WEBVTT - China's Millennials Are Changing the World 0:00:03.920 --> 0:00:07.360 Hello, and welcome to Stephanomics, the podcast that brings the 0:00:07.360 --> 0:00:14.520 global economy to you. Now, if you're interested in the 0:00:14.520 --> 0:00:18.160 global economy, you'll have spent time thinking about China. In fact, 0:00:18.280 --> 0:00:21.119 I'm amazed it's taken as six episodes of Stephanomics to 0:00:21.120 --> 0:00:23.159 get around to it. But I was waiting for the 0:00:23.320 --> 0:00:28.440 perfect story to bring China's economic and social transformation to life. 0:00:29.040 --> 0:00:33.040 I think the case of China's spendthrift millennials might be it. 0:00:33.800 --> 0:00:36.960 This new generation of Chinese are not like their parents, 0:00:37.240 --> 0:00:40.120 and they will change the world economy. And a few 0:00:40.120 --> 0:00:43.320 minutes I'll talk about that with our resident China hands, 0:00:43.400 --> 0:00:46.640 the former Wall Street Journal China editor Andrew Brown and 0:00:46.680 --> 0:00:50.640 Bloomberg Economics chief economist Tom Orlick. I'll also be grabbing 0:00:50.640 --> 0:00:53.080 a few minutes for the latest on US China trade 0:00:53.080 --> 0:00:57.040 wars with our senior trade reporter Sean Donnan. But first, 0:00:57.320 --> 0:01:01.480 here's Bloomberg China Economy reporter Kevin Hamlin with his insight 0:01:01.640 --> 0:01:12.319 into the world of the parent EATA. Meet Jenny, a 0:01:12.480 --> 0:01:15.120 bubbly twenty five year old who works in a television 0:01:15.120 --> 0:01:18.360 station in Beijing. My mona called me, had me seecrets 0:01:20.280 --> 0:01:25.039 our generations were we are labeled as the lazy, ourself 0:01:25.040 --> 0:01:29.880 senter and and for me, how I don't save money. 0:01:30.400 --> 0:01:34.280 I want to spend my money on traveling where I 0:01:34.280 --> 0:01:38.640 want to enjoy the moment. She's one of more than 0:01:38.720 --> 0:01:43.280 four hundred million Chinese millennials roughly speaking people aged eighteen 0:01:43.280 --> 0:01:46.679 to thirty five. That's five times more millennials than in 0:01:46.680 --> 0:01:50.240 the United States, and it's more than in North America, Europe, 0:01:50.520 --> 0:01:54.120 and the Middle East combined. Jenny and her millennial peers 0:01:54.120 --> 0:01:57.000 are very different from the generation who built modern China. 0:01:58.080 --> 0:02:00.920 The influence of Chinese millennials may even be so great 0:02:00.960 --> 0:02:03.760 that they also make the world very different from the 0:02:03.760 --> 0:02:08.440 one we know today. While the previous generation was known 0:02:08.440 --> 0:02:12.000 for its prolific saving habits, Jenny doesn't put away money 0:02:12.000 --> 0:02:15.079 at all. She likes to spend spare cash on things 0:02:15.120 --> 0:02:20.080 including travel and branded cosmetics. She even pays thirty dollars 0:02:20.080 --> 0:02:22.320 a time for her cat to have a shower in 0:02:22.360 --> 0:02:26.520 a cat spa. Since Jenny graduated from University in Florida 0:02:26.560 --> 0:02:29.639 about a year ago, she's traveled to Japan, as well 0:02:29.680 --> 0:02:33.120 as Shanghai and Chan in China. She's looking to visit 0:02:33.160 --> 0:02:36.120 Greece and Spain in the next couple of years. Her 0:02:36.200 --> 0:02:40.040 dream is to be a blogger writing about her travel experiences, 0:02:40.080 --> 0:02:43.480 something she says her parents think is ridiculous. If there's 0:02:43.520 --> 0:02:45.720 one thing that sums up Jenny, it's that she likes 0:02:45.760 --> 0:02:48.680 to live in the moment. I think my parents have 0:02:48.919 --> 0:02:52.919 saved enough money that I always encouraged them to spend 0:02:53.000 --> 0:02:56.920 some to spend money um on something they like that. 0:02:57.200 --> 0:03:00.480 They always try to to to save money. That's the 0:03:00.520 --> 0:03:04.120 point I don't understand. They worry about the future. The 0:03:04.160 --> 0:03:08.200 most extreme members of Jenny's generation are sometimes colloquially referred 0:03:08.200 --> 0:03:11.640 to in a colorful way. They're called the parent eaters 0:03:12.040 --> 0:03:16.400 or a Mandarin condo, a term with profound implications for 0:03:16.560 --> 