Daybreak Weekend: U.S Jobs, UK Elections, Hong Kong Handover

Bloomberg Audio Studios, Podcasts, radio News. 0:00:09.760 --> 0:00:12.399 This is Bloomberg day Break Weekend, our global look at 0:00:12.440 --> 0:00:14.360 the top stories of the coming week from our day 0:00:14.400 --> 0:00:17.240 Break anchors all around the world. And just to handle 0:00:17.280 --> 0:00:20.200 the program, I'll look ahead to the June jobs report 0:00:20.320 --> 0:00:22.440 in the US and what it means for the FEDS 0:00:22.520 --> 0:00:25.759 monetary policy going forward. I'm John Tucker in New York. 0:00:26.079 --> 0:00:28.600 I'm Caroline Hepkitt in London, where we're looking ahead to 0:00:28.640 --> 0:00:32.000 what is expected to be a landmark election in the UK. 0:00:32.479 --> 0:00:34.680 Hi Brian Curtis in Hong Kong. We look ahead to 0:00:34.720 --> 0:00:37.360 the twenty seventh anniversary of the handover of Hong Kong 0:00:37.440 --> 0:00:40.160 to China. What's changed and where are we going? 0:00:42.479 --> 0:00:45.760 That's all straight ahead on Bloomberg day Break Weekend on 0:00:45.920 --> 0:00:48.760 Bloomberg E Loove on three O New York, Bloomberg ninety 0:00:48.840 --> 0:00:52.400 nine 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 0:00:57.440 --> 0:01:00.280 XM one nineteen and around the world on Blue Bomberg 0:01:00.400 --> 0:01:03.080 Radio dot com and buy the Bloomberg Business app. 0:01:07.000 --> 0:01:10.120 Hi everybody, I'm John Tucker, and we begin Today's program 0:01:10.160 --> 0:01:12.000 with a look ahead to the June jobs report in 0:01:12.000 --> 0:01:14.120 the US. That data is going to be released next 0:01:14.160 --> 0:01:17.920 Friday at eight thirty am Wall Street. Time for more. 0:01:18.000 --> 0:01:21.160 We're joined by our economic roundtable. Let's bring in Michael McKee, 0:01:21.200 --> 0:01:26.240 Bloomberg International Economics and Policy correspondent, and Ira Jersey, Bloomberg 0:01:26.280 --> 0:01:31.560 Intelligence Chief US Interest rates strategist. So the next big 0:01:31.720 --> 0:01:34.959 data point the payrolls. That's the other side of the 0:01:34.959 --> 0:01:38.759 FEDS policy mandate. Because we already heard about inflation, so 0:01:38.800 --> 0:01:42.520 correct me if I'm wrong, guys, inflation the rate of 0:01:42.560 --> 0:01:45.760 inflation headed in the right direction. So what are we 0:01:45.800 --> 0:01:49.600 expecting from the jobs market? To Mike McKee, we'll start 0:01:49.640 --> 0:01:49.880 with you. 0:01:50.640 --> 0:01:54.640 Well, we basically look at the jobs market as unchanged, 0:01:54.680 --> 0:01:58.320 or at least when I say we, I mean the 0:01:58.320 --> 0:02:01.600 consensus of economists surveyed by Bloomberg as they like us 0:02:01.640 --> 0:02:05.400 to say. One hundred and eighty eight thousand is the forecast, 0:02:05.440 --> 0:02:08.519 which is roughly what the forecast was last month. Of course, 0:02:08.520 --> 0:02:10.320 we've got a big surprise came in at two hundred 0:02:10.320 --> 0:02:11.679 and seventy two thousand. 0:02:12.560 --> 0:02:13.120 It kind of. 0:02:13.800 --> 0:02:18.960 Expect hiring to slow, but until it does, they're reluctant 0:02:19.000 --> 0:02:22.400 to predict it, so they still see essentially where we 0:02:22.440 --> 0:02:23.880 are is where we. 0:02:23.880 --> 0:02:27.400 Are, all right, So, Ira, what does a slowing jobs 0:02:27.520 --> 0:02:29.480 market mean for rates? 0:02:29.880 --> 0:02:32.160 Just like it has been over the last couple of 0:02:32.200 --> 0:02:36.520 weeks when we've gotten the better inflation data, it probably 0:02:36.560 --> 0:02:40.680 means that that interest rates will continue to slowly come down, 0:02:40.960 --> 0:02:45.480 and eventually, once the Federal Reserve starts to actually cut 0:02:45.520 --> 0:02:49.320 interest rates, some of that rally in the treasury market. 0:02:49.400 --> 0:02:52.959 So that means prices higher, yields lower, that it can 0:02:53.000 --> 0:02:55.960 accelerate a little bit, particularly in some of the shorter 0:02:56.080 --> 0:02:59.079 term maturities like two year treasuries and three year treasuries. 0:02:59.120 --> 0:03:03.320 So this this Friday's data is going to be pretty important, 0:03:03.360 --> 0:03:06.359 you know, from from the overall kind of mosaic of 0:03:06.560 --> 0:03:09.640 the economic landscape. But I think what's really interesting about 0:03:09.680 --> 0:03:11.680 it is the fact that it's on a Friday, in 0:03:11.720 --> 0:03:14.680 between the fourth of July and a weekend. Uh So 0:03:15.000 --> 0:03:18.640 I know I'm now, but you guys going to be 0:03:18.680 --> 0:03:22.400 around yeah. So so that I think one of the 0:03:22.440 --> 0:03:25.720 questions is how how well stabbed will will trading desk be. 0:03:25.800 --> 0:03:28.680 So if we do get a number that's significantly away 0:03:28.720 --> 0:03:31.000 from consensus, like a big number like we had last month, 0:03:31.240 --> 0:03:34.720 or a much lower number. Will we see additional volatility 0:03:34.760 --> 0:03:37.080 then you might expect otherwise, And I do suspect that 0:03:37.120 --> 0:03:39.960 we could wind up seeing like a crazy knee jerk 0:03:40.000 --> 0:03:43.040 reaction one way the other. Maybe over time that gets 0:03:43.280 --> 0:03:46.320 kind of taken back, but I suspect that there is 0:03:46.360 --> 0:03:49.440 the potential for very high volatility, not only rates markets, 0:03:49.440 --> 0:03:51.360 but just about every market around the world. 0:03:51.440 --> 0:03:53.640 Will you guys explain to me, I mean, what's the 0:03:53.720 --> 0:03:57.360 dividing line here? At some point a slowing economy that's 0:03:57.400 --> 0:04:00.080 not great for company profits. 0:04:00.000 --> 0:04:03.640 Depends on how companies manage their margins. What we're seeing 0:04:03.720 --> 0:04:08.440 in some cases is the slow down may be affecting hiring. 0:04:08.480 --> 0:04:11.320 In other words, people not adding as many jobs. That's 0:04:11.360 --> 0:04:13.880 what's being expected. Of course, I just told you that 0:04:13.960 --> 0:04:17.880 we probably did, but we're expecting fewer people being hired, 0:04:17.960 --> 0:04:21.080 and jobless claims have gone up a little bit. So 0:04:21.400 --> 0:04:24.599 if the economy slows some but you're cutting some of 0:04:24.640 --> 0:04:28.360 your expenses, and we saw earning supports in the first 0:04:28.440 --> 0:04:30.800 quarter that companies are looking for a lot of ways 0:04:30.800 --> 0:04:34.240 to manage their expenses, then margins can stay higher and 0:04:35.040 --> 0:04:38.320 profits can be still strong. So it's kind of hard 0:04:38.320 --> 0:04:40.440 to say at this point it is going to really 0:04:40.520 --> 0:04:44.200 hurt the investor going forward. When the Fed starts cutting rates, 0:04:44.200 --> 0:04:45.360 it should help investors. 0:04:45.640 --> 0:04:49.800 Okay, so it's political season, the silly season. So what 0:04:49.839 --> 0:04:52.960 does this mean for politics? And IRA? You're going to 0:04:53.000 --> 0:04:55.919 put on your politics hat right now and answer that 0:04:56.040 --> 0:05:00.920 question for me. Is it good for the administration? The administration? 