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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Daybreak Geisha podcast. I'm Doug Krisner. You can join Brian

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Speaker 1: Curtis and myself for the stories, making news and moving

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Speaker 1: markets in the APAC region. You can subscribe to the

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Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app.

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Speaker 2: In our studios is Jinglu, Chief Economist for Greater China

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Speaker 2: at HSBC, Gingu. Thanks very much for coming into our studios.

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Speaker 2: So we saw this report on CCTV that holiday hotel

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Speaker 2: sales surged more than sixty percent year on year. This

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Speaker 2: is just really tracking several days during the holiday period

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Speaker 2: the Spring festival. But also said that prices of grain,

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Speaker 2: edible oil, pork, meat, chicken, and eggs remain basically unchanged.

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Speaker 2: So I don't know if that's good news or bad news.

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Speaker 2: But when China comes back from all next week, are

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Speaker 2: we going to be looking at it with an optimistic

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Speaker 2: feeling or more pessimism.

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Speaker 3: I think the holiday spending definitely is on track to

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Speaker 3: hit a record high. This is optimistic, I would say,

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Speaker 3: And this is a fully normalized spring festival after twenty nineteen,

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Speaker 3: so we see quite some pent up demand. And this

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Speaker 3: year there's some emergence of the new spending trend going

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Speaker 3: back home for the holiday first and then going out

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Speaker 3: for travel. So that's why everywhere we see people, and

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Speaker 3: in China, people even create a new phrase to describe

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Speaker 3: the crowd.

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Speaker 1: One of the things that we talk a lot about

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Speaker 1: on this program as it relates to consumer sentiment in

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Speaker 1: China is not only the performance of the property market,

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Speaker 1: and I choose those words very carefully because I really

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Speaker 1: think that it's been underperforming in a major, major way

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Speaker 1: that's known. The other thing that's been happening is that

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Speaker 1: the equity market has been struggling. We know that well,

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Speaker 1: and I'm wondering maybe that authorities will surprise markets. Before

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Speaker 1: the resumption of trading on Monday, one of the writers

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Speaker 1: on our m Live blog was hypothesizing about the possibility,

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Speaker 1: let's say, of a cut in the one year MLF

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Speaker 1: over the weekend that would be an unexpected positive for stocks.

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Speaker 1: Is that something that could happen?

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Speaker 3: Well, Actually, we don't see the MFF cut on this Sunday.

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Speaker 3: We actually see most likely after fat pivot in the

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Speaker 3: second half of this year, there will be twenty basis

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Speaker 3: point mlf cut. That being said, likely we're going to

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Speaker 3: see the LPR cut on twentieth of February, so or

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Speaker 3: you know, at least earlier than mlf cut. I think

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Speaker 3: you know. Basically, we have observed recently the policymakers have

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Speaker 3: stepped up their support for the economy and even for

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Speaker 3: the equity market. So that is taken in an optimistic

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Speaker 3: way by Chinese people.

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Speaker 2: Now, if you've been in this business as long as

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Speaker 2: people like Doug and I have been, you know that

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Speaker 2: things are not usually as bad as they seem in

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Speaker 2: the media. And that's even where media people and they're

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Speaker 2: not usually as good as they are sometimes portrayed as well.

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Speaker 2: So we look at these these reports with a bit

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Speaker 2: of a grain of salt. I mentioned the one from

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Speaker 2: CCTV City Group also said that Macau casinos, for instance,

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Speaker 2: had a pretty strong start to the holidays, with visitors

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Speaker 2: up about thirty four percent in the first three days.

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Speaker 2: So when you look at some of these anecdotal pieces

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Speaker 2: of information, does it give you hope that they can

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Speaker 2: emerge from this or is it really just overshadowed to

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Speaker 2: too much of a degree by the housing and the

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Speaker 2: stock market crashes.

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Speaker 3: I think, you know, we definitely see the passenger trips

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Speaker 3: increase quite a bit, both domestically and you know, offshore.

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Speaker 3: It's also important to look at the per capita spending

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Speaker 3: and there seems to be quite promising to be comparable

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Speaker 3: to the twenty nineteen level. And on top of that,

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Speaker 3: we see on the housing side there's a lot of

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Speaker 3: you know, measures being rolled out trying to stabilize a

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Speaker 3: housing market. If the government by using this new dual

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Speaker 3: track model to support the housing market, then probably we'll

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Speaker 3: see consumer confidence continue to recover.

