Speaker 1: Welcome to Bloomberg Opinion. I'm Vonnie Quinn this week, what's
Speaker 1: really interesting is this constant questioning, this idea that there
Speaker 1: is always a consor narrative, so we have to constantly
Speaker 1: bus everything to the point that everything is unknowable. Tara
Speaker 1: for Era Marquez on Putin's propaganda war. Later, we'll speak
Speaker 1: with Julie Ran on lessons China could learn from a neighbor.
Speaker 1: First to the market though. Lots of FED speakers this
Speaker 1: week before the FED hits it's blackout period, all vowing
Speaker 1: the FED will conquer inflation. Here is Jerry J. Powell
Speaker 1: at the Cato Institute Thursday. The longer inflation remains well
Speaker 1: above target, the greater the concern that the public will
Speaker 1: start to naturally incorporate higher inflation into its economic decision making,
Speaker 1: and our job is to make sure that doesn't happen.
Speaker 1: We're with Bloomberg Opinions. Connor Sen Connor. Some FED speaker
Speaker 1: is going so far is to give specific reasons why
Speaker 1: we'll continue to see inflation moderate Lele Brainer, for example,
Speaker 1: talking about lower retail margins and cooling housing. How much
Speaker 1: is the inflation threat receding. I think it's significant we're
Speaker 1: going to see in the August inflation the PO report
Speaker 1: next week. But we've seen gas prices come off a lot. Obviously,
Speaker 1: there's signs of supply chains using all of the place.
Speaker 1: Auto production is picking up, which would help with auto pricing.
Speaker 1: That there seems to be some data suggesting that auto
Speaker 1: prices are coming down now as well. And so then
Speaker 1: it really becomes a question of your view of how
Speaker 1: inflation will stick for core services and labor. But this
Speaker 1: is subjective view. But I just think that that's going
Speaker 1: to come down somewhat as well as the economy kind
Speaker 1: of normalizes from its pandemic state. Right. But we did
Speaker 1: see wage growth often just a little bit, right, I mean,
Speaker 1: it's not like the labor market is intensely strong, right,
Speaker 1: And at the sector level, we're seeing signs that in
Speaker 1: the industries where labor growth was the most acute last year,
Speaker 1: things like leisure and hospitality and transportation and warehousing, things
Speaker 1: like e commerce and Amazon, that in those industries that's
Speaker 1: coming off more than it is for the labor market
Speaker 1: of the whole, suggesting to me that that's going to
Speaker 1: sort of spread throughout the rest of the labor market.
Speaker 1: Has hiring catches up to demand. Yeah, so there are
Speaker 1: question marks surrounding the labor market. In one sense, it's
Speaker 1: help the economy. In another sense, a less strong labor
Speaker 1: market is what we're looking for. So traders are still
Speaker 1: looking for a seventy five basis point hike in September.
Speaker 1: But is a less aggressive hike warranted given all the
Speaker 1: bite spots that you know, you and I have been
Speaker 1: pointing out and the moderating inflation in the data. It's
Speaker 1: a complicated question because I think that the Fed's main
Speaker 1: goal right now, and we sort of stave us with
Speaker 1: sed share pal speech at Jackson Hole, is that they
Speaker 1: don't want to market the price a pivot in monetary
Speaker 1: policy and a surge back in stock markets and the
Speaker 1: housing market and so on. They think that keeping markets
Speaker 1: and the housing market kind of where they are, I
Speaker 1: would say at least a few more months is critical
Speaker 1: for them as they assess how much progress we've made
Speaker 1: on inflation. And they can't really tell us that they're
Speaker 1: anticipating inflation to come down in the near term, because
Speaker 1: again then we would price that they have a tricky
Speaker 1: path to walk right now as they bounce their goals. Yeah,
Speaker 1: and obviously we're seeing improvement in curves and so on
Speaker 1: as well, the copper curve for one example, but we
Speaker 1: do still have the two sns inverted, not the price thirties.
Speaker 1: Is the yield curve signaling procession right now? I would
Speaker 1: say it's signaling that near term inflation is going to
Speaker 1: be higher than longer term inflation. And whether you think
Speaker 1: that means recession or that they'll sort of moderate their
Speaker 1: stands down the road as there's signs that inflation has moderated.
Speaker 1: That gets to a subjective question. I'm so optimistic, but
Speaker 1: if you're looking for a recession, I'd say the Yelk
Speaker 1: curve maybe there's the most smoking gun you can see
Speaker 1: in markets right now. I saw I mentioned today a
Speaker 1: City note actually the possibility of what they're calling transitory
Speaker 1: stag inflation. So City talking about the potential to see
Speaker 1: elevated inflation and slower growth for just a couple of quarters,
Speaker 1: but that the result would be an enquoting now intensified
Speaker 1: stress and financial markets and increased pressures on central banks.