0:05:01.240 --> 0:05:03.960 Well, no, it's I you know, slowing economy I think 0:05:04.000 --> 0:05:06.559 in general would be bad for the for the current 0:05:06.560 --> 0:05:10.000 administration and the current party that's in power and incumbents 0:05:10.080 --> 0:05:12.080 in general. We have seen that. 0:05:12.040 --> 0:05:16.440 Trans rights are coming down in lower rate of inflation 0:05:16.520 --> 0:05:18.040 and lower rates. That's good. 0:05:18.279 --> 0:05:21.360 Yeah, you know, keep in mind, you know, I've we've 0:05:21.400 --> 0:05:23.240 all been around for for a very long time. So 0:05:23.360 --> 0:05:25.880 for those people who were you know, newer to the markets, 0:05:26.080 --> 0:05:28.480 were meaningfully younger than us. You know, I recall during 0:05:28.520 --> 0:05:32.599 the nineteen ninety two presidential election, you know, George Bush 0:05:32.680 --> 0:05:35.000 kept on saying, oh, the economy is improving, the economy 0:05:35.080 --> 0:05:37.400 is improving, which was true if you looked at the 0:05:37.440 --> 0:05:41.040 GDP data and you know, industrial production and even the 0:05:41.120 --> 0:05:43.760 job market. But people didn't feel that way and because 0:05:43.760 --> 0:05:47.679 people didn't feel that way. You wound up with George 0:05:47.680 --> 0:05:50.320 Bush losing to Bill Clinton, right, and and something that 0:05:50.720 --> 0:05:53.680 was crazy after the golf War, given how popular George 0:05:53.680 --> 0:05:57.520 Bush was just a year before. So I suspect that 0:05:57.520 --> 0:06:00.159 that part of what we look at with some of 0:06:00.200 --> 0:06:02.320 the data that we received. You know, just this past 0:06:02.360 --> 0:06:05.800 week we got some the Michigan consumer confidence data that 0:06:05.960 --> 0:06:08.159 actually popped up a bit, but it's still showing that 0:06:08.200 --> 0:06:11.640 people are less confident than they were, you know, in 0:06:11.760 --> 0:06:14.479 twenty twenty one. So, you know, and a big part 0:06:14.480 --> 0:06:16.760 of that, I think is still this overhang of how 0:06:16.839 --> 0:06:21.560 high inflation was and the idea that we have politics 0:06:21.600 --> 0:06:24.080 being so poor, I think is reflective in a lot 0:06:24.120 --> 0:06:27.360 of the survey data. Even though some of the hard data, 0:06:27.360 --> 0:06:29.560 well it's slowing, is still pretty good, right, one hundred 0:06:29.560 --> 0:06:32.080 and eighty eight thousand jobs. If that were to be 0:06:32.160 --> 0:06:36.000 the steady state pace of the job market would be fine. Yeah, 0:06:36.040 --> 0:06:37.320 that would be absolutely fine. 0:06:37.440 --> 0:06:40.480 Mike McKey, does the tone of the FED I feel 0:06:40.600 --> 0:06:44.680 doesn't match the data that I've seen. Am I crazy? 0:06:45.279 --> 0:06:45.400 No? 0:06:45.480 --> 0:06:48.479 I think, I mean it depends on the data you're 0:06:48.640 --> 0:06:51.480 referring to. The tone of the FED. Basically has been 0:06:52.440 --> 0:06:56.880 looks all good, but let's make sure that it doesn't reverse. 0:06:57.440 --> 0:07:00.600 And so we're waiting for additional data come in. But 0:07:00.640 --> 0:07:05.200 remember they're also talking to CEOs and small business owners 0:07:05.600 --> 0:07:08.279 all the time, and they have a pretty good read 0:07:08.360 --> 0:07:11.400 on what the businesses in their districts are thinking they're 0:07:11.440 --> 0:07:14.280 going to do in terms of hiring, in terms of business, 0:07:14.320 --> 0:07:18.360 in terms of pricing. So they've got both sides of 0:07:18.400 --> 0:07:23.760 it covered there. And once they are a little more certain, 0:07:23.840 --> 0:07:27.480 which would probably be in another month or so, then 0:07:27.560 --> 0:07:31.400 they probably will look to cut interest rates, and you'll 0:07:31.440 --> 0:07:35.640 hear much more unanimity on that idea. Problem is, it 0:07:35.680 --> 0:07:39.040 takes a while, we have lags for rates to have 0:07:39.120 --> 0:07:43.160 an impact. In most cases, they would have more immediate 0:07:43.200 --> 0:07:47.800 impact on Wall Street, which exists to react, but for 0:07:47.880 --> 0:07:49.800 the American people, it's going to take a while before 0:07:49.800 --> 0:07:53.400 they really see lower mortgage rates or lower auto loan rates. 0:07:53.440 --> 0:07:55.920 So it would take a while to sink in. That's 0:07:55.920 --> 0:07:59.240 a little bit of a way around the answer an 0:07:59.280 --> 0:08:02.360 answer to what you we're asking about politics, Probably even 0:08:02.360 --> 0:08:05.280 if the Fed cut in September, people wouldn't be putting 0:08:05.320 --> 0:08:07.480 a lot on that by election day. 0:08:07.840 --> 0:08:11.360 Okay, I'll focus a little more on the mandate that 0:08:11.880 --> 0:08:16.679 Congress usually follows. But deficits, Ira Jersey, can we focus 0:08:16.720 --> 0:08:19.320 on that because they do matter? And I don't hear 0:08:19.600 --> 0:08:24.040 too much rhetoric from the candidates on this front. When 0:08:24.040 --> 0:08:29.400 the government's competing for capital because it has high deficits, 0:08:29.840 --> 0:08:34.680 it takes away from the capital available for investment that 0:08:35.040 --> 0:08:37.560 essentially drives up rates. Do I have that right? 0:08:37.679 --> 0:08:40.880 Generally speaking? Yeah, additional supply should mean that that rates 0:08:40.880 --> 0:08:43.240 would be higher than they would be otherwise. But the 0:08:43.280 --> 0:08:46.200 treasury market is still the safest, most liquid market in 0:08:46.240 --> 0:08:49.160 the world. So, and it is much more sensitive and 0:08:49.200 --> 0:08:54.120 remains much more sensitive to expectations for the Fed. So yes, 0:08:54.360 --> 0:08:57.199 you know. So instead of maybe say a one percent 0:08:57.400 --> 0:09:00.960 decline in interest rates, if the feders we're to cut, 0:09:01.040 --> 0:09:04.400 maybe you only get zero point nine to five basis points, right, 0:09:04.400 --> 0:09:06.880 You get ninety ninety five basis points instead of one 0:09:06.920 --> 0:09:09.880 hundred basis points in terms of a rally in the 0:09:09.960 --> 0:09:12.880 rate market. So it's still what the Fed does matters 0:09:12.920 --> 0:09:16.400 the most for returns for treasury investors. Yeah, as far 0:09:16.400 --> 0:09:18.280 as deficits go, you know, one of the one of 0:09:18.320 --> 0:09:23.240 the issues right now, and to your point is neither 0:09:23.520 --> 0:09:27.400 Neither party seems very focused on being fiscally prudent and 0:09:27.400 --> 0:09:31.480 fiscally responsible, so that there's not a lot of gain 0:09:31.559 --> 0:09:33.800 to be made politically in order to say, hey, we're 0:09:33.800 --> 0:09:37.319 going to cut the deficit by increasing taxes and cutting spending, 0:09:37.400 --> 0:09:38.640 right like neither party wants. 0:09:38.600 --> 0:09:40.760 You're not going to get to any political points for 0:09:40.880 --> 0:09:42.200 being responsible. 0:09:42.720 --> 0:09:46.319 Yeah, Changler, the first rule of politics. 0:09:47.960 --> 0:09:50.240 Okay, Mike McKee, I'm going to throw this one at you. 0:09:51.040 --> 0:09:54.840 The Fed's balance sheet, and don't tune out anybody, because 0:09:54.840 --> 0:09:57.880 this is not boring the balance sheet. There's a contraction 0:09:58.080 --> 0:10:00.440 from the Fed's balance sheet, and the the reason this 0:10:00.559 --> 0:10:03.560 matters is because they were spending a lot to stimulate 0:10:03.600 --> 0:10:06.880 the economy slowly. That's contracting. So what's that going to 0:10:06.920 --> 0:10:10.640 mean for assets like my stock portfolio? If that's contracting 0:10:10.679 --> 0:10:12.599 and there's no longer stimulus there. 