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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis

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Speaker 2: along with Doug Krisner. Join us each day for the

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Speaker 2: stories making news and moving markets in the Asia Pacific.

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Speaker 2: You can subscribe to the show anywhere you get your

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Speaker 2: podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and

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Speaker 2: the Bloomberg Business App.

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Speaker 1: Well, we've been talking about today's PCEE inflation data right

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Speaker 1: on target with estimates and man where markets relieved since

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Speaker 1: the recent readings on both consumer and producer prices were

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Speaker 1: above forecast. I think we can agree that the cooling

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Speaker 1: of inflation is a little slower now. Growth, though, is

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Speaker 1: holding up. So the question how is the White House

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Speaker 1: viewing today's news. Earlier I spoke with Gene Sperling, senior

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Speaker 1: advisor to President Biden. I began by asking for his

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Speaker 1: takeaway on the data.

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Speaker 3: I think what we're seeing is a recovery that has

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Speaker 3: shown significant resilience.

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Speaker 4: Obviously, as we all know, it was only.

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Speaker 3: A year ago where people were predicting, you know, with

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Speaker 3: tremendous uncertainty, that the only way inflation was going to

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Speaker 3: come down was by crushing demand, risking potential.

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Speaker 4: Recession. But I think what we've seen is more and.

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Speaker 3: More evidence that the global inflation we saw was primarily

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Speaker 3: driven by things related to the global economy being shut

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Speaker 3: down starting back up, the supply chain snarls, the supply shortages,

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Speaker 3: and that actually we're seeing, you know, something even better

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Speaker 3: than a soft landing, because we've been able to see

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Speaker 3: growth stay fairly strong, unemployment state under four percent. That's

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Speaker 3: much better than the kind of just soft landing that

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Speaker 3: just misses a recession.

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Speaker 4: This is solid.

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Speaker 3: So you know, for us, I think that this just

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Speaker 3: confirmed what we think is an overall, you know, very

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Speaker 3: positive trend to Whether you want to call it a

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Speaker 3: soft landing or no landing, I guess I would say

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Speaker 3: a resilient recovery where the fact that people have spending power,

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Speaker 3: with such a large percentage of people are working, where

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Speaker 3: you actually have prime age labor participation actually stronger than

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Speaker 3: pre pandemic.

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Speaker 4: Looks positive.

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Speaker 3: The fact that you know, incomes are up, spendings down

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Speaker 3: a little in a month in January, you know, I

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Speaker 3: think we'll all kind of wait to see, you know,

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Speaker 3: what the next couple of months are, and look over

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Speaker 3: look at what the trend is.

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Speaker 4: You know, again, consumer confidence that looks strong.

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Speaker 3: You had one month where you know, it didn't improve,

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Speaker 3: but you still have the Michigan consumer confidence twenty five

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Speaker 3: percent stronger than October. So I think what people were

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Speaker 3: probably feeling positive about today was the sense that the

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Speaker 3: trend is still over all your friend.

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Speaker 1: But we are in an election year and one of

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Speaker 1: the things that I think we can agree on, Yes,

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Speaker 1: the data have been positive, whether you're looking at overall

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Speaker 1: economic growth, the strength of the labor market, or inflation,

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Speaker 1: but the president doesn't seem to be getting any credit

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Speaker 1: for it today. Bloomberg News and Morning Consult released a

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Speaker 1: poll conducted in February, and I'm going to highlight one

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Speaker 1: swing state, Pennsylvania. Only forty three percent of voters believe

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Speaker 1: the economy is headed in the right direction. So I'm

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Speaker 1: trying to understand why the messaging on success has not

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Speaker 1: penetrated and what needs to change.

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Speaker 3: Well, look, you know, I always say that every family

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Speaker 3: is the world's greatest expert on how they're doing. On

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Speaker 3: the other hand, what people are hearing, what they see

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Speaker 3: the direction at that can be something that is affected

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Speaker 3: by what people are hearing. And also what they've experienced.

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Speaker 3: So I'm such an old man that I started in

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Speaker 3: the White House in nineteen ninety three with President Clinton,

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Speaker 3: and I think that we found in ninety four and

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Speaker 3: nineteen ninety five that even though the deaths it was down,

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Speaker 3: even though unemployment was down, you weren't seeing the pickup

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Speaker 3: and consumer confidence. There can be a lag, particularly if

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Speaker 3: people have been worried for a while, and it's been

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Speaker 3: a pretty tough few years for people going through the

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Speaker 3: pandemic two variants twenty twenty two, where we saw global

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Speaker 3: prices go high, we saw a war in Ukraine, you know,

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Speaker 3: royal energy and food markets. So people don't always react

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Speaker 3: on a dime with the you know, with the news.