Speaker 1: So obviously City does have some concerns. Still, would that
Speaker 1: be a scenario that you think is a possibility that's
Speaker 1: arguabably got in the first half of the year where
Speaker 1: real GDP growth was negative and inflation accelerated, and so
Speaker 1: you know whether that continues or not. I actually think
Speaker 1: we've been making progress there over the past few months
Speaker 1: because we're seeing again that headline inflation is coming down,
Speaker 1: the labor market remains strong, so for workers, real incomes
Speaker 1: or seemed to be going again, which was not the
Speaker 1: case in the first half of the year. And there's
Speaker 1: also hopes that say, in the labor market, whereas workers
Speaker 1: get up to speed, we've all the new higher in
Speaker 1: the workplace, that they'll become more productive and that will
Speaker 1: help with this sort of stagg inflationary head when you've
Speaker 1: been dealing with as well. So I guess you're very
Speaker 1: optimistic in some ways. But how much can we look
Speaker 1: at the US market as a solo concern. Are you
Speaker 1: concerned at all about China and Europe slowing as it
Speaker 1: relates to feedback loops for example? Well, I certainly a
Speaker 1: much more pessimistic on the foreign situations before China can't
Speaker 1: seem to exit this code zerior situation. The ear problem
Speaker 1: is pretty well understood and discussed in terms of they're
Speaker 1: dealing with inflation, energy criss fallowing currencies, and it's very
Speaker 1: hard to be optimistic about Europe over the next six months.
Speaker 1: So I think the question is what are the feedback
Speaker 1: loops into the US and for financial markets, I think
Speaker 1: they're pretty high where we're seeing it in arguably that
Speaker 1: as interest rates rise in Europe as a deild conflation,
Speaker 1: that's pushing our yield higher. But the real economy pass
Speaker 1: through is much more limited my opinion, and we're not
Speaker 1: really seeing that yet data. Yeah, and so you might
Speaker 1: skirt any problems, is what you're saying. I think right
Speaker 1: now the adjustment is really happening more for Wall Street
Speaker 1: than Main Street, and that's something that we're not used
Speaker 1: to because for so long that was not the case.
Speaker 1: And we see this in the jobs of or we
Speaker 1: had another thre hid thousand jobs, and we see all
Speaker 1: these problems in areas of concerning financial markets. We just
Speaker 1: haven't seen the same thing happen in the real economy.
Speaker 1: So Connor, let me ask you, then, plenty of calls
Speaker 1: for the SMB to drop as much as scent I've
Speaker 1: seen from here, the founder of Interactive Brokers among them,
Speaker 1: but also Goldman Sacks Michael Bury Bank America clients and
Speaker 1: net sellaries at the moment, are you looking for the
Speaker 1: SMB to drop? Not like that right now. My view
Speaker 1: is that earnings estimates have been pretty stable for the
Speaker 1: past two months. We saw a little bit of weakness
Speaker 1: in July, which is mostly due to the currency impact
Speaker 1: on big tech companies. You know, Microsoft's earning less money
Speaker 1: from Europe due to the rise in the dollar previously.
Speaker 1: But outside of that, earning ustiments are pretty stable and
Speaker 1: they're not really following. And so if earnings don't fall
Speaker 1: at least meaningfully, then to me, you're not going to
Speaker 1: see that kind of weakness in the stock market. You
Speaker 1: might see some weakness as we've seen with rising interest
Speaker 1: rates making equities relatively less attractive, but that's not attend
Speaker 1: to fifteen percent sell off. That's just sort of stops
Speaker 1: moving in line with the bond market. Yeah, So, where
Speaker 1: is the potential for holes in your argument? Because when
Speaker 1: you lay it out, it seems plausible, very likely. Even
Speaker 1: there's certainly a lot of scenarios where this to go wrong. First,
Speaker 1: energy prices could flare back up and bring back the
Speaker 1: concerns of inflation that we had in May and June,
Speaker 1: we might we might see that productivity growth of labor
Speaker 1: market could continue to remain weak, which might mean more
Speaker 1: labor markets flowing that I'm anticipating the set could just
Speaker 1: mis read the economy and sort of overtighten into a
Speaker 1: slowdown and sort of cause reception before they have time
Speaker 1: to adjust. I think the path through is pretty limited.
Speaker 1: But if Europe and trying to get worse, then there
Speaker 1: could be some paths through there, so you could point
Speaker 1: to things where this could happen. But it's just right now,
Speaker 1: it's hard to see that with the state of the
Speaker 1: labor market, the state of Happle balance sheets, sort of
Speaker 1: where corporate America is my view of where inflation is
Speaker 1: going over the next two or three quarters. To me,
Speaker 1: we're just gonna do okay and model through even though
Speaker 1: we're being a lot in certainty day to day, week
Speaker 1: a week. Conners and there don't forget listeners. Get in
Speaker 1: touch via Twitter at Vanna Quinn or email v Quinn
Speaker 1: at Bloomberg dot net. Opinions and comments always welcome. Russia's
Speaker 1: RT Broadcast Operation bills itself as an English language news
Speaker 1: channel which brings the Russian of view on Global News.