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Speaker 1: I'm wondering about what's been going on with deflation. You know,

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Speaker 1: we talk so much about the inflation story in the

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Speaker 1: other developed markets like the US and to a lesser extent, Australia,

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Speaker 1: even in Europe. It's maybe a situation now where we

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Speaker 1: have stalled just a bit, so maybe something that's approaching,

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Speaker 1: you know, kind of stagflation. I mean, growth is still strong,

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Speaker 1: so I don't want to even characterize it in that way,

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Speaker 1: but I think what's unmistakable is what's happening in China

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Speaker 1: is very much a deflation story. How severe is it

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Speaker 1: in you review.

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Speaker 3: China is definitely an outlier on this front. But when

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Speaker 3: we look at the composition of inflation, then you probably

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Speaker 3: won't be as worried because the major drag came from

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Speaker 3: the food prices and to a lesser extent, commodity prices,

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Speaker 3: and uh, you know, this year, I think starting from

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Speaker 3: the second half of this year, we'll see paulk an

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Speaker 3: important driver for inflation. Deflation in China actually will likely

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Speaker 3: you know, uh turn from deflation to inflation. That could

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Speaker 3: be much less of a drag. So I think, you know,

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Speaker 3: key is still to see whether consumer confidence improves enough

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Speaker 3: such that there's a uh you know, the domestic demand

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Speaker 3: picking up.

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Speaker 2: We have seen measures described as ineffective by the marketplace, UH,

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Speaker 2: measures that have been put in to try to stem

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Speaker 2: the uh, the difficulties in the property market. If you

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Speaker 2: and if HSBC had a sort of wishless for things

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Speaker 2: that could be done, what would they be for China

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Speaker 2: to stem the decline? Right?

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Speaker 3: I think, you know, we give a lot of thoughts

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Speaker 3: on this, and our our view is that there need

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Speaker 3: to be a more top down, coordinated measure. Now we

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Speaker 3: see a lot of trials and localized level, but at

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Speaker 3: the same time, the central government rolls out this steel

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Speaker 3: track model, which basically says we're going to segregate the

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Speaker 3: social housing and the private housing market. And then the

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Speaker 3: catch of the social housing market is that not only

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Speaker 3: it can actually help especially the lower income people uh

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Speaker 3: to have more spending power if they're eligible to live

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Speaker 3: in social housing, but also the government will use social

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Speaker 3: housing to absorb some of the oversupply on private housing.

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Speaker 3: That's a way to help rebalance the market. So, uh,

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Speaker 3: if I could say something, I would say, you know,

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Speaker 3: maybe do a larger scale of social housing.

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Speaker 1: Beyond the property market overall. Do you think there's over

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Speaker 1: regulation in China? And that is really the key problem here,

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Speaker 1: that the way to reinvigorate growth is just to not

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Speaker 1: only relax some of the regulations, but to send a

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Speaker 1: very powerful message that these changes aren't going to be

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Speaker 1: dynamic or mercurial, that once they're set, the market can

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Speaker 1: comfortably rely that they will remain in place for the

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Speaker 1: foreseeable future.

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Speaker 3: Yeah, that's a fair comment. We did say, you know,

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Speaker 3: we still see the lingering in fact of the regulation

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Speaker 3: regulatory tightening from twenty twenty one, and we need to

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Speaker 3: see more coordinated effort from the government and to sure

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Speaker 3: the market the regulation is more transparent and predictable. On

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Speaker 3: that front, I think it's quite interesting to see that

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Speaker 3: NDRC actually came out now said they are going to

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Speaker 3: sponsor legislation which will give the private owned enterprises equal

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Speaker 3: rights as soees. So if that actually materialize this year

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Speaker 3: on next year, that would be another level, you know,

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Speaker 3: in a sense that people are more assured there's a

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Speaker 3: legal protection with respect to the equal market access and

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Speaker 3: many other things for the poees.

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Speaker 2: Yeah, some have even said that in the state owned

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Speaker 2: enterprise sector that they could increase the dividends and try

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Speaker 2: to get some of the money back into the system.

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Speaker 2: But I suppose since the state is the main owner

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Speaker 2: of shares of those maybe it would be like giving

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Speaker 2: the money from the left hand to the right hand. Anyway, Jing,

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Speaker 2: thanks very much for joining us. Jing Lu Cheap Economist

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Speaker 2: China at hs SE well one of our featured stories

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Speaker 2: today for saying that it sees low cost Chinese electric

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Speaker 2: vehicles as a major threat. Now for some of the

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Speaker 2: background on this. Currently, there's a twenty seven point five

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Speaker 2: percent tariff on Chinese evs to be sold in the

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Speaker 2: United States. Thus you're not seeing Chinese evs circulate in

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Speaker 2: the United States. But now many of the Chinese EV makers,

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Speaker 2: like BYD, are scouting spots in Mexico so that they

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Speaker 2: could take advantage of the US MCA trade agreement which

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Speaker 2: would give them access to the United States. So to

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Speaker 2: discuss this now we're joined by Danny Lee Bloomberg's Asia

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Speaker 2: Transport Reporter with this live in our studios. How real

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Speaker 2: and how big and how immediate is this threat?

