Speaker 1: You're listening to Asia Centric from Bloomberg Intelligence, the podcast
Speaker 1: that pulls back the curtain on global business so you
Speaker 1: can invest better across the Pacific rim. I'm Tom Corbett
Speaker 1: in Hong Kong.
Speaker 2: And I'm John Lee. The drumbeat of pessimism coming out
Speaker 2: of China is growing faster and louder.
Speaker 1: A property crisis, faltering economic growth, towering debt, and high
Speaker 1: youth unemployment have drowned out their cheers about China's growth juggernaut,
Speaker 1: leaving investors wringing their hands and wondering what's next.
Speaker 2: A China's days as an economic powerhouse a thing of
Speaker 2: the past. Is it just navigating a rough patch? Or
Speaker 2: can it overcome formidable forces to achieve bolder growth in
Speaker 2: a brighter future.
Speaker 3: I'm still not super barish about China's economy, but in
Speaker 3: the property sector, I think it will get worse before
Speaker 3: it gets better.
Speaker 1: Let's bring in Louis Kousch, Asia Pacific chief economist at
Speaker 1: S and P Global Ratings.
Speaker 3: Louis, welcome, Hey Louis, Thank you, Tom and John. Hi.
Speaker 3: How are you guys.
Speaker 2: Louis. You've been a China observerer for two decades. You
Speaker 2: lived in Beijing for seven years, You're hearing about all
Speaker 2: the negative news. Is it time to worry about China?
Speaker 3: I think it is legitimate to worry about China. It
Speaker 3: always is. It's a big economy. We rely on it internationally,
Speaker 3: so it's legitimate to worry. Now, you know, sometimes I
Speaker 3: feel maybe people worry a little bit too much, as
Speaker 3: in absolutely, we're going through a rough patch. There is
Speaker 3: a cyclical slowdown after the spurt, you know, the post
Speaker 3: COVID spurt. In addition, there are quite a few more
Speaker 3: structural headwinds. So definitely there are lots of things to
Speaker 3: worry about. But if you ask me, are China's time
Speaker 3: over as a country, as an economy that will continue
Speaker 3: to grow quite a bit faster than the US? I
Speaker 3: would say no.
Speaker 1: Louis to borrow a phrase from the global financial crisis
Speaker 1: of an earlier decade, Is China too big to fail?
Speaker 3: Probably not if you look at that from the perspective
Speaker 3: of Beijing. It hasn't really changed, right, So China may
Speaker 3: play a different role in the global economy now then
Speaker 3: it did, say fifteen years ago. But I guess from
Speaker 3: the perspective of Beijing they would look at it in
Speaker 3: a different way. Like I think for Beijing policy makers,
Speaker 3: things like growth have probably become a little bit less
Speaker 3: the one and only policy priority than they were fifteen
Speaker 3: years ago, compared to additional policy considerations like sustainability of growth,
Speaker 3: financial risk, and even things like national security issues. So
Speaker 3: the way that they are looking at economic growth is
Speaker 3: different now than they did fifteen years ago, and that
Speaker 3: has implications for the global economy.
Speaker 2: Where did this all go wrong? China was supposed to
Speaker 2: really come out of COVID very strong, like a lot
Speaker 2: of western countries did, but obviously been a lot weaker
Speaker 2: than expected.
Speaker 3: Well, if I look at our forecasts and how they
Speaker 3: have evolved over the last nine to months, yeah, we
Speaker 3: have recently downscaled the forecast a bit, like we bumped
Speaker 3: it up earlier on. So I would say absolutely during
Speaker 3: twenty twenty three, forecasts have been going down a bit.
Speaker 3: But it's not as if we're talking about a crash
Speaker 3: in the economy, right, We're still talking about you know,
Speaker 3: we used to have our forecasts a little bit above
Speaker 3: five percent for this year. We may be coming out
Speaker 3: somewhere lower than five percent, but this we are still
Speaker 3: growing faster than pretty much all other large economies in
Speaker 3: the world. This year next year is a big challenge,
Speaker 3: and it's going to be key to see how the
Speaker 3: authorities are responding to this cyclical slow down. Do they
Speaker 3: still care quite a bit about growth as I would think,
Speaker 3: or is it as some other people say that they
Speaker 3: have stopped fully caring about growth. That matters a lot,
Speaker 3: of course for how you look at that slowdown. But
Speaker 3: you know, I would still say in part, people are
Speaker 3: disappointed because perhaps some of the expectations were a little
Speaker 3: bit higher.
