Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Brian Curtis
Speaker 2: along with Doug Krisner. Join us each day for the
Speaker 2: stories making news and moving markets in the Asia Pacific.
Speaker 2: You can subscribe to the show anywhere you get your
Speaker 2: podcasts and always on Bloomberg Radio, the Bloomberg Terminal, and
Speaker 2: the Bloomberg Business App.
Speaker 1: Well, we've been talking about today's PCEE inflation data right
Speaker 1: on target with estimates and man where markets relieved since
Speaker 1: the recent readings on both consumer and producer prices were
Speaker 1: above forecast. I think we can agree that the cooling
Speaker 1: of inflation is a little slower now. Growth, though, is
Speaker 1: holding up. So the question how is the White House
Speaker 1: viewing today's news. Earlier I spoke with Gene Sperling, senior
Speaker 1: advisor to President Biden. I began by asking for his
Speaker 1: takeaway on the data.
Speaker 3: I think what we're seeing is a recovery that has
Speaker 3: shown significant resilience.
Speaker 4: Obviously, as we all know, it was only.
Speaker 3: A year ago where people were predicting, you know, with
Speaker 3: tremendous uncertainty, that the only way inflation was going to
Speaker 3: come down was by crushing demand, risking potential.
Speaker 4: Recession. But I think what we've seen is more and.
Speaker 3: More evidence that the global inflation we saw was primarily
Speaker 3: driven by things related to the global economy being shut
Speaker 3: down starting back up, the supply chain snarls, the supply shortages,
Speaker 3: and that actually we're seeing, you know, something even better
Speaker 3: than a soft landing, because we've been able to see
Speaker 3: growth stay fairly strong, unemployment state under four percent. That's
Speaker 3: much better than the kind of just soft landing that
Speaker 3: just misses a recession.
Speaker 4: This is solid.
Speaker 3: So you know, for us, I think that this just
Speaker 3: confirmed what we think is an overall, you know, very
Speaker 3: positive trend to Whether you want to call it a
Speaker 3: soft landing or no landing, I guess I would say
Speaker 3: a resilient recovery where the fact that people have spending power,
Speaker 3: with such a large percentage of people are working, where
Speaker 3: you actually have prime age labor participation actually stronger than
Speaker 3: pre pandemic.
Speaker 4: Looks positive.
Speaker 3: The fact that you know, incomes are up, spendings down
Speaker 3: a little in a month in January, you know, I
Speaker 3: think we'll all kind of wait to see, you know,
Speaker 3: what the next couple of months are, and look over
Speaker 3: look at what the trend is.
Speaker 4: You know, again, consumer confidence that looks strong.
Speaker 3: You had one month where you know, it didn't improve,
Speaker 3: but you still have the Michigan consumer confidence twenty five
Speaker 3: percent stronger than October. So I think what people were
Speaker 3: probably feeling positive about today was the sense that the
Speaker 3: trend is still over all your friend.
Speaker 1: But we are in an election year and one of
Speaker 1: the things that I think we can agree on, Yes,
Speaker 1: the data have been positive, whether you're looking at overall
Speaker 1: economic growth, the strength of the labor market, or inflation,
Speaker 1: but the president doesn't seem to be getting any credit
Speaker 1: for it today. Bloomberg News and Morning Consult released a
Speaker 1: poll conducted in February, and I'm going to highlight one
Speaker 1: swing state, Pennsylvania. Only forty three percent of voters believe
Speaker 1: the economy is headed in the right direction. So I'm
Speaker 1: trying to understand why the messaging on success has not
Speaker 1: penetrated and what needs to change.
Speaker 3: Well, look, you know, I always say that every family
Speaker 3: is the world's greatest expert on how they're doing. On
Speaker 3: the other hand, what people are hearing, what they see
Speaker 3: the direction at that can be something that is affected
Speaker 3: by what people are hearing. And also what they've experienced.
Speaker 3: So I'm such an old man that I started in
Speaker 3: the White House in nineteen ninety three with President Clinton,
Speaker 3: and I think that we found in ninety four and
Speaker 3: nineteen ninety five that even though the deaths it was down,
Speaker 3: even though unemployment was down, you weren't seeing the pickup
Speaker 3: and consumer confidence. There can be a lag, particularly if
Speaker 3: people have been worried for a while, and it's been
Speaker 3: a pretty tough few years for people going through the
Speaker 3: pandemic two variants twenty twenty two, where we saw global
Speaker 3: prices go high, we saw a war in Ukraine, you know,
Speaker 3: royal energy and food markets. So people don't always react
Speaker 3: on a dime with the you know, with the news.