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Speaker 4: Well, if you're Ford, they clearly have a worry that

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Speaker 4: quote China being a colossal strategic threat that they're coming,

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Speaker 4: whatever the barriers that there are in stopping the Chinese

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Speaker 4: EV makers the brands right now from entering the US.

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Speaker 4: And these comments kind of echo something that either Musk

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Speaker 4: had touched earlier this year. He said that quote, Frankly,

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Speaker 4: if I think there are not more trade barriers established,

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Speaker 4: they will pretty much demolish most other car companies in

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Speaker 4: the world. So even Needel Musk is concerned of the

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Speaker 4: rise and the dominance of the Chinese automakers, and particularly

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Speaker 4: when you look at how BYD in theory could undercut

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Speaker 4: forward right now with its own EV as cheap as

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Speaker 4: eleven thousand dollars in China, but when you look at

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Speaker 4: the US being around sixty thousand US dollars, there's a

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Speaker 4: lot of room for the Chinese automakers and EV makers

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Speaker 4: to undercut the legacy US brands who have dominated the

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Speaker 4: auto space for such a long time, and they're just

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Speaker 4: not used to seeing the competition, and particularly out of China,

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Speaker 4: who are leading the way in terms of innovation and

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Speaker 4: development of evs.

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Speaker 1: Well, the US auto industry has had to deal with

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Speaker 1: what happened in the nineteen seventies with the Japanese automakers,

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Speaker 1: to a lesser extent, what's come out of parts of Germany.

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Speaker 1: One of the things I was struck by, Danny, and

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Speaker 1: I'm sure you read the piece so that our Bloomberg

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Speaker 1: team put together. The chief operating officer at Ford EV's unit,

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Speaker 1: marn Jaya, was saying that essentially Chinese EV makers are

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Speaker 1: ahead of the in the technology space, so their technology

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Speaker 1: is more advanced. Do you know what he's talking about here?

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Speaker 1: Is it something beyond just the battery technology.

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Speaker 4: It's a combination of the battery technology and the technology

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Speaker 4: that the way in which ev is are powered. When

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Speaker 4: it comes to the features, whether it be autonomous driving,

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Speaker 4: to features in which consumers drivers can be better connected

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Speaker 4: to their car with their for example, their phones. Says

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Speaker 4: there's a much more holistic ecosystem. This has a horrible

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Speaker 4: phrase here, but it just means drivers are better connected

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Speaker 4: with a whole range of features, and it just means

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Speaker 4: that there is less there's less friction when it comes

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Speaker 4: to using your car as just a car. They can

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Speaker 4: use it as feels like just much more than that.

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Speaker 2: Well, as we heard from that chief operating officer at Ford,

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Speaker 2: they're well aware of the problem now and they're on

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Speaker 2: the case, and they do have some time because it

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Speaker 2: takes a while to build a plant and to start

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Speaker 2: churning out cars. How much time do they have.

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Speaker 4: Well, frankly, if there were no tread barriers today, China

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Speaker 4: would be in the US market, and particularly these emerging

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Speaker 4: Chinese brands, and even for the big brands like Byd

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Speaker 4: as you said, who overtook Tesla last year as the

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Speaker 4: biggest TV seller.

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Speaker 2: So in regards why I mentioned the twenty seven point

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Speaker 2: five percent tariff because that kind of prices them out

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Speaker 2: to a certain degree. But they can get around that

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Speaker 2: with the USMCA. But they have to build a plant.

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Speaker 2: How long will it take and can the US manufacturers

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Speaker 2: respond in that time?

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Speaker 4: Well, the Chinese brands would be at least a couple

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Speaker 4: of years away, if not at least three years, depending

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Speaker 4: on how quickly they can pour the resources in. And

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Speaker 4: we knew that from BYD speaking to Bloomberg in fact

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Speaker 4: last year, late last year that they were looking at Mexico.

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Speaker 4: So this is not necessarily new point, but the fact

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Speaker 4: that they have been looking and looking for the facilities

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Speaker 4: and the ways and where to construct. They are already

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Speaker 4: thinking about the bigger picture. And clearly Mexico for a

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Speaker 4: lot of Chinese brands and supplies is a key launching

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Speaker 4: pad for them to get to the US.