Speaker 2: So, Louis, you talked about the sickly slow down, but
Speaker 2: what about the structural issues Country Garden, the country's largest
Speaker 2: private developers. Just mister coupon payment. You worried about the
Speaker 2: problems in the property sector.
Speaker 3: Yeah, so the property side is absolutely you know, if
Speaker 3: you ask me what is the one reason why we
Speaker 3: have a slowdown in China at the moment, I would
Speaker 3: say it's the property sector. The weakness in the property
Speaker 3: sector has a lot of negative economic implications. In addition
Speaker 3: to that, it has lots of financial problems. Right, we
Speaker 3: have the defaults, we have all of the negative sentiment
Speaker 3: that comes as a result of that. It is also
Speaker 3: affecting households if they want to buy a house or not,
Speaker 3: so a lot of implications what to make of that
Speaker 3: weakness in the property sector. To some extent, it is
Speaker 3: a little bit deliberate in the sense that the authorities
Speaker 3: in twenty twenty one did go in and basically force
Speaker 3: that sector to start to take on a smaller footprint
Speaker 3: in the overall economy. That was a major objective of
Speaker 3: the initiative that they took in twenty twenty one. There
Speaker 3: was a bit of a u turn later in twenty
Speaker 3: twenty two when they realized, Okay, we don't want to
Speaker 3: overdo the impact on the economy. There's too much weakness,
Speaker 3: and maybe we should take a bit of a breather
Speaker 3: in terms of how much pain we want to inflict.
Speaker 3: But I don't think that fundamental project to lower the
Speaker 3: economic footprint of the property sector in the economy. I
Speaker 3: don't think that that has changed, and that unfortunately goes
Speaker 3: along with quite a bit of short term pain. But
Speaker 3: it's a little bit something that we all, all of
Speaker 3: the external observers have been asking for for a long time.
Speaker 3: You know, everybody asked China, you need to lower the
Speaker 3: footprint of your property sector.
Speaker 1: You just spoke about the Chinese property sector and the
Speaker 1: influencer was having on consumer confidence. What could do more damage?
Speaker 1: Is it just the debt, the defaults, the deflation, or
Speaker 1: could the crisis of confidence actually be causing more damage
Speaker 1: than the former three.
Speaker 3: Your question is a good one in the sense that
Speaker 3: the confidence aspect of all of these developments is really
Speaker 3: weighing over the sentiment sentiment of potential buyers, and people
Speaker 3: have become reluctant to buy right because they worry that
Speaker 3: the company that they're buying from and that they have
Speaker 3: to advance money to may not even be able to
Speaker 3: deliver the home, let alone what it will do to
Speaker 3: the housing price. So absolutely, I think confidence is a
Speaker 3: really important part over here, and we are definitely not
Speaker 3: out of the woods. Broadly speaking. I'm still not super
Speaker 3: bearish about China's economy, but in the property sector, I
Speaker 3: think it will get worse before it gets better, given
Speaker 3: how damaged confidence has been.
Speaker 1: Louis Kaus, You've been studying China for decades, you lived
Speaker 1: there for many years. How does this confluence of pessimism,
Speaker 1: if you will, this parade of economic doom and gloom,
Speaker 1: so to speak, how does it stack up against the
Speaker 1: broader challenges of the past have century in China. Is
Speaker 1: this the worst the country has faced?
Speaker 3: You know, I think in terms of how downbeat everybody
Speaker 3: is about the prospects, both internationally but also within China,
Speaker 3: I think, you know, this would stand out is probably
Speaker 3: among the less optimistic phases.
Speaker 1: Absolutely, And is there a way out of it? What
Speaker 1: would you say would be China's roadmap to steering out
Speaker 1: of it? And is that going to be a long
Speaker 1: term or a short term solution?