0:03:21.200 China and the global economy. Sky High home prices in 0:03:21.240 --> 0:03:24.359 big cities mean they struggle to get on the property ladder, 0:03:24.520 --> 0:03:26.919 and often parents have to use their savings to help 0:03:26.919 --> 0:03:30.360 them meet large down payments and monthly mortgage payments to 0:03:30.360 --> 0:03:34.680 buy a home. Zack dyke Wald is an American who 0:03:34.720 --> 0:03:38.160 wrote a book called Young China, How the Restless Generation 0:03:38.200 --> 0:03:41.880 will Change China and the world. Here's what he has 0:03:41.920 --> 0:03:45.920 to say about the potential global impact of millennials. It's 0:03:45.960 --> 0:03:50.200 the first East Asian power with enough political and economic 0:03:50.400 --> 0:03:53.600 clout that the way that they live, the way they 0:03:53.600 --> 0:03:55.600 see the world, what they want, what they want from 0:03:55.600 --> 0:03:58.480 a product, what they want from a style of loan, 0:03:58.560 --> 0:04:00.800 what they how they want to see the country perceived 0:04:00.800 --> 0:04:04.240 in the world, for the first time ever has enough 0:04:04.280 --> 0:04:07.120 cultural gravity that it could start to change that they 0:04:07.120 --> 0:04:09.400 could start to change the way that our world spins. 0:04:09.760 --> 0:04:13.320 This young generation is going to be impacting you personally. 0:04:14.200 --> 0:04:18.479 They redefine every market they touch. And the craziest part 0:04:18.760 --> 0:04:21.640 about about a lot of this consumer culture that we're 0:04:21.680 --> 0:04:25.919 seeing really really blossoming with this young generation in China 0:04:26.400 --> 0:04:30.040 is it's hardly started yet. The consumer cloud of this 0:04:30.120 --> 0:04:34.800 young generation has only just begun to articulate itself on 0:04:34.839 --> 0:04:47.000 the world stage. The spending and saving behavior of the 0:04:47.040 --> 0:04:51.080 millennial generation already is helping bring down the nation's legendary 0:04:51.160 --> 0:04:58.240 lofty savings rate from about last year. Here's what Ju 0:04:58.360 --> 0:05:01.840 Hi Bin, chief China colonomist that JP Morgan had to say. 0:05:02.160 --> 0:05:06.160 Because the population aging because of these new millenniums, are 0:05:06.200 --> 0:05:09.479 different spending pattern, China saving red were woken keen to 0:05:09.560 --> 0:05:13.240 move down. We were still pretty high, but we believe 0:05:13.279 --> 0:05:16.000 that we were having argued before that we're talking about 0:05:16.040 --> 0:05:21.279 lovely probably every year two percentage point of receiving rates. Yeah, 0:05:21.320 --> 0:05:24.360 that's hobby. While the major macro theme to watch out, 0:05:25.080 --> 0:05:28.880 millennials choosing to spend on tourism and foreign products rather 0:05:28.960 --> 0:05:32.240 than save their money is one driver behind why China 0:05:32.400 --> 0:05:35.000 is poised to import capital from the rest of the 0:05:35.040 --> 0:05:37.640 world this year for the first time in the modern era, 0:05:38.400 --> 0:05:43.400 after decades of exporting its excess savings to other countries. Deloitte, 0:05:43.680 --> 0:05:46.800 a big consulting and accounting firm, says the trend will 0:05:46.920 --> 0:05:54.279 change the world. For now, Jenny and her millennial peers 0:05:54.360 --> 0:05:57.159 may be too busy making their travel plans to worry 0:05:57.200 --> 0:06:01.880 about such abstractions. Die Quotes research shows that between two 0:06:01.880 --> 0:06:05.280 thousand and eight and two thousand and sixteen, China's spending 0:06:05.320 --> 0:06:10.240 on international travel roads until the nine percent of mainland 0:06:10.320 --> 0:06:14.960 Chinese without passports, two thirds are millennials. Here's Dike Wald again, 0:06:15.200 --> 0:06:18.240 there's a different sense of why you're working hard. Before 0:06:18.279 --> 0:06:20.359 you were working hard because that's what everyone did, and 0:06:20.400 --> 0:06:23.400 you're saving up for the future, for the next generation 0:06:23.440 --> 0:06:25.960 even or for you to have a good life. You're 0:06:25.960 --> 0:06:29.520 trying to push back subsistence. Now. You're working hard so 0:06:29.600 --> 0:06:31.680 you can