0:10:12.520 --> 0:10:16.000 Well it shouldn't mean anything, and so far hasn't meaned 0:10:16.400 --> 0:10:20.280 meant anything. The Fed has figured out that QT, as 0:10:20.320 --> 0:10:22.839 people like to call it, it doesn't work the same 0:10:22.880 --> 0:10:28.199 way as QE because when the Fed starts stimulating the 0:10:28.240 --> 0:10:32.240 economy by buying assets, the market's pricing the idea that 0:10:32.280 --> 0:10:36.920 assets are going to go down eventually because it has 0:10:36.960 --> 0:10:41.520 to end, and so the QT process becomes an accepted 0:10:41.600 --> 0:10:45.840 part of the cycle and it doesn't really move the 0:10:45.880 --> 0:10:49.000 market move yields in the same way that it does 0:10:49.160 --> 0:10:53.920 on the way up. So the Fed's argument and the 0:10:54.040 --> 0:10:57.360 research has shown that you don't get much of a 0:10:57.480 --> 0:11:01.520 change because of QT. You can have a problem in 0:11:01.600 --> 0:11:05.200 the money markets if there is a shortage because the 0:11:05.320 --> 0:11:09.560 FED is taking securities out of the market, there's a 0:11:09.600 --> 0:11:12.240 shortage of stuff to repo, and we had that problem 0:11:12.320 --> 0:11:16.800 in twenty nineteen. FED officials argue now that won't happen 0:11:16.920 --> 0:11:19.400 because a there's a lot of money in the reverse 0:11:19.480 --> 0:11:23.640 repo facility that can come back into the repo market. 0:11:23.720 --> 0:11:27.880 And there's also the FED standing repo facility where if 0:11:28.160 --> 0:11:30.680 you need cash, you can give the FED securities and 0:11:31.240 --> 0:11:34.040 they'll give you cash. So they shouldn't see the twenty 0:11:34.160 --> 0:11:37.960 nineteen issue arise again. But they're still going to be careful, 0:11:38.000 --> 0:11:42.400 which is one reason they're tapered the amount that they're 0:11:42.480 --> 0:11:43.720 running off each month. 0:11:43.920 --> 0:11:47.240 I were Jersey are rate strategist. I'm looking at my screen. 0:11:47.640 --> 0:11:51.439 There's this inversion between rates. The two year and ten 0:11:51.520 --> 0:11:54.200 year will take that the two year is higher than 0:11:54.240 --> 0:11:56.360 the ten year. That's what we call the inversion. That's 0:11:56.440 --> 0:11:59.280 usually been a predictor, at least in the past anyway 0:11:59.400 --> 0:12:02.880 of sessions. It's been that way for a long time. 0:12:03.400 --> 0:12:06.000 We haven't had a recession. Can you give me a 0:12:06.040 --> 0:12:06.679 reason why. 0:12:06.920 --> 0:12:09.199 Yeah, Well, the market got it wrong. The market had 0:12:09.240 --> 0:12:12.400 been pricing for a recession for you know, the better 0:12:12.400 --> 0:12:16.240 part of a year, and and that we never we 0:12:16.320 --> 0:12:18.840 never actually got the recession. All all that did, inverted 0:12:18.880 --> 0:12:21.920 yield curve says is that the market believes that interust 0:12:22.000 --> 0:12:23.520 rate's going to be lower in the future than they 0:12:23.520 --> 0:12:27.559 are today. Now, why is that? Probably because of a recession. 0:12:28.520 --> 0:12:30.760 We don't have one, and so the market has to 0:12:30.840 --> 0:12:32.600 keep on kind of pushing that out and pushing that 0:12:32.640 --> 0:12:34.960 out and pushing that out until we actually see the 0:12:34.960 --> 0:12:37.720 recession and the Fed actually begin cutting interest rates. 0:12:37.800 --> 0:12:41.000 That's a good explanation. Again. The next big data point 0:12:41.040 --> 0:12:45.400 payrolls the other side of the Fed's policy mandate. All right, 0:12:45.400 --> 0:12:49.400 Thanks to Michael McKay, Bloomberg International Economics and Policy correspondent, 0:12:49.640 --> 0:12:54.160 at Ira Jersey, Bloomberg Intelligence Chief US interest rates strategist. 0:12:54.800 --> 0:12:56.760 Just to hit on Bloomberg Daybreak weekend. We're going to 0:12:56.800 --> 0:12:59.920 look ahead to what's expected to be a landmark election 0:13:00.200 --> 0:13:04.079 in the UK. I'm John tucker That this is Boomberg. 0:13:14.520 --> 0:13:17.320 This is Bloomberg Daybreak Weekend or Global look Ahead at 0:13:17.360 --> 0:13:19.600 the top stories for investors in the coming week. I'm 0:13:19.679 --> 0:13:22.560 John Tuckery in New York. Up later in the program, 0:13:22.600 --> 0:13:24.559 we're going to look ahead to the anniversary of Hong 0:13:24.640 --> 0:13:28.200 Kong's hand over it to China and examine its current 0:13:28.280 --> 0:13:32.160 relationship with China. But first, voters in the UK will 0:13:32.200 --> 0:13:35.800 go to the polls on Thursday to choose the next government. 0:13:35.920 --> 0:13:38.880 The opposition Labor Party has had a massive lead in 0:13:38.920 --> 0:13:42.040 the polls for many months, while the ruling Conservative Party 0:13:42.080 --> 0:13:46.280 could be on track for an electoral wipeout. Regardless of 0:13:46.280 --> 0:13:49.640 who wins, the next government will face major economic challenges 0:13:49.679 --> 0:13:52.960 and fiscal constraints. For more, Let's go to London and 0:13:53.000 --> 0:13:56.199 bring in Bloomberg Daybreak Europe anchor Caroline Hepger. 0:13:56.840 --> 0:14:00.480 John DK has had five prime ministers in the past years, 0:14:00.520 --> 0:14:03.360 and it looks likely it will be getting a sixth 0:14:03.440 --> 0:14:06.160 in the coming days. According to Bloomberg's poll of polls, 0:14:06.400 --> 0:14:09.160 the Labour Party has had a twenty point lead over 0:14:09.200 --> 0:14:12.960 the Conservatives for months now, and the election campaign hasn't 0:14:13.000 --> 0:14:16.679 done much to shift that advantage. Labour hasn't been in 0:14:16.720 --> 0:14:20.280 power in the UK since twenty ten, and some projections 0:14:20.320 --> 0:14:24.120 see a victory akin to that of Tony Blair's landslide 0:14:24.160 --> 0:14:28.440 election win in nineteen ninety seven, but the economic context 0:14:28.480 --> 0:14:32.440 this time is very different. Fiscal space is in short supply, 0:14:32.600 --> 0:14:35.480 and fears of a repeat of the market mayhem that 0:14:35.560 --> 0:14:38.560 engulfed the UK in twenty twenty two under the then 0:14:38.600 --> 0:14:42.800 Prime Minister Liz Trust will prevent any big boring binge. 0:14:43.200 --> 0:14:43.400 Now. 0:14:43.480 --> 0:14:46.800 Both the two main political parties claim that they are 0:14:46.840 --> 0:14:50.080 the Party of Business, and that was a key battleground 0:14:50.080 --> 0:14:52.920 when the business sectory Kenny Bade not form the Conservative 0:14:52.960 --> 0:14:56.520 Party and her Labour counterpart Jonathan Reynolds took part in 0:14:56.640 --> 0:14:59.960 our special Bloomberg debate just in the last few days. 0:15:00.520 --> 0:15:02.840 The Labor Manifesto of the Labor Agenda is what we 0:15:02.920 --> 0:15:05.840 call a pro worker, pro business agenda, and the agenda 0:15:05.880 --> 0:15:09.680 reflects that in its aggregate and total form. It's everything 0:15:09.720 --> 0:15:12.720 from a better business environment around changes to planning to 0:15:12.800 --> 0:15:15.520 tax certainty to how things like the skill system works 0:15:15.560 --> 0:15:18.160 but we want that to deliver growth that every part 0:15:18.320 --> 0:15:20.600 of the UK and every person within it benefits from, 0:15:20.840 --> 0:15:24.760 and the employment framework will the flow will rise. But frankly, 0:15:25.080 --> 0:15:27.440 the vast majority of businesses operating in the UK are 0:15:27.440 --> 0:15:30.720 operating to a higher standard than those sets of proposals. 