Speaker 1: It's been banned in the United States and Europe, but
Speaker 1: a boomer opinions. Clara Ferreira Marquez points out it's winning
Speaker 1: friends in the developing world and as functioning as an
Speaker 1: important instrument in Vladimir Putin's propaganda campaign. Tara Ferra Marquez
Speaker 1: joins us, Now, so, Clara, what is RT? Who founded it?
Speaker 1: Who runs it? So? RT is Russia's twenty four our
Speaker 1: primarily the English but not only in English news network.
Speaker 1: It was founders in two thousand five, really the creature
Speaker 1: of two men, Mikail lives In, who was medium minister
Speaker 1: but at that time already presidential advisor in Alex Sigma,
Speaker 1: the former diplomat who'd run the press service, and they
Speaker 1: really understood that Russia needed a better instrument to communicate it,
Speaker 1: choosing to try and bring people around to the country's views.
Speaker 1: They felt really that the international traditional media was not
Speaker 1: doing a good enough job. And also the context is
Speaker 1: at the time for two thousand five is also when
Speaker 1: a lot of other non English sort of news channels
Speaker 1: were coming out. So this is our Jazeera in English
Speaker 1: France twenty four, So it wasn't alone at that point
Speaker 1: in time. And then it really has als. And that's
Speaker 1: what interested us when we were looking into it, is
Speaker 1: how it has changed over time, right, because I remember
Speaker 1: that year. I remember when it started. I had colleagues interested,
Speaker 1: just as they were interested in Al Jazeera. There was
Speaker 1: maybe a little bit of skepticism that there would be
Speaker 1: some pressure from the top two tow aligne or what
Speaker 1: have you, But in the main it seems like people
Speaker 1: were actually okay with working in many of these broadcast outlets.
Speaker 1: Did something change in the mission of RT over time?
Speaker 1: What has it become? So? I mean, I think to
Speaker 1: be clear, from the beginning, it was an instrument funded
Speaker 1: by the Russian government and intended for a particular purpose.
Speaker 1: It just was perhaps doing it in a slightly different
Speaker 1: way to At the beginning it was more about presenting
Speaker 1: news from Russia and the foremost of the Union that
Speaker 1: you know, wasn't really covered elsewhere. It was a little
Speaker 1: bit more straightforward. As it went on, things changed and
Speaker 1: the turning point there were few I mean, the two
Speaker 1: thousand and eight Georgian War was really a very significant one.
Speaker 1: At that point, the realization in becomment that perhaps this
Speaker 1: wasn't working as a way of getting their point across
Speaker 1: because and the Georgian War happened, if you remember, that
Speaker 1: was really about Russia having said they did not want
Speaker 1: Georgia and later and later going ahead allowing Georgia to
Speaker 1: begin talk, and then it accelerated from then on. I
Speaker 1: mean really, then you had the n team if you
Speaker 1: remember in twenty fourteen, that's a really good example of
Speaker 1: how the Channel works in terms of counter narratives and
Speaker 1: conspiracy theories. And then twenty seventeen and think of the
Speaker 1: scriptile poisoning in the UK and then obviously now that
Speaker 1: with the war in Ukraine. But what really then changed
Speaker 1: is the way that it moved from being primarily worried
Speaker 1: about Western markets who are much broader, do that focuses
Speaker 1: on the emerging world. Well, so it's not officially an
Speaker 1: arm of the government or anything like that. Is there
Speaker 1: any kind of an effort to suggest that it's still
Speaker 1: a free and fair organization or does it always just
Speaker 1: spit out what the government press office will tell it?
Speaker 1: So no, I mean our tea will say, and they
Speaker 1: told us they themselves operationally and editorially independent. They are
Speaker 1: however funded by the Russian g LINT. In their perspect
Speaker 1: the constellation of media companies that are Strip related, not
Speaker 1: all of them. Ownership structure is a little messy, but
Speaker 1: it all comes under sort of Russian government funded organizations
Speaker 1: that are certainly intended to get the Russian view across
Speaker 1: and they are also I think very interesting characters that
Speaker 1: pressly runs it women called who took over our tea
Speaker 1: very early. She's only twenty five when she took it on,
Speaker 1: and has with the war in Ukraine, become one of
Speaker 1: the strongest, most hawkish voices on Russian domestic television. So
Speaker 1: Art also has the sort of inn words function. It's
Speaker 1: so fascinating because obviously you always want a free and
Speaker 1: fair press. It is, after all, the fourth estate. But
Speaker 1: even in the freest of countries and societies, you have
Speaker 1: organizations with a bias or that are restricted in some
Speaker 1: way by their ownership or run by very hands on owners.