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Speaker 3: They can want greater reassurance. It can take a while

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Speaker 3: to change people's attitudes.

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Speaker 1: Jane. Before I let you go, I want to talk

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Speaker 1: about trade relations, particularly US China, certainly to become a

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Speaker 1: hot topic as we move closer to the election. How

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Speaker 1: should we be thinking about the way in which the

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Speaker 1: administration wants to deal with China, whether it's export controls

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Speaker 1: or what we learned today where the President is taking

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Speaker 1: steps to block Internet connected Chinese cars and trucks, from

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Speaker 1: entering the American market.

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Speaker 4: Look overall putting China to the side.

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Speaker 3: This is a president who has done so much with

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Speaker 3: the Chips Act, with the infrastructure built with the Inflation

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Speaker 3: Reduction Act to attract hundreds of billions of dollars of

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Speaker 3: investment here. We want people to move factories here, We

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Speaker 3: want them to create jobs here. We want American companies

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Speaker 3: and American jobs to do well, and we want people

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Speaker 3: to uh who might be in another country to decide

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Speaker 3: to build their future here. But the President is very

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Speaker 3: clear when it comes to both security and economic fairness. Uh,

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Speaker 3: he's going to insist on both from China, and you know,

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Speaker 3: to the degree that there is uh government led over

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Speaker 3: capacity that that uh put our workers at a disadvantage

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Speaker 3: in you know, important manufacturing areas or as you've seen

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Speaker 3: things that we do not have the confidence in that

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Speaker 3: would not be a threat to not just national security,

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Speaker 3: but but the data and privacy of Americans. As you

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Speaker 3: saw today, We're going to be clear, uh, clear as

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Speaker 3: a bell, and we're going to be you know, tough

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Speaker 3: when necessary.

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Speaker 1: Jane Sperling, Senior advisor to President Biden, Thanks so much

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Speaker 1: for joining us.

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Speaker 4: Thanks and May appreciate it.

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Speaker 2: The US is not yet calling for a ban on

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Speaker 2: Chinese evs, but could impose some limitations on imports of

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Speaker 2: the vehicles or parts joining US. Now for some discussion

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Speaker 2: of this year is Ed Ludlow, Bloomberg Technology Show host. So, Ed,

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Speaker 2: we understand that there are some risks here, data and

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Speaker 2: cybersecurity risks. I want to say this in a flippant

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Speaker 2: way to get people's attention, but there's a there's a

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Speaker 2: serious question embedded. Is Gina Romando seeing a Chinese ghost

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Speaker 2: around every corner?

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Speaker 5: Yeah, there's a close look at it. I mean you

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Speaker 5: have to remember that the barrier to entry for Chinese

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Speaker 5: cause in America is literally high because of the Trump

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Speaker 5: Are are tariffs right, there's a twenty seven point five

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Speaker 5: percent tariff on any Chinese built ev that that wants

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Speaker 5: to be sold here. So they've not become pervasive. But

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Speaker 5: this is really interesting. You have to compare what the

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Speaker 5: US is doing versus Europe, because the US is saying

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Speaker 5: we're looking at this through the lens of national security,

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Speaker 5: not economics, whereas you look at Europe, they're saying we're

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Speaker 5: going to take a real look at Chinese evs because

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Speaker 5: we're super worried economically that they'll out compete our industry.

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Speaker 2: Exactly, why not call a spade is spae That's the

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Speaker 2: thrust of the question.

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Speaker 5: So I think, you know, we've actually seen this as

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Speaker 5: a kind of tip for tat. There was a very

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Speaker 5: similar story with Tesla last year and the year before,

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Speaker 5: where the Chinese government looked at teslas that were owned

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Speaker 5: by Chinese government employees and officials as a security concern

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Speaker 5: because of the data that runs through the car. Right

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Speaker 5: think about the just the miles of telematics and personal

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Speaker 5: or consumer data that a modern day vehicle has. The

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Speaker 5: US is doing something similar, you know, like each computer

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Speaker 5: is based at each computer, Each car is basically a

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Speaker 5: computer on wheels these days. And so what the US

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Speaker 5: is doing, according to the official that Bloomberg spoke to,

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Speaker 5: is looking at those vulnerability as a precursor to making

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Speaker 5: a firm policy decision on Chinese made evs in this country.

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Speaker 1: So Brian and I were talking earlier ed about the

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Speaker 1: change that may occur when Chinese manufacturers begin setting up

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Speaker 1: production facilities in Mexico with the idea of moving those

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Speaker 1: vehicles into the American market. Does any of this kind

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Speaker 1: of run up against a massive change as a result

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Speaker 1: of what the administration is trying to achieve.