0:15:31.040 --> 0:15:33.680 It I think provides what I would call the flexibility 0:15:33.680 --> 0:15:35.760 that works both ways, so it doesn't take away some 0:15:35.800 --> 0:15:37.880 of the advantages of our labor market, but it delivers 0:15:37.920 --> 0:15:39.840 in a way which isn't one side, and it gives 0:15:39.880 --> 0:15:42.680 people the chance to feel and participate in the economy, 0:15:42.720 --> 0:15:45.240 to have the benefits for themselves and their family that 0:15:45.280 --> 0:15:48.320 they're seeking. And it's been developed very closely with businesses 0:15:48.360 --> 0:15:50.560 to make sure those burdens are not two burdens. 0:15:50.600 --> 0:15:52.600 I mean it developed closely with business. 0:15:52.600 --> 0:15:55.000 Why has the Conservative Party not to try to introduce 0:15:55.040 --> 0:15:55.560 those kinds of. 0:15:55.560 --> 0:15:58.400 Measures because business doesn't want them. I think it is 0:15:58.720 --> 0:16:02.640 unbelievable Nathan would actually suggest that those employment regulations have 0:16:02.680 --> 0:16:06.760 been developed with business, which business Business is terrified of 0:16:06.760 --> 0:16:09.120 what labor is selling. And one of the things that's 0:16:09.120 --> 0:16:11.880 really interesting is to listen to how labour talks. He's 0:16:11.880 --> 0:16:14.640 talking about Rischie Sunact being dishonest. He's talking about Listrass. 0:16:14.840 --> 0:16:17.960 This is very personal. They have no diagnosis of the 0:16:17.960 --> 0:16:21.440 fundamental problems of this country. All they can see is 0:16:21.560 --> 0:16:23.880 the individuals in the government. There is no and if 0:16:23.880 --> 0:16:26.360 you do not have a good diagnosis, you have no solutions. 0:16:26.640 --> 0:16:29.560 I would ask him what he thinks business thinks of 0:16:29.760 --> 0:16:31.840 the new employment regulations that are going to make it 0:16:32.000 --> 0:16:36.240 very hard to hire, strangling employment right at both the 0:16:36.320 --> 0:16:39.720 day one rights that they're bringing in. Businesses CEO of ASDA, 0:16:39.960 --> 0:16:42.920 Curry's m ands have said that these are terrible regulations, 0:16:43.080 --> 0:16:45.400 which businesses have they developed them with They are bad 0:16:45.400 --> 0:16:46.320 ideas well. 0:16:46.360 --> 0:16:47.800 I've strongly pushed back on that, and I would just 0:16:47.880 --> 0:16:51.080 remind you, Kenmy, when the Conservative Party led this country 0:16:51.120 --> 0:16:53.600 out of the European Union, you promised an employment bill. 0:16:53.640 --> 0:16:56.240 You promised many of the things that are in this package. 0:16:56.240 --> 0:16:58.080 You didn't deliver on them. That's one of the reasons 0:16:58.080 --> 0:17:01.320 you've lost so much support. You promise people's security in 0:17:01.360 --> 0:17:03.360 the workplace. They haven't had that. And I don't think 0:17:03.360 --> 0:17:05.840 anyone could look at the set of proposals being put 0:17:05.880 --> 0:17:08.520 forward by the Labor Party and say they are unreasonable 0:17:08.520 --> 0:17:09.879 and the idea by the way, there's some sort of 0:17:09.880 --> 0:17:13.560 continental labor market. These are specific things for the UK 0:17:13.960 --> 0:17:16.240 that will give people a chance to participate and feel 0:17:16.280 --> 0:17:18.840 a part and feel the benefits of a stronger economy 0:17:18.840 --> 0:17:21.439 which in a way is still without any question a 0:17:21.480 --> 0:17:24.920 better business environment to operate in, and which frankly give 0:17:24.960 --> 0:17:26.600 people the kind of security, the kind of work you 0:17:26.600 --> 0:17:29.000 can raise and build your family around that everyone should 0:17:29.000 --> 0:17:29.880 be supporting in the UK. 0:17:30.119 --> 0:17:34.240 It should be terrified about surrendering your business the economy 0:17:34.480 --> 0:17:38.159 tax to labor, absolutely terrified. And the reason why I 0:17:38.200 --> 0:17:40.800 say that is because the problems in our economy are 0:17:40.840 --> 0:17:43.359 not to do with flexible working rights. We have some 0:17:43.400 --> 0:17:46.040 of the most flexible working rights in the world. That 0:17:46.200 --> 0:17:48.400 is a problem that is solved. We've brought in all 0:17:48.440 --> 0:17:52.440 sorts of things, working from home, breathemently, parentally, shared parentally. 0:17:52.680 --> 0:17:54.719 We have done a lot. The fact that they are 0:17:54.760 --> 0:17:57.879 fishing in this empty barrel for solutions shows that labor 0:17:57.920 --> 0:17:59.880 have no idea what this economy. 0:18:00.520 --> 0:18:03.520 That was Kenny Badenoch, the current business sectory there speaking 0:18:03.520 --> 0:18:06.160 to our colleague Ana Edwards in the TV and radio 0:18:06.240 --> 0:18:09.960 debate that took place at Blomberg's European headquarters, so that 0:18:09.960 --> 0:18:12.040 gives you a flavor of how the two main parties 0:18:12.080 --> 0:18:16.360 are thinking about this campaign. Investors, interestingly don't seem too 0:18:16.400 --> 0:18:20.120 worried about the risk of volatility from this election, partly 0:18:20.280 --> 0:18:24.520 down to the cautious policy proposals of the Labor Party 0:18:24.600 --> 0:18:27.520 and the Conservatives and the limited room for really big 0:18:27.560 --> 0:18:31.200 spending plans. Here's the view of Henrietta Pakmar, who is 0:18:31.240 --> 0:18:34.760 head of Global fixed Income at all Spring Global Investments 0:18:34.760 --> 0:18:35.560 on that point. 0:18:36.040 --> 0:18:40.520 So the UK government is likely to have issues, Yes, absolutely, 0:18:40.560 --> 0:18:42.639 They're going to have to make some tough choices in 0:18:42.720 --> 0:18:45.399 terms of what they choose to fund and how they 0:18:45.480 --> 0:18:48.119 choose to fund it. So the markets are going to 0:18:48.119 --> 0:18:50.960 be watching them like hawks, and the long end is 0:18:51.000 --> 0:18:54.480 going to be the more volatile area there, so really 0:18:54.560 --> 0:18:57.680 interesting to see how they react. Do we get the 0:18:57.720 --> 0:19:01.119 same volatility as we had in the trust sort of 0:19:01.240 --> 0:19:05.840 moment in twenty two I do think one different compared 0:19:05.880 --> 0:19:09.440 to that time is a technical environment is a little 0:19:09.440 --> 0:19:13.960 different given what we lived through in that period, so 0:19:14.000 --> 0:19:16.760 some of the leverage in the system isn't going to 0:19:16.800 --> 0:19:21.120 be quite as acute. That being said, I do think 0:19:21.160 --> 0:19:23.880 that the markets, and it's not just a UK are 0:19:23.920 --> 0:19:26.960 going to look to keep a lid on spending generally 0:19:27.320 --> 0:19:30.159 at a sovereign sovereign basis at the short end of 0:19:30.200 --> 0:19:33.240 the guilt curve. How many BOE cuts are you expecting 0:19:33.280 --> 0:19:37.040 this year? Our call has been that the BOE would 0:19:37.080 --> 0:19:41.439 come after the ECBs, so at this point, probably a 0:19:41.480 --> 0:19:46.960 couple of cuts in August, possibly in August, depending on 0:19:47.200 --> 0:19:49.800 the data that we get between between now and then. 0:19:50.720 --> 0:19:53.520 We think that that that probably makes sense given the 0:19:53.600 --> 0:19:56.760 sort of inflation progress at the UK has made so 0:19:56.920 --> 0:19:59.520 far and the sort of growth prospects as well. 0:19:59.640 --> 0:20:03.480 That was Henrietta Peckamar from all Spring Global Investments, speaking 0:20:03.520 --> 0:20:07.240 to Bloomberg's Lizzie Burden. The economic outlook for the UK 0:20:07.480 --> 0:20:10.520 is improving. Inflation hit the Bank of England's target of 0:20:10.560 --> 0:20:13.920 two percent in the recent prend Bloomberg Economics is also 0:20:14.080 --> 0:20:16.560 expecting too, interest rate cuts from the Bank of England 0:20:16.560 --> 0:20:19.960 this year, and growth for twenty twenty four of zero 0:20:19.960 --> 0:20:22.679 point eight percent. That would actually be an improvement on 0:20:22.760 --> 0:20:25.960 twenty twenty three. Business groups want the next government to 0:20:26.040 --> 0:20:29.160 tackle some of the longer term issues facing the UK economy. 