time 0:38:37.480 --> 0:38:39.960 for the latest on markets. Overseas and the news you 0:38:40.080 --> 0:38:43.080 need to start your day. I'm Tom Buzby. Stay with US. 0:38:43.360 --> 0:38:47.280 Top stories and global business headlines are coming up right now.