WEBVTT - China's Xi Voices Support For Private Sector

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, Radio News.

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<v Speaker 2>Welcome to the Bloomberg Daybreak Asia podcast. I'm Dan Schwartzman

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<v Speaker 2>in for Doug Prisner. We begin in China, where President

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<v Speaker 2>Xi Jinping hosted a number of the country's most prominent

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<v Speaker 2>tech entrepreneurs. She voiced support for the country's private sector,

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<v Speaker 2>seen as integral to reviving China's economy. For more on

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<v Speaker 2>the China story, we hear from How Hang, chief economists

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<v Speaker 2>that Grow Investment Group. He spoke to Bloomberg Sherry On

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<v Speaker 2>and Heidi Stroud Watts.

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<v Speaker 1>It's been a few years and so much volatility and

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<v Speaker 1>ups and downs for the Chinese market since then. Do

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<v Speaker 1>you think this is a sustainable romie.

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<v Speaker 3>It's a good rebound, so I think, you know, before

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<v Speaker 3>it really wove into multi years of a rising trend,

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<v Speaker 3>a lot needs to be done, and for now, I

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<v Speaker 3>think many of us are still seeing fundamental problem with

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<v Speaker 3>the Chinese economy. So as such, you know, the earning

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<v Speaker 3>schools hasn't been sustainable for some time. For the past

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<v Speaker 3>ten years, earnings per year in the Chinese markets more

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<v Speaker 3>less the same r So basically the change in the

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<v Speaker 3>stock price level has been the result of changing in

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<v Speaker 3>valuation multiples. So if you really want a sustainable bull

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<v Speaker 3>market for the long term, you really want a sustainable

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<v Speaker 3>growth model going forward.

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<v Speaker 1>There's a lot of optimism about these cheaper AI models

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<v Speaker 1>and perhaps a China could lead the way when it

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<v Speaker 1>comes to the new tech revolution. Could that sustain in

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<v Speaker 1>those expectations.

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<v Speaker 3>I think for now people are really insotistic and by

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<v Speaker 3>the prospects of it. I think Deepstick did a really

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<v Speaker 3>good job to break the technology Germany and the embargo

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<v Speaker 3>from the US. Now, you know, having said that, though,

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<v Speaker 3>I think it's still very difficult to see how to

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<v Speaker 3>monetize from this app. And also you know, Chinese are

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<v Speaker 3>renowned for not willing to pay for software. So I

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<v Speaker 3>think if you look at back in the nineties, right,

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<v Speaker 3>so when we was first introduced to China, so basically

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<v Speaker 3>nine percent of the copies used in the market, says

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<v Speaker 3>actually pirated copies all the way it until like ten

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<v Speaker 3>fifteen years later, So you know, it's a difficult market

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<v Speaker 3>to monetize. I think it's still very early stage. It's

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<v Speaker 3>a huge breakthrough, but then at the same time, you know,

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<v Speaker 3>for now, I don't see a good way to monetize it.

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<v Speaker 4>Does the season thing meeting the idea of Beijing's endorsement

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<v Speaker 4>for the sect and now does that still have the

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<v Speaker 4>same power that it would have used to as some

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<v Speaker 4>sort of government put.

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<v Speaker 3>I think back in twenty eighteen, November twenty eighteen, there

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<v Speaker 3>was a similar meeting with the private entrepreneurs in Beijing,

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<v Speaker 3>and back then it was at the depth of the

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<v Speaker 3>trade war back then, and the Chinese market didn't bottom

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<v Speaker 3>until like two three months later in January twenty nineteen.

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<v Speaker 3>So that is telling you a lot about you know,

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<v Speaker 3>the signals from these meetings can be fleeting. And also yesterday,

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<v Speaker 3>if you look at the market reaction, you know, firstly

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<v Speaker 3>the market was rising strongly in Hong Kong, but then

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<v Speaker 3>regurgitate a lot of the gains towards the end. And

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<v Speaker 3>also yesterday's you know, the best performing sector is actually

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<v Speaker 3>the SOE sectors. The private sectors for some reason, is

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<v Speaker 3>legging substantially yesterday.

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<v Speaker 4>And I'm guessing you think that none of this exuberance

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<v Speaker 4>or that we've seen so far is enough to counterbalance

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<v Speaker 4>against the broader economic malays the property overhanging. You know,

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<v Speaker 4>what more can the government do from a policy perspective

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<v Speaker 4>to really change the mindset there.