Speaker 1: Maybe elucidate for us the difference between something like a
Speaker 1: Fox News or an MSNBC or Rupert Murdock's Empire in
Speaker 1: Britain and Art. I mean, let's be clear that just
Speaker 1: by the virtue of what we choose to focus our energy,
Speaker 1: it's done in a way is editorializing, is making decisions.
Speaker 1: But the fact is that most mainstream media make a
Speaker 1: very significant effort to balance about reporting, unless it's not
Speaker 1: done at I T and in fact it's not done
Speaker 1: at Fox News either or indeed at the name group
Speaker 1: at Murdoch outlets in the UK. But I think what's
Speaker 1: really interesting is this what's about sism, which is this
Speaker 1: constant questioning, this idea that there is always a counter narrative,
Speaker 1: that we have to constantly bouse everything to the point
Speaker 1: that everything is unknowable. And that's a really powerful propaganda
Speaker 1: tool because if you think back to the Soviet propaganda
Speaker 1: or in the US propaganda during the Cold War, it
Speaker 1: was really about getting everyone to believe a particular narratives
Speaker 1: in the Soviet case, to try and get everyone to
Speaker 1: believe one thing. What's really powerful about tox news, about
Speaker 1: talk TV, about our t in particular, really who pioneered this?
Speaker 1: If you don't have to believe what we think, you
Speaker 1: just have to believe in nothing. So if you'd undertake
Speaker 1: an analysis of the rhetoric and the rhetorical devices, you
Speaker 1: would actually see similar types of devices being used. So
Speaker 1: beyond that rhetorical device, are there more that you've noticed Kara. Yeah,
Speaker 1: there's a few. There's one that's very effective. It's the
Speaker 1: mechanisms us been advertising to it. It's conspiratorial idea. It's
Speaker 1: this idea that I as the host, I as Pucker Casts,
Speaker 1: and I as one of the hosts on ARTI I
Speaker 1: speak to you directly and they say, you know, you're
Speaker 1: clever enough, you don't believe the official narratives. This conspiratorial
Speaker 1: connection works very well. Also the use of social media
Speaker 1: to both reinforce their narratives them to spreads them. That
Speaker 1: is done very very well. The use of changing audiences.
Speaker 1: So if you look at trust and mainstain media, the
Speaker 1: look at the way people can staine you, especially in
Speaker 1: the emerging world, much more on social media, which means
Speaker 1: that it's much easier to consume partisan news because if
Speaker 1: you're consuming news on social media's probably coming from people
Speaker 1: within your circle of people. People need the same as you.
Speaker 1: So it's not the same way as what it was
Speaker 1: like in the seventies of races, for everyone watches the
Speaker 1: same news religions, so it's encourages parts of the politics
Speaker 1: well now. So these types of organizations have always existed,
Speaker 1: but the viewer is supposed to use discretion in their
Speaker 1: viewing habits. Right. It's not that these organizations shouldn't be
Speaker 1: allowed to exist, although I'm sure some people would suggest
Speaker 1: that they shouldn't be allowed to exist. How are the
Speaker 1: viewers drawn in? And do we have viewership numbers for
Speaker 1: something like arety So No, not really, I mean we
Speaker 1: don't have very reliable ones. We have them necessarily patch rickly.
Speaker 1: It depends country by country. Our T tends to focus
Speaker 1: on people who are able to view the channel, which
Speaker 1: is obviously quite different from people who view the channel.
Speaker 1: I think the really important thing to understand about urt
Speaker 1: about Fox News better these channels, that people tend to
Speaker 1: view what they believe rather than believe what they see.
Speaker 1: You can see the difference. It's not that people watch
Speaker 1: our T and are instantly converted. It's the same way
Speaker 1: that you and I can watch Fox News and not
Speaker 1: automatically become you know, ultra Trump supporters. So that is true,
Speaker 1: But then when you're dealing with the changing news environment
Speaker 1: which people are consuming much more partisan news, it becomes
Speaker 1: quite a different proposition. And I think it's important to
Speaker 1: understmber that, Yes, the viewership is definitely small in Europe,
Speaker 1: but subtractors as an instrument. Once it gets into societies
Speaker 1: that are more skeptical a priori of the traditional media
Speaker 1: of the US of Western intentions, you're feeding an audience
Speaker 1: that is easier to bring along and also use of
Speaker 1: societies where media is typically still funded. It's not doing
Speaker 1: its own reporting. So, for example, when I look at
Speaker 1: sprytnic and artie content that is reproduced in Southeast Asia,
Speaker 1: it sucking reproduced without any such criticism because these organizations
Speaker 1: do not have their people on the grounds in Ukraine, Sarah,
Speaker 1: It's difficult to view are t through a non Western
Speaker 1: lens because obviously we have our biases and our perceptions
Speaker 1: and so on. But how is the art content perceived
Speaker 1: in other parts of the world. Do people accept it?