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Speaker 1: It's a perfect segue into Elon Musk inviting some of

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Speaker 1: these Chinese autopart makers into the Mexican market as a

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Speaker 1: way of supplying what Tesla is hoping to do when

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Speaker 1: it creates this massive production facility in Mexico. Right, do

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Speaker 1: you want to weigh in on that? I mean, is

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Speaker 1: this going to be something that the US government is

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Speaker 1: going to really kind of push back against to the

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Speaker 1: extent that it can with mister Elon Musk.

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Speaker 4: Yeah, this is a fascinating one. But for you know, Musk, clearly,

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Speaker 4: as Tesla has to grow, it has to find sites

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Speaker 4: not just in the US, but outside of the US

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Speaker 4: where it can they continue to add production ad capacity.

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Speaker 4: You know, Mexico is a clear answer here, and you

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Speaker 4: know Mexico hasn't been long known for auto producing and

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Speaker 4: particularly for the North American brands. So I think the

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Speaker 4: US has to be careful at how it looks at Mexico.

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Speaker 4: But for now, you know, the Chinese supply chain has

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Speaker 4: been a huge component of even Must being able to develop.

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Speaker 4: So it's clearly an interesting one that Washington will still

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Speaker 4: sit up.

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Speaker 2: And we're seeing a parallel story developed in Europe right

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Speaker 2: now for the Chinese automakers. That's another story that we

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Speaker 2: watch very closely. Thanks to Danny Danny Lee Bloomberg News,

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Speaker 2: we moved to this story Indonesia's Defense Minister of probol

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Speaker 2: Or Subianto declaring victory himself in the presidential vote, citing

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Speaker 2: independent posters, and we bring in has Linda Amen, Bloomberg

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Speaker 2: Chief South East Asia correspondent and anchor for Bloomberg Markets Asia,

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Speaker 2: for a closer look at this. So before we get

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Speaker 2: to the significance of this and the implications of it

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Speaker 2: has Let's talk a little bit about what has to

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Speaker 2: happen for this to become fact and not just Proboo

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Speaker 2: declaring victory.

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Speaker 5: Well, that's right, I mean the official results actually will

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Speaker 5: come in in about a few weeks. What we've been

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Speaker 5: referring to is the quick count done by independent posts.

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Speaker 5: It is unofficial, but you know, this quick count of

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Speaker 5: an acurage for the party election, so a lot a

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Speaker 5: lot of beings out right now it shows a decisive

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Speaker 5: victory for Pobo and his running made Gibrun, who is

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Speaker 5: by the way, the incumbent President Jokoi's son. They secured

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Speaker 5: almost sixty percent of the votes, which by the way

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Speaker 5: is higher than what most poles predicted and better than

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Speaker 5: Jokui's own performance at the last two elections. And now

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Speaker 5: it shows up successful media strategy, in particular, his TikTok

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Speaker 5: strategy have been in remaking his image from a Jannal

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Speaker 5: who allegedly was involved in the killings and etymore in

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Speaker 5: Papa ne Guinea. It's well as the abduction of shudent

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Speaker 5: protesters in the late ninety nineties. Now, I was a

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Speaker 5: rookie reporter. Then I remember those days. He was blacklisted

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Speaker 5: by the US for two decades, allowed to listen only

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Speaker 5: recently it's like four years ago. Now. Obviously it comes

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Speaker 5: down to that strategy and that's one of the heart

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Speaker 5: of minds of the younger voters because more fifty percent

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Speaker 5: of the two hundred million voters are under forty years old.

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Speaker 5: It shows how, you know, how he's won the heart

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Speaker 5: of mind because through his needed strategy, he's come across

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Speaker 5: as a cuddly grandfather. His name is of a chubby grandfather.

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Speaker 5: So you know, when you speak to the young people

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Speaker 5: around here, they say, you know what, okay, people change

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Speaker 5: and what he stands for is a good economy and

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Speaker 5: great jobs and that's what his promised to young people.

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Speaker 2: The one thing I'm curious about, though, has has a

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Speaker 2: little back and forth. One thing I'm curious about is

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Speaker 2: why hasn't Joko Widodo publicly declared declared support given that

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Speaker 2: his son is the running mate.