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<v Speaker 3>Yeah, I think so far this technical rebound has been

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<v Speaker 3>the result of the sentiment changed, right, So, because the

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<v Speaker 3>deep Sik moment really woke up the Chinese investment communities. Wow,

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<v Speaker 3>you know what is possible right going forward? And also

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<v Speaker 3>the Chinese tech sector variation has been depressed for a

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<v Speaker 3>long time, and some of the foreign investors have been buying,

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<v Speaker 3>you know, for a sort of a trading opportunity, and

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<v Speaker 3>I think that's sort of a set of the rally

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<v Speaker 3>in the past months or so. I think right now,

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<v Speaker 3>you know, we're running into a very strong resistance level, right,

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<v Speaker 3>So these are key technical levels, and many of our

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<v Speaker 3>technical indicators are actually running into very strong resistance. So

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<v Speaker 3>for the market to go substantially high from here, a

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<v Speaker 3>lot needs to be done, a lot of policies needs

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<v Speaker 3>to be set, you know, in March in the coming twin.

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<v Speaker 1>Sessions, always with the voice of caution there. But I

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<v Speaker 1>really find it interesting the timing that you have PRESIDENCYGMP

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<v Speaker 1>putting all of these tech leaders in the forefront of

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<v Speaker 1>what he's trying to achieve. How much is this to

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<v Speaker 1>do with the Trump trade tensions, with potentially the rivalry

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<v Speaker 1>that's just going to heat up in the next few years,

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<v Speaker 1>and how Beijing needs to position for that. And given

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<v Speaker 1>that sort of external threat, could you see it being

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<v Speaker 1>more proactive in terms of helping the private sector.

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<v Speaker 3>I think to a certain extent, Chininese the private sector

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<v Speaker 3>to be strong more than ever now. I think, you know,

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<v Speaker 3>the government is indeed, you know, trying to help the

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<v Speaker 3>private sector to a certain extent. But you know, having

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<v Speaker 3>said that in the past few years, you know what

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<v Speaker 3>gets really strong is the so E sectors, right, So

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<v Speaker 3>the resources is really going into the S sectors, and

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<v Speaker 3>because of the incentive system, the commercial banks are lending

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<v Speaker 3>sort of towards the SE sectors rather than to the

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<v Speaker 3>private sectors. You know, because if your longo sour, you

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<v Speaker 3>have to be responsible, right, even if you left the job.

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<v Speaker 1>Right.

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<v Speaker 3>So that's the reason why you know, the private sector

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<v Speaker 3>is not getting enough credit and if they really want

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<v Speaker 3>to grow, you know, they have to find a way

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<v Speaker 3>to get credits from the banking system. Now with Diepsicek,

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<v Speaker 3>you know, for some reason, you know, use deepsiy as

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<v Speaker 3>an example, right, So the founder is actually a dh

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<v Speaker 3>fund tycoon, right, He's loaded, right, so he he has

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<v Speaker 3>money he's willing to burn. And also you know for

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<v Speaker 3>his own business. You know, he's he's been using AI algorithm,

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<v Speaker 3>you know, to trade to make money from trainese market

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<v Speaker 3>and has been very successful. And so I think, you know,

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<v Speaker 3>Deep is you know, one of those sort of accidental

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<v Speaker 3>sort of fortune that the founder used his own money

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<v Speaker 3>to burn and there's very limited government intervention and therefore,

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<v Speaker 3>you know, Deepsey was able to flourish, you know, under

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<v Speaker 3>such system. I think to replicate the success of Deep

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<v Speaker 3>Sick really needs a really hands off approach from the government.

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<v Speaker 4>I wanted to get your views on Ali Barber because

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<v Speaker 4>I do wonder with this sort of return to the

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<v Speaker 4>fould with jackmar how much could we see a re

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<v Speaker 4>reversal of Barber's fortunes. Right, Because you can take a

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<v Speaker 4>look on that chart twenty twenty November when the ANTIPO

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<v Speaker 4>was called off, we've not even seen with the recent

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<v Speaker 4>recovery that stock price even halfway back to the previous levels.

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<v Speaker 4>Do you think that this is the start of a

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<v Speaker 4>meaningful improvement.