Speaker 1: Um Certainly people are a lot more sympathetic to something
Speaker 1: like actually because it isn't seen as some crazy Russian outlets.
Speaker 1: It's seen as the way of obtaining me but is
Speaker 1: resably okay. And that is true in Africa, it is
Speaker 1: true in mass America, it's true in the Middle East.
Speaker 1: It's true here in the Asia atly in Southeast Asia,
Speaker 1: particularly for example, in Southeast Asia, where Russia is perceived
Speaker 1: as an Islamic friendly country as opposed to the worst
Speaker 1: these narratives. They carry a lot of weight. And the
Speaker 1: way that art has worked in lastin America's a good example.
Speaker 1: They really have played to the strength speaking to particular audiences,
Speaker 1: looking at particular countries where they are more accepted, for
Speaker 1: example Argentina, Mexican Vinetuela. It's been very, very effective. You
Speaker 1: have some fantastic examples of the types of slogans that
Speaker 1: are associated with art in your story. One is question more.
Speaker 1: You also mentioned that one of Artie's favorite talking points
Speaker 1: is there are no good guys and no bad guys,
Speaker 1: which is perially similar to something we heard here in
Speaker 1: the United States back a few years which I won't repeat.
Speaker 1: How did and how does RT deal with international news?
Speaker 1: So for example the Giljan protests in France or the
Speaker 1: Black Lives Matter demonstrations here, it tends to view and
Speaker 1: this is true by the way of I see in
Speaker 1: different languages, it tends to be The contents is different,
Speaker 1: it is produced differently, it has a certainly different focus,
Speaker 1: but the way they deal with it is recently similar.
Speaker 1: So there are sort of three types of dues on art.
Speaker 1: One is the sensational and this is particularly true on
Speaker 1: social media. So these a lot of sensational content. It
Speaker 1: could be violent in the US, it could be a volcanoes,
Speaker 1: it could be the viral type content. That's one. The
Speaker 1: second is um us content and content from Western countries
Speaker 1: that shows dysfunctions and shows that these systems don't work,
Speaker 1: and shows that multicultural systems have problems and serious ones
Speaker 1: at that the Black Lives Matter occupy a Wall Street
Speaker 1: June in France. These were absolutely brilliant for them. In fact,
Speaker 1: it is such good work that they were nominated for
Speaker 1: an Emmy. So um these are these are very important. Yes,
Speaker 1: these the narratives that they fit with their view. I mean,
Speaker 1: one really good example was the January stick, where are
Speaker 1: t actually doesn't have to do anything. They just played
Speaker 1: the images and it really just said this does it
Speaker 1: look at the chaos that is in the Western world,
Speaker 1: the last of conservative value use. It's violent, but they
Speaker 1: just needed to show the image and they do that
Speaker 1: quite a lot. And I think the third bucket with
Speaker 1: international needs viewed through their lens and Russian needs, but
Speaker 1: that really tends to be in the minority. You have
Speaker 1: to wonder how much staffers know, or how staffers feel
Speaker 1: about working at places like that. Are they completely on
Speaker 1: board of everything? Do they have to sign nondsculture agreements?
Speaker 1: For example, they do have to sign nonsculture agreements. There
Speaker 1: is a different setting between the people who worked for
Speaker 1: ACTI early on and then as it continued and they
Speaker 1: became more apparent as the channel itself changed. But I
Speaker 1: think it's important to understand the people that are see services,
Speaker 1: and they generally hired young people, people who are desperate
Speaker 1: to make it in the media TV. Is there absolutely
Speaker 1: cut urate world. It's not hard to understand why very
Speaker 1: generous offers that actually made particularly early years, was very appealing.
Speaker 1: I mean a lot of people also less to be
Speaker 1: clear in February, including some of their strongest forces. But
Speaker 1: so yeah, people make complicated compromises. I think there's a
Speaker 1: lot of people probably no, no, no, where we're in
Speaker 1: the you know we work, and that people were able,
Speaker 1: especially we're still employed, would say no, we're still able
Speaker 1: to do the same reporting that anyone else does, which
Speaker 1: find a little bit difficult to believe, just in terms
Speaker 1: of editorial priorities. You make the point in the story
Speaker 1: that Vladimir Puddin is going to use r T in
Speaker 1: order to get through the sanctions and the impact of
Speaker 1: the sanctions on the Russian economy. Explain what you mean
Speaker 1: by that theory. I think it's says a wider strategy
Speaker 1: as the Russian government has. But you know, as it
Speaker 1: is increasingly isolated from the West, it needs to find
Speaker 1: alternative markets. It needs different alternative political partners, people that
Speaker 1: you can do business with, also people who can stand
Speaker 1: by it in security Council votes, the United Relations and
Speaker 1: at the G twinity. And so that's where the emerging
Speaker 1: world is so important. And in particular non aligned nations.