afford that great hot pot meal with your 0:06:31.720 --> 0:06:34.040 friends on the weekend, so you can afford that Europe 0:06:34.080 --> 0:06:36.599 trip which you've been imagining, or that Beijing trip, or 0:06:36.640 --> 0:06:38.320 to buy that great bag that would give you a 0:06:38.320 --> 0:06:40.080 little bit more social status and make you feel like 0:06:40.080 --> 0:06:45.960 you're living a good life. I visited Jong Joe in 0:06:46.000 --> 0:06:49.080 central China recently, a city best known for a huge 0:06:49.120 --> 0:06:52.960 factory that makes Apple iPhones. I bumped into thirty euro 0:06:53.080 --> 0:06:57.120 banker Jangee at a Starbucks coffee shop. He didn't want 0:06:57.160 --> 0:06:59.760 to be recorded for this podcast, but he told me 0:06:59.800 --> 0:07:03.080 that in October he and his wife spent fifty yuan 0:07:03.600 --> 0:07:06.960 or seven thousand, four hundred dollars on a trip to Iceland. 0:07:07.839 --> 0:07:11.960 That's about a quarter of their combined annual income. They've 0:07:12.040 --> 0:07:15.600 also recently visited Japan and the Maldives, as well as 0:07:15.680 --> 0:07:19.320 Chinese destinations such as Inner Mongolia and the tropical island 0:07:19.320 --> 0:07:24.520 of Hainan. Jenny is among the very lucky ones because 0:07:24.520 --> 0:07:28.480 her parents have accumulated three apartments, so she doesn't worry 0:07:28.520 --> 0:07:30.840 about saving to buy one, and that frees her of 0:07:30.880 --> 0:07:35.200 a huge burden. Her plan to buy health insurance rather 0:07:35.280 --> 0:07:38.440 than have idle funds set aside for potential illness is 0:07:38.480 --> 0:07:42.160 another force that drives China's shift to consumption, which could 0:07:42.160 --> 0:07:45.080 in turn become a key driver for the country's growth. 0:07:46.080 --> 0:07:49.200 As for Jenny's other spending, not much of it pleases 0:07:49.240 --> 0:07:52.160 her parents. The complains are about I spend a lot 0:07:52.160 --> 0:07:55.360 of money on my cats. I could buying a lot 0:07:55.440 --> 0:08:00.680 of toys and some snags for my cats, just like 0:08:00.720 --> 0:08:05.000 a resource. I don't think I have a very clear 0:08:05.040 --> 0:08:10.480 pictures of my futures, but I hope when I enter 0:08:11.080 --> 0:08:13.440 thirty years old, I can't have a lot of free 0:08:13.440 --> 0:08:19.520 time to go to go aboard to enjoy my holidays. Yeah, 0:08:19.600 --> 0:08:22.560 that's my goal. But for those who aren't so lucky. 0:08:23.040 --> 0:08:27.320 Higher indebtedness beckons household borrowing has been climbing for ten 0:08:27.400 --> 0:08:30.520 years straight at the pace that rivals any such run 0:08:30.560 --> 0:08:34.640 up in major economies. Fred who runs his own private 0:08:34.679 --> 0:08:37.440 equity firm in Beijing and used to be the chairman 0:08:37.480 --> 0:08:41.840 of Goldman Sachs in Greater China. He's fifty five years old, 0:08:42.040 --> 0:08:44.560 and his life has spanned the chaos of China's Cultural 0:08:44.600 --> 0:08:48.960 Revolution to the emergence of a new consumer culture. When 0:08:49.000 --> 0:08:51.960 I was going up as a child, even for me 0:08:52.120 --> 0:08:57.840 to travel with the partvincial capital city was like a dream, 0:08:57.920 --> 0:09:03.760 And of course was very close by going to Hong Kong, 0:09:04.280 --> 0:09:08.640 Taiwan and the United States just to forget about it. 0:09:09.960 --> 0:09:14.880 When China was poor and asserted there was just no hope. 0:09:15.559 --> 0:09:20.160 People didn't have dreams. Didn't you endared to dream? Now 0:09:20.240 --> 0:09:24.800 for the younger generation of Chinese, anything is possible. The 0:09:24.960 --> 0:09:30.880 sky is the limit. I'm Kevin Hamlin in Beijing for 0:09:30.960 --> 0:09:44.880 Bloomberg News. So I'm joined now by Andrew Brown, editorial 0:09:44.920 --> 0:09:47.800 director for the Bloomberg New Economy Forum, which is going 0:09:47.840 --> 0:09:50.640 to be held in Beijing later this year, who was 0:09:50.679 --> 0:09:53.480 previously China editor for The Wall Street Journal, and our 0:09:53.480 --> 0:09:56.320 own chief economist, Tom Aulick, who spent eleven years in 0:09:56.360 --> 0:10:00.360 Beijing before moving last year to d C. So, Andy, 0:10:00.800 --> 0:10:04.640 we had a lot there about parents, eaters, the millennials, 0:10:05.280 --> 0:10:09.040 they're spending habits. Are they telling us that China is 0:10:09.080 --> 0:10:12.320 now on course to really becoming a consumer driven society? 