WEBVTT - PCE Data, NPC Meeting 0:00:00.160 --> 0:00:06.800 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.320 --> 0:00:13.040 This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis 0:00:13.119 --> 0:00:15.840 along with Doug Krisner. Join us each day for the 0:00:15.880 --> 0:00:19.280 stories making news and moving markets in the Asia Pacific. 0:00:19.480 --> 0:00:21.880 You can subscribe to the show anywhere you get your 0:00:21.920 --> 0:00:25.799 podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and 0:00:25.920 --> 0:00:27.280 the Bloomberg Business App. 0:00:28.000 --> 0:00:31.800 Well, we've been talking about today's PCEE inflation data right 0:00:32.120 --> 0:00:35.640 on target with estimates and man where markets relieved since 0:00:35.680 --> 0:00:38.840 the recent readings on both consumer and producer prices were 0:00:38.920 --> 0:00:42.360 above forecast. I think we can agree that the cooling 0:00:42.400 --> 0:00:45.199 of inflation is a little slower now. Growth, though, is 0:00:45.240 --> 0:00:48.200 holding up. So the question how is the White House 0:00:48.280 --> 0:00:51.400 viewing today's news. Earlier I spoke with Gene Sperling, senior 0:00:51.440 --> 0:00:54.640 advisor to President Biden. I began by asking for his 0:00:54.800 --> 0:00:56.840 takeaway on the data. 0:00:56.880 --> 0:01:01.200 I think what we're seeing is a recovery that has 0:01:01.320 --> 0:01:04.520 shown significant resilience. 0:01:06.520 --> 0:01:09.440 Obviously, as we all know, it was only. 0:01:09.360 --> 0:01:12.440 A year ago where people were predicting, you know, with 0:01:12.880 --> 0:01:17.480 tremendous uncertainty, that the only way inflation was going to 0:01:17.560 --> 0:01:23.039 come down was by crushing demand, risking potential. 0:01:24.080 --> 0:01:27.880 Recession. But I think what we've seen is more and. 0:01:27.800 --> 0:01:33.880 More evidence that the global inflation we saw was primarily 0:01:34.040 --> 0:01:39.200 driven by things related to the global economy being shut 0:01:39.280 --> 0:01:44.440 down starting back up, the supply chain snarls, the supply shortages, 0:01:44.920 --> 0:01:50.080 and that actually we're seeing, you know, something even better 0:01:50.160 --> 0:01:53.040 than a soft landing, because we've been able to see 0:01:53.080 --> 0:01:58.800 growth stay fairly strong, unemployment state under four percent. That's 0:01:58.880 --> 0:02:01.800 much better than the kind of just soft landing that 0:02:02.000 --> 0:02:04.640 just misses a recession. 0:02:04.840 --> 0:02:06.000 This is solid. 0:02:07.000 --> 0:02:10.520 So you know, for us, I think that this just 0:02:10.680 --> 0:02:14.079 confirmed what we think is an overall, you know, very 0:02:14.200 --> 0:02:18.040 positive trend to Whether you want to call it a 0:02:18.080 --> 0:02:21.400 soft landing or no landing, I guess I would say 0:02:21.480 --> 0:02:26.680 a resilient recovery where the fact that people have spending power, 0:02:26.760 --> 0:02:29.519 with such a large percentage of people are working, where 0:02:29.520 --> 0:02:34.720 you actually have prime age labor participation actually stronger than 0:02:34.800 --> 0:02:36.440 pre pandemic. 0:02:36.200 --> 0:02:37.080 Looks positive. 0:02:37.160 --> 0:02:40.200 The fact that you know, incomes are up, spendings down 0:02:40.240 --> 0:02:43.640 a little in a month in January, you know, I 0:02:43.639 --> 0:02:46.480 think we'll all kind of wait to see, you know, 0:02:47.280 --> 0:02:49.920 what the next couple of months are, and look over 0:02:50.120 --> 0:02:51.320 look at what the trend is. 0:02:51.400 --> 0:02:53.840 You know, again, consumer confidence that looks strong. 