Speaker 3: I think tom so many people are wondering how much
Speaker 3: short term stimulus is the government going to give, right
Speaker 3: and I think.
Speaker 1: They've been reluctant to give stimulus.
Speaker 3: They've been very reluctant, and that may not even be
Speaker 3: such a bad thing, but it would actually be quite
Speaker 3: helpful for them to be a bit more explicit and
Speaker 3: clear about that. What do you have in mind? Or
Speaker 3: you know, it could well be that the argumentation is, look,
Speaker 3: we said we were going to grow by about five percent,
Speaker 3: maybe four point eight percent is about five percent, So
Speaker 3: that is why we are not piling on with stimulus.
Speaker 3: Would be good to be a bit more explicit and
Speaker 3: clear about that. And of course, secondly, it would be
Speaker 3: really helpful to attack those pressure points that the private
Speaker 3: sector worries about, that households worry about the role of
Speaker 3: the private sector. What do you have in mind with
Speaker 3: regard to that, the role of reforms to boost productivity
Speaker 3: and to unleash market forces, but also the kind of
Speaker 3: reforms that are needed to boost household spending, because to
Speaker 3: increase household confidence would be really helpful to see more
Speaker 3: steps to really address these issues in a structural manner.
Speaker 2: Well, what type of stimulus do you think the government
Speaker 2: could do. Are you talking about monetary stimulus or is
Speaker 2: it more fiscal stimulus.
Speaker 3: I think at the moment we will have to look
Speaker 3: more at physical stimulus. On the monetary side, they're a
Speaker 3: bit constrained, actually, especially with regard to interest rates. We
Speaker 3: know the authorities are quite keen to keep the interest
Speaker 3: margin for the banks at a certain level, so that
Speaker 3: is a constraint for them. On top of that, US
Speaker 3: rates we all follow the news that they are not
Speaker 3: going to come down anytime soon. So on the monetary side,
Speaker 3: it's not easy. On the fiscal side, I wouldn't say
Speaker 3: it's easy in terms of the traditional mode of fiscal stimulus,
Speaker 3: Traditionally the government has always relied a lot on local
Speaker 3: government stimulus. The local governments are highly stretched at the moment,
Speaker 3: so that's not going to be easy. But there's no
Speaker 3: reason in principle why the central government couldn't borrow more
Speaker 3: and increase its deficit. It's not used to doing that,
Speaker 3: but there's no obvious reason why it wouldn't take that course.
Speaker 2: But it wouldn't be the typical, say, infrastructure spending that
Speaker 2: we saw in previous cycles with it.
Speaker 3: It wouldn't be the local government led infrastructure spending. You know,
Speaker 3: if the national government wanted to, it could chip in more,
Speaker 3: it could increase its share that has traditionally been relatively
Speaker 3: low over there, or it could take other fiscal measures.
Speaker 1: Louis, do you have any thoughts about why the Chinese
Speaker 1: government has been so reluctant to say, give stimulus directly
Speaker 1: to how holds. They've been particularly recalcitured about that. Can
Speaker 1: you talk a little bit about why.
Speaker 3: Yeah, this is a good question because we have seen
Speaker 3: many other governments taking such measures right to boost household income.
Speaker 3: The United States, other economies in this region, Australia did
Speaker 3: a lot as well, and there have been some others.
Speaker 3: I think traditionally this is not something that China has
Speaker 3: relied on. Even before we get into anything like traditional
Speaker 3: philosophy or anything like that, I think China has had
Speaker 3: a recipe for stimulus that the authorities know has always worked.
Speaker 3: We pump money into the economy by infrastructure and in
Speaker 3: the past also the household sector. We want to see
Speaker 3: investment growth, and ideally we want to be the entities
Speaker 3: that do this spending rather than relying on say, household
Speaker 3: because we are never sure whether they will actually spend
Speaker 3: that money if we give them more money. And actually
Speaker 3: there has unfortunately been a not so positive precedent a
Speaker 3: few years ago. I think that was perhaps what a
Speaker 3: twenty twenty where the authorities did take a more western
Speaker 3: type of physical expansion. They gave text cuts to both
Speaker 3: businesses and households. It didn't really work at that time,
Speaker 3: and that I think has further reduced, in the eyes
Speaker 3: of Maaging the attractiveness of such a measure. Even though
Speaker 3: most external experts would say you're going to have to
Speaker 3: try this out at some point.