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Speaker 5: I think that's a really smart question, and you have

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Speaker 5: to go back to the stipulations of the Inflation Reduction

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Speaker 5: Act and the Treasury and IRS guidelines, which is it's

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Speaker 5: not just where the vehicle is made, but it is

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Speaker 5: every single component where the component is made, but also

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Speaker 5: the ownership of the company that made that component. So

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Speaker 5: let's just take like, I don't know, let me think

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Speaker 5: of something equally as flippant. Let's take a nut and bolt,

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Speaker 5: you know, on the axle of the car. If that

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Speaker 5: nut or bolt comes from a supplier that is owned

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Speaker 5: by twenty five percent Chinese ownership or higher, it's not

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Speaker 5: eligible for the federal tax credit or any other access

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Speaker 5: to public funds. So there's a disincentive there. But again

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Speaker 5: go back to the Bloomberg reporting. Right now, this is

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Speaker 5: not about economics, it's about national security, and so the

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Speaker 5: supply chain issue at this time is not what's the

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Speaker 5: under the microscope.

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Speaker 2: Is it possible that the European Union, even though you

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Speaker 2: mentioned it's a different approach, they're challenging on economic rather

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Speaker 2: than national security concerns, But Is it possible that they

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Speaker 2: too have these concerns about security risks?

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Speaker 5: Yes, certainly, I think, you know, we look at the

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Speaker 5: European Union as not just a governmental body but a regulator,

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Speaker 5: right and certainly in my coverage of broadly of the

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Speaker 5: technology sector, the European Commission, you know, if you think

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Speaker 5: is a parallel example social media and TikTok, they have

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Speaker 5: the same debates in that jurisdiction as we have here

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Speaker 5: with the safety of TikTok and whether it provides a

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Speaker 5: vulnerability to their citizens because downchain, the Chinese government may

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Speaker 5: or may not have access to data, and so there's

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Speaker 5: some evidence that the European Union looks at Chinese vehicles

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Speaker 5: in the same lens. But I would underscore that europe

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Speaker 5: came out early and said, look, this is just an

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Speaker 5: issue of competition. We don't want to get outdone or

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Speaker 5: undercut by the Chinese suppliers.

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Speaker 1: In the bigger picture, though, I'm trying to understand the

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Speaker 1: supply demand imbalance. I'm looking at your story now on Fisker,

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Speaker 1: the company. You're raising substantial doubt about its ability to

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Speaker 1: be basically an ongoing operation. Fifteen percent of the workforce

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Speaker 1: gets cut, right, are we living in an era where

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Speaker 1: there's simply too much capacity.

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Speaker 5: Fisker is a wild story that has its own unique problems.

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Speaker 5: But what the CEO told me an interview earlier is

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Speaker 5: that there is a demand problem. You know, Fiska has

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Speaker 5: a unique business model where it has a contract manufacturer,

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Speaker 5: Magna International, and they build Fisker's EV's on their behalf

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Speaker 5: at a plant in Austria, and they can build as

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Speaker 5: many or as few as they want. So what Fisker

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Speaker 5: said is, we're going to make twenty to twenty two

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Speaker 5: in twenty twenty four, but if demand improves, we can

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Speaker 5: just dial up because of our unique business model. This

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Speaker 5: is a company that's seriously and financially shaky, right, seriously

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Speaker 5: in trouble. And what they've told investors this evening is

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Speaker 5: there is one unnamed automaker waiting in the wings who

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Speaker 5: is agreed to partner with Fisker and give them a

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Speaker 5: cash injection. The deal's not done yet and it will

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Speaker 5: happen soon, is what the CEO told me. But here

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Speaker 5: goes back to the root of your question. EV demand

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Speaker 5: is down right now, everyone is pulling back, So why

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Speaker 5: would an automaker make an investment in another EV name

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Speaker 5: like Fiska in that environment, and you guys probably see

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Speaker 5: the stock down thirty seven percent in after ours.

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Speaker 2: If prices continue to get cut, because even BYD has struggled,

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Speaker 2: even though it has it's out selling Tesla, but it

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Speaker 2: has struggled because having to lower prices in the margins

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Speaker 2: are really cut. It starts to become I mean, does

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Speaker 2: that bring the other automakers, more automakers into the picture,

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Speaker 2: or does it just mean that it's going to you know,

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Speaker 2: it's going to undercut the overall thrust of the industry

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Speaker 2: over the next couple of years.