Speaker 1: You have those countries like Eritrea or Nuganda that you
Speaker 1: know we'll fall behind Russia. But more important for Russia
Speaker 1: are those who purport not to take aside, so China, Brazil, Indonesia, India,
Speaker 1: these are really important countries for Russia. In the bulk
Speaker 1: of that in America, bulk of Africa that Russian needs
Speaker 1: to keep on side. And if you look at the
Speaker 1: countries you have in post functions, I mean the large
Speaker 1: proportion of the chiefs we have not Yeah, that's that's
Speaker 1: for sure. And we'll see in November what happens in Indonesia.
Speaker 1: Tie this all together for us, what else is available
Speaker 1: to people given that Vladimir Puddin cracked down on media
Speaker 1: and so many of the international journalists that were based
Speaker 1: in Russia had to leave. I think it's important to
Speaker 1: distinguish what the audiences that I see, how such primarily internationals.
Speaker 1: There is our T in Russian, but it isn't really
Speaker 1: used domestically. It is primarily other intentions. It does have
Speaker 1: echos internally, so for example, arts Twitter content or artis
Speaker 1: editor in chief wid Simon and can be used for
Speaker 1: domestic propaganda purses and they are She's very very prominent
Speaker 1: hawkish voice on Russian television, But Russian propaganda on Russian
Speaker 1: TV for domestic consumption is just much more sort of
Speaker 1: out there, much naked in its narrative, and these sort
Speaker 1: of more outrageous things that are possible for the Russian
Speaker 1: TV presented, which is a little bit more international in
Speaker 1: this approach. Bloomberg Opinions At Clara Ferrera Marquez, you all
Speaker 1: know Shuli Wren. She covers Asian markets and regularly discusses
Speaker 1: China's economy and markets with us. Well. She finally got
Speaker 1: to travel around the Southeast Asia again recently after a
Speaker 1: long hiatus, A trip to Vietnam produced some fascinating insights
Speaker 1: about what two communist countries can learn from each other. Socially.
Speaker 1: China is slowing. The question we don't know yet is
Speaker 1: by how much Vietnam, by contrast, is growing quite healthily.
Speaker 1: Both communist countries, though obviously not carbon copies in terms
Speaker 1: of their ideologies, and obviously there's huge difference as we
Speaker 1: know in terms of GDP per capita, population size and
Speaker 1: so on, but in terms of governance at least truly
Speaker 1: tell us what Vietnam is doing differently to China that's
Speaker 1: benefiting its economic prospects. I think the biggest difference with
Speaker 1: Vietnam so far is that Vietnam seems able to self
Speaker 1: correct from its pastistics. Believe it or not. Hoim City
Speaker 1: basically the commercial herb above Vietnam. They also had a
Speaker 1: really harsh lockdown for four months last June or the
Speaker 1: way to September, and the military was out amiss, reports
Speaker 1: of full shortages and untreated medical illnesses. And what happened
Speaker 1: before that was that Paranoya was also like China, they
Speaker 1: had a lot of national pride. They wanted to build
Speaker 1: their own vaccine, but because of the Holciming City they
Speaker 1: locked down. They decided that their vaccine was just not working,
Speaker 1: and they started taking vaccines from everyone from Mastras, Anaca,
Speaker 1: Visor Moderna, even from China's Sinal firm. Basically whoever whichever
Speaker 1: contrade that was willing to donate the vaccine through the
Speaker 1: diplomacy channels of the w h os Kovacs programs they
Speaker 1: were taken. They even asked them some electronics to somehow
Speaker 1: source vaccines for them worldwide. As a result Vietnam's economy,
Speaker 1: they are fully reopened these days. If you want to
Speaker 1: go into Vietnam, you don't have to show your vaccine
Speaker 1: record or have a negative PC artist. You can just
Speaker 1: go because they feel like they're pretty confident that the
Speaker 1: whole population is vaccinated and they have pretty effective faccine
Speaker 1: in the population, so they feel pretty good about that.
Speaker 1: Whereas in China and these days, coming from Hong Kong,
Speaker 1: we have more flights to hold Shimi City than to Shanghai.
Speaker 1: In the month of August, there are only two flights
Speaker 1: operated by a Cafe Pacific from Hong Kong to Shanghai.
Speaker 1: That's just ridiculous. Well, and As a result of all this,
Speaker 1: Vietnam is actually looking towards seven percent growth this year.
