1 00:00:02,440 --> 00:00:07,600 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:09,760 --> 00:00:12,399 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,440 --> 00:00:14,360 Speaker 2: the top stories of the coming week from our day 4 00:00:14,400 --> 00:00:17,240 Speaker 2: Break anchors all around the world. And just to handle 5 00:00:17,280 --> 00:00:20,200 Speaker 2: the program, I'll look ahead to the June jobs report 6 00:00:20,320 --> 00:00:22,440 Speaker 2: in the US and what it means for the FEDS 7 00:00:22,520 --> 00:00:25,759 Speaker 2: monetary policy going forward. I'm John Tucker in New York. 8 00:00:26,079 --> 00:00:28,600 Speaker 1: I'm Caroline Hepkitt in London, where we're looking ahead to 9 00:00:28,640 --> 00:00:32,000 Speaker 1: what is expected to be a landmark election in the UK. 10 00:00:32,479 --> 00:00:34,680 Speaker 3: Hi Brian Curtis in Hong Kong. We look ahead to 11 00:00:34,720 --> 00:00:37,360 Speaker 3: the twenty seventh anniversary of the handover of Hong Kong 12 00:00:37,440 --> 00:00:40,160 Speaker 3: to China. What's changed and where are we going? 13 00:00:42,479 --> 00:00:45,760 Speaker 4: That's all straight ahead on Bloomberg day Break Weekend on 14 00:00:45,920 --> 00:00:48,760 Speaker 4: Bloomberg E Loove on three O New York, Bloomberg ninety 15 00:00:48,840 --> 00:00:52,400 Speaker 4: nine to one, Washington, DC, Bloomberg one O six one, Boston, 16 00:00:52,479 --> 00:00:57,280 Speaker 4: Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 17 00:00:57,440 --> 00:01:00,280 Speaker 4: XM one nineteen and around the world on Blue Bomberg 18 00:01:00,400 --> 00:01:03,080 Speaker 4: Radio dot com and buy the Bloomberg Business app. 19 00:01:07,000 --> 00:01:10,120 Speaker 2: Hi everybody, I'm John Tucker, and we begin Today's program 20 00:01:10,160 --> 00:01:12,000 Speaker 2: with a look ahead to the June jobs report in 21 00:01:12,000 --> 00:01:14,120 Speaker 2: the US. That data is going to be released next 22 00:01:14,160 --> 00:01:17,920 Speaker 2: Friday at eight thirty am Wall Street. Time for more. 23 00:01:18,000 --> 00:01:21,160 Speaker 2: We're joined by our economic roundtable. Let's bring in Michael McKee, 24 00:01:21,200 --> 00:01:26,240 Speaker 2: Bloomberg International Economics and Policy correspondent, and Ira Jersey, Bloomberg 25 00:01:26,280 --> 00:01:31,560 Speaker 2: Intelligence Chief US Interest rates strategist. So the next big 26 00:01:31,720 --> 00:01:34,959 Speaker 2: data point the payrolls. That's the other side of the 27 00:01:34,959 --> 00:01:38,759 Speaker 2: FEDS policy mandate. Because we already heard about inflation, so 28 00:01:38,800 --> 00:01:42,520 Speaker 2: correct me if I'm wrong, guys, inflation the rate of 29 00:01:42,560 --> 00:01:45,760 Speaker 2: inflation headed in the right direction. So what are we 30 00:01:45,800 --> 00:01:49,600 Speaker 2: expecting from the jobs market? To Mike McKee, we'll start 31 00:01:49,640 --> 00:01:49,880 Speaker 2: with you. 32 00:01:50,640 --> 00:01:54,640 Speaker 5: Well, we basically look at the jobs market as unchanged, 33 00:01:54,680 --> 00:01:58,320 Speaker 5: or at least when I say we, I mean the 34 00:01:58,320 --> 00:02:01,600 Speaker 5: consensus of economists surveyed by Bloomberg as they like us 35 00:02:01,640 --> 00:02:05,400 Speaker 5: to say. One hundred and eighty eight thousand is the forecast, 36 00:02:05,440 --> 00:02:08,519 Speaker 5: which is roughly what the forecast was last month. Of course, 37 00:02:08,520 --> 00:02:10,320 Speaker 5: we've got a big surprise came in at two hundred 38 00:02:10,320 --> 00:02:11,679 Speaker 5: and seventy two thousand. 39 00:02:12,560 --> 00:02:13,120 Speaker 3: It kind of. 40 00:02:13,800 --> 00:02:18,960 Speaker 5: Expect hiring to slow, but until it does, they're reluctant 41 00:02:19,000 --> 00:02:22,400 Speaker 5: to predict it, so they still see essentially where we 42 00:02:22,440 --> 00:02:23,880 Speaker 5: are is where we. 43 00:02:23,880 --> 00:02:27,400 Speaker 2: Are, all right, So, Ira, what does a slowing jobs 44 00:02:27,520 --> 00:02:29,480 Speaker 2: market mean for rates? 45 00:02:29,880 --> 00:02:32,160 Speaker 6: Just like it has been over the last couple of 46 00:02:32,200 --> 00:02:36,520 Speaker 6: weeks when we've gotten the better inflation data, it probably 47 00:02:36,560 --> 00:02:40,680 Speaker 6: means that that interest rates will continue to slowly come down, 48 00:02:40,960 --> 00:02:45,480 Speaker 6: and eventually, once the Federal Reserve starts to actually cut 49 00:02:45,520 --> 00:02:49,320 Speaker 6: interest rates, some of that rally in the treasury market. 50 00:02:49,400 --> 00:02:52,959 Speaker 6: So that means prices higher, yields lower, that it can 51 00:02:53,000 --> 00:02:55,960 Speaker 6: accelerate a little bit, particularly in some of the shorter 52 00:02:56,080 --> 00:02:59,079 Speaker 6: term maturities like two year treasuries and three year treasuries. 53 00:02:59,120 --> 00:03:03,320 Speaker 6: So this this Friday's data is going to be pretty important, 54 00:03:03,360 --> 00:03:06,359 Speaker 6: you know, from from the overall kind of mosaic of 55 00:03:06,560 --> 00:03:09,640 Speaker 6: the economic landscape. But I think what's really interesting about 56 00:03:09,680 --> 00:03:11,680 Speaker 6: it is the fact that it's on a Friday, in 57 00:03:11,720 --> 00:03:14,680 Speaker 6: between the fourth of July and a weekend. Uh So 58 00:03:15,000 --> 00:03:18,640 Speaker 6: I know I'm now, but you guys going to be 59 00:03:18,680 --> 00:03:22,400 Speaker 6: around yeah. So so that I think one of the 60 00:03:22,440 --> 00:03:25,720 Speaker 6: questions is how how well stabbed will will trading desk be. 61 00:03:25,800 --> 00:03:28,680 Speaker 6: So if we do get a number that's significantly away 62 00:03:28,720 --> 00:03:31,000 Speaker 6: from consensus, like a big number like we had last month, 63 00:03:31,240 --> 00:03:34,720 Speaker 6: or a much lower number. Will we see additional volatility 64 00:03:34,760 --> 00:03:37,080 Speaker 6: then you might expect otherwise, And I do suspect that 65 00:03:37,120 --> 00:03:39,960 Speaker 6: we could wind up seeing like a crazy knee jerk 66 00:03:40,000 --> 00:03:43,040 Speaker 6: reaction one way the other. Maybe over time that gets 67 00:03:43,280 --> 00:03:46,320 Speaker 6: kind of taken back, but I suspect that there is 68 00:03:46,360 --> 00:03:49,440 Speaker 6: the potential for very high volatility, not only rates markets, 69 00:03:49,440 --> 00:03:51,360 Speaker 6: but just about every market around the world. 