Speaker 3: They can want greater reassurance. It can take a while
Speaker 3: to change people's attitudes.
Speaker 1: Jane. Before I let you go, I want to talk
Speaker 1: about trade relations, particularly US China, certainly to become a
Speaker 1: hot topic as we move closer to the election. How
Speaker 1: should we be thinking about the way in which the
Speaker 1: administration wants to deal with China, whether it's export controls
Speaker 1: or what we learned today where the President is taking
Speaker 1: steps to block Internet connected Chinese cars and trucks, from
Speaker 1: entering the American market.
Speaker 4: Look overall putting China to the side.
Speaker 3: This is a president who has done so much with
Speaker 3: the Chips Act, with the infrastructure built with the Inflation
Speaker 3: Reduction Act to attract hundreds of billions of dollars of
Speaker 3: investment here. We want people to move factories here, We
Speaker 3: want them to create jobs here. We want American companies
Speaker 3: and American jobs to do well, and we want people
Speaker 3: to uh who might be in another country to decide
Speaker 3: to build their future here. But the President is very
Speaker 3: clear when it comes to both security and economic fairness. Uh,
Speaker 3: he's going to insist on both from China, and you know,
Speaker 3: to the degree that there is uh government led over
Speaker 3: capacity that that uh put our workers at a disadvantage
Speaker 3: in you know, important manufacturing areas or as you've seen
Speaker 3: things that we do not have the confidence in that
Speaker 3: would not be a threat to not just national security,
Speaker 3: but but the data and privacy of Americans. As you
Speaker 3: saw today, We're going to be clear, uh, clear as
Speaker 3: a bell, and we're going to be you know, tough
Speaker 3: when necessary.
Speaker 1: Jane Sperling, Senior advisor to President Biden, Thanks so much
Speaker 1: for joining us.
Speaker 4: Thanks and May appreciate it.
Speaker 2: The US is not yet calling for a ban on
Speaker 2: Chinese evs, but could impose some limitations on imports of
Speaker 2: the vehicles or parts joining US. Now for some discussion
Speaker 2: of this year is Ed Ludlow, Bloomberg Technology Show host. So, Ed,
Speaker 2: we understand that there are some risks here, data and
Speaker 2: cybersecurity risks. I want to say this in a flippant
Speaker 2: way to get people's attention, but there's a there's a
Speaker 2: serious question embedded. Is Gina Romando seeing a Chinese ghost
Speaker 2: around every corner?
Speaker 5: Yeah, there's a close look at it. I mean you
Speaker 5: have to remember that the barrier to entry for Chinese
Speaker 5: cause in America is literally high because of the Trump
Speaker 5: Are are tariffs right, there's a twenty seven point five
Speaker 5: percent tariff on any Chinese built ev that that wants
Speaker 5: to be sold here. So they've not become pervasive. But
Speaker 5: this is really interesting. You have to compare what the
Speaker 5: US is doing versus Europe, because the US is saying
Speaker 5: we're looking at this through the lens of national security,
Speaker 5: not economics, whereas you look at Europe, they're saying we're
Speaker 5: going to take a real look at Chinese evs because
Speaker 5: we're super worried economically that they'll out compete our industry.
Speaker 2: Exactly, why not call a spade is spae That's the
Speaker 2: thrust of the question.
Speaker 5: So I think, you know, we've actually seen this as
Speaker 5: a kind of tip for tat. There was a very
Speaker 5: similar story with Tesla last year and the year before,
Speaker 5: where the Chinese government looked at teslas that were owned
Speaker 5: by Chinese government employees and officials as a security concern
Speaker 5: because of the data that runs through the car. Right
Speaker 5: think about the just the miles of telematics and personal
Speaker 5: or consumer data that a modern day vehicle has. The
Speaker 5: US is doing something similar, you know, like each computer
Speaker 5: is based at each computer, Each car is basically a
Speaker 5: computer on wheels these days. And so what the US
Speaker 5: is doing, according to the official that Bloomberg spoke to,
Speaker 5: is looking at those vulnerability as a precursor to making
Speaker 5: a firm policy decision on Chinese made evs in this country.
Speaker 1: So Brian and I were talking earlier ed about the
Speaker 1: change that may occur when Chinese manufacturers begin setting up
Speaker 1: production facilities in Mexico with the idea of moving those
Speaker 1: vehicles into the American market. Does any of this kind
Speaker 1: of run up against a massive change as a result
Speaker 1: of what the administration is trying to achieve.