0:02:53.919 --> 0:02:56.840 You had one month where you know, it didn't improve, 0:02:56.960 --> 0:03:01.119 but you still have the Michigan consumer confidence twenty five 0:03:01.160 --> 0:03:06.040 percent stronger than October. So I think what people were 0:03:06.080 --> 0:03:10.160 probably feeling positive about today was the sense that the 0:03:10.960 --> 0:03:13.080 trend is still over all your friend. 0:03:13.919 --> 0:03:16.080 But we are in an election year and one of 0:03:16.120 --> 0:03:17.839 the things that I think we can agree on, Yes, 0:03:17.880 --> 0:03:20.280 the data have been positive, whether you're looking at overall 0:03:20.280 --> 0:03:23.480 economic growth, the strength of the labor market, or inflation, 0:03:23.600 --> 0:03:25.919 but the president doesn't seem to be getting any credit 0:03:25.960 --> 0:03:29.480 for it today. Bloomberg News and Morning Consult released a 0:03:29.520 --> 0:03:32.639 poll conducted in February, and I'm going to highlight one 0:03:32.680 --> 0:03:36.680 swing state, Pennsylvania. Only forty three percent of voters believe 0:03:36.720 --> 0:03:39.520 the economy is headed in the right direction. So I'm 0:03:39.520 --> 0:03:43.400 trying to understand why the messaging on success has not 0:03:43.560 --> 0:03:45.760 penetrated and what needs to change. 0:03:46.160 --> 0:03:51.480 Well, look, you know, I always say that every family 0:03:52.200 --> 0:03:55.760 is the world's greatest expert on how they're doing. On 0:03:55.840 --> 0:04:00.760 the other hand, what people are hearing, what they see 0:04:00.800 --> 0:04:04.800 the direction at that can be something that is affected 0:04:04.840 --> 0:04:09.680 by what people are hearing. And also what they've experienced. 0:04:10.080 --> 0:04:12.320 So I'm such an old man that I started in 0:04:12.400 --> 0:04:16.680 the White House in nineteen ninety three with President Clinton, 0:04:17.320 --> 0:04:21.120 and I think that we found in ninety four and 0:04:21.240 --> 0:04:24.719 nineteen ninety five that even though the deaths it was down, 0:04:24.760 --> 0:04:29.240 even though unemployment was down, you weren't seeing the pickup 0:04:29.279 --> 0:04:33.040 and consumer confidence. There can be a lag, particularly if 0:04:33.080 --> 0:04:35.360 people have been worried for a while, and it's been 0:04:35.400 --> 0:04:38.680 a pretty tough few years for people going through the 0:04:38.720 --> 0:04:43.560 pandemic two variants twenty twenty two, where we saw global 0:04:43.640 --> 0:04:48.040 prices go high, we saw a war in Ukraine, you know, 0:04:48.240 --> 0:04:54.200 royal energy and food markets. So people don't always react 0:04:54.279 --> 0:04:57.039 on a dime with the you know, with the news. 0:04:57.080 --> 0:05:00.599 They can want greater reassurance. It can take a while 0:05:00.720 --> 0:05:04.279 to change people's attitudes. 0:05:04.760 --> 0:05:06.400 Jane. Before I let you go, I want to talk 0:05:06.440 --> 0:05:10.320 about trade relations, particularly US China, certainly to become a 0:05:10.320 --> 0:05:13.800 hot topic as we move closer to the election. How 0:05:13.839 --> 0:05:16.120 should we be thinking about the way in which the 0:05:16.160 --> 0:05:19.880 administration wants to deal with China, whether it's export controls 0:05:19.960 --> 0:05:23.480 or what we learned today where the President is taking 0:05:23.480 --> 0:05:28.040 steps to block Internet connected Chinese cars and trucks, from 0:05:28.279 --> 0:05:30.120 entering the American market. 