70 00:03:51,440 --> 00:03:53,640 Speaker 2: Will you guys explain to me, I mean, what's the 71 00:03:53,720 --> 00:03:57,360 Speaker 2: dividing line here? At some point a slowing economy that's 72 00:03:57,400 --> 00:04:00,080 Speaker 2: not great for company profits. 73 00:04:00,000 --> 00:04:03,640 Speaker 5: Depends on how companies manage their margins. What we're seeing 74 00:04:03,720 --> 00:04:08,440 Speaker 5: in some cases is the slow down may be affecting hiring. 75 00:04:08,480 --> 00:04:11,320 Speaker 5: In other words, people not adding as many jobs. That's 76 00:04:11,360 --> 00:04:13,880 Speaker 5: what's being expected. Of course, I just told you that 77 00:04:13,960 --> 00:04:17,880 Speaker 5: we probably did, but we're expecting fewer people being hired, 78 00:04:17,960 --> 00:04:21,080 Speaker 5: and jobless claims have gone up a little bit. So 79 00:04:21,400 --> 00:04:24,599 Speaker 5: if the economy slows some but you're cutting some of 80 00:04:24,640 --> 00:04:28,360 Speaker 5: your expenses, and we saw earning supports in the first 81 00:04:28,440 --> 00:04:30,800 Speaker 5: quarter that companies are looking for a lot of ways 82 00:04:30,800 --> 00:04:34,240 Speaker 5: to manage their expenses, then margins can stay higher and 83 00:04:35,040 --> 00:04:38,320 Speaker 5: profits can be still strong. So it's kind of hard 84 00:04:38,320 --> 00:04:40,440 Speaker 5: to say at this point it is going to really 85 00:04:40,520 --> 00:04:44,200 Speaker 5: hurt the investor going forward. When the Fed starts cutting rates, 86 00:04:44,200 --> 00:04:45,360 Speaker 5: it should help investors. 87 00:04:45,640 --> 00:04:49,800 Speaker 2: Okay, so it's political season, the silly season. So what 88 00:04:49,839 --> 00:04:52,960 Speaker 2: does this mean for politics? And IRA? You're going to 89 00:04:53,000 --> 00:04:55,919 Speaker 2: put on your politics hat right now and answer that 90 00:04:56,040 --> 00:05:00,920 Speaker 2: question for me. Is it good for the administration? The administration? 91 00:05:01,240 --> 00:05:03,960 Speaker 6: Well, no, it's I you know, slowing economy I think 92 00:05:04,000 --> 00:05:06,559 Speaker 6: in general would be bad for the for the current 93 00:05:06,560 --> 00:05:10,000 Speaker 6: administration and the current party that's in power and incumbents 94 00:05:10,080 --> 00:05:12,080 Speaker 6: in general. We have seen that. 95 00:05:12,040 --> 00:05:16,440 Speaker 2: Trans rights are coming down in lower rate of inflation 96 00:05:16,520 --> 00:05:18,040 Speaker 2: and lower rates. That's good. 97 00:05:18,279 --> 00:05:21,360 Speaker 6: Yeah, you know, keep in mind, you know, I've we've 98 00:05:21,400 --> 00:05:23,240 Speaker 6: all been around for for a very long time. So 99 00:05:23,360 --> 00:05:25,880 Speaker 6: for those people who were you know, newer to the markets, 100 00:05:26,080 --> 00:05:28,480 Speaker 6: were meaningfully younger than us. You know, I recall during 101 00:05:28,520 --> 00:05:32,599 Speaker 6: the nineteen ninety two presidential election, you know, George Bush 102 00:05:32,680 --> 00:05:35,000 Speaker 6: kept on saying, oh, the economy is improving, the economy 103 00:05:35,080 --> 00:05:37,400 Speaker 6: is improving, which was true if you looked at the 104 00:05:37,440 --> 00:05:41,040 Speaker 6: GDP data and you know, industrial production and even the 105 00:05:41,120 --> 00:05:43,760 Speaker 6: job market. But people didn't feel that way and because 106 00:05:43,760 --> 00:05:47,679 Speaker 6: people didn't feel that way. You wound up with George 107 00:05:47,680 --> 00:05:50,320 Speaker 6: Bush losing to Bill Clinton, right, and and something that 108 00:05:50,720 --> 00:05:53,680 Speaker 6: was crazy after the golf War, given how popular George 109 00:05:53,680 --> 00:05:57,520 Speaker 6: Bush was just a year before. So I suspect that 110 00:05:57,520 --> 00:06:00,159 Speaker 6: that part of what we look at with some of 111 00:06:00,200 --> 00:06:02,320 Speaker 6: the data that we received. You know, just this past 112 00:06:02,360 --> 00:06:05,800 Speaker 6: week we got some the Michigan consumer confidence data that 113 00:06:05,960 --> 00:06:08,159 Speaker 6: actually popped up a bit, but it's still showing that 114 00:06:08,200 --> 00:06:11,640 Speaker 6: people are less confident than they were, you know, in 115 00:06:11,760 --> 00:06:14,479 Speaker 6: twenty twenty one. So, you know, and a big part 116 00:06:14,480 --> 00:06:16,760 Speaker 6: of that, I think is still this overhang of how 117 00:06:16,839 --> 00:06:21,560 Speaker 6: high inflation was and the idea that we have politics 118 00:06:21,600 --> 00:06:24,080 Speaker 6: being so poor, I think is reflective in a lot 119 00:06:24,120 --> 00:06:27,360 Speaker 6: of the survey data. Even though some of the hard data, 120 00:06:27,360 --> 00:06:29,560 Speaker 6: well it's slowing, is still pretty good, right, one hundred 121 00:06:29,560 --> 00:06:32,080 Speaker 6: and eighty eight thousand jobs. If that were to be 122 00:06:32,160 --> 00:06:36,000 Speaker 6: the steady state pace of the job market would be fine. Yeah, 123 00:06:36,040 --> 00:06:37,320 Speaker 6: that would be absolutely fine. 124 00:06:37,440 --> 00:06:40,480 Speaker 2: Mike McKey, does the tone of the FED I feel 125 00:06:40,600 --> 00:06:44,680 Speaker 2: doesn't match the data that I've seen. Am I crazy? 