0:20:29.600 --> 0:20:32.880 Martha Lane Fox, president of the British Chambers of Commerce 0:20:33.080 --> 0:20:37.040 told us recently of the massive skills shortage that is 0:20:37.119 --> 0:20:39.119 holding back growth in many businesses. 0:20:39.600 --> 0:20:41.880 We're not going to be able to make our businesses 0:20:41.920 --> 0:20:44.680 more competitive globally, but also just to grow the economy, 0:20:44.720 --> 0:20:47.000 as every single politician has said ad nauseum in the 0:20:47.040 --> 0:20:49.000 last few weeks, if we don't make sure we've got 0:20:49.040 --> 0:20:51.439 the right talent to do it. And it's depressing that 0:20:51.880 --> 0:20:55.840 nearly three quarters of our businesses are feeling anxious about 0:20:56.240 --> 0:20:59.440 skills in their business and crucially, in my opinion, feeling 0:20:59.440 --> 0:21:03.200 anxious about two enormously important areas of skills development over 0:21:03.240 --> 0:21:07.160 the next decade AI digitization and the green economy, where 0:21:07.160 --> 0:21:09.280 we're going to need people if we're going to build 0:21:09.400 --> 0:21:12.359 a modern, robust economy for twenty thirty twenty forty. 0:21:12.400 --> 0:21:14.520 And what is the message to the next government then, 0:21:14.760 --> 0:21:18.000 in terms of laying the groundwork for skills from here. 0:21:18.000 --> 0:21:20.240 Well, I think the first thing is to really recognize 0:21:20.320 --> 0:21:23.720 the issue. And when I first became president of the 0:21:23.800 --> 0:21:27.640 BCC eighteen months ago, come from the technology sector predominantly, 0:21:27.680 --> 0:21:29.399 I'm used to never having enough skills because it was 0:21:29.400 --> 0:21:31.399 inventing stuff you don't really have the right people. But 0:21:31.520 --> 0:21:35.200 I was so shocked by the skills issues across every sector, 0:21:35.320 --> 0:21:37.320 every bit of the country that I went to, whether 0:21:37.359 --> 0:21:39.520 it was hospitality, whether it was social care, whether it 0:21:39.560 --> 0:21:42.159 was a vast manufacturing defense, whatever the area, I was 0:21:42.440 --> 0:21:45.359 lucky enough to be understanding. So I think there are 0:21:45.400 --> 0:21:47.760 some things that are working. And one of the things 0:21:47.760 --> 0:21:50.320 that we've run at the British Chambers are the local 0:21:50.359 --> 0:21:53.360 Skills Improvement plans. We run them on behalf of the government. 0:21:53.520 --> 0:21:56.800 They're great. They are a framework for businesses to sit 0:21:56.880 --> 0:22:01.480 down with a local set of both skills providers, universities, schools, 0:22:01.520 --> 0:22:03.840 other people that can help solve the issue, to map 0:22:03.880 --> 0:22:05.920 out what the local businesses need and what the local 0:22:05.960 --> 0:22:08.760 area can try and build capacity. And so there are 0:22:08.800 --> 0:22:11.320 things that work and we really hope that any future 0:22:11.320 --> 0:22:14.120 government pays attention to that. We did a report called 0:22:14.119 --> 0:22:16.000 the Future of the Economy and we look particularly at 0:22:16.000 --> 0:22:18.840 people who work loads and loads of policy ideas in there, 0:22:18.960 --> 0:22:21.119 so there's no shortage of ideas. But it's also about 0:22:21.119 --> 0:22:24.520 businesses themselves having faced such tough economic headwinds in the 0:22:24.560 --> 0:22:28.400 last few years. Unfortunately, skills training budgets do get put 0:22:28.560 --> 0:22:31.720 down the list and deprioritized and so we know that 0:22:31.720 --> 0:22:33.360 there's just been far less investment. 0:22:33.680 --> 0:22:36.679 That was Martha Lane Fox of the British Chambers of 0:22:36.760 --> 0:22:38.719 Commerce speaking to Bluemberg's Anna Edwards. 0:22:39.400 --> 0:22:39.560 Well. 0:22:39.600 --> 0:22:43.040 Another fact which is contributing to the UK's labor shortage 0:22:43.080 --> 0:22:45.240 is the number of people who have dropped out of 0:22:45.320 --> 0:22:49.000 the workforce. We've been discussing that with Raoul Ruperraal, who 0:22:49.040 --> 0:22:52.520 is the director of BCG's Center for Growth and also 0:22:52.560 --> 0:22:55.640 a former advisor to the former Prime Minister Theresa May. 0:22:56.119 --> 0:22:59.000 The consulting firm has just published a report on the 0:22:59.119 --> 0:23:01.639 problems economic inactivity. 0:23:02.320 --> 0:23:04.240 The key challenge that needs to be tackled that we've 0:23:04.240 --> 0:23:07.160 identified is this rise in long term sick people out 0:23:07.200 --> 0:23:09.960 of the workforce. So since before COVID, we've seen a 0:23:10.040 --> 0:23:12.480 rise of around seven hundred and fifty thousand people who 0:23:12.480 --> 0:23:15.200 are long term sick and out of the workforce, and 0:23:15.200 --> 0:23:17.439 that is a significant rise and makes the UK and 0:23:17.480 --> 0:23:20.840 outlier compared to its peers. So the UK's economic inactivity 0:23:20.920 --> 0:23:24.080 is risen by one over a percentage point, whereas most 0:23:24.080 --> 0:23:26.000 of you countries have seen at fall by over two 0:23:26.000 --> 0:23:28.639 percentage points. So we're really on a completely different trend 0:23:28.680 --> 0:23:31.560 to everyone else. And I think the impact of this 0:23:31.600 --> 0:23:34.479 is significant. We looked at the potential size of the 0:23:34.520 --> 0:23:37.600 prize in terms of both economic and fiscal gains if 0:23:37.640 --> 0:23:40.840 you reverse some of this rise, and it could free 0:23:40.920 --> 0:23:42.600 up over the next five years over the course of 0:23:42.640 --> 0:23:45.640 the next parliament between thirty five billion and fifty seven 0:23:45.640 --> 0:23:48.800 billion in fiscal funds by reducing number of benefits payments 0:23:48.800 --> 0:23:51.359 in improving the tax take, and it could also boost 0:23:51.359 --> 0:23:54.320 GDP by up to three percent over five years. 0:23:54.359 --> 0:23:55.280 So these are. 0:23:55.200 --> 0:23:57.920 Really big numbers and show that tackling some of these 0:23:57.960 --> 0:24:01.679 complex health challenges and complex economic challenges is actually the 0:24:01.720 --> 0:24:04.520 best way to look at generating growth and fiscal revenue 0:24:04.880 --> 0:24:07.119 compared to some of the tinkering we've seen debated in 0:24:07.480 --> 0:24:10.439 recent weeks. Do you get the sense that you know 0:24:10.440 --> 0:24:13.560 that the big parties have really taking this issue seriously. Yeah, Look, 0:24:13.600 --> 0:24:15.520 I do think it is an issue that they take 0:24:15.560 --> 0:24:17.760 seriously for a couple of reasons. One is obviously the 0:24:17.800 --> 0:24:22.040 significant fiscal costs that I've outlined, and I think you know, 0:24:22.080 --> 0:24:26.280 in a very fiscally constrained environment, freeing up thirty to 0:24:26.359 --> 0:24:29.560 fifty billion over five years is a significant amount and 0:24:29.600 --> 0:24:32.639 something that both parties take seriously. And we've heard talks 0:24:32.720 --> 0:24:36.520 about the Benefits Bill etc. During the course of this election, 0:24:36.680 --> 0:24:38.960 but I think they've often talked about the wrong thing 0:24:39.000 --> 0:24:41.480 and not looked at the fundamental drivers as we are here. 0:24:41.840 --> 0:24:43.920 And then the second reason is, you know we have 0:24:44.560 --> 0:24:48.280 still very low unemployment, very very high employment and a 0:24:48.400 --> 0:24:52.120 very tight labor market. And you know, having a very 0:24:52.119 --> 0:24:54.240 tight labor market and this number of people out of 0:24:54.280 --> 0:24:56.280 the workforce is going to have a long term effect 0:24:56.400 --> 0:25:00.000 on the supply potential of our economy and effect on growth. 