0:05:29.880 --> 0:05:33.279 Look overall putting China to the side. 0:05:33.520 --> 0:05:38.000 This is a president who has done so much with 0:05:38.120 --> 0:05:42.279 the Chips Act, with the infrastructure built with the Inflation 0:05:42.400 --> 0:05:47.359 Reduction Act to attract hundreds of billions of dollars of 0:05:47.480 --> 0:05:51.720 investment here. We want people to move factories here, We 0:05:51.760 --> 0:05:56.520 want them to create jobs here. We want American companies 0:05:56.560 --> 0:05:59.400 and American jobs to do well, and we want people 0:05:59.480 --> 0:06:03.120 to uh who might be in another country to decide 0:06:03.160 --> 0:06:07.760 to build their future here. But the President is very 0:06:07.800 --> 0:06:13.880 clear when it comes to both security and economic fairness. Uh, 0:06:13.920 --> 0:06:17.960 he's going to insist on both from China, and you know, 0:06:18.040 --> 0:06:23.279 to the degree that there is uh government led over 0:06:23.400 --> 0:06:29.279 capacity that that uh put our workers at a disadvantage 0:06:29.480 --> 0:06:33.840 in you know, important manufacturing areas or as you've seen 0:06:35.279 --> 0:06:38.920 things that we do not have the confidence in that 0:06:39.000 --> 0:06:42.560 would not be a threat to not just national security, 0:06:42.600 --> 0:06:46.440 but but the data and privacy of Americans. As you 0:06:46.520 --> 0:06:51.000 saw today, We're going to be clear, uh, clear as 0:06:51.000 --> 0:06:53.760 a bell, and we're going to be you know, tough 0:06:54.200 --> 0:06:55.040 when necessary. 0:06:55.200 --> 0:06:58.480 Jane Sperling, Senior advisor to President Biden, Thanks so much 0:06:58.520 --> 0:06:59.160 for joining us. 0:06:59.480 --> 0:07:01.120 Thanks and May appreciate it. 0:07:07.839 --> 0:07:10.400 The US is not yet calling for a ban on 0:07:10.640 --> 0:07:14.280 Chinese evs, but could impose some limitations on imports of 0:07:14.320 --> 0:07:18.040 the vehicles or parts joining US. Now for some discussion 0:07:18.080 --> 0:07:22.280 of this year is Ed Ludlow, Bloomberg Technology Show host. So, Ed, 0:07:22.320 --> 0:07:25.640 we understand that there are some risks here, data and 0:07:25.720 --> 0:07:29.200 cybersecurity risks. I want to say this in a flippant 0:07:29.200 --> 0:07:31.640 way to get people's attention, but there's a there's a 0:07:31.680 --> 0:07:36.119 serious question embedded. Is Gina Romando seeing a Chinese ghost 0:07:36.200 --> 0:07:37.320 around every corner? 0:07:38.080 --> 0:07:40.640 Yeah, there's a close look at it. I mean you 0:07:40.680 --> 0:07:43.360 have to remember that the barrier to entry for Chinese 0:07:43.440 --> 0:07:46.760 cause in America is literally high because of the Trump 0:07:46.840 --> 0:07:49.480 Are are tariffs right, there's a twenty seven point five 0:07:49.480 --> 0:07:52.680 percent tariff on any Chinese built ev that that wants 0:07:52.680 --> 0:07:56.480 to be sold here. So they've not become pervasive. But 0:07:56.560 --> 0:07:58.680 this is really interesting. You have to compare what the 0:07:58.760 --> 0:08:02.080 US is doing versus Europe, because the US is saying 0:08:02.360 --> 0:08:05.000 we're looking at this through the lens of national security, 0:08:05.680 --> 0:08:09.360 not economics, whereas you look at Europe, they're saying we're 0:08:09.360 --> 0:08:11.280 going to take a real look at Chinese evs because 0:08:11.280 --> 0:08:15.840 we're super worried economically that they'll out compete our industry. 0:08:15.640 --> 0:08:18.000 Exactly, why not call a spade is spae That's the 0:08:18.080 --> 0:08:19.000 thrust of the question. 0:08:19.680 --> 0:08:22.360 So I think, you know, we've actually seen this as 0:08:22.360 --> 0:08:23.920 a kind of tip for tat. There was a very 0:08:23.920 --> 0:08:27.160 similar story with Tesla last year and the year before, 0:08:27.640 --> 0:08:32.520 where the Chinese government looked at teslas that were owned 0:08:32.520 --> 0:08:36.480 by Chinese government employees and officials as a security concern 0:08:36.520 --> 0:08:39.760 because of the data that runs through the car. Right 0:08:39.880 --> 0:08:43.440 think about the just the miles of telematics and personal 0:08:43.480 --> 0:08:47.120 or consumer data that a modern day vehicle has. The 0:08:47.240 --> 0:08:50.000 US is doing something similar, you know, like each computer 0:08:50.160 --> 0:08:52.520 is based at each computer, Each car is basically a 0:08:52.520 --> 0:08:55.280 computer on wheels these days. And so what the US 0:08:55.360 --> 0:08:57.880 is doing, according to the official that Bloomberg spoke to, 0:08:58.440 --> 0:09:02.520 is looking at those vulnerability as a precursor to making 0:09:02.600 --> 0:09:06.720 a firm policy decision on Chinese made evs in this country. 