126 00:06:45,279 --> 00:06:45,400 Speaker 7: No? 127 00:06:45,480 --> 00:06:48,479 Speaker 5: I think, I mean it depends on the data you're 128 00:06:48,640 --> 00:06:51,480 Speaker 5: referring to. The tone of the FED. Basically has been 129 00:06:52,440 --> 00:06:56,880 Speaker 5: looks all good, but let's make sure that it doesn't reverse. 130 00:06:57,440 --> 00:07:00,600 Speaker 5: And so we're waiting for additional data come in. But 131 00:07:00,640 --> 00:07:05,200 Speaker 5: remember they're also talking to CEOs and small business owners 132 00:07:05,600 --> 00:07:08,279 Speaker 5: all the time, and they have a pretty good read 133 00:07:08,360 --> 00:07:11,400 Speaker 5: on what the businesses in their districts are thinking they're 134 00:07:11,440 --> 00:07:14,280 Speaker 5: going to do in terms of hiring, in terms of business, 135 00:07:14,320 --> 00:07:18,360 Speaker 5: in terms of pricing. So they've got both sides of 136 00:07:18,400 --> 00:07:23,760 Speaker 5: it covered there. And once they are a little more certain, 137 00:07:23,840 --> 00:07:27,480 Speaker 5: which would probably be in another month or so, then 138 00:07:27,560 --> 00:07:31,400 Speaker 5: they probably will look to cut interest rates, and you'll 139 00:07:31,440 --> 00:07:35,640 Speaker 5: hear much more unanimity on that idea. Problem is, it 140 00:07:35,680 --> 00:07:39,040 Speaker 5: takes a while, we have lags for rates to have 141 00:07:39,120 --> 00:07:43,160 Speaker 5: an impact. In most cases, they would have more immediate 142 00:07:43,200 --> 00:07:47,800 Speaker 5: impact on Wall Street, which exists to react, but for 143 00:07:47,880 --> 00:07:49,800 Speaker 5: the American people, it's going to take a while before 144 00:07:49,800 --> 00:07:53,400 Speaker 5: they really see lower mortgage rates or lower auto loan rates. 145 00:07:53,440 --> 00:07:55,920 Speaker 5: So it would take a while to sink in. That's 146 00:07:55,920 --> 00:07:59,240 Speaker 5: a little bit of a way around the answer an 147 00:07:59,280 --> 00:08:02,360 Speaker 5: answer to what you we're asking about politics, Probably even 148 00:08:02,360 --> 00:08:05,280 Speaker 5: if the Fed cut in September, people wouldn't be putting 149 00:08:05,320 --> 00:08:07,480 Speaker 5: a lot on that by election day. 150 00:08:07,840 --> 00:08:11,360 Speaker 2: Okay, I'll focus a little more on the mandate that 151 00:08:11,880 --> 00:08:16,679 Speaker 2: Congress usually follows. But deficits, Ira Jersey, can we focus 152 00:08:16,720 --> 00:08:19,320 Speaker 2: on that because they do matter? And I don't hear 153 00:08:19,600 --> 00:08:24,040 Speaker 2: too much rhetoric from the candidates on this front. When 154 00:08:24,040 --> 00:08:29,400 Speaker 2: the government's competing for capital because it has high deficits, 155 00:08:29,840 --> 00:08:34,680 Speaker 2: it takes away from the capital available for investment that 156 00:08:35,040 --> 00:08:37,560 Speaker 2: essentially drives up rates. Do I have that right? 157 00:08:37,679 --> 00:08:40,880 Speaker 6: Generally speaking? Yeah, additional supply should mean that that rates 158 00:08:40,880 --> 00:08:43,240 Speaker 6: would be higher than they would be otherwise. But the 159 00:08:43,280 --> 00:08:46,200 Speaker 6: treasury market is still the safest, most liquid market in 160 00:08:46,240 --> 00:08:49,160 Speaker 6: the world. So, and it is much more sensitive and 161 00:08:49,200 --> 00:08:54,120 Speaker 6: remains much more sensitive to expectations for the Fed. So yes, 162 00:08:54,360 --> 00:08:57,199 Speaker 6: you know. So instead of maybe say a one percent 163 00:08:57,400 --> 00:09:00,960 Speaker 6: decline in interest rates, if the feders we're to cut, 164 00:09:01,040 --> 00:09:04,400 Speaker 6: maybe you only get zero point nine to five basis points, right, 165 00:09:04,400 --> 00:09:06,880 Speaker 6: You get ninety ninety five basis points instead of one 166 00:09:06,920 --> 00:09:09,880 Speaker 6: hundred basis points in terms of a rally in the 167 00:09:09,960 --> 00:09:12,880 Speaker 6: rate market. So it's still what the Fed does matters 168 00:09:12,920 --> 00:09:16,400 Speaker 6: the most for returns for treasury investors. Yeah, as far 169 00:09:16,400 --> 00:09:18,280 Speaker 6: as deficits go, you know, one of the one of 170 00:09:18,320 --> 00:09:23,240 Speaker 6: the issues right now, and to your point is neither 171 00:09:23,520 --> 00:09:27,400 Speaker 6: Neither party seems very focused on being fiscally prudent and 172 00:09:27,400 --> 00:09:31,480 Speaker 6: fiscally responsible, so that there's not a lot of gain 173 00:09:31,559 --> 00:09:33,800 Speaker 6: to be made politically in order to say, hey, we're 174 00:09:33,800 --> 00:09:37,319 Speaker 6: going to cut the deficit by increasing taxes and cutting spending, 175 00:09:37,400 --> 00:09:38,640 Speaker 6: right like neither party wants. 176 00:09:38,600 --> 00:09:40,760 Speaker 2: You're not going to get to any political points for 177 00:09:40,880 --> 00:09:42,200 Speaker 2: being responsible. 178 00:09:42,720 --> 00:09:46,319 Speaker 5: Yeah, Changler, the first rule of politics. 