0:10:12.480 --> 0:10:16.640 Oh yeah, China. China is well on its way to 0:10:16.679 --> 0:10:21.520 becoming a consumer society driven by the millennials. The millennials 0:10:21.600 --> 0:10:28.439 are the luckiest generation in Chinese history. Their grandparents experienced 0:10:28.480 --> 0:10:32.319 extreme deprivation, even starvation if they were alive in the 0:10:32.400 --> 0:10:37.439 late fifties during the Great Leap Forward. Their parents understood hardship, 0:10:38.320 --> 0:10:42.679 but they also cashed in on the greatest economic boom 0:10:42.720 --> 0:10:48.080 in human history in the eighties, nineties, in the two thousand's. 0:10:48.800 --> 0:10:52.440 And the millennials are going to inherit it all. And 0:10:52.480 --> 0:10:54.400 what are they going to do to the economy and 0:10:54.480 --> 0:10:57.040 to society when you look to the next ten or 0:10:57.080 --> 0:11:00.640 twenty years. How is this going to shape China? I 0:11:00.679 --> 0:11:05.640 think it's going to transform the Chinese economy and with it, 0:11:05.880 --> 0:11:09.960 potentially the global economy. I mean, I think if it 0:11:10.000 --> 0:11:15.240 in terms of three major trends. The first is that 0:11:15.559 --> 0:11:20.520 Chinese millennials want authenticity. They want the real thing. Their 0:11:20.559 --> 0:11:24.920 parents were okay with fakes. Uh. Yeah, it was all 0:11:24.960 --> 0:11:27.560 about the price tag and if the knockoff Gucci was 0:11:28.240 --> 0:11:31.200 as good as the real thing, that was fine. The 0:11:31.240 --> 0:11:38.040 millennials don't want that. So obviously this implies greater protection 0:11:38.080 --> 0:11:42.160 for intellectual property. Uh. It implies more rule of law, 0:11:43.280 --> 0:11:47.360 and it implies less trade friction between China and its 0:11:47.480 --> 0:11:50.640 major trading partners, the days of China as the knockoff 0:11:50.800 --> 0:11:54.040 center of the globe and number. I think the second 0:11:54.760 --> 0:12:00.520 factor is that millennials care very deeply about how their 0:12:00.600 --> 0:12:06.520 goods are made. They care about environmental issues, environmental pollution, 0:12:06.960 --> 0:12:12.520 they care about safety, product safety, industrial safety, and the 0:12:12.600 --> 0:12:16.640 government has to focus on these issues like a laser 0:12:17.200 --> 0:12:22.679 in response. Again a big positive for China with global implications. 0:12:22.720 --> 0:12:28.360 The third one I would mention is millennials want customization. 0:12:29.040 --> 0:12:34.440 They're not content to be merely passive consumers of goods 0:12:34.480 --> 0:12:38.200 as well as services. They want to be co creators. 0:12:39.040 --> 0:12:44.360 They want their Mini Cooper or their Nike sneakers to 0:12:44.440 --> 0:12:49.080 scream me. It's all about expressing their individuality and in 0:12:49.120 --> 0:12:52.680 a in a way, this sort of flips all the 0:12:52.760 --> 0:12:57.160 power relations in the Chinese economy. Its strengthens the market 0:12:57.240 --> 0:13:02.640 over the state. It strengthens consumers of producers. It tends 0:13:02.760 --> 0:13:07.640 to work in favor of private enterprise. I don't know 0:13:07.640 --> 0:13:10.120 if it's going too far to say this, but I 0:13:10.160 --> 0:13:14.720 think in some ways it's the millennial consumers that is 0:13:14.760 --> 0:13:19.080 going to force the type of reforms onto the Chinese 0:13:19.080 --> 0:13:23.120 economy that the current crop of leaders in Beijing us 0:13:23.240 --> 0:13:27.240 so reluctant to implement and could in time lead to 0:13:27.280 --> 0:13:30.600 political opening as well. Tom When people look at China, 0:13:32.320 --> 0:13:36.400 the two big things that China has to achieve if 0:13:36.440 --> 0:13:39.960 it's going to continue the kind of growth it's had. 0:13:40.040 --> 0:13:41.680 You know, we know this. It has to become a 0:13:41.679 --> 0:13:44.880 more consumer driven society. You know, economists have