0:25:00.119 --> 0:25:03.480 So for both those reasons, and then we also add 0:25:03.480 --> 0:25:05.840 in the fact that we have you know, this has 0:25:05.920 --> 0:25:09.159 effects on people's health outcomes and people being sicker. So 0:25:09.680 --> 0:25:12.240 three really big reasons there why I think both parties 0:25:12.280 --> 0:25:13.639 are aware of this issue. 0:25:13.800 --> 0:25:17.520 That was BCG's role Ruperral speaking to Bloomberg, Stephen Caroll 0:25:17.560 --> 0:25:20.880 and Jack Siddits. So plenty of challenges then facing the 0:25:20.920 --> 0:25:23.520 next government. But first of course we have to get 0:25:23.560 --> 0:25:27.159 over the general election. We've been watching the performance of 0:25:27.200 --> 0:25:31.760 the smaller parties too. Nigel Farag's Reform UK has been 0:25:31.800 --> 0:25:34.359 creeping up in the polls, benefiting from the drop in 0:25:34.400 --> 0:25:38.200 support for the Conservatives. The Liberal Democrats and the Greens 0:25:38.200 --> 0:25:42.000 are also hoping to make gains. We'll have full coverage 0:25:42.040 --> 0:25:45.840 and analysis of the election results on the fifth of July. 0:25:45.920 --> 0:25:49.320 Here on Bloomberg Radio. I'm Caroline Hepge here in London. 0:25:49.400 --> 0:25:52.600 You can catch us every weekday morning for Bloomberg Daybreak. 0:25:52.600 --> 0:25:55.160 You're at beginning at six am in London. That's one 0:25:55.200 --> 0:25:56.399 am on Wall Street. 0:25:56.520 --> 0:26:00.560 John, all right, thanks Caroline, Justy Hen On Bloomberg DA Weekend, 0:26:00.840 --> 0:26:04.520 we look ahead to Hong Kong's handover anniversary to China 0:26:04.920 --> 0:26:08.919 and examine its current relationship with China. I'm John Tucker, 0:26:09.080 --> 0:26:23.320 and this is Bloomberg. I'm John Tucker in New York 0:26:23.400 --> 0:26:25.399 with your global look ahead at the top stories for 0:26:25.440 --> 0:26:28.480 investors in the coming week. This coming July first marks 0:26:28.480 --> 0:26:31.480 the twenty seventh year since the handover of Hong Kong 0:26:31.560 --> 0:26:34.920 to China from British colonial rule. Let's get to Bloomberg 0:26:35.000 --> 0:26:38.040 Daybreak Asia co host Brian Curtis and Doug Chrisner to 0:26:38.119 --> 0:26:40.720 talk about the changes the city has been through. 0:26:41.240 --> 0:26:44.800 John, The anniversary of the handover puts Hong Kong back 0:26:44.800 --> 0:26:48.760 in the global spotlight. Establishment Day, as it's called here, 0:26:48.960 --> 0:26:50.919 means different things to different people. 0:26:51.160 --> 0:26:54.680 Hong Kong's chief executive John Lee says the anniversary will 0:26:54.720 --> 0:26:57.679 be a day filled with joy now. That will be 0:26:57.720 --> 0:27:00.280 the case for many loyalists who see the return of 0:27:00.320 --> 0:27:03.600 Hong Kong as a key moment in China's rise. 0:27:03.800 --> 0:27:05.840 But for many others it will be a day of 0:27:05.840 --> 0:27:10.960 frustration since the handover itself. In addition to celebration, July 0:27:11.080 --> 0:27:14.159 first had been a day of peaceful protest for promises 0:27:14.200 --> 0:27:16.840 not yet kept. It was a day when hundreds of 0:27:16.880 --> 0:27:20.480 thousands of people would march from Victoria Park to Central 0:27:20.880 --> 0:27:24.359 calling for more democracy. But all that changed in twenty 0:27:24.440 --> 0:27:28.560 twenty when Beijing imposed a national security law. Since then, 0:27:29.119 --> 0:27:31.000 no large protests have been allowed. 0:27:31.200 --> 0:27:34.760 Meantime, Hong Kong has also faced challenges on the economic front. 0:27:34.800 --> 0:27:39.440 The pandemic, the protest, and US China tensions all weakening 0:27:39.480 --> 0:27:43.639 the economy. The property in stock markets have seen aggressive declines. 0:27:43.680 --> 0:27:47.080 As an example, to Hanksang is down thirty six percent 0:27:47.119 --> 0:27:49.880 over the past five years, and the region has seen 0:27:49.920 --> 0:27:53.400 an exodus of local residents and foreign professionals. 0:27:54.040 --> 0:27:57.080 So joining us now for some insights on where Hong 0:27:57.160 --> 0:27:59.800 Kong is heading is Jenny Marsh Bloomberg Team leader for 0:27:59.880 --> 0:28:03.720 Go Greater China ECO GOV and Alan Wong Bloomberg China 0:28:03.840 --> 0:28:08.680 ECO Gov Editor. So, Jenny, let's start with you. Let's 0:28:08.760 --> 0:28:12.720 examine really what's changed here since the handover. Freedom of 0:28:12.720 --> 0:28:16.320 the press, the rule of law, the independence of the judiciary, 0:28:16.960 --> 0:28:21.920 and political opposition all have been severely diminished. And a 0:28:21.960 --> 0:28:25.600 recent example is Lord Assumption, one of the UK judges 0:28:25.640 --> 0:28:28.520 who resigned from the Court of Final Appeal. He said, 0:28:28.520 --> 0:28:32.760 the rule of law here has been quote profoundly compromised. 0:28:32.760 --> 0:28:36.280 So my question to you is how much has the 0:28:36.359 --> 0:28:38.800 high degree of autonomy actually been eroded? 0:28:39.560 --> 0:28:41.720 As you say, there have been many ways in which, 0:28:41.760 --> 0:28:44.520 you know, China has made this huge push over the 0:28:44.560 --> 0:28:46.400 past four years to sort of really make sure that 0:28:46.440 --> 0:28:49.080 it has Hong Kong under control in all the ways 0:28:49.080 --> 0:28:52.400 that Chijing pink things matter. So you know, that is 0:28:52.440 --> 0:28:56.680 sort of wiping out the opposition from the legislature, is 0:28:56.760 --> 0:28:59.720 not having this sort of rumbunctious kind of free press 0:28:59.720 --> 0:29:01.560 that we used to have. It's making sure that people 0:29:01.560 --> 0:29:04.080 like Jimmy Laie, who had long been the thought in 0:29:04.120 --> 0:29:07.000 the side of Beijing, are under control. Because of what 0:29:07.040 --> 0:29:09.560 you have now Hong Kong, you know, there's is sort 0:29:09.560 --> 0:29:11.840 of outside perception, I think that Hong Kong has become 0:29:11.960 --> 0:29:14.840 another Chinese city, which I think out on the ground 0:29:14.960 --> 0:29:17.000 is not what it feels like, kid. But for sure 0:29:17.440 --> 0:29:19.880 there have been huge changes and sort of what you 0:29:19.920 --> 0:29:23.320 can say here, what you can print, you know, and 0:29:23.400 --> 0:29:25.880 the way that the political system works, and the result 0:29:25.920 --> 0:29:28.320 of all of that has been that the Communist Party 0:29:28.320 --> 0:29:31.240 feels that Hong Kong is now firmly under its control. 