179 00:09:47,960 --> 00:09:50,240 Speaker 2: Okay, Mike McKee, I'm going to throw this one at you. 180 00:09:51,040 --> 00:09:54,840 Speaker 2: The Fed's balance sheet, and don't tune out anybody, because 181 00:09:54,840 --> 00:09:57,880 Speaker 2: this is not boring the balance sheet. There's a contraction 182 00:09:58,080 --> 00:10:00,440 Speaker 2: from the Fed's balance sheet, and the the reason this 183 00:10:00,559 --> 00:10:03,560 Speaker 2: matters is because they were spending a lot to stimulate 184 00:10:03,600 --> 00:10:06,880 Speaker 2: the economy slowly. That's contracting. So what's that going to 185 00:10:06,920 --> 00:10:10,640 Speaker 2: mean for assets like my stock portfolio? If that's contracting 186 00:10:10,679 --> 00:10:12,599 Speaker 2: and there's no longer stimulus there. 187 00:10:12,520 --> 00:10:16,000 Speaker 5: Well it shouldn't mean anything, and so far hasn't meaned 188 00:10:16,400 --> 00:10:20,280 Speaker 5: meant anything. The Fed has figured out that QT, as 189 00:10:20,320 --> 00:10:22,839 Speaker 5: people like to call it, it doesn't work the same 190 00:10:22,880 --> 00:10:28,199 Speaker 5: way as QE because when the Fed starts stimulating the 191 00:10:28,240 --> 00:10:32,240 Speaker 5: economy by buying assets, the market's pricing the idea that 192 00:10:32,280 --> 00:10:36,920 Speaker 5: assets are going to go down eventually because it has 193 00:10:36,960 --> 00:10:41,520 Speaker 5: to end, and so the QT process becomes an accepted 194 00:10:41,600 --> 00:10:45,840 Speaker 5: part of the cycle and it doesn't really move the 195 00:10:45,880 --> 00:10:49,000 Speaker 5: market move yields in the same way that it does 196 00:10:49,160 --> 00:10:53,920 Speaker 5: on the way up. So the Fed's argument and the 197 00:10:54,040 --> 00:10:57,360 Speaker 5: research has shown that you don't get much of a 198 00:10:57,480 --> 00:11:01,520 Speaker 5: change because of QT. You can have a problem in 199 00:11:01,600 --> 00:11:05,200 Speaker 5: the money markets if there is a shortage because the 200 00:11:05,320 --> 00:11:09,560 Speaker 5: FED is taking securities out of the market, there's a 201 00:11:09,600 --> 00:11:12,240 Speaker 5: shortage of stuff to repo, and we had that problem 202 00:11:12,320 --> 00:11:16,800 Speaker 5: in twenty nineteen. FED officials argue now that won't happen 203 00:11:16,920 --> 00:11:19,400 Speaker 5: because a there's a lot of money in the reverse 204 00:11:19,480 --> 00:11:23,640 Speaker 5: repo facility that can come back into the repo market. 205 00:11:23,720 --> 00:11:27,880 Speaker 5: And there's also the FED standing repo facility where if 206 00:11:28,160 --> 00:11:30,680 Speaker 5: you need cash, you can give the FED securities and 207 00:11:31,240 --> 00:11:34,040 Speaker 5: they'll give you cash. So they shouldn't see the twenty 208 00:11:34,160 --> 00:11:37,960 Speaker 5: nineteen issue arise again. But they're still going to be careful, 209 00:11:38,000 --> 00:11:42,400 Speaker 5: which is one reason they're tapered the amount that they're 210 00:11:42,480 --> 00:11:43,720 Speaker 5: running off each month. 211 00:11:43,920 --> 00:11:47,240 Speaker 2: I were Jersey are rate strategist. I'm looking at my screen. 212 00:11:47,640 --> 00:11:51,439 Speaker 2: There's this inversion between rates. The two year and ten 213 00:11:51,520 --> 00:11:54,200 Speaker 2: year will take that the two year is higher than 214 00:11:54,240 --> 00:11:56,360 Speaker 2: the ten year. That's what we call the inversion. That's 215 00:11:56,440 --> 00:11:59,280 Speaker 2: usually been a predictor, at least in the past anyway 216 00:11:59,400 --> 00:12:02,880 Speaker 2: of sessions. It's been that way for a long time. 217 00:12:03,400 --> 00:12:06,000 Speaker 2: We haven't had a recession. Can you give me a 218 00:12:06,040 --> 00:12:06,679 Speaker 2: reason why. 219 00:12:06,920 --> 00:12:09,199 Speaker 6: Yeah, Well, the market got it wrong. The market had 220 00:12:09,240 --> 00:12:12,400 Speaker 6: been pricing for a recession for you know, the better 221 00:12:12,400 --> 00:12:16,240 Speaker 6: part of a year, and and that we never we 222 00:12:16,320 --> 00:12:18,840 Speaker 6: never actually got the recession. All all that did, inverted 223 00:12:18,880 --> 00:12:21,920 Speaker 6: yield curve says is that the market believes that interust 224 00:12:22,000 --> 00:12:23,520 Speaker 6: rate's going to be lower in the future than they 225 00:12:23,520 --> 00:12:27,559 Speaker 6: are today. Now, why is that? Probably because of a recession. 226 00:12:28,520 --> 00:12:30,760 Speaker 6: We don't have one, and so the market has to 227 00:12:30,840 --> 00:12:32,600 Speaker 6: keep on kind of pushing that out and pushing that 228 00:12:32,640 --> 00:12:34,960 Speaker 6: out and pushing that out until we actually see the 229 00:12:34,960 --> 00:12:37,720 Speaker 6: recession and the Fed actually begin cutting interest rates. 230 00:12:37,800 --> 00:12:41,000 Speaker 2: That's a good explanation. Again. The next big data point 231 00:12:41,040 --> 00:12:45,400 Speaker 2: payrolls the other side of the Fed's policy mandate. All right, 232 00:12:45,400 --> 00:12:49,400 Speaker 2: Thanks to Michael McKay, Bloomberg International Economics and Policy correspondent, 233 00:12:49,640 --> 00:12:54,160 Speaker 2: at Ira Jersey, Bloomberg Intelligence Chief US interest rates strategist. 234 00:12:54,800 --> 00:12:56,760 Speaker 2: Just to hit on Bloomberg Daybreak weekend. We're going to 235 00:12:56,800 --> 00:12:59,920 Speaker 2: look ahead to what's expected to be a landmark election 236 00:13:00,200 --> 00:13:04,079 Speaker 2: in the UK. I'm John tucker That this is Boomberg. 237 00:13:14,520 --> 00:13:17,320 Speaker 2: This is Bloomberg Daybreak Weekend or Global look Ahead at 238 00:13:17,360 --> 00:13:19,600 Speaker 2: the top stories for investors in the coming week. I'm 239 00:13:19,679 --> 00:13:22,560 Speaker 2: John Tuckery in New York. Up later in the program, 240 00:13:22,600 --> 00:13:24,559 Speaker 2: we're going to look ahead to the anniversary of Hong 241 00:13:24,640 --> 00:13:28,200 Speaker 2: Kong's hand over it to China and examine its current 242 00:13:28,280 --> 00:13:32,160 Speaker 2: relationship with China. But first, voters in the UK will 243 00:13:32,200 --> 00:13:35,800 Speaker 2: go to the polls on Thursday to choose the next government. 