always said 0:13:45.280 --> 0:13:47.959 you have to have consumption risings and savings fall as 0:13:47.960 --> 0:13:50.280 a share of GDP. But they also need to get 0:13:50.280 --> 0:13:53.880 productivity growth, and that's the big question mark. And people 0:13:53.880 --> 0:13:56.200 who are pessimists about China, who say the whole thing 0:13:56.320 --> 0:13:58.880 is going to blow up, tend to be pessimists on 0:13:58.960 --> 0:14:02.200 the productivity side. You know, how does this story that 0:14:02.280 --> 0:14:05.920 Andy's telling play into how you might think the economy 0:14:06.040 --> 0:14:09.440 is going to evolve? I think on the first access 0:14:09.480 --> 0:14:13.200 that you talked about, Stephanie, the UM shift away from 0:14:13.440 --> 0:14:18.079 high saving and investment towards a more consumer driven economy. UM. 0:14:18.120 --> 0:14:21.760 This millennial shift that Andy has identified is going to 0:14:21.800 --> 0:14:26.560 be incredibly significant. The parents of the current generation, they 0:14:26.600 --> 0:14:29.600 grew up in the reform era, but they also grew 0:14:29.680 --> 0:14:33.200 up in a period where state and enterprises were closed. 0:14:33.560 --> 0:14:38.080 The iron Rice bowl of welfare benefits was broken, and 0:14:38.120 --> 0:14:42.240 they responded to that by saving, saving a really high 0:14:42.280 --> 0:14:47.520 share of their income. The millennial generation haven't experienced that 0:14:47.680 --> 0:14:51.280 stripping away of social benefits. They certainly haven't experienced the 0:14:51.320 --> 0:14:54.680 privations of the Mao era, and so as Andy mentioned, 0:14:55.000 --> 0:14:58.600 they really have a different attitude to consumption. They're very 0:14:58.600 --> 0:15:02.760 free spending. That can only drive a shift in China's 0:15:02.760 --> 0:15:07.720 economy away from saving, away from investment, towards consumption. The 0:15:07.760 --> 0:15:11.920 second question which you raised is can this also drive 0:15:12.040 --> 0:15:17.000 higher productivity in China's economy. Ultimately, that's what's most important 0:15:17.120 --> 0:15:19.880 if China is going to sustain high growth. I think 0:15:19.920 --> 0:15:23.040 they're the jury is still out that A couple of 0:15:23.080 --> 0:15:29.080 points suggest reasons for optimism. Firstly, that desire for authenticity 0:15:29.320 --> 0:15:31.640 is going to mean that China needs to put in 0:15:31.680 --> 0:15:35.960 place firm of protections for intellectual property. If you don't 0:15:35.960 --> 0:15:39.000 have intellectual property protections, the market will continue to be 0:15:39.040 --> 0:15:42.400 flooded with fakes um. When you put the intellectual property 0:15:42.440 --> 0:15:47.000 protections in place, that's part of creating the right atmosphere 0:15:47.320 --> 0:15:51.360 for a more dynamic entrepreneurial economy. The second point I 0:15:51.360 --> 0:15:55.000 would make is that the millennial generation are just much 0:15:55.040 --> 0:15:59.520 better educated than their parents and certainly their grandparents. Their 0:15:59.560 --> 0:16:04.600 parents probably graduated from high school. The millennials probably graduated 0:16:04.640 --> 0:16:08.119 from university, and many of them will have studied overseas 0:16:08.120 --> 0:16:11.720 as well. That higher level of education is also a 0:16:11.760 --> 0:16:15.280 basis for optimism about a more productive economy. You know, 0:16:15.360 --> 0:16:17.400 it's interesting that if you bring together the things that 0:16:17.400 --> 0:16:20.520 both of you have talked about, UM, I'm struck by 0:16:20.520 --> 0:16:23.200 two things. You know. One is it's sort of starts 0:16:23.240 --> 0:16:25.800 to look like the story that was always told about China. 