0:29:31.320 --> 0:29:33.280 And for so many years, Hong Kong was given all 0:29:33.320 --> 0:29:35.800 these freedoms to have the kind of street protests that 0:29:35.840 --> 0:29:38.400 you laid out that were really kind of a symbol 0:29:38.440 --> 0:29:41.360 of sort of what made Hong Kong so different from 0:29:41.400 --> 0:29:44.120 mainland China, and the erasure of that sort of the 0:29:44.160 --> 0:29:47.160 result is that in many ways, you know, Hong Kong 0:29:47.560 --> 0:29:50.520 feels more similar to mainland China. But of course there 0:29:50.520 --> 0:29:52.520 are still some really big differences here, and I think, 0:29:52.520 --> 0:29:55.440 you know, chief among them is the fact that we 0:29:55.440 --> 0:29:57.960 still have a free internet. And there have been cases 0:29:58.000 --> 0:29:59.960 that sort of dip their tee into testing the limit 0:30:00.160 --> 0:30:03.120 of that, such as the government's injunction on the Glory 0:30:03.160 --> 0:30:04.040 to Hong Kong Song. 0:30:04.960 --> 0:30:05.800 But overall, you. 0:30:05.720 --> 0:30:08.880 Know, the internet here is still free there's still much 0:30:08.920 --> 0:30:11.440 greater freedom of speech here than in mainland China. And 0:30:11.480 --> 0:30:14.040 on the court, you know, there's still the common law 0:30:14.120 --> 0:30:16.920 system here. It's a very different legal system to the 0:30:16.920 --> 0:30:19.360 one in mainland China. And while you know, we are 0:30:19.400 --> 0:30:22.280 seeing sort of the foreign judges backing off, they're pulling 0:30:22.320 --> 0:30:25.240 away from the court final appeal because they don't feel 0:30:25.280 --> 0:30:27.080 they can sort of uphold this system where the national 0:30:27.080 --> 0:30:30.000 security cases are going through the courts. It is still 0:30:30.000 --> 0:30:32.960 a very different legal system to mainland China. So you know, 0:30:33.000 --> 0:30:37.320 I think overall we've seen the liberal freedoms that we 0:30:37.400 --> 0:30:39.960 had here, the way you could push for democracy, all 0:30:39.960 --> 0:30:42.520 that is over. It's a new era for Hong Kong. 0:30:42.920 --> 0:30:45.920 So you know, essentially Jupe has it under his control. 0:30:46.000 --> 0:30:49.440 But now the question really is can Hong Kong continue 0:30:49.480 --> 0:30:52.080 to walk that fine line? You know, where where does 0:30:52.120 --> 0:30:54.800 it end? Is this the Hong Kong that Tjinping wants 0:30:54.840 --> 0:30:55.720 or is there more to come? 0:30:56.000 --> 0:30:58.800 So the rights that you're describing there have been pretty 0:30:58.840 --> 0:31:01.680 much enshrined in the Many Constitution, the basic law. But 0:31:01.800 --> 0:31:05.200 now as I understand it, the national security law from 0:31:05.280 --> 0:31:08.960 China is above where the basic law had been. So 0:31:09.000 --> 0:31:11.400 allan is there a case to be made that in 0:31:11.480 --> 0:31:14.880 some way Beijing is violating the terms of the handover. 0:31:15.760 --> 0:31:18.800 Some foreign governments have definitely made that case, saying that 0:31:19.400 --> 0:31:22.240 well China did with Hong Kong by imposing the National 0:31:22.240 --> 0:31:25.080 Security Law is a violation of the Sign of British 0:31:25.160 --> 0:31:28.920 Joint Declaration that saw Hong Kong return to Chinese rule 0:31:29.120 --> 0:31:32.480 back in nineteen ninety seven. China would claim that it 0:31:32.560 --> 0:31:35.600 has every right to protect its national security. But I 0:31:35.640 --> 0:31:38.800 think for observers what's important is that when they look 0:31:38.840 --> 0:31:41.600 at Hong Kong and see the headlines, they're seeing that 0:31:41.920 --> 0:31:45.160 the July one March has been curbed and the annual 0:31:45.240 --> 0:31:50.240 June fourth commemoration of the Tenement Square massacre was also curbed. 0:31:50.480 --> 0:31:55.240 So those events were only allowed in Hong Kong across China, 0:31:55.840 --> 0:31:58.720 and they for a long time was seen as a 0:31:58.720 --> 0:32:03.040 symbol of Hong Kong's freedom and that distinct they distinguish 0:32:03.560 --> 0:32:06.760 Hong Kong from the rest of China. So that's now gone, 0:32:06.880 --> 0:32:10.880 and so if you look at why they created this 0:32:11.000 --> 0:32:14.080 one country, two systems framework for Hong Kong's return to 0:32:14.160 --> 0:32:18.680 Chinese rule, those distinctions are being erased and it's no 0:32:18.760 --> 0:32:23.200 wonder that people question if China's action amounts to a 0:32:23.280 --> 0:32:26.160 violation of the spirit, if not the letter, of the 0:32:26.200 --> 0:32:27.520 initial design. 0:32:27.480 --> 0:32:31.520 The protesters were calling for that which was promised, as 0:32:31.520 --> 0:32:34.880 I mentioned earlier, And you wonder whether or not you 0:32:34.920 --> 0:32:37.560 know what was the catalyst for china feeling is though 0:32:37.600 --> 0:32:40.080 that they had gone too far. And I'm also curious 0:32:40.120 --> 0:32:42.440 alan whether or not you think that the US and 0:32:42.520 --> 0:32:47.320 the UK and others actually hurt the political aspirations of 0:32:47.360 --> 0:32:50.000 Hong Kong protesters by being so supportive. I know that 0:32:50.040 --> 0:32:52.520 sounds funny, but some would make that claim. 0:32:52.680 --> 0:32:55.280 I think it's a legitimate claim, and some you know, 0:32:55.320 --> 0:32:59.360 a question that I'm sure historians will will ask themselves 0:32:59.360 --> 0:33:02.560 going forward. The China and Hong Kong authorities, they have 0:33:03.040 --> 0:33:06.480 now branded the twenty nineteen protests as some sort of 0:33:06.520 --> 0:33:11.240 a color revolution, which you know generally means that you know, 0:33:11.320 --> 0:33:15.160 people trying to topple the Communist Party. There would be 0:33:15.200 --> 0:33:17.240 a crime, you know, in many places. But I mean, 0:33:17.640 --> 0:33:20.800 any reporter in Hong Kong covering those events could tell 0:33:20.800 --> 0:33:24.080 you that, you know, people weren't out there. Most people 0:33:24.080 --> 0:33:27.240 weren't out there to try to overthrow their government. Most 0:33:27.280 --> 0:33:30.440 of them were responding to what they saw as police 0:33:30.440 --> 0:33:34.880 abuse in their enforcement action against protesters, as well as 0:33:34.920 --> 0:33:37.360 a demand for greater freedoms in electing their own leaders 0:33:37.400 --> 0:33:38.360 and lawmakers. 0:33:38.800 --> 0:33:41.480 Let's talk a little bit about the demographic shift. We 0:33:41.640 --> 0:33:43.920 have been alluding to the fact that there has been 0:33:43.920 --> 0:33:47.040 a bit of a brain drain happening, while at the 0:33:47.040 --> 0:33:49.760 same time, from what I'm understanding, the World Bank is 0:33:49.760 --> 0:33:53.760 saying that Hong Kong has the world's lowest fertility rate 0:33:53.880 --> 0:33:58.080 and nearly thirty percent of the population will be sixty 0:33:58.080 --> 0:34:01.920 five or above by twenty forty. So, Jenny, is there 0:34:02.080 --> 0:34:04.200 a kind of a crisis happening when you look at 0:34:04.200 --> 0:34:05.040 the demographics. 0:34:05.280 --> 0:34:07.800 Absolutely, you know, it's not just Hong Kong. Hong Kong's 0:34:07.840 --> 0:34:10.399 sort of trend of this aging population is in line 0:34:10.400 --> 0:34:13.120 with what we're seeing in other parts of Asia, you know, Japan, 0:34:13.239 --> 0:34:16.640 South Korea and increasingly China having similar problems. But in 0:34:16.680 --> 0:34:19.319 Hong Kong it is acute and it hasn't been helped 0:34:19.320 --> 0:34:22.319 by the political problems. In the past few years. You know, 0:34:22.880 --> 0:34:25.600 there's been a big sort of exodus of talent overseas. 