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<v Speaker 3>Yeah, I think Baba has done a lot of work

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<v Speaker 3>in the past few years, right, so I think it

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<v Speaker 3>is actually leading the AI makements in China, Right, so

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<v Speaker 3>a lot of people didn't see the efforts endeavors that

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<v Speaker 3>is being sort of undertaken by Baba. Having said that,

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<v Speaker 3>though you know, the stocks has rarely for like more

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<v Speaker 3>than fifty percent now, all right, So you know, even

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<v Speaker 3>though it's down substantially from the peak in twenty twenty one,

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<v Speaker 3>you know, people still need to see earnings growths from

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<v Speaker 3>this company and also sort of a better sort of

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<v Speaker 3>a reception from the government for BAB and also for

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<v Speaker 3>the entire private enterprise, you know, for people to pick

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<v Speaker 3>up confidence again in these sectors.

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<v Speaker 4>How Home always great to argue with US partner and

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<v Speaker 4>chief economists at Grow Investment Group.

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<v Speaker 2>Welcome back to the Daybreak Asia podcast. Dan Schwort's been

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<v Speaker 2>inaing for Doug Chrisner for a look at the broader

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<v Speaker 2>market landscape in the Asia Pacific. We heard from me

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<v Speaker 2>Katerina bigos Cio for Asia Extra Paan Core Investments at

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<v Speaker 2>ACT Investment Managers. She spoke earlier with Bloomberg's David and

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<v Speaker 2>Glass and Rebecca Chue Wilkins in Hong Kong.

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<v Speaker 5>Let's start with China. Now that this market's been liberated

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<v Speaker 5>somewhat of the premium, what Now, how do you look

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<v Speaker 5>at the market right now thirty percent into the rally, Yeah, of.

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<v Speaker 6>Course, I mean I think we have to break it

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<v Speaker 6>down a little bit to look at where the rally

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<v Speaker 6>is coming from. And again it's very concentrated. As we know.

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<v Speaker 6>The positive since the beginning of the year has been

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<v Speaker 6>the Deep Sick innovation. I think it's excited a lot

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<v Speaker 6>of market participants and corporations in China about the potential

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<v Speaker 6>implications of that on a corporate sector again a longer term,

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<v Speaker 6>that kind of implication of productivity, again, new business, new

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<v Speaker 6>revenue streams, and of course we've had the meeting of

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<v Speaker 6>she with various tech leaders at the broader tech industry,

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<v Speaker 6>and I think that's a positive. I think it shows

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<v Speaker 6>that the goals are aligned. But again the market has

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<v Speaker 6>in not taking it with additional let's say support in

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<v Speaker 6>a raally sense, again, because we've had a meeting in

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<v Speaker 6>twenty eighteen, and again the consequences of the evolution of

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<v Speaker 6>that has been somewhat different to what was again stated

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<v Speaker 6>in twenty eighteen. I think it's a positive, but I

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<v Speaker 6>think we have to be cognizant that the aim for China.

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<v Speaker 6>I think the goals are aligned and the aim for

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<v Speaker 6>China is still common prosperity's technological advancement and the realization

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<v Speaker 6>of the government that tech has a big contribution to that,

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<v Speaker 6>and I think this.

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<v Speaker 3>Is a positive.

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<v Speaker 7>I want to ask about and sort of shift gears.

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<v Speaker 7>So think about that a little bit more in the

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<v Speaker 7>context of tariffs and Trump coming in. You know, in

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<v Speaker 7>December we saw the PBOC shifting its monetary policy. Starts

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<v Speaker 7>the most aggressive in fourteen years, promising triple our cut.

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<v Speaker 7>The PBAC has sort of taught the talk, it hasn't

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<v Speaker 7>worked the walk, and to some extent there's been this

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<v Speaker 7>relentless focus on instead prioritizing the stability of the end.

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<v Speaker 7>How do you think reactors have Investors are reacting to this?

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<v Speaker 7>I mean, are they surprised, confused, disappointed.