244 00:13:35,920 --> 00:13:38,880 Speaker 2: The opposition Labor Party has had a massive lead in 245 00:13:38,920 --> 00:13:42,040 Speaker 2: the polls for many months, while the ruling Conservative Party 246 00:13:42,080 --> 00:13:46,280 Speaker 2: could be on track for an electoral wipeout. Regardless of 247 00:13:46,280 --> 00:13:49,640 Speaker 2: who wins, the next government will face major economic challenges 248 00:13:49,679 --> 00:13:52,960 Speaker 2: and fiscal constraints. For more, Let's go to London and 249 00:13:53,000 --> 00:13:56,199 Speaker 2: bring in Bloomberg Daybreak Europe anchor Caroline Hepger. 250 00:13:56,840 --> 00:14:00,480 Speaker 1: John DK has had five prime ministers in the past years, 251 00:14:00,520 --> 00:14:03,360 Speaker 1: and it looks likely it will be getting a sixth 252 00:14:03,440 --> 00:14:06,160 Speaker 1: in the coming days. According to Bloomberg's poll of polls, 253 00:14:06,400 --> 00:14:09,160 Speaker 1: the Labour Party has had a twenty point lead over 254 00:14:09,200 --> 00:14:12,960 Speaker 1: the Conservatives for months now, and the election campaign hasn't 255 00:14:13,000 --> 00:14:16,679 Speaker 1: done much to shift that advantage. Labour hasn't been in 256 00:14:16,720 --> 00:14:20,280 Speaker 1: power in the UK since twenty ten, and some projections 257 00:14:20,320 --> 00:14:24,120 Speaker 1: see a victory akin to that of Tony Blair's landslide 258 00:14:24,160 --> 00:14:28,440 Speaker 1: election win in nineteen ninety seven, but the economic context 259 00:14:28,480 --> 00:14:32,440 Speaker 1: this time is very different. Fiscal space is in short supply, 260 00:14:32,600 --> 00:14:35,480 Speaker 1: and fears of a repeat of the market mayhem that 261 00:14:35,560 --> 00:14:38,560 Speaker 1: engulfed the UK in twenty twenty two under the then 262 00:14:38,600 --> 00:14:42,800 Speaker 1: Prime Minister Liz Trust will prevent any big boring binge. 263 00:14:43,200 --> 00:14:43,400 Speaker 3: Now. 264 00:14:43,480 --> 00:14:46,800 Speaker 1: Both the two main political parties claim that they are 265 00:14:46,840 --> 00:14:50,080 Speaker 1: the Party of Business, and that was a key battleground 266 00:14:50,080 --> 00:14:52,920 Speaker 1: when the business sectory Kenny Bade not form the Conservative 267 00:14:52,960 --> 00:14:56,520 Speaker 1: Party and her Labour counterpart Jonathan Reynolds took part in 268 00:14:56,640 --> 00:14:59,960 Speaker 1: our special Bloomberg debate just in the last few days. 269 00:15:00,520 --> 00:15:02,840 Speaker 8: The Labor Manifesto of the Labor Agenda is what we 270 00:15:02,920 --> 00:15:05,840 Speaker 8: call a pro worker, pro business agenda, and the agenda 271 00:15:05,880 --> 00:15:09,680 Speaker 8: reflects that in its aggregate and total form. It's everything 272 00:15:09,720 --> 00:15:12,720 Speaker 8: from a better business environment around changes to planning to 273 00:15:12,800 --> 00:15:15,520 Speaker 8: tax certainty to how things like the skill system works 274 00:15:15,560 --> 00:15:18,160 Speaker 8: but we want that to deliver growth that every part 275 00:15:18,320 --> 00:15:20,600 Speaker 8: of the UK and every person within it benefits from, 276 00:15:20,840 --> 00:15:24,760 Speaker 8: and the employment framework will the flow will rise. But frankly, 277 00:15:25,080 --> 00:15:27,440 Speaker 8: the vast majority of businesses operating in the UK are 278 00:15:27,440 --> 00:15:30,720 Speaker 8: operating to a higher standard than those sets of proposals. 279 00:15:31,040 --> 00:15:33,680 Speaker 8: It I think provides what I would call the flexibility 280 00:15:33,680 --> 00:15:35,760 Speaker 8: that works both ways, so it doesn't take away some 281 00:15:35,800 --> 00:15:37,880 Speaker 8: of the advantages of our labor market, but it delivers 282 00:15:37,920 --> 00:15:39,840 Speaker 8: in a way which isn't one side, and it gives 283 00:15:39,880 --> 00:15:42,680 Speaker 8: people the chance to feel and participate in the economy, 284 00:15:42,720 --> 00:15:45,240 Speaker 8: to have the benefits for themselves and their family that 285 00:15:45,280 --> 00:15:48,320 Speaker 8: they're seeking. And it's been developed very closely with businesses 286 00:15:48,360 --> 00:15:50,560 Speaker 8: to make sure those burdens are not two burdens. 287 00:15:50,600 --> 00:15:52,600 Speaker 9: I mean it developed closely with business. 288 00:15:52,600 --> 00:15:55,000 Speaker 10: Why has the Conservative Party not to try to introduce 289 00:15:55,040 --> 00:15:55,560 Speaker 10: those kinds of. 290 00:15:55,560 --> 00:15:58,400 Speaker 9: Measures because business doesn't want them. I think it is 291 00:15:58,720 --> 00:16:02,640 Speaker 9: unbelievable Nathan would actually suggest that those employment regulations have 292 00:16:02,680 --> 00:16:06,760 Speaker 9: been developed with business, which business Business is terrified of 293 00:16:06,760 --> 00:16:09,120 Speaker 9: what labor is selling. And one of the things that's 294 00:16:09,120 --> 00:16:11,880 Speaker 9: really interesting is to listen to how labour talks. He's 295 00:16:11,880 --> 00:16:14,640 Speaker 9: talking about Rischie Sunact being dishonest. He's talking about Listrass. 296 00:16:14,840 --> 00:16:17,960 Speaker 9: This is very personal. They have no diagnosis of the 297 00:16:17,960 --> 00:16:21,440 Speaker 9: fundamental problems of this country. All they can see is 298 00:16:21,560 --> 00:16:23,880 Speaker 9: the individuals in the government. There is no and if 299 00:16:23,880 --> 00:16:26,360 Speaker 9: you do not have a good diagnosis, you have no solutions. 