Speaker 5: I think that's a really smart question, and you have
Speaker 5: to go back to the stipulations of the Inflation Reduction
Speaker 5: Act and the Treasury and IRS guidelines, which is it's
Speaker 5: not just where the vehicle is made, but it is
Speaker 5: every single component where the component is made, but also
Speaker 5: the ownership of the company that made that component. So
Speaker 5: let's just take like, I don't know, let me think
Speaker 5: of something equally as flippant. Let's take a nut and bolt,
Speaker 5: you know, on the axle of the car. If that
Speaker 5: nut or bolt comes from a supplier that is owned
Speaker 5: by twenty five percent Chinese ownership or higher, it's not
Speaker 5: eligible for the federal tax credit or any other access
Speaker 5: to public funds. So there's a disincentive there. But again
Speaker 5: go back to the Bloomberg reporting. Right now, this is
Speaker 5: not about economics, it's about national security, and so the
Speaker 5: supply chain issue at this time is not what's the
Speaker 5: under the microscope.
Speaker 2: Is it possible that the European Union, even though you
Speaker 2: mentioned it's a different approach, they're challenging on economic rather
Speaker 2: than national security concerns, But Is it possible that they
Speaker 2: too have these concerns about security risks?
Speaker 5: Yes, certainly, I think, you know, we look at the
Speaker 5: European Union as not just a governmental body but a regulator,
Speaker 5: right and certainly in my coverage of broadly of the
Speaker 5: technology sector, the European Commission, you know, if you think
Speaker 5: is a parallel example social media and TikTok, they have
Speaker 5: the same debates in that jurisdiction as we have here
Speaker 5: with the safety of TikTok and whether it provides a
Speaker 5: vulnerability to their citizens because downchain, the Chinese government may
Speaker 5: or may not have access to data, and so there's
Speaker 5: some evidence that the European Union looks at Chinese vehicles
Speaker 5: in the same lens. But I would underscore that europe
Speaker 5: came out early and said, look, this is just an
Speaker 5: issue of competition. We don't want to get outdone or
Speaker 5: undercut by the Chinese suppliers.
Speaker 1: In the bigger picture, though, I'm trying to understand the
Speaker 1: supply demand imbalance. I'm looking at your story now on Fisker,
Speaker 1: the company. You're raising substantial doubt about its ability to
Speaker 1: be basically an ongoing operation. Fifteen percent of the workforce
Speaker 1: gets cut, right, are we living in an era where
Speaker 1: there's simply too much capacity.
Speaker 5: Fisker is a wild story that has its own unique problems.
Speaker 5: But what the CEO told me an interview earlier is
Speaker 5: that there is a demand problem. You know, Fiska has
Speaker 5: a unique business model where it has a contract manufacturer,
Speaker 5: Magna International, and they build Fisker's EV's on their behalf
Speaker 5: at a plant in Austria, and they can build as
Speaker 5: many or as few as they want. So what Fisker
Speaker 5: said is, we're going to make twenty to twenty two
Speaker 5: in twenty twenty four, but if demand improves, we can
Speaker 5: just dial up because of our unique business model. This
Speaker 5: is a company that's seriously and financially shaky, right, seriously
Speaker 5: in trouble. And what they've told investors this evening is
Speaker 5: there is one unnamed automaker waiting in the wings who
Speaker 5: is agreed to partner with Fisker and give them a
Speaker 5: cash injection. The deal's not done yet and it will
Speaker 5: happen soon, is what the CEO told me. But here
Speaker 5: goes back to the root of your question. EV demand
Speaker 5: is down right now, everyone is pulling back, So why
Speaker 5: would an automaker make an investment in another EV name
Speaker 5: like Fiska in that environment, and you guys probably see
Speaker 5: the stock down thirty seven percent in after ours.
Speaker 2: If prices continue to get cut, because even BYD has struggled,
Speaker 2: even though it has it's out selling Tesla, but it
Speaker 2: has struggled because having to lower prices in the margins
Speaker 2: are really cut. It starts to become I mean, does
Speaker 2: that bring the other automakers, more automakers into the picture,
Speaker 2: or does it just mean that it's going to you know,
Speaker 2: it's going to undercut the overall thrust of the industry
Speaker 2: over the next couple of years.
Speaker 5: I mean, what's unique about China's EV market is there
Speaker 5: are many more individual players, right the consumer has more choice.
Speaker 5: But we've learned pretty quickly that the Chinese economy is
Speaker 5: not immune to what's happening around the world, so there's
Speaker 5: some pressure there. You know. The overall picture is we
Speaker 5: live in a really high interest rate environment around the world.