0:16:25.880 --> 0:16:29.160 You know, we've talked in the past about why, you 0:16:29.160 --> 0:16:31.920 know what what the West quote unquotes thought where they 0:16:32.000 --> 0:16:34.320 let China into the World Training Organization. That you know, 0:16:34.400 --> 0:16:37.840 if you if you allow, if you see embrace China 0:16:37.920 --> 0:16:40.600 in the global economy, inevitably being part of a more 0:16:40.600 --> 0:16:43.920 global market economy makes you also more likely to be 0:16:43.960 --> 0:16:48.080 a democracy um, and a more market led country. We 0:16:48.160 --> 0:16:51.240 haven't seen that to the extent to the extent that 0:16:51.280 --> 0:16:53.280 we thought we were going to see it, certainly not 0:16:53.320 --> 0:16:57.360 on the democracy front. But I think but you're suggesting 0:16:57.360 --> 0:16:58.920 that we just said it's just a matter of time 0:16:58.960 --> 0:17:03.680 that inevitably the individualism of a consumer driven society means 0:17:03.720 --> 0:17:05.959 you have to start giving political choices to people as 0:17:06.000 --> 0:17:09.640 well as choices in the marketplace. Do you think that's yeah, well, 0:17:09.840 --> 0:17:14.480 I think I think it's all it's all generational. You know. 0:17:14.520 --> 0:17:20.040 So the grandparents of today's millennials, Um, we're penny pinchers. 0:17:20.040 --> 0:17:25.160 They counted their pennies very carefully. The parents with thrifty 0:17:25.720 --> 0:17:30.520 they saved. And the millennials who have never experienced an 0:17:30.560 --> 0:17:34.240 economic downturn, and actually their parents haven't really experienced an 0:17:34.320 --> 0:17:37.719 economic downturn for the last four decades or so, and 0:17:37.760 --> 0:17:40.920 they want to spend ah, and you know, they can 0:17:40.960 --> 0:17:45.160 dip into family savings. See, a lot of their parents 0:17:45.800 --> 0:17:49.520 would have I think that's where the parent eating comes out. 0:17:49.600 --> 0:17:51.200 This is where this is where the parents, there's where 0:17:51.200 --> 0:17:52.800 the parents. I mean that a lot of their parents 0:17:52.840 --> 0:17:56.240 would have bought property for a song in the late 0:17:56.280 --> 0:18:00.800 nine nineties early two thousand's when China privatized its housing stocks, 0:18:00.800 --> 0:18:04.240 so they haven't had to, you know, buy their own homes. 0:18:04.800 --> 0:18:08.840 Their education has been paid for. Um, you know, they've 0:18:08.880 --> 0:18:11.919 traveled overseas as young adults on their own mom and 0:18:12.000 --> 0:18:16.199 dad's credit cards. But I will say I will say 0:18:16.320 --> 0:18:21.280 that there are there are serious caveats to this scenario, 0:18:21.840 --> 0:18:27.200 and the good times are not gonna last forever. At 0:18:27.240 --> 0:18:31.800 some point, China is going to have a major turndown. 0:18:32.680 --> 0:18:35.359 We don't know when that's going to be, but it 0:18:35.400 --> 0:18:38.639 will have one, and when it comes, it could be 0:18:38.640 --> 0:18:43.679 pretty brutal. I mean, you could see sharply lower property 0:18:43.720 --> 0:18:50.280 prices eating into the major asset value of Chinese households, 0:18:50.280 --> 0:18:54.479 potentially this old speculative, potentially inflation, which could you know, 0:18:54.560 --> 0:18:58.040 eat away at at savings, and it's going to sort 0:18:58.040 --> 0:19:02.520 of scramble the way that millennials think about the future. 0:19:03.320 --> 0:19:06.760 I've never had to worry about this before. I would say. 0:19:06.800 --> 0:19:12.320 The second factor is China's aging demographic. That China faces 0:19:12.359 --> 0:19:17.480 this demographic time bomb. The baby boomers of the fifties 0:19:17.560 --> 0:19:20.800 and sixties are retiring, and they're going to be supported 0:19:20.920 --> 0:19:25.560 by a workforce that is shrinking as a result of 0:19:25.640 --> 0:19:29.600 the one child family policy which kicked in in the 0:19:29.640 --> 0:19:34.080 seventies and eighties. And what that's going to mean is 0:19:34.160 --> 0:19:37.000 that all of these savings, a lot of these savings 0:19:37.040 --> 0:19:40.520 are going to go into caring for the elderly and 0:19:40.560 --> 0:19:48.919 all the conditions associated with aging, um stroke and heart attack, cancers, 0:19:49.040 --> 0:19:52.080 and so on, and so these enormous pools of family 0:19:52.359 --> 0:19:56.560 savings aren't going to look quite as big when faced 0:19:56.560 --> 0:20:01.320 with with this demographic shock. I mean, that's right, isn't it. 0:20:01.760 --> 0:20:04.960 Tom That on top of everything else, you know, every 0:20:04.960 --> 0:20:08.440 country is trying to deal with the challenge of aging, 0:20:08.600 --> 0:20:12.400 and China has that in a particularly acute way. How 0:20:12.400 --> 0:20:16.960 do you generate productivity growth in that kind of environment? Andy, 0:20:16.960 --> 0:20:19.040 I really feel like you've dragged the mood down in 0:20:19.080 --> 0:20:22.720 this discussion. We came in talking about customized Mini Coopers 0:20:22.800 --> 0:20:26.280 and Nike trainers. I thought maybe Hello Kitty or k 0:20:26.480 --> 0:20:29.200 Pop might get mentioned at some point, and now here 0:20:29.240 --> 0:20:32.120 we are talking about old people's home strengths and heart attacks. 