Speaker 1: We know the China's five and a half percent target is,
Speaker 1: as you actually put it on this show, fantasy at
Speaker 1: this point. But the other difference is that Vietnam went
Speaker 1: all in on stimulus. So fifteen billion dollars worth of
Speaker 1: fiscal stimulus and an easy monetary policy in a world
Speaker 1: where central banks are really turning, hawk is particularly fed,
Speaker 1: how is this working out for Vietnam? So for Vietnam,
Speaker 1: I don't think it's working out very well on the ground.
Speaker 1: One complaint you hear from investors and the Vietnamese themselves
Speaker 1: is that even though the government has pledged a lot
Speaker 1: of stimulus, like infrastructure, your building, you just don't hear
Speaker 1: construction sounds very much like infrastructure has halted, and that
Speaker 1: that's actually stopping Vietnam from growing faster. I mean, Vietnam
Speaker 1: right now, it's targeting seven percent, which is quite good
Speaker 1: by global standards, but it's nothing compared to say, two
Speaker 1: decades ago, when China was growing over ten percent during
Speaker 1: China's export board. So I think Vietnam can do better
Speaker 1: on infrastructure spending. Still a pretty phenomenal figure. Though for
Speaker 1: a country just out of COVID, what are companies doing?
Speaker 1: Are they looking to Vietnam as a potential base as
Speaker 1: opposed to China or maybe even in addition to China.
Speaker 1: So I think at this point the companies that are
Speaker 1: only talking about China plus one. So a lot of companies,
Speaker 1: like Apples supply chain, they're looking at bidding for industrial
Speaker 1: land in the northern part of Vietnam, like Ya Hanoi,
Speaker 1: in part because it's closer to China. Perhaps you know,
Speaker 1: supply chain is just a little bit better, and in
Speaker 1: part because multinationals do want to diversify out of China.
Speaker 1: But one thing that I have to say though, is
Speaker 1: that you know, like for the Boding electronic supply chain,
Speaker 1: the supply chain is very very long. You have to
Speaker 1: have everything basic materials, chemicals, acid or even construction materials,
Speaker 1: and the Vietnam doesn't seem to have that. And then
Speaker 1: when you talk to people on the ground, they were saying, yeah,
Speaker 1: I would like to open factories, but I cannot even
Speaker 1: find the aluminum window sills still have to somehow important
Speaker 1: from China. So you do you do here? That's one
Speaker 1: bottleneck that the economy itself doesn't produce basic industrials. And
Speaker 1: another thing is the infrastructure. They just feel like, oh,
Speaker 1: the roads are very very slow. The government can be
Speaker 1: building faster highways. You know, Homing City didn't even have subway.
Speaker 1: Right now, there's one big highway called the North South Expressway.
Speaker 1: It's pretty much stopped. If you want to do like
Speaker 1: express package from Hanoi to Hochem City, it can take
Speaker 1: four days, whereas in China even today it will be
Speaker 1: pretty fast within a day. Who or what policy is
Speaker 1: to blame for that, truly, because you would imagine it
Speaker 1: would be pretty easy and even cost efficient to get
Speaker 1: flights in the are also to have ports built up
Speaker 1: and down the vast coastline. Is that not happening? So
Speaker 1: Vietnam is also doing anti corruption campaign just like China.
Speaker 1: The General secretary he started his un president the third
Speaker 1: term last year and he's worried, you know, with all
Speaker 1: this one party route there. They want to ensure the
Speaker 1: legitimacy of the Communist Party and he has been cracking
Speaker 1: down and tech corruption. And then like all the officials,
Speaker 1: they're just very scared. They just they are not even proved, uh,
Speaker 1: like infrastructure projects because construction costs has come up. We
Speaker 1: all not right globally. Material cost has come up. We
Speaker 1: used to cost one hundred million, will cost like say
Speaker 1: one million. And if you approve it, the government can
Speaker 1: suddenly say why are you approving it? Trying to help
Speaker 1: your friends and family, So like that's the problem. Like
Speaker 1: anti corruption campaign has slowed down bureaucracy in Vietnam, so
Speaker 1: it'll be some time before we see the infrastructure build
Speaker 1: out that we saw in China, and that could make
Speaker 1: a massive and well, so the other question is how
Speaker 1: it's been holding up in terms of foreign reserves, which
Speaker 1: seems to be pretty well, and we know in many
Speaker 1: emerging countries right now, the problem is foreign reserves. Currencies
Speaker 1: have been weakening as the dollar has been strengthening, and
Speaker 1: some frontier markets are having to beg the i m
Speaker 1: F for loans and meet all sorts of requirements and
Speaker 1: so on. But in Vietnam they're near a record something
Speaker 1: like a hundred and ten billion dollars right now. And yeah,
Speaker 1: the Vietnamese dong has been depreciating, but the central bank
Speaker 1: has been able to keep money market stable by selling
Speaker 1: foreign currency. Does that continue? So I think that the
Speaker 1: Enamese government is very nervous about the dog and then
Speaker 1: about any talk of its weakening effects reserves because there
Speaker 1: is a lot of water components in it. What happens
Speaker 1: is that, say, like if you look at the Vietnam,
Speaker 1: it's actually dipping into a current account deficit now because
Speaker 1: the growth boy economy is flowing pretty fast. Right, So
Speaker 1: what was happening right now is like say, at the
Speaker 1: beginning of the year February March, the outlook was rosier.