Speaker 5: The financing of your car is probably your second biggest
Speaker 5: expense after your mortgage or your rent. And the first
Speaker 5: so called first adopters have been and gone in North
Speaker 5: American Europe. So what's left is a price conscious consumer
Speaker 5: and the EV price premium is still so great even
Speaker 5: after price cuts that they're still going for cheaper combustion
Speaker 5: engine models. In China that's less so the case, but
Speaker 5: because there are so many players, you've got to cut
Speaker 5: prices to be competitive.
Speaker 1: Yeah, but we also have the issue of tax cuts
Speaker 1: to consider it, right. And then there's the charging infrastructure
Speaker 1: story and whether or not that's not only reliable, widespread
Speaker 1: enough so that consumers feel comfortable in making the investment.
Speaker 5: Yeah, And today's a big milestone in North America on
Speaker 5: that front, right, because Tesla has opened up its charging
Speaker 5: network to other companies. So today Ford customers could start
Speaker 5: charging their Ford evs using a Tesla charger with an adapter.
Speaker 5: But that answers your question, right, that Ford had to
Speaker 5: make the painful reputational decision to ask Tesla for help
Speaker 5: because the infrastructure broadly wasn't there beyond what Tesla offers.
Speaker 5: And that is true of many jurisdictions around the world.
Speaker 2: So back to the original investigation that we talked about
Speaker 2: with General Mondo and Joe Biden, does that overlap with
Speaker 2: one that we saw yesterday in the executive order that
Speaker 2: was also about data security?
Speaker 5: Yeah, I mean, what I'm learning, and actually I'm learning
Speaker 5: this in the context of AI companies as well, guys,
Speaker 5: is that you know, the Commerce Department and other government
Speaker 5: agencies are very closely aligned on the topic. You know, again,
Speaker 5: I just repeat that this is a cyber security and
Speaker 5: data security issue for the time being in the car
Speaker 5: context or EV context, and it's not billed as a
Speaker 5: competition or economic problem. But this administration is increasingly thinking
Speaker 5: about this, and we're in an election cycle where you know,
Speaker 5: look at Bloomberg's reporting out of Washington, d C. And
Speaker 5: the relationship with China for both sides of the aisle
Speaker 5: and both eventual candidates is going to be front and
Speaker 5: center in this election. So what's analogous is, yes, it's cybersecurity,
Speaker 5: but in this case, remember that the car is a
Speaker 5: computer on wheels. That's what I'd ask your audience to
Speaker 5: take away. What we're hearing from officials is that's the concern, so.
Speaker 2: A Chinese price war, although I note that Lee Auto
Speaker 2: has served something like sixty seven percent in the last
Speaker 2: month with some new designs and such. Ed thanks very
Speaker 2: much for joining us out of time now Ed Ludlow
Speaker 2: Bloomberg Technology Show host with his live here on Bloomberg
Speaker 2: at Daybreak Asia. This see is Bloomberg. Manufacturing activity in
Speaker 2: Asia slumped in February, factories wrestling with weak demand in
Speaker 2: China and supply chain disruptions in major shipping routes factories
Speaker 2: across North Asia cutting output and new orders last month.
Speaker 2: Joining us now is David Chu, Bloomberg China economist, to
Speaker 2: take a look at how China may be at the
Speaker 2: heart of this. How much is China in a sense
Speaker 2: David spreading out some of its weakness to other countries.
Speaker 6: Well, actually, I think if you look at the PM itself,
Speaker 6: uh uh, you've got a very weak reading because of
Speaker 6: the job in the in the manufacturing p M I
Speaker 6: uh this month. But actually I want to say that
Speaker 6: it's not only this month because China is slowing. Slowdown
Speaker 6: has started uh several months ago. And we all know
Speaker 6: that China is the buyer of materials from Southeast Asia,
Speaker 6: so that the slowdown of China a definitely will well
Speaker 6: not will It's influencing the Southeast Asia economies. And uh,
Speaker 6: previously China slowed down also influenced the South Korea as well.
Speaker 6: But this time we think we see that the South
Speaker 6: Korea export uh outer performs. Uh. We think that this
Speaker 6: was because of the export of chips, so that we
Speaker 6: can see that the electronic and the AI contributes some
Speaker 6: uh strong to South Korea. So that but anyway, in
Speaker 6: the Southeast Asia, the exporters of industrial materials, they are
Speaker 6: you know, suffering somehow from China. Slowdown.