Speaker 1: You're listening to Asia Centric from Bloomberg Intelligence. By the way,
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Speaker 1: from our listeners. A step that China has taken recently
Speaker 1: that attracted a lot of attention a lot of reaction
Speaker 1: in the West, has been its decision to stop releasing
Speaker 1: youth unemployment figures. This is on the heels of recent
Speaker 1: figures that showed youth unemployment exceeding twenty twenty one percent
Speaker 1: in China. You know, sometimes the reaction to bad news
Speaker 1: can be worse than the bad news itself. Do you
Speaker 1: think this great quote unquote walling off is a sign
Speaker 1: that conditions in China are worse than we're seeing or
Speaker 1: do you sense a kind of retrenchment? What do you
Speaker 1: think is at work in that decision?
Speaker 3: Yeah, you know, probably if China were booming, we may
Speaker 3: have seen a different type of a response, right, Sure,
Speaker 3: But I agree with you sometimes the medicine can be
Speaker 3: more problematic than the disease. Personally, I think that the
Speaker 3: increase in youth employment in July is likely not to
Speaker 3: have been as problematic as the bad reputational consequences of
Speaker 3: this decision that everybody, including my uncle in the Netherlands
Speaker 3: now knows about that China is withholding this data. I
Speaker 3: think it was a mistake. There could well be reasons,
Speaker 3: and I think youth unemployment is not an easy concept
Speaker 3: to get right. We know from the European experience where
Speaker 3: we've had you know, when I was young, we had
Speaker 3: something like forty percent youth unemployment in Italy and Greece.
Speaker 3: It's a funny concept. So I would accept some technical
Speaker 3: qualifications and nuances, but stopping the publication of such data
Speaker 3: is much less productive than flanking the existing one with
Speaker 3: an additional one. Right, So it is definitely, in my
Speaker 3: view not in the benefit of China to continue on
Speaker 3: this road.
Speaker 1: For the Western investor, it raises questions about transparency.
Speaker 3: For sure, it's a little bit like an on goal.
Speaker 3: It was not necessary, I think definitely. Sometimes our economic
Speaker 3: indicators have issues, have problems. I think the best way
Speaker 3: to respond to that is to explain what is wrong
Speaker 3: with them, rather than to withhold them.
Speaker 2: So we had the consumer prices fall in July for
Speaker 2: the first time in many years, and it's created this
Speaker 2: narrative that China is almost turning into a Japan of
Speaker 2: the nineteen nineties with low growth japanification exactly do you
Speaker 2: think this comparison is really apt?
Speaker 3: I wouldn't want to argue that there is absolutely zero comparison,
Speaker 3: absolutely zero shared characteristic between China now and Japan. Before
Speaker 3: you know, there are some similarities, right, Both are highly
Speaker 3: manufacturing led lots of supply, not always a lot of demand,
Speaker 3: So there are some similarities. I would say if you
Speaker 3: look at say the stage of development, also the policy response,
Speaker 3: I would say there's still a lot of differences. So
Speaker 3: China's headline inflation was negative in July. How worried some
Speaker 3: is that I would I wouldn't worry too much about it.
Speaker 3: China's core inflation is still quite solidly positive. It mainly
Speaker 3: the headline number fell because of food and fuel price declines.
Speaker 3: Those declines will not be with us for a long time,
Speaker 3: so I would expect China to be in positive territory
Speaker 3: later this year. Again, I think China will always be
Speaker 3: a low inflation country, given that China's economy is very
Speaker 3: good in creating supply. We said that before, less good
Speaker 3: in creating demand, So low inflation is probably the norm,
Speaker 3: But I wouldn't worry too much about.
Speaker 2: Deflation, and you don't think they can experience a similar
Speaker 2: sort of lost decade like Japan, so to speak.