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Speaker 5: I mean, what's unique about China's EV market is there

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Speaker 5: are many more individual players, right the consumer has more choice.

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Speaker 5: But we've learned pretty quickly that the Chinese economy is

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Speaker 5: not immune to what's happening around the world, so there's

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Speaker 5: some pressure there. You know. The overall picture is we

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Speaker 5: live in a really high interest rate environment around the world.

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Speaker 5: The financing of your car is probably your second biggest

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Speaker 5: expense after your mortgage or your rent. And the first

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Speaker 5: so called first adopters have been and gone in North

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Speaker 5: American Europe. So what's left is a price conscious consumer

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Speaker 5: and the EV price premium is still so great even

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Speaker 5: after price cuts that they're still going for cheaper combustion

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Speaker 5: engine models. In China that's less so the case, but

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Speaker 5: because there are so many players, you've got to cut

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Speaker 5: prices to be competitive.

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Speaker 1: Yeah, but we also have the issue of tax cuts

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Speaker 1: to consider it, right. And then there's the charging infrastructure

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Speaker 1: story and whether or not that's not only reliable, widespread

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Speaker 1: enough so that consumers feel comfortable in making the investment.

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Speaker 5: Yeah, And today's a big milestone in North America on

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Speaker 5: that front, right, because Tesla has opened up its charging

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Speaker 5: network to other companies. So today Ford customers could start

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Speaker 5: charging their Ford evs using a Tesla charger with an adapter.

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Speaker 5: But that answers your question, right, that Ford had to

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Speaker 5: make the painful reputational decision to ask Tesla for help

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Speaker 5: because the infrastructure broadly wasn't there beyond what Tesla offers.

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Speaker 5: And that is true of many jurisdictions around the world.

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Speaker 2: So back to the original investigation that we talked about

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Speaker 2: with General Mondo and Joe Biden, does that overlap with

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Speaker 2: one that we saw yesterday in the executive order that

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Speaker 2: was also about data security?

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Speaker 5: Yeah, I mean, what I'm learning, and actually I'm learning

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Speaker 5: this in the context of AI companies as well, guys,

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Speaker 5: is that you know, the Commerce Department and other government

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Speaker 5: agencies are very closely aligned on the topic. You know, again,

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Speaker 5: I just repeat that this is a cyber security and

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Speaker 5: data security issue for the time being in the car

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Speaker 5: context or EV context, and it's not billed as a

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Speaker 5: competition or economic problem. But this administration is increasingly thinking

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Speaker 5: about this, and we're in an election cycle where you know,

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Speaker 5: look at Bloomberg's reporting out of Washington, d C. And

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Speaker 5: the relationship with China for both sides of the aisle

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Speaker 5: and both eventual candidates is going to be front and

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Speaker 5: center in this election. So what's analogous is, yes, it's cybersecurity,

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Speaker 5: but in this case, remember that the car is a

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Speaker 5: computer on wheels. That's what I'd ask your audience to

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Speaker 5: take away. What we're hearing from officials is that's the concern, so.

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Speaker 2: A Chinese price war, although I note that Lee Auto

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Speaker 2: has served something like sixty seven percent in the last

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Speaker 2: month with some new designs and such. Ed thanks very

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Speaker 2: much for joining us out of time now Ed Ludlow

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Speaker 2: Bloomberg Technology Show host with his live here on Bloomberg

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Speaker 2: at Daybreak Asia. This see is Bloomberg. Manufacturing activity in

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Speaker 2: Asia slumped in February, factories wrestling with weak demand in

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Speaker 2: China and supply chain disruptions in major shipping routes factories

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Speaker 2: across North Asia cutting output and new orders last month.

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Speaker 2: Joining us now is David Chu, Bloomberg China economist, to

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Speaker 2: take a look at how China may be at the

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Speaker 2: heart of this. How much is China in a sense

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Speaker 2: David spreading out some of its weakness to other countries.

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Speaker 6: Well, actually, I think if you look at the PM itself,

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Speaker 6: uh uh, you've got a very weak reading because of

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Speaker 6: the job in the in the manufacturing p M I

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Speaker 6: uh this month. But actually I want to say that

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Speaker 6: it's not only this month because China is slowing. Slowdown

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Speaker 6: has started uh several months ago. And we all know

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Speaker 6: that China is the buyer of materials from Southeast Asia,

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Speaker 6: so that the slowdown of China a definitely will well

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Speaker 6: not will It's influencing the Southeast Asia economies. And uh,

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Speaker 6: previously China slowed down also influenced the South Korea as well.