0:09:06.960 --> 0:09:09.360 So Brian and I were talking earlier ed about the 0:09:09.440 --> 0:09:13.200 change that may occur when Chinese manufacturers begin setting up 0:09:13.240 --> 0:09:17.720 production facilities in Mexico with the idea of moving those 0:09:17.800 --> 0:09:21.280 vehicles into the American market. Does any of this kind 0:09:21.320 --> 0:09:24.360 of run up against a massive change as a result 0:09:24.400 --> 0:09:27.040 of what the administration is trying to achieve. 0:09:27.360 --> 0:09:29.800 I think that's a really smart question, and you have 0:09:29.880 --> 0:09:34.520 to go back to the stipulations of the Inflation Reduction 0:09:34.679 --> 0:09:40.080 Act and the Treasury and IRS guidelines, which is it's 0:09:40.120 --> 0:09:43.000 not just where the vehicle is made, but it is 0:09:43.400 --> 0:09:47.400 every single component where the component is made, but also 0:09:47.480 --> 0:09:50.480 the ownership of the company that made that component. So 0:09:50.600 --> 0:09:52.760 let's just take like, I don't know, let me think 0:09:52.800 --> 0:09:57.720 of something equally as flippant. Let's take a nut and bolt, 0:09:57.960 --> 0:10:02.040 you know, on the axle of the car. If that 0:10:02.240 --> 0:10:05.160 nut or bolt comes from a supplier that is owned 0:10:05.200 --> 0:10:09.240 by twenty five percent Chinese ownership or higher, it's not 0:10:09.320 --> 0:10:13.720 eligible for the federal tax credit or any other access 0:10:13.760 --> 0:10:17.320 to public funds. So there's a disincentive there. But again 0:10:17.520 --> 0:10:20.200 go back to the Bloomberg reporting. Right now, this is 0:10:20.200 --> 0:10:23.720 not about economics, it's about national security, and so the 0:10:23.760 --> 0:10:28.040 supply chain issue at this time is not what's the 0:10:28.200 --> 0:10:29.199 under the microscope. 0:10:30.360 --> 0:10:32.920 Is it possible that the European Union, even though you 0:10:32.960 --> 0:10:35.800 mentioned it's a different approach, they're challenging on economic rather 0:10:35.840 --> 0:10:39.000 than national security concerns, But Is it possible that they 0:10:39.040 --> 0:10:42.560 too have these concerns about security risks? 0:10:42.960 --> 0:10:46.240 Yes, certainly, I think, you know, we look at the 0:10:46.280 --> 0:10:50.600 European Union as not just a governmental body but a regulator, 0:10:50.679 --> 0:10:53.720 right and certainly in my coverage of broadly of the 0:10:53.760 --> 0:10:57.480 technology sector, the European Commission, you know, if you think 0:10:57.559 --> 0:11:00.440 is a parallel example social media and TikTok, they have 0:11:00.480 --> 0:11:02.960 the same debates in that jurisdiction as we have here 0:11:03.000 --> 0:11:06.199 with the safety of TikTok and whether it provides a 0:11:06.280 --> 0:11:11.360 vulnerability to their citizens because downchain, the Chinese government may 0:11:11.480 --> 0:11:13.720 or may not have access to data, and so there's 0:11:13.720 --> 0:11:16.760 some evidence that the European Union looks at Chinese vehicles 0:11:17.000 --> 0:11:19.600 in the same lens. But I would underscore that europe 0:11:19.600 --> 0:11:21.200 came out early and said, look, this is just an 0:11:21.240 --> 0:11:23.920 issue of competition. We don't want to get outdone or 0:11:24.000 --> 0:11:25.640 undercut by the Chinese suppliers. 