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Speaker 5: Well, the thing is this right as a president Constitutionally

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Speaker 5: he's meant to stay neutral. But obviously, uh, you know

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Speaker 5: has been seen with Pa bol He's been he's been

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Speaker 5: supporting Pro Bowl, uh and feel that his son is

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Speaker 5: the vice president. That shows a lot of support pa

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Speaker 5: bowl Uh and hence that has become quite an issue

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Speaker 5: with the people who see this as DJOKOI himself trying

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Speaker 5: to build a political dynasty. Yet he's done two talented

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Speaker 5: dollars but no, he's not leaving because his son it's

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Speaker 5: going to be next in power. So a lot of

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Speaker 5: you know, unease in the.

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Speaker 1: Country has I know you have great familiarity with Indonesia,

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Speaker 1: a lot of experience. I'm wondering if you can help

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Speaker 1: me understand how the economy is performing. You talked about

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Speaker 1: the support among the younger generation for Subianto. Give me

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Speaker 1: a sense of what's happening economically that may be helping

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Speaker 1: to feed some of that support among the younger generation.

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Speaker 5: You know, members don't lie. It would take a look

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Speaker 5: at the last eight years and how the JCI, the

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Speaker 5: Chiconta comment in index is done. It's sets forty five percent.

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Speaker 5: The rupia has been pretty stable despite the pandemic, and

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Speaker 5: that shows the legacy that Djokowidodo is leaving behind. And

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Speaker 5: average growth of five percent, you know what, nothing to

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Speaker 5: scream about. It far far away from that seven percent goal,

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Speaker 5: but it is still five percent, a growth rate that

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Speaker 5: many countries even in this part of the world and

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Speaker 5: not showing. So the country is doing pretty well. What

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Speaker 5: they doesn't want to see its stability, and they're getting

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Speaker 5: that with the results of this election. What they want

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Speaker 5: to see is policy continuity, and Carboo has prockles that.

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Speaker 5: So you can expect policies like downstreaming, like infrastructure spending,

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Speaker 5: infrastructure building. The move of the capital from Chakata to

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Speaker 5: Lufantara will continue, and that might just be enough for

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Speaker 5: the JCI to sturge even more and for the currency

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Speaker 5: to strengthen. From here.

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Speaker 2: Let's go back to the comment you made about Proboo

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Speaker 2: being banned from the US for a couple of decades.

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Speaker 2: That's because of alleged human rights abuses. And he's the

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Speaker 2: former son in law of the late dictator. Is so

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Speaker 2: hard to is any of that cloud still following him

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Speaker 2: or is that all cleared now?

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Speaker 5: Well, when it comes to relations with the US, I

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Speaker 5: think ours that you speak to constructive relationship because Indonesia

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Speaker 5: plays a pivotal role in balancing the influence between the

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Speaker 5: US and China in this part of the world, the

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Speaker 5: Indo Pacific. As Trump himself talked about and I think

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Speaker 5: that is crucial in putting things in perspective. Also, remember

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Speaker 5: that Indonesia is one one of the biggest exporters of

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Speaker 5: the likes of coal, of nickel, And as the world

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Speaker 5: moves into the eavy space, as climate becomes essential an

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Speaker 5: essential conversation, and as China tries to shape and influence

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Speaker 5: a lot of the regions, I think both sides in

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Speaker 5: Anesia in particular knows what at stake and is willing

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Speaker 5: to play both sides. So I think whether Biden comes

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Speaker 5: to power or whether Trump comes back to power, I

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Speaker 5: think there'll be no difference in how relationships pan out

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Speaker 5: from here. It will be a constructive relationship.

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Speaker 1: It's a big country, a lot of provinces that have

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Speaker 1: to report. Has last question, how long do you think

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Speaker 1: it will be before the results of this election are official.

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Speaker 5: It's going to be a couple of weeks.

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Speaker 4: You know.

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Speaker 5: You can talk about how large it is. Let me

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Speaker 5: just put that in perspective very quickly. It is an archipelago,

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Speaker 5: seventeen thousand islands, seven hundred languae, three different time zones,

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Speaker 5: all in an area as big as the US. So

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Speaker 5: you know it was amazing that the whole election two

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Speaker 5: hundred million voters took all of six hours to cost

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Speaker 5: the votes and it will take a few weeks for

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Speaker 5: the off show results come through.

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Speaker 1: Haz thanks so much. I know it's a busy day

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Speaker 1: for you. I appreciate you making time for us here

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Speaker 1: on the radio side. Huslinda, I'm in Bloomberg is the

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Speaker 1: Chief South Asia correspondent also anchor of Bloomberg Markets Asia

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Speaker 1: from Jakarta, Indonesia. Here on Daybreak Asia.

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Speaker 2: This is the Bloomberg Daybreak Asia podcast, bringing you the

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

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Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more

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Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to

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