Speaker 3: I think it's a bit too early for that, given
Speaker 3: where China is. You know, if you look at where
Speaker 3: Japan was in terms of its stage of development, at
Speaker 3: something like almost seventy percent of the US in terms
Speaker 3: of productivity and income levels, China is at less than
Speaker 3: half of that. So even with all of the challenges
Speaker 3: that China faces, it's going to be a bit easier
Speaker 3: to get underlying growth of something I don't know, four
Speaker 3: four and a half five percent or so, and that
Speaker 3: makes it a bit less likely to get jependification already.
Speaker 1: Luis Couch, how much of this, what we're seeing, this
Speaker 1: narrative coming out of China right now, reaches back to
Speaker 1: COVID zero. We all remember the lockdowns, the restrictions, the
Speaker 1: blow it took on retail manufacturing supply chains. It almost
Speaker 1: seems too easy to blame COVID zero. But does it
Speaker 1: go beyond that or is that really the culprit?
Speaker 3: So we talked about the property issue, right and the
Speaker 3: property weakness, the property all drums are to a little
Speaker 3: extent related to COVID, to a large extent related to
Speaker 3: both policy and some kind of correction after previous accesses. Right,
Speaker 3: more generally, especially looking at the consumer, I think that
Speaker 3: we are still facing hangovers from the COVID period. If
Speaker 3: you talk to Chinese people and policy makers in Beijing,
Speaker 3: they would point out a few ways in which people's
Speaker 3: behavior is still affected by COVID. People continue to be
Speaker 3: quite comfortable at home sometimes and be less keen to
Speaker 3: go out.
Speaker 1: Also true as much of the world as well.
Speaker 3: Yeah, also probably where China is a bit different. I
Speaker 3: think in the West we've seen quite a bit of
Speaker 3: revenge spending. I'm not saying that we haven't seen any
Speaker 3: revenge spending in China, but perhaps it was a little
Speaker 3: bit disappointing on that front.
Speaker 2: Louis, you're an economist. You have been for over thirty years.
Speaker 2: Your profession has had a really bad run at predicting
Speaker 2: the global economy. Firstly, you look, economists overestimated the impact
Speaker 2: of COVID and the world actually rebounded a lot faster.
Speaker 2: And then economists we're talking about inflation being transitory. Now
Speaker 2: that's obviously, you know, being wrong. It's lasted a lot
Speaker 2: longer than expectations, And we just talked about how China
Speaker 2: was expected to rebound out of COVID much faster than expected.
Speaker 2: What's been so difficult in forecasting these global trends? And
Speaker 2: could economists be wrong about China this time?
Speaker 3: Yeah, so, I'm not going to defend the whole profession,
Speaker 3: and because there are a lot of people involved and
Speaker 3: there are lots of mistakes that we make. One thing,
Speaker 3: of course, is that it's not that difficult to forecast
Speaker 3: if all the rules of the game remain unchanged. And
Speaker 3: there are a few things that happened during and after
Speaker 3: COVID which kind of implied that the rules of the
Speaker 3: game had changed. Right. If you look at the policy
Speaker 3: stimulus during COVID, it is just, i mean, mind boggling.
Speaker 3: If you look the amount of money that was pumped
Speaker 3: into the economy, not just in the US, also in
Speaker 3: many other economies. We're still dealing with the aftermath of that.
Speaker 3: It's spectacular, and of course that was not expected by economists.
Speaker 3: You know. I was just on the way here listening
Speaker 3: to how people in the US are not sending their
Speaker 3: kids back to school in the way that we had expected. Labor,
Speaker 3: the relation to the labor market is different, so the
Speaker 3: relation to employers. Quite a few things that are still
Speaker 3: coming out of the COVID period affecting our behavior and
Speaker 3: economists are particularly bad at those types of times.
Speaker 1: Louis Beijing is usually sensitive to its media image in
Speaker 1: the West, and it's usually quick to refute any negative
Speaker 1: news that may make its way into the Western media narrative. Lately,
Speaker 1: it's been surprisingly silent, even as this drumbeat of negativity
Speaker 1: beats around us. Is there anything we should read into that?
Speaker 1: You know?