0:11:25.960 --> 0:11:28.040 In the bigger picture, though, I'm trying to understand the 0:11:28.080 --> 0:11:31.760 supply demand imbalance. I'm looking at your story now on Fisker, 0:11:31.920 --> 0:11:35.760 the company. You're raising substantial doubt about its ability to 0:11:35.840 --> 0:11:39.840 be basically an ongoing operation. Fifteen percent of the workforce 0:11:39.880 --> 0:11:42.400 gets cut, right, are we living in an era where 0:11:42.400 --> 0:11:44.719 there's simply too much capacity. 0:11:45.480 --> 0:11:49.640 Fisker is a wild story that has its own unique problems. 0:11:49.679 --> 0:11:51.880 But what the CEO told me an interview earlier is 0:11:51.880 --> 0:11:54.679 that there is a demand problem. You know, Fiska has 0:11:54.720 --> 0:11:57.800 a unique business model where it has a contract manufacturer, 0:11:58.200 --> 0:12:02.240 Magna International, and they build Fisker's EV's on their behalf 0:12:02.280 --> 0:12:04.839 at a plant in Austria, and they can build as 0:12:04.840 --> 0:12:07.320 many or as few as they want. So what Fisker 0:12:07.360 --> 0:12:09.400 said is, we're going to make twenty to twenty two 0:12:09.760 --> 0:12:12.920 in twenty twenty four, but if demand improves, we can 0:12:12.960 --> 0:12:15.520 just dial up because of our unique business model. This 0:12:15.679 --> 0:12:19.280 is a company that's seriously and financially shaky, right, seriously 0:12:19.320 --> 0:12:22.520 in trouble. And what they've told investors this evening is 0:12:22.760 --> 0:12:27.200 there is one unnamed automaker waiting in the wings who 0:12:27.280 --> 0:12:29.880 is agreed to partner with Fisker and give them a 0:12:29.920 --> 0:12:35.160 cash injection. The deal's not done yet and it will 0:12:35.200 --> 0:12:37.920 happen soon, is what the CEO told me. But here 0:12:38.200 --> 0:12:40.600 goes back to the root of your question. EV demand 0:12:40.640 --> 0:12:43.079 is down right now, everyone is pulling back, So why 0:12:43.120 --> 0:12:46.040 would an automaker make an investment in another EV name 0:12:46.120 --> 0:12:49.439 like Fiska in that environment, and you guys probably see 0:12:49.480 --> 0:12:52.959 the stock down thirty seven percent in after ours. 0:12:53.960 --> 0:12:58.439 If prices continue to get cut, because even BYD has struggled, 0:12:58.840 --> 0:13:02.080 even though it has it's out selling Tesla, but it 0:13:02.120 --> 0:13:04.920 has struggled because having to lower prices in the margins 0:13:04.920 --> 0:13:08.520 are really cut. It starts to become I mean, does 0:13:08.559 --> 0:13:12.079 that bring the other automakers, more automakers into the picture, 0:13:12.640 --> 0:13:16.160 or does it just mean that it's going to you know, 0:13:16.200 --> 0:13:20.360 it's going to undercut the overall thrust of the industry 0:13:20.600 --> 0:13:21.720 over the next couple of years. 0:13:22.040 --> 0:13:24.440 I mean, what's unique about China's EV market is there 0:13:24.440 --> 0:13:27.600 are many more individual players, right the consumer has more choice. 0:13:27.640 --> 0:13:30.640 But we've learned pretty quickly that the Chinese economy is 0:13:30.679 --> 0:13:33.600 not immune to what's happening around the world, so there's 0:13:33.600 --> 0:13:37.439 some pressure there. You know. The overall picture is we 0:13:37.760 --> 0:13:40.720 live in a really high interest rate environment around the world. 