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<v Speaker 6>I think there's a limited room I would say for

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<v Speaker 6>BOC at the moment to move aggressively purely because again

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<v Speaker 6>the FED is on extended pause, if you might say,

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<v Speaker 6>the monetary policy. We had indications that again the economy

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<v Speaker 6>in US stay is stronger, the inflation is still resisting

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<v Speaker 6>another three point level in the core side. So again

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<v Speaker 6>with FED being on pause again puts a little bit

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<v Speaker 6>more restrained to China and the ability of China to

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<v Speaker 6>continue easing without pressure on its currency. And I think

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<v Speaker 6>the second part is what are going to be the

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<v Speaker 6>next steps for the tariffs. I think the market is

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<v Speaker 6>certainly not believing that this is the ten percent was

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<v Speaker 6>the end of the tariffs between US and China, and

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<v Speaker 6>I think this is somewhat preserving some omnistion to understand

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<v Speaker 6>what are the implications of the next stage of this

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<v Speaker 6>TYRFS to to continue to ease with the monetary policy.

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<v Speaker 6>I think ultimately, and we've said it before, fiscal needs

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<v Speaker 6>to do a lot more and fiscal needs to do

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<v Speaker 6>a lot more in kind of demand side, are you

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<v Speaker 6>doing more for the consumer? And I would say if

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<v Speaker 6>you had to kind of expand a little bit the

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<v Speaker 6>tech positive leaning towards tech, it's again it's somewhat in

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<v Speaker 6>indication that they're willing to do a lot more demand

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<v Speaker 6>time of support support a confidence, support invested confidence, but

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<v Speaker 6>also support private sector and consumers.

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<v Speaker 3>That's a good.

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<v Speaker 7>Point that you make on trying to essentially trying to

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<v Speaker 7>preserve ammunition when it comes to tariffs. Do you think

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<v Speaker 7>that there's potential for tariffs or tariffs that we're expecting

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<v Speaker 7>to see. Are they forcing the PBOC to break its

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<v Speaker 7>promises and are we seeing a new playbook from the

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<v Speaker 7>PBOC when it comes to dealing with the trade war.

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<v Speaker 6>Absolutely, I mean, look at there's a new playbook there,

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<v Speaker 6>because there's no other playbook. You know, in the previous

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<v Speaker 6>trade conflict there was the China was in a different state.

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<v Speaker 6>It was in an economic state, but also the monetary

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<v Speaker 6>policy in a different stage. So at the moment is

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<v Speaker 6>certainly it's a wait and see. They need to see

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<v Speaker 6>how the tariffs, what tifts, what the implication, what the

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<v Speaker 6>size of those, the timing of that is to kind

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<v Speaker 6>of of craft their own monetary and fiscal policy accordingly.

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<v Speaker 5>What are the things are happening right now? I mean,

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<v Speaker 5>this exuberance in Chinese markets might be sort of overshadowing

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<v Speaker 5>other market teams right now.

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<v Speaker 4>What else is on your mind?

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<v Speaker 6>Well, I think the tech broader tech it's staying as

0:12:17.000 --> 0:12:20.239
<v Speaker 6>a theme that is drive is going to drive global investment.

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<v Speaker 6>I think for the next couple of years of not

0:12:23.040 --> 0:12:26.400
<v Speaker 6>a decade, because I think technology and innovation and advancement

0:12:26.480 --> 0:12:29.440
<v Speaker 6>it's at the forefront of many economies, and I think

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<v Speaker 6>what Diepsick has provided to investors is that there'll be

0:12:33.320 --> 0:12:36.839
<v Speaker 6>more players to it, and clearly, particularly in eye development,

0:12:37.360 --> 0:12:40.400
<v Speaker 6>when we'll look to build the models, US will build

0:12:40.400 --> 0:12:42.840
<v Speaker 6>their own models in English. Probably there will be Chinese.

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<v Speaker 6>They will build some models in English and in Chinese

0:12:45.400 --> 0:12:47.679
<v Speaker 6>because again they need to cater to their own demand, right,

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<v Speaker 6>So there will be certainly a lot more broader spectrum

0:12:51.000 --> 0:12:54.720
<v Speaker 6>of players into this field that investment needs to capitalize on.

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<v Speaker 6>And again the ramification of it at the moment is

0:12:57.559 --> 0:12:59.839
<v Speaker 6>that it's still in a stage of development. Is still

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<v Speaker 6>an page of training those models, and those still have

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<v Speaker 6>implication on building system building thefrastructure, and I still has

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<v Speaker 6>a positive impact on a broader Asian economies a place

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<v Speaker 6>like Japan, places like Korea, a potential of Taiwan that

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<v Speaker 6>are part of that supply chain of building dafrastructure and

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<v Speaker 6>the ecosystem pro tech development.