Speaker 3: I think China is probably a actually sensitive as it
Speaker 3: regards things like politics, geopolitics, things like that. It's also
Speaker 3: clearly more sensitive, you know, the domestic Mandarin speaking narrative
Speaker 3: than you know, in comparison to what's happening outside. I
Speaker 3: cannot be certain, but I wouldn't be surprised if one
Speaker 3: of the things that Beijing is kind of telling us
Speaker 3: that some people are getting really hung up about the slowdown.
Speaker 3: I do also think tom that when foreigners worries so
Speaker 3: much about what is going wrong in China at the moment,
Speaker 3: it could well be because the shape of China's recovery
Speaker 3: is just not benefiting them as much. Right, if we
Speaker 3: look at all of the strength in consumer spending, especially
Speaker 3: in the service area, all that you know, people are traveling,
Speaker 3: they are visiting, they are going to restaurants. That is
Speaker 3: not spilling over very much into the global economy, and
Speaker 3: perhaps that is why internationally people are a bit disappointed.
Speaker 3: Even though I have to say, I know economists don't
Speaker 3: do a good job in many ways, but we have
Speaker 3: always since November last year, explained that this is going
Speaker 3: to be a service and consumer led recovery.
Speaker 1: It's the old joke. Economists have forecast three of the
Speaker 1: last nine recessions, or nine of the last three recessions,
Speaker 1: any of those, Louis, do you think what China is
Speaker 1: going through right now is just a temporary rough patch
Speaker 1: it's fleeting, it will pass, or could it be that
Speaker 1: we're on the cusp of some more fundamental change emerging.
Speaker 3: I do think that there are two things going on.
Speaker 3: We talked about the cyclical slowdown. We are also, as
Speaker 3: we have been already for quite a number of years
Speaker 3: and as we will be for decades, we are undergoing
Speaker 3: a cooling of China's trend growth that is going to
Speaker 3: be relentless it will continue. We will never go back
Speaker 3: to the six or let alone eight percent growth of
Speaker 3: the past, and so we all need to get used
Speaker 3: to that cooling, not of the actual number of GDP growth,
Speaker 3: but of the trend beneath that, the potential growth rate.
Speaker 3: That's something that we have been expecting. It's something that
Speaker 3: has gotten a bit worse because of things like the
Speaker 3: technology restrictions by the US and things like that. But
Speaker 3: so we are facing that long term slow down, and yeah,
Speaker 3: we all have to incorporate that in our views.
Speaker 1: And the applications for global growth.
Speaker 3: The implications for global growth, interestingly enough, are not significant
Speaker 3: as you would expect because China's economy continues to expand
Speaker 3: you know, if you look at the pronouncement by the IMF,
Speaker 3: the IMF, I would say it's a little bit more
Speaker 3: negative on China's growth in the coming decade than I am.
Speaker 3: But even on their numbers, they find that as the
Speaker 3: economy keeps on expanding, and as they continue to grow
Speaker 3: almost double the rate of the US, China's contribution to
Speaker 3: global rate will continue to be quite large. Even in
Speaker 3: that a little bit less optimistic scenario of the IMF,
Speaker 3: the long term.
Speaker 1: One Luis Couch. How worried should China be should the
Speaker 1: wider world be about its debts?
Speaker 3: So, China's grows debt. If you look at all the
Speaker 3: debt that there is in China is a very significant
Speaker 3: share of its economy. It's three times as much. That
Speaker 3: is quite high in comparison to rich economies. It's especially
Speaker 3: high in comparison to other emerging markets. You know, there
Speaker 3: are some benign reasons that one could point to. China
Speaker 3: doesn't need Wall Street or other foreign investors to service
Speaker 3: all that that we know all these things. I would
Speaker 3: say that China should watch out because the amount of
Speaker 3: new credit creation in China every year is actually quite large.
Speaker 3: There's no other major economy that gets anywhere close, not
Speaker 3: even India, in terms of the new debt that we
Speaker 3: are releasing into the economy every year. And so it
Speaker 3: challenges the financial sector. It challenges all these entities like
Speaker 3: local governments and companies that need to repay those debt.