0:13:41.080 --> 0:13:45.080 The financing of your car is probably your second biggest 0:13:45.120 --> 0:13:48.800 expense after your mortgage or your rent. And the first 0:13:49.040 --> 0:13:51.560 so called first adopters have been and gone in North 0:13:51.559 --> 0:13:55.360 American Europe. So what's left is a price conscious consumer 0:13:56.120 --> 0:13:58.839 and the EV price premium is still so great even 0:13:58.880 --> 0:14:01.959 after price cuts that they're still going for cheaper combustion 0:14:02.040 --> 0:14:05.920 engine models. In China that's less so the case, but 0:14:06.040 --> 0:14:08.600 because there are so many players, you've got to cut 0:14:08.640 --> 0:14:09.840 prices to be competitive. 0:14:10.240 --> 0:14:12.720 Yeah, but we also have the issue of tax cuts 0:14:12.720 --> 0:14:15.880 to consider it, right. And then there's the charging infrastructure 0:14:15.920 --> 0:14:19.360 story and whether or not that's not only reliable, widespread 0:14:19.480 --> 0:14:22.840 enough so that consumers feel comfortable in making the investment. 0:14:23.400 --> 0:14:25.920 Yeah, And today's a big milestone in North America on 0:14:25.960 --> 0:14:29.120 that front, right, because Tesla has opened up its charging 0:14:29.160 --> 0:14:33.560 network to other companies. So today Ford customers could start 0:14:33.640 --> 0:14:37.560 charging their Ford evs using a Tesla charger with an adapter. 0:14:38.080 --> 0:14:40.320 But that answers your question, right, that Ford had to 0:14:40.320 --> 0:14:44.400 make the painful reputational decision to ask Tesla for help 0:14:44.800 --> 0:14:48.600 because the infrastructure broadly wasn't there beyond what Tesla offers. 0:14:49.440 --> 0:14:52.040 And that is true of many jurisdictions around the world. 0:14:52.840 --> 0:14:55.880 So back to the original investigation that we talked about 0:14:55.920 --> 0:14:59.880 with General Mondo and Joe Biden, does that overlap with 0:15:00.120 --> 0:15:03.120 one that we saw yesterday in the executive order that 0:15:03.240 --> 0:15:04.560 was also about data security? 0:15:05.200 --> 0:15:08.600 Yeah, I mean, what I'm learning, and actually I'm learning 0:15:08.600 --> 0:15:11.000 this in the context of AI companies as well, guys, 0:15:11.720 --> 0:15:15.160 is that you know, the Commerce Department and other government 0:15:15.160 --> 0:15:18.400 agencies are very closely aligned on the topic. You know, again, 0:15:18.440 --> 0:15:21.880 I just repeat that this is a cyber security and 0:15:23.160 --> 0:15:26.040 data security issue for the time being in the car 0:15:26.080 --> 0:15:29.560 context or EV context, and it's not billed as a 0:15:29.560 --> 0:15:34.760 competition or economic problem. But this administration is increasingly thinking 0:15:34.760 --> 0:15:38.960 about this, and we're in an election cycle where you know, 0:15:38.960 --> 0:15:42.440 look at Bloomberg's reporting out of Washington, d C. And 0:15:42.560 --> 0:15:45.040 the relationship with China for both sides of the aisle 0:15:45.080 --> 0:15:48.400 and both eventual candidates is going to be front and 0:15:48.440 --> 0:15:53.720 center in this election. So what's analogous is, yes, it's cybersecurity, 0:15:54.000 --> 0:15:56.880 but in this case, remember that the car is a 0:15:56.920 --> 0:15:59.080 computer on wheels. That's what I'd ask your audience to 0:15:59.120 --> 0:16:03.520 take away. What we're hearing from officials is that's the concern, so. 0:16:03.440 --> 0:16:06.720 A Chinese price war, although I note that Lee Auto 0:16:06.880 --> 0:16:09.840 has served something like sixty seven percent in the last 0:16:09.880 --> 0:16:13.880 month with some new designs and such. Ed thanks very 0:16:13.960 --> 0:16:15.840 much for joining us out of time now Ed Ludlow 0:16:15.880 --> 0:16:19.360 Bloomberg Technology Show host with his live here on Bloomberg 0:16:19.400 --> 0:16:30.240 at Daybreak Asia. This see is Bloomberg. Manufacturing activity in 0:16:30.320 --> 0:16:34.520 Asia slumped in February, factories wrestling with weak demand in 0:16:34.600 --> 0:16:39.240 China and supply chain disruptions in major shipping routes factories 0:16:39.280 --> 0:16:42.640 across North Asia cutting output and new orders last month. 