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Speaker 6: But this time we think we see that the South

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Speaker 6: Korea export uh outer performs. Uh. We think that this

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Speaker 6: was because of the export of chips, so that we

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Speaker 6: can see that the electronic and the AI contributes some

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Speaker 6: uh strong to South Korea. So that but anyway, in

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Speaker 6: the Southeast Asia, the exporters of industrial materials, they are

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Speaker 6: you know, suffering somehow from China. Slowdown.

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Speaker 1: Yeah, I think it's important to remember sometimes I forget

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Speaker 1: that PMI data is kind of soft data. It's a

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Speaker 1: sentiment indicator. And when you think of sentiment, particularly given

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Speaker 1: the challenges confronting China right now, it's all about sentiment

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Speaker 1: or a lot of it seems to be the lack

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Speaker 1: of it, a positive sentiment and the lack of confidence.

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Speaker 1: Next week we've got the NPC meeting. What do you

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Speaker 1: think the government can do to begin to begin I

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Speaker 1: know steps have already been taken, but what let me

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Speaker 1: say it another way, what more can be done to

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Speaker 1: kind of tackle this issue of just weak sentiment.

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Speaker 6: Well, it is two problems, what it should do and

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Speaker 6: what it will do. Right, Yeah, let me say what

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Speaker 6: they should do. In our minds, the better way for

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Speaker 6: the government is to declare their eager for priority for

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Speaker 6: development for growth, so that let the market know that

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Speaker 6: the top leaders are still taking growth as the first

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Speaker 6: priority and they are willing to do something to help

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Speaker 6: the economy. So that is the concrete information they need

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Speaker 6: to convey to the market. But on the other hand,

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Speaker 6: what they can do is we think if we look

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Speaker 6: at the target, we think that they are going to

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Speaker 6: set the target growth target at five percent, which is

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Speaker 6: actually a strong target for us because although we achieved

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Speaker 6: five point two percent young er GDP growth last year,

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Speaker 6: it was largely because of the low base in the

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Speaker 6: previous year, so that in this year, if they set

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Speaker 6: the five percent as the target, that would be a

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Speaker 6: high bar. In addition, people will look at the fiscal

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Speaker 6: deficit target. I think, in my mind this could be

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Speaker 6: something understood market expectation. We are expecting something like three

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Speaker 6: point two percent, but we think the market is expecting more.

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Speaker 2: The taishin manufacturing PMI was actually a little bit more positive,

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Speaker 2: and it generally tends to be, but this reading was

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Speaker 2: fifty point nine, a little up from the fifty point

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Speaker 2: eight in January. And you've seen the bounce in the

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Speaker 2: equity market. We've seen about ten percent gains in a

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Speaker 2: couple of weeks for the CSI three hundred. I know

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Speaker 2: there's been a lot of hands on measures from authorities

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Speaker 2: on that, but are there some bright spots? Can we

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Speaker 2: can we think about things getting better here over the

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Speaker 2: next few months.

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Speaker 6: Well, we think it's too early to say so, because

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Speaker 6: the first two months in China usually we don't have

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Speaker 6: we don't have concrete data expected for PMI inflation because

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Speaker 6: it is the Lunar New Year holiday distorting the whole thing.

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Speaker 6: So that but we can also look at the high

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Speaker 6: frequency data and also the consumption during the Luna New

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Speaker 6: Year holiday, and what we got was that, you know, overall,

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Speaker 6: on balance it is still to the negative side. One

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Speaker 6: of the key reasons is that the home sales is

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Speaker 6: still very weak. I read the data last couple of

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Speaker 6: days ago at in the first of two months, the

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Speaker 6: sales in value was fifty percent down from last year.

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Speaker 6: So it tells us that the housing sector is still

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Speaker 6: weak because of the weak confidence or sentiment in the

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Speaker 6: households sector.

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Speaker 1: So we're ready to wrap up here. I can give

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Speaker 1: you thirty seconds, David, to tackle the problem with deflation

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Speaker 1: and trying to revitalize consumption. What's the best way for

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Speaker 1: the government to do that? Handout money.

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Speaker 6: Well, I don't think there is a silver belated to

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Speaker 6: solve this deflation problem. Well in the past, based on

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Speaker 6: the past experience, if the PBOC opens the door for easing,

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Speaker 6: it could help. But on the other hand, you know,

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Speaker 6: China's trapped with high deadness, so that strong or aggressive

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Speaker 6: easy for the PBOC is not so feasible.

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Speaker 2: Right, Okay, all right, David, Thank you, David Chu, Bloomberg

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Speaker 2: China Economists.

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Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you

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Speaker 1: the stories making news and moving markets in the Asia Pacific.

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