Speaker 3: It also challenges policymakers who have to avoid when things
Speaker 3: go bad, you know with some property developers or from companies,
Speaker 3: they have to avoid that then spilling over and becoming
Speaker 3: a systemic issue. And the higher that leverage will creep up,
Speaker 3: the harder it will get. To mitigate those systemic spillover implications,
Speaker 3: I think so far, because China doesn't rely on the
Speaker 3: rest of the world, and because the government is quite
Speaker 3: present in the economy, especially in the financial sector, they
Speaker 3: haven't yet lost control of this. But they really have
Speaker 3: to watch out because, as I said, the amount of
Speaker 3: new money pumped into the economy like this every year
Speaker 3: is quite impressive.
Speaker 2: And are you referring to the local government debt or
Speaker 2: what's commonly referred to as the lgfs, or you referring
Speaker 2: to say, household dead or corporate debt.
Speaker 3: I was referring to the overall picture. So all of
Speaker 3: these I still remember twelve years ago, say twelve fifteen
Speaker 3: years ago, we all said, okay, China's local governments were
Speaker 3: already quite leveraged up at that time, the corporate sector
Speaker 3: as well. But ten twelve years ago we said, oh,
Speaker 3: the household sector is not very leveraged. That's different now
Speaker 3: even household leverage is quite hard. So if you look
Speaker 3: at the overall amount of debt in China's economy, it's
Speaker 3: about three hundred percent of GDP.
Speaker 1: Do you see a country giving China a run for
Speaker 1: its money or emerging as a serious competitor.
Speaker 3: Definitely. If you look at growth rates, India is going
Speaker 3: to be there. Even some of the other Asian economies
Speaker 3: I think, say in the coming ten years, I would
Speaker 3: expect Indonesia and the Philippines and also Vietnam of course,
Speaker 3: to all grow faster than China. Now how much does
Speaker 3: that impact the global economy is another matter, right, because
Speaker 3: the Indian economy is I think something like five times
Speaker 3: as small as China is in market exchange, right, so
Speaker 3: it's going to not off If you think there is
Speaker 3: a slowdown in China to what extent can other economies
Speaker 3: off set that? That is going to be a little
Speaker 3: bit harder because the size is still so much smaller.
Speaker 3: But in terms of growth rates, definitely, these other Asian
Speaker 3: economies are quite well placed.
Speaker 2: Based on your economic growth assumptions, do you think China
Speaker 2: would catch up to the US in terms of GDP
Speaker 2: in the next say, ten twenty years, you.
Speaker 3: Mean, well, China's overall level of the economy exceed that
Speaker 3: of the US. Yes, yeah, yeah, it will not as
Speaker 3: early as we expected, say five six years ago, but
Speaker 3: I would still expect that to happen definitely in the
Speaker 3: coming decade. And sometimes people say, wow, that means you're
Speaker 3: very optimistic about China's pattern of growth. But actually that's
Speaker 3: not very optimistic at all, because China has more than
Speaker 3: four times as many people, right, so we're still talking
Speaker 3: about an economy that is much less rich and much
Speaker 3: less productive than the US.
Speaker 1: So Louis summing it up, are you optimistic about China
Speaker 1: or downbeat about China?
Speaker 3: You know, I think optimism and pessimism are all relative, right,
Speaker 3: I think compared to many other observers of China's economy,
Speaker 3: I'm probably still cautiously optimistic. But my cautious optimism looks
Speaker 3: different than what it did six years ago because of
Speaker 3: those structural headwinds that we have been talking about, and
Speaker 3: also at the moment, because of that cyclical weakness and
Speaker 3: the weak confidence that we are all witnessing.
Speaker 1: Our guest has been Louis Couch, Asia Pacific chief economist
Speaker 1: at S and P Global Ratings. It's been a wide
Speaker 1: ranging conversation about all things China, its growth, its challenges,
Speaker 1: and its prospects for the future. Louis, it's been a
Speaker 1: pleasure having you here, hearing your insights and we look
Speaker 1: forward to staying in touch.
Speaker 3: Thank you very much, gentlemen, what's a pleasure.
Speaker 1: I'm Tom mccorbett in Hong Kong.
Speaker 2: And I'm John Lee. This podcast was edited by Clara
Speaker 2: Chen and you've been listening to the Asia Centric podcast