0:16:42.960 --> 0:16:46.800 Joining us now is David Chu, Bloomberg China economist, to 0:16:46.840 --> 0:16:49.160 take a look at how China may be at the 0:16:49.200 --> 0:16:51.840 heart of this. How much is China in a sense 0:16:51.920 --> 0:16:55.120 David spreading out some of its weakness to other countries. 0:16:56.240 --> 0:17:00.520 Well, actually, I think if you look at the PM itself, 0:17:00.720 --> 0:17:04.600 uh uh, you've got a very weak reading because of 0:17:04.720 --> 0:17:08.600 the job in the in the manufacturing p M I 0:17:08.720 --> 0:17:11.440 uh this month. But actually I want to say that 0:17:11.480 --> 0:17:14.600 it's not only this month because China is slowing. Slowdown 0:17:14.720 --> 0:17:19.679 has started uh several months ago. And we all know 0:17:19.840 --> 0:17:25.159 that China is the buyer of materials from Southeast Asia, 0:17:25.400 --> 0:17:29.040 so that the slowdown of China a definitely will well 0:17:29.160 --> 0:17:35.720 not will It's influencing the Southeast Asia economies. And uh, 0:17:36.240 --> 0:17:40.720 previously China slowed down also influenced the South Korea as well. 0:17:41.080 --> 0:17:43.960 But this time we think we see that the South 0:17:44.040 --> 0:17:49.199 Korea export uh outer performs. Uh. We think that this 0:17:49.400 --> 0:17:54.960 was because of the export of chips, so that we 0:17:55.000 --> 0:17:58.720 can see that the electronic and the AI contributes some 0:17:58.960 --> 0:18:04.960 uh strong to South Korea. So that but anyway, in 0:18:05.040 --> 0:18:10.720 the Southeast Asia, the exporters of industrial materials, they are 0:18:11.800 --> 0:18:15.480 you know, suffering somehow from China. Slowdown. 0:18:16.200 --> 0:18:19.080 Yeah, I think it's important to remember sometimes I forget 0:18:19.119 --> 0:18:21.800 that PMI data is kind of soft data. It's a 0:18:21.840 --> 0:18:26.040 sentiment indicator. And when you think of sentiment, particularly given 0:18:26.080 --> 0:18:29.120 the challenges confronting China right now, it's all about sentiment 0:18:29.240 --> 0:18:31.440 or a lot of it seems to be the lack 0:18:31.520 --> 0:18:34.600 of it, a positive sentiment and the lack of confidence. 0:18:35.400 --> 0:18:38.159 Next week we've got the NPC meeting. What do you 0:18:38.200 --> 0:18:41.399 think the government can do to begin to begin I 0:18:41.440 --> 0:18:43.840 know steps have already been taken, but what let me 0:18:43.880 --> 0:18:46.480 say it another way, what more can be done to 0:18:46.640 --> 0:18:49.440 kind of tackle this issue of just weak sentiment. 0:18:51.400 --> 0:18:56.000 Well, it is two problems, what it should do and 0:18:56.160 --> 0:19:01.080 what it will do. Right, Yeah, let me say what 0:19:01.119 --> 0:19:04.919 they should do. In our minds, the better way for 0:19:05.040 --> 0:19:10.960 the government is to declare their eager for priority for 0:19:11.440 --> 0:19:15.440 development for growth, so that let the market know that 0:19:15.960 --> 0:19:19.119 the top leaders are still taking growth as the first 0:19:19.200 --> 0:19:22.800 priority and they are willing to do something to help 0:19:22.840 --> 0:19:26.720 the economy. So that is the concrete information they need 0:19:26.760 --> 0:19:30.520 to convey to the market. But on the other hand, 0:19:30.600 --> 0:19:34.040 what they can do is we think if we look 0:19:34.119 --> 0:19:36.919 at the target, we think that they are going to 0:19:37.040 --> 0:19:40.320 set the target growth target at five percent, which is 0:19:40.359 --> 0:19:45.680 actually a strong target for us because although we achieved 0:19:45.920 --> 0:19:49.040 five point two percent young er GDP growth last year, 0:19:49.080 --> 0:19:51.879 it was