0:20:32.200 --> 0:20:37.600 Is it's deeply depressing? Um so um? I think it's 0:20:37.600 --> 0:20:41.480 a it's a critically important question. Japan, in some respects 0:20:41.960 --> 0:20:44.320 points the way forward. They're the first economy in the 0:20:44.359 --> 0:20:49.080 world to sell more adult diapers than they sold child diapers, 0:20:49.320 --> 0:20:52.160 and I think if we delve into Japan, we see 0:20:52.520 --> 0:20:55.320 various ways in which they're thinking of innovative responses to 0:20:55.359 --> 0:20:59.320 the problem of aging, including use of a robotics in caring, 0:20:59.359 --> 0:21:02.560 for example. So perhaps there is a path there um. 0:21:02.680 --> 0:21:06.800 The concluding thought which I which I had, was we 0:21:06.840 --> 0:21:11.520 should be careful about our assumptions on what drives what 0:21:11.960 --> 0:21:15.200 we've talked about. The assumption in the past that entering 0:21:15.240 --> 0:21:19.200 the World Trade Organization would be a driver of economic 0:21:19.240 --> 0:21:24.840 reform and democratization for China, the idea that Western markets 0:21:24.840 --> 0:21:28.760 would be sort of seed carriers of Western values. Clearly 0:21:28.800 --> 0:21:31.439 that didn't play out, um, And now we have the 0:21:31.560 --> 0:21:36.160 idea that the millennials will be potentially the seed carriers 0:21:36.200 --> 0:21:40.400 of a similar set of values because they're more individualistic. Um, 0:21:40.600 --> 0:21:45.280 they're more highly educated, and that is an entirely plausible story. 0:21:45.320 --> 0:21:48.960 But there's also another plausible story, which is the millennials 0:21:49.000 --> 0:21:53.800 are allowed to be individualistic and express their preferences when 0:21:53.800 --> 0:21:56.840 it comes to consumption. They can have whatever color Mini 0:21:56.880 --> 0:22:01.440 Cooper or whatever color Nike trainers, they want the color 0:22:01.480 --> 0:22:08.120 adult diaper looking indeed, and maybe some hollow kitty adult lopers. Um. 0:22:08.160 --> 0:22:12.600 But their freedom, their individualism is restricted to that relatively 0:22:12.760 --> 0:22:16.760 narrow world of consumption, and we don't see the largest 0:22:16.800 --> 0:22:21.920 systemic impacts that many people anticipate. Thank you very much, 0:22:21.960 --> 0:22:31.919 Andy Brown and Tom Mollett, thank you. Thanks. What we 0:22:31.920 --> 0:22:34.480 were trying to think big about the future of China, 0:22:34.520 --> 0:22:36.040 and I think I think we did that, But of 0:22:36.080 --> 0:22:39.560 course we can't. We can't talk about China these days 0:22:39.600 --> 0:22:44.280 without also having a few words about US China trade wars. 0:22:44.400 --> 0:22:48.360 So I've brought in Sean Donnan, our senior trade reporter, 0:22:48.560 --> 0:22:50.359 to give me the low down on that and also 0:22:50.440 --> 0:22:53.119 a bit of insight into how trade wars and the 0:22:53.160 --> 0:22:57.520 uncertainty they create might be affecting the US economy and 0:22:57.600 --> 0:23:01.080 indeed US politics. Sean, thanks for grabbing a few minutes. 0:23:01.080 --> 0:23:02.719 I know it's a it's a busy week for you. 0:23:03.440 --> 0:23:07.960 Just tell us briefly what to think about the developments 0:23:07.960 --> 0:23:10.280 of the last week or so. You know, I think 0:23:10.320 --> 0:23:12.600 those people who were not following the day to day 0:23:12.640 --> 0:23:14.879 on this might have thought we were cruising towards some 0:23:15.000 --> 0:23:18.159 kind of US China trade deal. Now everything seems to 0:23:18.200 --> 0:23:21.200 have gone in reverse over the weekend. What's up? Yeah, Well, 0:23:21.200 --> 0:23:23.320 I think the the short answer is the endgame and 0:23:23.400 --> 0:23:26.080 trade negotiations is always messy. There's always ups and downs. 