Speaker 1: Yeah, I think it's important to remember sometimes I forget
Speaker 1: that PMI data is kind of soft data. It's a
Speaker 1: sentiment indicator. And when you think of sentiment, particularly given
Speaker 1: the challenges confronting China right now, it's all about sentiment
Speaker 1: or a lot of it seems to be the lack
Speaker 1: of it, a positive sentiment and the lack of confidence.
Speaker 1: Next week we've got the NPC meeting. What do you
Speaker 1: think the government can do to begin to begin I
Speaker 1: know steps have already been taken, but what let me
Speaker 1: say it another way, what more can be done to
Speaker 1: kind of tackle this issue of just weak sentiment.
Speaker 6: Well, it is two problems, what it should do and
Speaker 6: what it will do. Right, Yeah, let me say what
Speaker 6: they should do. In our minds, the better way for
Speaker 6: the government is to declare their eager for priority for
Speaker 6: development for growth, so that let the market know that
Speaker 6: the top leaders are still taking growth as the first
Speaker 6: priority and they are willing to do something to help
Speaker 6: the economy. So that is the concrete information they need
Speaker 6: to convey to the market. But on the other hand,
Speaker 6: what they can do is we think if we look
Speaker 6: at the target, we think that they are going to
Speaker 6: set the target growth target at five percent, which is
Speaker 6: actually a strong target for us because although we achieved
Speaker 6: five point two percent young er GDP growth last year,
Speaker 6: it was largely because of the low base in the
Speaker 6: previous year, so that in this year, if they set
Speaker 6: the five percent as the target, that would be a
Speaker 6: high bar. In addition, people will look at the fiscal
Speaker 6: deficit target. I think, in my mind this could be
Speaker 6: something understood market expectation. We are expecting something like three
Speaker 6: point two percent, but we think the market is expecting more.
Speaker 2: The taishin manufacturing PMI was actually a little bit more positive,
Speaker 2: and it generally tends to be, but this reading was
Speaker 2: fifty point nine, a little up from the fifty point
Speaker 2: eight in January. And you've seen the bounce in the
Speaker 2: equity market. We've seen about ten percent gains in a
Speaker 2: couple of weeks for the CSI three hundred. I know
Speaker 2: there's been a lot of hands on measures from authorities
Speaker 2: on that, but are there some bright spots? Can we
Speaker 2: can we think about things getting better here over the
Speaker 2: next few months.
Speaker 6: Well, we think it's too early to say so, because
Speaker 6: the first two months in China usually we don't have
Speaker 6: we don't have concrete data expected for PMI inflation because
Speaker 6: it is the Lunar New Year holiday distorting the whole thing.
Speaker 6: So that but we can also look at the high
Speaker 6: frequency data and also the consumption during the Luna New
Speaker 6: Year holiday, and what we got was that, you know, overall,
Speaker 6: on balance it is still to the negative side. One
Speaker 6: of the key reasons is that the home sales is
Speaker 6: still very weak. I read the data last couple of
Speaker 6: days ago at in the first of two months, the
Speaker 6: sales in value was fifty percent down from last year.
Speaker 6: So it tells us that the housing sector is still
Speaker 6: weak because of the weak confidence or sentiment in the
Speaker 6: households sector.
Speaker 1: So we're ready to wrap up here. I can give
Speaker 1: you thirty seconds, David, to tackle the problem with deflation
Speaker 1: and trying to revitalize consumption. What's the best way for
Speaker 1: the government to do that? Handout money.
Speaker 6: Well, I don't think there is a silver belated to
Speaker 6: solve this deflation problem. Well in the past, based on
Speaker 6: the past experience, if the PBOC opens the door for easing,
Speaker 6: it could help. But on the other hand, you know,
Speaker 6: China's trapped with high deadness, so that strong or aggressive
Speaker 6: easy for the PBOC is not so feasible.
Speaker 2: Right, Okay, all right, David, Thank you, David Chu, Bloomberg
Speaker 2: China Economists.
Speaker 1: This has been the Bloomberg Daybreak Asia podcast, bringing you
Speaker 1: the stories making news and moving markets in the Asia Pacific.
Speaker 1: Visit the Bloomberg Podcast channel on YouTube to get more
Speaker 1: episodes of this and other shows from Bloomberg. Subscribe to
Speaker 1: the podcast on Apple, Spotify, or anywhere else you listen,
Speaker 1: and always on Bloomberg Radio, the Bloomberg Terminal, and the
Speaker 1: Bloomberg Business App.