0:34:26.040 --> 0:34:29.439 The UK has this visa program now which has seen 0:34:29.600 --> 0:34:32.479 you know, tens of thousands of Hong Kong's leave. Most 0:34:32.520 --> 0:34:35.200 of those are young people, exactly the kind of people 0:34:35.239 --> 0:34:37.080 you know, from an economic point of view, that you'd 0:34:37.120 --> 0:34:39.600 want to keep in the city. That's an issue for 0:34:39.640 --> 0:34:41.680 the Hong Kong government, you know. At the same time, 0:34:41.719 --> 0:34:44.120 in terms of sort of overall population, we did see 0:34:44.120 --> 0:34:47.279 this big exodus during COVID and in the wake of 0:34:47.400 --> 0:34:50.480 the protests and when the UK and other nations such 0:34:50.520 --> 0:34:54.000 as Canada opened up visa programs. The government says now 0:34:54.040 --> 0:34:56.640 that the population actually has sort of replenished back to 0:34:56.680 --> 0:34:59.080 sort of the figures we were at pre COVID. By think, 0:34:59.120 --> 0:35:02.239 what you have seen is a demographic shift, and so 0:35:02.360 --> 0:35:05.040 where we did sort of you know, lose people, people 0:35:05.080 --> 0:35:07.239 from Midland China have come in and sort of replaced 0:35:07.800 --> 0:35:10.560 those parts of the population. It's hard to know exactly 0:35:10.600 --> 0:35:14.320 how many foreigners have left. We don't have the latest 0:35:14.360 --> 0:35:16.480 census figures on that which would tell us, but I 0:35:16.480 --> 0:35:18.680 think just anecdotally, you know, when you look at some 0:35:18.719 --> 0:35:21.400 of the schools and the private members clubs, it feels 0:35:21.480 --> 0:35:24.120 like those institutions which rely on ITX perhaps are sort 0:35:24.160 --> 0:35:27.560 of they're reporting fewer foreigners in their ranks. 0:35:27.680 --> 0:35:30.040 I think many people expect a lot of Mainlanders to 0:35:30.080 --> 0:35:33.400 be coming here and perhaps to help on that front, 0:35:33.440 --> 0:35:37.280 to provide younger people here. You need only walk around 0:35:37.320 --> 0:35:40.680 Central and getting the elevators, and it seems like mostly 0:35:40.719 --> 0:35:43.800 what you hear is Mandarin these days. I was told 0:35:44.440 --> 0:35:47.360 a long time ago, right in fact, right at the handover, 0:35:47.760 --> 0:35:49.799 that Hong Kong was on its way to becoming an 0:35:49.840 --> 0:35:52.480 important regional city in China, but it would lose its 0:35:52.480 --> 0:35:56.400 status as a regional powerhouse and indeed a global powerhouse. 0:35:57.040 --> 0:35:59.440 Is that where we're heading, Jenny, or can it be 0:35:59.480 --> 0:36:00.000 turned around? 0:36:00.440 --> 0:36:02.160 I'm not sure that is where it's heading, I think 0:36:02.520 --> 0:36:05.080 because people maybe expected China to sort of liberalize more 0:36:05.120 --> 0:36:07.960 than it has done, but that doesn't seem to be 0:36:08.000 --> 0:36:10.520 the way that China is trending. Particularly, you know, it's 0:36:10.560 --> 0:36:12.640 changing things sort of gets into sort of more of 0:36:12.680 --> 0:36:16.399 a confrontation with the US. So, you know, Hong Kong 0:36:16.440 --> 0:36:19.279 is at a very important conduit flow of money between 0:36:19.320 --> 0:36:21.560 the mainland and the rest of the world. The biggest 0:36:21.600 --> 0:36:23.600 problem for Hong Kong, I think, is that China's own 0:36:23.640 --> 0:36:26.640 economy is slowing down, so there's less of that money 0:36:26.840 --> 0:36:29.120 flowing and you know, that is really one of the 0:36:29.160 --> 0:36:31.880 biggest drags for Hong Kong right now. And then in 0:36:31.960 --> 0:36:34.520 terms of you know, the regional powerhousing it, I think 0:36:34.560 --> 0:36:37.120 it's the same point. You know, once there's more money 0:36:37.120 --> 0:36:38.680 to be made in China again, I think Hong Kong 0:36:38.680 --> 0:36:41.920 will flourished. The other problem Hong Kong has, though, is 0:36:41.960 --> 0:36:45.439 that its own geopolitical ties with Western countries are also 0:36:45.520 --> 0:36:48.239 quite strained. And I think what that wouldn't stop people 0:36:48.239 --> 0:36:50.680 from doing from living here and doing business. What they 0:36:50.680 --> 0:36:53.760 worry about is their unpredictability, you know, are their feathers 0:36:53.800 --> 0:36:56.399 sort of you know, will be more sanctions on leaders here, 0:36:56.400 --> 0:36:58.520 Will that create a backlash from Hong Kong, or Hong 0:36:58.600 --> 0:37:00.920 Kong lose more of it specialty just around the world. 0:37:01.280 --> 0:37:04.000 That sort of adds sensibility, which I think is a 0:37:04.080 --> 0:37:06.959 risk to the city's future as a financial hub, no. 0:37:06.920 --> 0:37:08.920 Doubt about that. I mean, we know Hong Kong for 0:37:08.960 --> 0:37:11.840 that reason being a kind of a gateway into China. 0:37:11.960 --> 0:37:15.200 But is there a move allen underway to try to 0:37:15.280 --> 0:37:19.640 diversify the economy in any way away from financial services, 0:37:19.680 --> 0:37:20.720 away from banking. 0:37:20.960 --> 0:37:25.000 Hong Kong is certainly trying to diversify. For the longest time, 0:37:25.160 --> 0:37:27.600 is always put all its X in one basket, which 0:37:27.640 --> 0:37:31.200 is China. But in its effort to diversify, it's still 0:37:31.239 --> 0:37:34.719 trying to position itself as the gateway between China and 0:37:34.760 --> 0:37:37.600 the rest of the world. But where it's making more 0:37:37.600 --> 0:37:41.520 effort now is in the Middle East, in Southeast Asia 0:37:41.560 --> 0:37:44.440 and South Asia. And I believe the Chief Executive just 0:37:44.480 --> 0:37:49.080 mentioned that the government will will tap Latin America as 0:37:49.120 --> 0:37:52.760 well in trying to pitch Hong Kong as a destination 0:37:52.800 --> 0:37:56.160 for the investment and access to the Chinese market in 0:37:56.200 --> 0:38:01.000 other areas. For example, tourism, Hong Kong is not realizing 0:38:01.040 --> 0:38:04.440 that it can't count on Chinese tourists forever and is 0:38:04.480 --> 0:38:09.360 trying to attract tourists from highest spending countries, for example Japan. 0:38:09.800 --> 0:38:12.959 So this is relatively new because of Chinese tourism. When 0:38:13.000 --> 0:38:17.000 the Chinese economy was performing while and growing rapidly, they 0:38:17.040 --> 0:38:19.600 were big spenders in Hong Kong. They represent the biggest 0:38:20.000 --> 0:38:23.319 slies of the Hong Kong tourism pie. But now with 0:38:23.440 --> 0:38:26.000 the slow down in a Chinese economy and the uncertain 0:38:26.040 --> 0:38:30.000 future with its economic growth, Hong Kong officials are thinking 0:38:30.040 --> 0:38:33.760 about alternative sources of tourism which make up a sizeable 0:38:33.880 --> 0:38:36.520 part of the economy and the local labor markets. 0:38:37.040 --> 0:38:39.239 Alan, thank you so much for joining us. Alan Wong, 0:38:39.280 --> 0:38:43.200 Bloomberg China Eco GOOV editor and Jenny Marsh Bloomberg team 0:38:43.239 --> 0:38:47.000 leader for Greater China EGOGOV with us here on this 0:38:47.040 --> 0:38:50.640 look at Hong Kong on Establishment Day as it approaches 0:38:50.719 --> 0:38:54.160 in the coming week. I'm Brian Curtis along with Doug Krisner. 0:38:54.480 --> 0:38:57.800 You can catch us every weekday here for Bloomberg Daybreak Asia, 0:38:57.880 --> 0:39:00.840 beginning at eight am in Hong Kong at eight pm 0:39:00.840 --> 0:39:01.600 on Wall Street. 0:39:01.880 --> 0:39:04.600 John all right, thanks Brian and Doug, and that does 0:39:04.640 --> 0:39:07.600 it for this edition of Bloomberg Daybreak Weekend. Join us 0:39:07.640 --> 0:39:10.360 again Monday morning at five am Wall Street time for 0:39:10.400 --> 0:39:13.600 the latest on markets overseas and the news you need 0:39:13.680 --> 0:39:16.080 to start your today. I'm John Tucker. Stay with us. 0:39:16.120 --> 0:39:20.560 Top stories global business headlines are coming up right now.