300 00:16:26,640 --> 00:16:29,560 Speaker 9: I would ask him what he thinks business thinks of 301 00:16:29,760 --> 00:16:31,840 Speaker 9: the new employment regulations that are going to make it 302 00:16:32,000 --> 00:16:36,240 Speaker 9: very hard to hire, strangling employment right at both the 303 00:16:36,320 --> 00:16:39,720 Speaker 9: day one rights that they're bringing in. Businesses CEO of ASDA, 304 00:16:39,960 --> 00:16:42,920 Speaker 9: Curry's m ands have said that these are terrible regulations, 305 00:16:43,080 --> 00:16:45,400 Speaker 9: which businesses have they developed them with They are bad 306 00:16:45,400 --> 00:16:46,320 Speaker 9: ideas well. 307 00:16:46,360 --> 00:16:47,800 Speaker 8: I've strongly pushed back on that, and I would just 308 00:16:47,880 --> 00:16:51,080 Speaker 8: remind you, Kenmy, when the Conservative Party led this country 309 00:16:51,120 --> 00:16:53,600 Speaker 8: out of the European Union, you promised an employment bill. 310 00:16:53,640 --> 00:16:56,240 Speaker 8: You promised many of the things that are in this package. 311 00:16:56,240 --> 00:16:58,080 Speaker 8: You didn't deliver on them. That's one of the reasons 312 00:16:58,080 --> 00:17:01,320 Speaker 8: you've lost so much support. You promise people's security in 313 00:17:01,360 --> 00:17:03,360 Speaker 8: the workplace. They haven't had that. And I don't think 314 00:17:03,360 --> 00:17:05,840 Speaker 8: anyone could look at the set of proposals being put 315 00:17:05,880 --> 00:17:08,520 Speaker 8: forward by the Labor Party and say they are unreasonable 316 00:17:08,520 --> 00:17:09,879 Speaker 8: and the idea by the way, there's some sort of 317 00:17:09,880 --> 00:17:13,560 Speaker 8: continental labor market. These are specific things for the UK 318 00:17:13,960 --> 00:17:16,240 Speaker 8: that will give people a chance to participate and feel 319 00:17:16,280 --> 00:17:18,840 Speaker 8: a part and feel the benefits of a stronger economy 320 00:17:18,840 --> 00:17:21,439 Speaker 8: which in a way is still without any question a 321 00:17:21,480 --> 00:17:24,920 Speaker 8: better business environment to operate in, and which frankly give 322 00:17:24,960 --> 00:17:26,600 Speaker 8: people the kind of security, the kind of work you 323 00:17:26,600 --> 00:17:29,000 Speaker 8: can raise and build your family around that everyone should 324 00:17:29,000 --> 00:17:29,880 Speaker 8: be supporting in the UK. 325 00:17:30,119 --> 00:17:34,240 Speaker 9: It should be terrified about surrendering your business the economy 326 00:17:34,480 --> 00:17:38,159 Speaker 9: tax to labor, absolutely terrified. And the reason why I 327 00:17:38,200 --> 00:17:40,800 Speaker 9: say that is because the problems in our economy are 328 00:17:40,840 --> 00:17:43,359 Speaker 9: not to do with flexible working rights. We have some 329 00:17:43,400 --> 00:17:46,040 Speaker 9: of the most flexible working rights in the world. That 330 00:17:46,200 --> 00:17:48,400 Speaker 9: is a problem that is solved. We've brought in all 331 00:17:48,440 --> 00:17:52,440 Speaker 9: sorts of things, working from home, breathemently, parentally, shared parentally. 332 00:17:52,680 --> 00:17:54,719 Speaker 9: We have done a lot. The fact that they are 333 00:17:54,760 --> 00:17:57,879 Speaker 9: fishing in this empty barrel for solutions shows that labor 334 00:17:57,920 --> 00:17:59,880 Speaker 9: have no idea what this economy. 335 00:18:00,520 --> 00:18:03,520 Speaker 1: That was Kenny Badenoch, the current business sectory there speaking 336 00:18:03,520 --> 00:18:06,160 Speaker 1: to our colleague Ana Edwards in the TV and radio 337 00:18:06,240 --> 00:18:09,960 Speaker 1: debate that took place at Blomberg's European headquarters, so that 338 00:18:09,960 --> 00:18:12,040 Speaker 1: gives you a flavor of how the two main parties 339 00:18:12,080 --> 00:18:16,360 Speaker 1: are thinking about this campaign. Investors, interestingly don't seem too 340 00:18:16,400 --> 00:18:20,120 Speaker 1: worried about the risk of volatility from this election, partly 341 00:18:20,280 --> 00:18:24,520 Speaker 1: down to the cautious policy proposals of the Labor Party 342 00:18:24,600 --> 00:18:27,520 Speaker 1: and the Conservatives and the limited room for really big 343 00:18:27,560 --> 00:18:31,200 Speaker 1: spending plans. Here's the view of Henrietta Pakmar, who is 344 00:18:31,240 --> 00:18:34,760 Speaker 1: head of Global fixed Income at all Spring Global Investments 345 00:18:34,760 --> 00:18:35,560 Speaker 1: on that point. 346 00:18:36,040 --> 00:18:40,520 Speaker 11: So the UK government is likely to have issues, Yes, absolutely, 347 00:18:40,560 --> 00:18:42,639 Speaker 11: They're going to have to make some tough choices in 348 00:18:42,720 --> 00:18:45,399 Speaker 11: terms of what they choose to fund and how they 349 00:18:45,480 --> 00:18:48,119 Speaker 11: choose to fund it. So the markets are going to 350 00:18:48,119 --> 00:18:50,960 Speaker 11: be watching them like hawks, and the long end is 351 00:18:51,000 --> 00:18:54,480 Speaker 11: going to be the more volatile area there, so really 352 00:18:54,560 --> 00:18:57,680 Speaker 11: interesting to see how they react. Do we get the 353 00:18:57,720 --> 00:19:01,119 Speaker 11: same volatility as we had in the trust sort of 354 00:19:01,240 --> 00:19:05,840 Speaker 11: moment in twenty two I do think one different compared 355 00:19:05,880 --> 00:19:09,440 Speaker 11: to that time is a technical environment is a little 356 00:19:09,440 --> 00:19:13,960 Speaker 11: different given what we lived through in that period, so 357 00:19:14,000 --> 00:19:16,760 Speaker 11: some of the leverage in the system isn't going to 358 00:19:16,800 --> 00:19:21,120 Speaker 11: be quite as acute. That being said, I do think 359 00:19:21,160 --> 00:19:23,880 Speaker 11: that the markets, and it's not just a UK are 360 00:19:23,920 --> 00:19:26,960 Speaker 11: going to look to keep a lid on spending generally 361 00:19:27,320 --> 00:19:30,159 Speaker 11: at a sovereign sovereign basis at the short end of 362 00:19:30,200 --> 00:19:33,240 Speaker 11: the guilt curve. How many BOE cuts are you expecting 363 00:19:33,280 --> 00:19:37,040 Speaker 11: this year? Our call has been that the BOE would 364 00:19:37,080 --> 00:19:41,439 Speaker 11: come after the ECBs, so at this point, probably a 365 00:19:41,480 --> 00:19:46,960 Speaker 11: couple of cuts in August, possibly in August, depending on 366 00:19:47,200 --> 00:19:49,800 Speaker 11: the data that we get between between now and then. 367 00:19:50,720 --> 00:19:53,520 Speaker 11: We think that that that probably makes sense given the 368 00:19:53,600 --> 00:19:56,760 Speaker 11: sort of inflation progress at the UK has made so 369 00:19:56,920 --> 00:19:59,520 Speaker 11: far and the sort of growth prospects as well. 370 00:19:59,640 --> 00:20:03,480 Speaker 1: That was Henrietta Peckamar from all Spring Global Investments, speaking 371 00:20:03,520 --> 00:20:07,240 Speaker 1: to Bloomberg's Lizzie Burden. The economic outlook for the UK 372 00:20:07,480 --> 00:20:10,520 Speaker 1: is improving. Inflation hit the Bank of England's target of 373 00:20:10,560 --> 00:20:13,920 Speaker 1: two percent in the recent prend Bloomberg Economics is also 374 00:20:14,080 --> 00:20:16,560 Speaker 1: expecting too, interest rate cuts from the Bank of England 375 00:20:16,560 --> 00:20:19,960 Speaker 1: this year, and growth for twenty twenty four of zero 376 00:20:19,960 --> 00:20:22,679 Speaker 1: point eight percent. That would actually be an improvement on 377 00:20:22,760 --> 00:20:25,960 Speaker 1: twenty twenty three. Business groups want the next government to 378 00:20:26,040 --> 00:20:29,160 Speaker 1: tackle some of the longer term issues facing the UK economy. 379 00:20:29,600 --> 00:20:32,880 Speaker 1: Martha Lane Fox, president of the British Chambers of Commerce 380 00:20:33,080 --> 00:20:37,040 Speaker 1: told us recently of the massive skills shortage that is 381 00:20:37,119 --> 00:20:39,119 Speaker 1: holding back growth in many businesses. 382 00:20:39,600 --> 00:20:41,880 Speaker 12: We're not going to be able to make our businesses 383 00:20:41,920 --> 00:20:44,680 Speaker 12: more competitive globally, but also just to grow the economy, 384 00:20:44,720 --> 00:20:47,000 Speaker 12: as every single politician has said ad nauseum in the 385 00:20:47,040 --> 00:20:49,000 Speaker 12: last few weeks, if we don't make sure we've got 386 00:20:49,040 --> 00:20:51,439 Speaker 12: the right talent to do it. And it's depressing that 387 00:20:51,880 --> 00:20:55,840 Speaker 12: nearly three quarters of our businesses are feeling anxious about 388 00:20:56,240 --> 00:20:59,440 Speaker 12: skills in their business and crucially, in my opinion, feeling 389 00:20:59,440 --> 00:21:03,200 Speaker 12: anxious about two enormously important areas of skills development over 390 00:21:03,240 --> 00:21:07,160 Speaker 12: the next decade AI digitization and the green economy, where 391 00:21:07,160 --> 00:21:09,280 Speaker 12: we're going to need people if we're going to build 392 00:21:09,400 --> 00:21:12,359 Speaker 12: a modern, robust economy for twenty thirty twenty forty. 393 00:21:12,400 --> 00:21:14,520 Speaker 10: And what is the message to the next government then, 394 00:21:14,760 --> 00:21:18,000 Speaker 10: in terms of laying the groundwork for skills from here. 395 00:21:18,000 --> 00:21:20,240 Speaker 12: Well, I think the first thing is to really recognize 396 00:21:20,320 --> 00:21:23,720 Speaker 12: the issue. And when I first became president of the 397 00:21:23,800 --> 00:21:27,640 Speaker 12: BCC eighteen months ago, come from the technology sector predominantly, 398 00:21:27,680 --> 00:21:29,399 Speaker 12: I'm used to never having enough skills because it was 399 00:21:29,400 --> 00:21:31,399 Speaker 12: inventing stuff you don't really have the right people. But 400 00:21:31,520 --> 00:21:35,200 Speaker 12: I was so shocked by the skills issues across every sector, 401 00:21:35,320 --> 00:21:37,320 Speaker 12: every bit of the country that I went to, whether 402 00:21:37,359 --> 00:21:39,520 Speaker 12: it was hospitality, whether it was social care, whether it 403 00:21:39,560 --> 00:21:42,159 Speaker 12: was a vast manufacturing defense, whatever the area, I was 404 00:21:42,440 --> 00:21:45,359 Speaker 12: lucky enough to be understanding. So I think there are 405 00:21:45,400 --> 00:21:47,760 Speaker 12: some things that are working. And one of the things 406 00:21:47,760 --> 00:21:50,320 Speaker 12: that we've run at the British Chambers are the local 407 00:21:50,359 --> 00:21:53,360 Speaker 12: Skills Improvement plans. We run them on behalf of the government. 