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<v Speaker 7>We've already seen deep seak being banned from government officials

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<v Speaker 7>phones in various countries, and of course this concern and

0:13:27.240 --> 0:13:30.040
<v Speaker 7>this SI theme of sovereign AI. I just want to

0:13:30.040 --> 0:13:32.439
<v Speaker 7>ask to what extent do you think these national security

0:13:32.480 --> 0:13:36.720
<v Speaker 7>concerns are going to hamper the development of the diversity

0:13:36.760 --> 0:13:39.080
<v Speaker 7>of what we see and also the ability for investors

0:13:39.400 --> 0:13:41.000
<v Speaker 7>to be moving into new markets.

0:13:41.320 --> 0:13:43.360
<v Speaker 6>No, absolutely, and this is a key concern. And again

0:13:43.400 --> 0:13:46.079
<v Speaker 6>the excitement is there. I think the potential for AI

0:13:46.160 --> 0:13:49.199
<v Speaker 6>is certainly there certain terms of the ability of AI

0:13:49.280 --> 0:13:53.520
<v Speaker 6>to enhance productivity, to provide new business lines and new revenues.

0:13:53.760 --> 0:13:56.160
<v Speaker 6>But we need to look at again, data security will

0:13:56.160 --> 0:13:58.440
<v Speaker 6>be a big concern. We have to look at dipstick

0:13:58.480 --> 0:14:02.000
<v Speaker 6>as an open ended again, anybody can build on that platform,

0:14:02.520 --> 0:14:05.520
<v Speaker 6>and that's a consideration and security and as we go

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<v Speaker 6>further down the line, a national security, data security, data privacy.

0:14:09.440 --> 0:14:11.760
<v Speaker 6>These are concerned that are still present, again beyond the

0:14:11.760 --> 0:14:14.160
<v Speaker 6>fact that the excitement and the potential value of AI

0:14:14.280 --> 0:14:17.359
<v Speaker 6>is still present. And then we have with the models themselves.

0:14:17.400 --> 0:14:19.880
<v Speaker 6>You know, the data in which those models are getting trained,

0:14:19.880 --> 0:14:22.200
<v Speaker 6>the hallucinations that they have, or the data output that

0:14:22.200 --> 0:14:24.720
<v Speaker 6>they potentially have that could be misleading. So there's a

0:14:24.760 --> 0:14:27.800
<v Speaker 6>lot of still things that needs to be hashed out

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<v Speaker 6>till we get to the endpoint where AI is really

0:14:31.760 --> 0:14:34.480
<v Speaker 6>manifesting in the industries. I think at the moment is

0:14:34.520 --> 0:14:37.920
<v Speaker 6>still very much about tech infrastructure, building training and getting

0:14:37.960 --> 0:14:40.840
<v Speaker 6>to that AI models that are right for particular industries

0:14:40.920 --> 0:14:43.000
<v Speaker 6>or particular countries in a.

0:14:43.080 --> 0:14:45.280
<v Speaker 7>Katerina, thank you so much for joining us today. That's

0:14:45.280 --> 0:14:49.240
<v Speaker 7>Ekaterina V. Got Cio for Asia Extra Pan Core Investments

0:14:49.480 --> 0:14:51.360
<v Speaker 7>at Access Investment Managers.

0:14:53.600 --> 0:14:56.960
<v Speaker 5>Thanks for listening to today's episode of the Bloomberg Daybreak

0:14:57.120 --> 0:15:00.480
<v Speaker 5>Asia Edition podcast. Each weekday, we look at the story

0:15:00.560 --> 0:15:04.600
<v Speaker 5>shaping markets, finance, and geopolitics in the Asia Pacific.

0:15:04.800 --> 0:15:08.120
<v Speaker 6>You can find us on Apple, Spotify, the Bloomberg Podcast

0:15:08.160 --> 0:15:10.520
<v Speaker 6>YouTube channel, or anywhere else you listen.

0:15:10.920 --> 0:15:13.800
<v Speaker 5>Join us again tomorrow for insight on the market moves

0:15:13.880 --> 0:15:17.080
<v Speaker 5>from Hong Kong to Singapore and Australia.

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<v Speaker 4>I'm Doug Prisoner and this is Bloomberg