0:23:26.080 --> 0:23:28.920 There isn't this kind of linear path, linear rational path 0:23:29.000 --> 0:23:32.359 to to a deal in trade negotiations. There's always just 0:23:32.359 --> 0:23:35.440 by the nature of the negotiations and the way they're constructed, 0:23:35.480 --> 0:23:37.480 the difficult issues are always left to the end, and 0:23:37.520 --> 0:23:40.200 that's always where you you kind of run into the 0:23:40.400 --> 0:23:42.680 roadblocks and so but there's no doubt that what we're 0:23:42.720 --> 0:23:47.240 seeing now is some real questions about whether the US 0:23:47.280 --> 0:23:50.240 and China can even reach a deal because we're getting 0:23:50.320 --> 0:23:53.679 to the hard part here, which is both sides have 0:23:53.800 --> 0:23:58.080 to give something, and both sides of domestic constituencies. And 0:23:58.080 --> 0:24:00.040 they also have economies that look a lot better and 0:24:00.040 --> 0:24:02.639 they did six or nine months ago, which means that 0:24:02.680 --> 0:24:04.919 they're less inclined to give. So you to get the 0:24:04.920 --> 0:24:08.160 sense that the Chinese speak with one voice on this, 0:24:08.280 --> 0:24:10.480 whereas there's quite a lot of different voices and different 0:24:10.560 --> 0:24:15.000 viewpoints inside Donald Trump's administration on trade. How are those 0:24:15.040 --> 0:24:17.320 feeding into this? Yeah, I mean, it's always hard to 0:24:17.320 --> 0:24:20.320 figure out what happened, what is happening exactly internally in 0:24:20.440 --> 0:24:22.680 terms of the debate and China, they're much more opaque 0:24:22.720 --> 0:24:25.800 than UH folks are here in the United States. But 0:24:25.880 --> 0:24:31.320 clearly we've seen cycles of hawks and doves gaining the 0:24:31.359 --> 0:24:36.160 ascendancy over the past year or two in the Trump administration, 0:24:36.200 --> 0:24:38.239 and we may be on a cycle now where the 0:24:38.280 --> 0:24:41.400 hawks are are gaining a little bit more footing. Part 0:24:41.440 --> 0:24:43.440 of that has to do with the kind of robust 0:24:43.480 --> 0:24:46.879 economic data that the President is seeing about the U 0:24:46.960 --> 0:24:50.320 s economy recently, but part of that is also other 0:24:50.359 --> 0:24:53.720 things we're hearing. For example, that Larry Cudlow has taken 0:24:53.760 --> 0:24:55.879 a few blows over the nomination of Stephen Moore to 0:24:55.920 --> 0:24:57.800 the FED and that going wrong, and that has kind 0:24:57.800 --> 0:25:00.320 of hurt his credibility inside the imagers did He's the 0:25:00.359 --> 0:25:03.160 presidents of Economic Advisor, he's the head of the National 0:25:03.200 --> 0:25:06.080 Economic Council in theory that the kind of the grand 0:25:06.520 --> 0:25:10.119 economic strategist, if you will, And he's also someone who's 0:25:10.160 --> 0:25:13.040 been in the past anti tariff and very propreate. True. 0:25:13.200 --> 0:25:15.399 I guess what I'm particularly interested in is the impact 0:25:15.440 --> 0:25:18.919 on the economy. You know, economists have tended to always 0:25:18.920 --> 0:25:23.600 assume that trade wars, tariffs but also the uncertainty from 0:25:23.600 --> 0:25:26.679 trade wars is going to be bad for the US economy. 0:25:27.000 --> 0:25:29.959 I saw you wrote an interesting piece on this at 0:25:30.000 --> 0:25:33.240 the end of last week, just sort of looking at 0:25:33.280 --> 0:25:35.520 how the numbers were playing out in terms of job 0:25:35.560 --> 0:25:39.040 losses and job gains and what did you find. Yeah, 0:25:39.160 --> 0:25:42.760 so one of the interesting things in ter force or 0:25:42.760 --> 0:25:45.199 trade wars, is that they're clearly our job gains and 0:25:45.240 --> 0:25:47.800 protected industries, but there's always a question as to how 0:25:47.880 --> 0:25:50.760 long does gains last for. And what we're starting to 0:25:50.800 --> 0:25:52.919 see in the jobs numbers, and that showed up in 0:25:52.920 --> 0:25:57.480 the April jobs report, is that the gains from in 0:25:57.640 --> 0:26:01.520