Speaker 1: So the likes of them song, I don't know. Fun
Speaker 1: some they have imported a lot of electronic components into Vietnam,
Speaker 1: so that was a big boosting import and now suddenly
Speaker 1: they're stepping back on the end production and demand, so
Speaker 1: they're not exporting as much. As a result, Vietnam is
Speaker 1: actually falling into a trade deficit instead of what we
Speaker 1: imagine would be a surplus. So the government is very
Speaker 1: nervous and the Vietnamese they don't like it when the
Speaker 1: down depreciates too fast. It is a problem that the
Speaker 1: Hannoi is facing right now. Surely, more generally, can other countries,
Speaker 1: not just Vietnam, not just even Southeast Asian countries, but
Speaker 1: can other countries copy in some ways. For Vietnam is
Speaker 1: doing and take away China's manufacturing shine, I think the
Speaker 1: other countries they have to be very brave because what
Speaker 1: China has done is that it has build up tremendous
Speaker 1: infrastructure network and the supply chain network through that. I mean,
Speaker 1: we all know China is one of the world's most
Speaker 1: indebtict countries. So for you to take away China's manufacturing power,
Speaker 1: you not only have to have broad, well connected infrastructure
Speaker 1: network as well as a big industrial base. So basically
Speaker 1: you have to be willing to take on that like
Speaker 1: of your GDP. So unless countries are willing to do that,
Speaker 1: I think it would be kind of difficult. Inflation it's
Speaker 1: not as much of a problem in Vietnam as it
Speaker 1: is in many countries obviously, but certainly it is a
Speaker 1: little bit more of a problem than it is in China.
Speaker 1: At the moment, we're looking at close to four percent
Speaker 1: for Vietnam. Our authorities keeping a close eye, yes, and
Speaker 1: then I mean China station could have been a lot worse.
Speaker 1: Right now, the end demand is not so good. So
Speaker 1: like if the Chinese and economy goes back to normal,
Speaker 1: like the inflation would be a lot higher, and the
Speaker 1: government is quite nervous about that because China overall inflation
Speaker 1: has been pretty stable for like twenty thirty years or so.
Speaker 1: But here and there you you see a little bit
Speaker 1: of spike in the pop prices, vegetables, fruit, and also
Speaker 1: we can go back to nine what happened during nine nine.
Speaker 1: That was when China the really high inflation and pretty
Speaker 1: low employment outlook and government nervous. Well exactly, we got
Speaker 1: a warning from Presidentia and being on inflation, which was
Speaker 1: actually quite a surprised But at the same time we're
Speaker 1: seeing the central bank engage in a little bit of
Speaker 1: monetary easing. There's the same conundrum going on for China
Speaker 1: as there is for the United States, growth versus inflation,
Speaker 1: right absolutely, And then like at this point it just
Speaker 1: does seem that the COVID zero policy is going to
Speaker 1: stay in China. The people who are basically executing COVID zero,
Speaker 1: they are getting promoted, so basically all other bureaucracies will
Speaker 1: have to somehow accommodate to prop up that COVID zero thing.
Speaker 1: And that's why the PBOC is easing a little bit.
Speaker 1: It's like a stimulus light I guess stimulus light. I
Speaker 1: love that well, except for Hong Kong, though shually know
Speaker 1: the city isn't exactly adhering to COVID zero in the
Speaker 1: same way that mainland China is. We also like to
Speaker 1: say we are the hair to COVID zero, but we
Speaker 1: have a little bit bleeg way, so we also have
Speaker 1: COVID zero lights. How Kong is trying to open up
Speaker 1: because it's not working. The economy really is not working.
Speaker 1: So right now we have three days of hotel quarantine
Speaker 1: plus four more days of Hong Kong, and we are
Speaker 1: trying to do a little bit better. Bloomberg Opinions Shuly
Speaker 1: Wren don't forget listeners. Get in touch via Twitter, I'm
Speaker 1: at Volley Quinn or email v Quinn at Bloomberg dot net.
Speaker 1: Opinions and comments always welcome, and we're also available as
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Speaker 1: that does it. For this week, we're produced by Eric Mollow.
Speaker 1: Until next time on Bloomberg Opinion