largely because of the low base in the 0:19:51.920 --> 0:19:54.640 previous year, so that in this year, if they set 0:19:54.680 --> 0:19:57.200 the five percent as the target, that would be a 0:19:57.280 --> 0:20:01.920 high bar. In addition, people will look at the fiscal 0:20:01.960 --> 0:20:06.280 deficit target. I think, in my mind this could be 0:20:06.400 --> 0:20:11.960 something understood market expectation. We are expecting something like three 0:20:12.000 --> 0:20:15.480 point two percent, but we think the market is expecting more. 0:20:16.320 --> 0:20:20.560 The taishin manufacturing PMI was actually a little bit more positive, 0:20:20.800 --> 0:20:24.040 and it generally tends to be, but this reading was 0:20:24.080 --> 0:20:26.840 fifty point nine, a little up from the fifty point 0:20:26.840 --> 0:20:31.119 eight in January. And you've seen the bounce in the 0:20:31.320 --> 0:20:34.119 equity market. We've seen about ten percent gains in a 0:20:34.160 --> 0:20:36.520 couple of weeks for the CSI three hundred. I know 0:20:36.560 --> 0:20:39.639 there's been a lot of hands on measures from authorities 0:20:40.359 --> 0:20:43.119 on that, but are there some bright spots? Can we 0:20:43.320 --> 0:20:45.639 can we think about things getting better here over the 0:20:45.640 --> 0:20:46.600 next few months. 0:20:47.240 --> 0:20:50.359 Well, we think it's too early to say so, because 0:20:51.640 --> 0:20:54.719 the first two months in China usually we don't have 0:20:55.160 --> 0:21:00.880 we don't have concrete data expected for PMI inflation because 0:21:01.400 --> 0:21:06.320 it is the Lunar New Year holiday distorting the whole thing. 0:21:06.760 --> 0:21:10.120 So that but we can also look at the high 0:21:10.160 --> 0:21:13.760 frequency data and also the consumption during the Luna New 0:21:13.800 --> 0:21:17.840 Year holiday, and what we got was that, you know, overall, 0:21:17.880 --> 0:21:23.520 on balance it is still to the negative side. One 0:21:23.560 --> 0:21:26.080 of the key reasons is that the home sales is 0:21:26.119 --> 0:21:30.239 still very weak. I read the data last couple of 0:21:30.320 --> 0:21:33.680 days ago at in the first of two months, the 0:21:33.720 --> 0:21:38.880 sales in value was fifty percent down from last year. 0:21:39.280 --> 0:21:41.840 So it tells us that the housing sector is still 0:21:41.880 --> 0:21:46.040 weak because of the weak confidence or sentiment in the 0:21:46.359 --> 0:21:47.399 households sector. 0:21:47.720 --> 0:21:49.360 So we're ready to wrap up here. I can give 0:21:49.359 --> 0:21:53.359 you thirty seconds, David, to tackle the problem with deflation 0:21:53.520 --> 0:21:56.639 and trying to revitalize consumption. What's the best way for 0:21:56.680 --> 0:21:59.720 the government to do that? Handout money. 0:22:01.040 --> 0:22:04.280 Well, I don't think there is a silver belated to 0:22:04.359 --> 0:22:09.359 solve this deflation problem. Well in the past, based on 0:22:09.400 --> 0:22:12.800 the past experience, if the PBOC opens the door for easing, 0:22:13.040 --> 0:22:15.399 it could help. But on the other hand, you know, 0:22:16.200 --> 0:22:23.560 China's trapped with high deadness, so that strong or aggressive 0:22:23.600 --> 0:22:26.400 easy for the PBOC is not so feasible. 0:22:26.520 --> 0:22:29.280 Right, Okay, all right, David, Thank you, David Chu, Bloomberg 0:22:29.400 --> 0:22:30.320 China Economists. 0:22:31.040 --> 0:22:34.000 This has been the Bloomberg Daybreak Asia podcast, bringing you 0:22:34.080 --> 0:22:37.160 the stories making news and moving markets in the Asia Pacific. 0:22:37.680 --> 0:22:40.800 Visit the Bloomberg Podcast channel on YouTube to get more 0:22:40.840 --> 0:22:44.439 episodes of this and other shows from Bloomberg. 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