408 00:21:53,520 --> 00:21:56,800 Speaker 12: They're great. They are a framework for businesses to sit 409 00:21:56,880 --> 00:22:01,480 Speaker 12: down with a local set of both skills providers, universities, schools, 410 00:22:01,520 --> 00:22:03,840 Speaker 12: other people that can help solve the issue, to map 411 00:22:03,880 --> 00:22:05,920 Speaker 12: out what the local businesses need and what the local 412 00:22:05,960 --> 00:22:08,760 Speaker 12: area can try and build capacity. And so there are 413 00:22:08,800 --> 00:22:11,320 Speaker 12: things that work and we really hope that any future 414 00:22:11,320 --> 00:22:14,120 Speaker 12: government pays attention to that. We did a report called 415 00:22:14,119 --> 00:22:16,000 Speaker 12: the Future of the Economy and we look particularly at 416 00:22:16,000 --> 00:22:18,840 Speaker 12: people who work loads and loads of policy ideas in there, 417 00:22:18,960 --> 00:22:21,119 Speaker 12: so there's no shortage of ideas. But it's also about 418 00:22:21,119 --> 00:22:24,520 Speaker 12: businesses themselves having faced such tough economic headwinds in the 419 00:22:24,560 --> 00:22:28,400 Speaker 12: last few years. Unfortunately, skills training budgets do get put 420 00:22:28,560 --> 00:22:31,720 Speaker 12: down the list and deprioritized and so we know that 421 00:22:31,720 --> 00:22:33,360 Speaker 12: there's just been far less investment. 422 00:22:33,680 --> 00:22:36,679 Speaker 1: That was Martha Lane Fox of the British Chambers of 423 00:22:36,760 --> 00:22:38,719 Speaker 1: Commerce speaking to Bluemberg's Anna Edwards. 424 00:22:39,400 --> 00:22:39,560 Speaker 5: Well. 425 00:22:39,600 --> 00:22:43,040 Speaker 1: Another fact which is contributing to the UK's labor shortage 426 00:22:43,080 --> 00:22:45,240 Speaker 1: is the number of people who have dropped out of 427 00:22:45,320 --> 00:22:49,000 Speaker 1: the workforce. We've been discussing that with Raoul Ruperraal, who 428 00:22:49,040 --> 00:22:52,520 Speaker 1: is the director of BCG's Center for Growth and also 429 00:22:52,560 --> 00:22:55,640 Speaker 1: a former advisor to the former Prime Minister Theresa May. 430 00:22:56,119 --> 00:22:59,000 Speaker 1: The consulting firm has just published a report on the 431 00:22:59,119 --> 00:23:01,639 Speaker 1: problems economic inactivity. 432 00:23:02,320 --> 00:23:04,240 Speaker 7: The key challenge that needs to be tackled that we've 433 00:23:04,240 --> 00:23:07,160 Speaker 7: identified is this rise in long term sick people out 434 00:23:07,200 --> 00:23:09,960 Speaker 7: of the workforce. So since before COVID, we've seen a 435 00:23:10,040 --> 00:23:12,480 Speaker 7: rise of around seven hundred and fifty thousand people who 436 00:23:12,480 --> 00:23:15,200 Speaker 7: are long term sick and out of the workforce, and 437 00:23:15,200 --> 00:23:17,439 Speaker 7: that is a significant rise and makes the UK and 438 00:23:17,480 --> 00:23:20,840 Speaker 7: outlier compared to its peers. So the UK's economic inactivity 439 00:23:20,920 --> 00:23:24,080 Speaker 7: is risen by one over a percentage point, whereas most 440 00:23:24,080 --> 00:23:26,000 Speaker 7: of you countries have seen at fall by over two 441 00:23:26,000 --> 00:23:28,639 Speaker 7: percentage points. So we're really on a completely different trend 442 00:23:28,680 --> 00:23:31,560 Speaker 7: to everyone else. And I think the impact of this 443 00:23:31,600 --> 00:23:34,479 Speaker 7: is significant. We looked at the potential size of the 444 00:23:34,520 --> 00:23:37,600 Speaker 7: prize in terms of both economic and fiscal gains if 445 00:23:37,640 --> 00:23:40,840 Speaker 7: you reverse some of this rise, and it could free 446 00:23:40,920 --> 00:23:42,600 Speaker 7: up over the next five years over the course of 447 00:23:42,640 --> 00:23:45,640 Speaker 7: the next parliament between thirty five billion and fifty seven 448 00:23:45,640 --> 00:23:48,800 Speaker 7: billion in fiscal funds by reducing number of benefits payments 449 00:23:48,800 --> 00:23:51,359 Speaker 7: in improving the tax take, and it could also boost 450 00:23:51,359 --> 00:23:54,320 Speaker 7: GDP by up to three percent over five years. 451 00:23:54,359 --> 00:23:55,280 Speaker 4: So these are. 452 00:23:55,200 --> 00:23:57,920 Speaker 7: Really big numbers and show that tackling some of these 453 00:23:57,960 --> 00:24:01,679 Speaker 7: complex health challenges and complex economic challenges is actually the 454 00:24:01,720 --> 00:24:04,520 Speaker 7: best way to look at generating growth and fiscal revenue 455 00:24:04,880 --> 00:24:07,119 Speaker 7: compared to some of the tinkering we've seen debated in 456 00:24:07,480 --> 00:24:10,439 Speaker 7: recent weeks. Do you get the sense that you know 457 00:24:10,440 --> 00:24:13,560 Speaker 7: that the big parties have really taking this issue seriously. Yeah, Look, 458 00:24:13,600 --> 00:24:15,520 Speaker 7: I do think it is an issue that they take 459 00:24:15,560 --> 00:24:17,760 Speaker 7: seriously for a couple of reasons. One is obviously the 460 00:24:17,800 --> 00:24:22,040 Speaker 7: significant fiscal costs that I've outlined, and I think you know, 461 00:24:22,080 --> 00:24:26,280 Speaker 7: in a very fiscally constrained environment, freeing up thirty to 462 00:24:26,359 --> 00:24:29,560 Speaker 7: fifty billion over five years is a significant amount and 463 00:24:29,600 --> 00:24:32,639 Speaker 7: something that both parties take seriously. And we've heard talks 464 00:24:32,720 --> 00:24:36,520 Speaker 7: about the Benefits Bill etc. During the course of this election, 465 00:24:36,680 --> 00:24:38,960 Speaker 7: but I think they've often talked about the wrong thing 466 00:24:39,000 --> 00:24:41,480 Speaker 7: and not looked at the fundamental drivers as we are here. 467 00:24:41,840 --> 00:24:43,920 Speaker 7: And then the second reason is, you know we have 468 00:24:44,560 --> 00:24:48,280 Speaker 7: still very low unemployment, very very high employment and a 469 00:24:48,400 --> 00:24:52,120 Speaker 7: very tight labor market. And you know, having a very 470 00:24:52,119 --> 00:24:54,240 Speaker 7: tight labor market and this number of people out of 471 00:24:54,280 --> 00:24:56,280 Speaker 7: the workforce is going to have a long term effect 472 00:24:56,400 --> 00:25:00,000 Speaker 7: on the supply potential of our economy and effect on growth. 473 00:25:00,119 --> 00:25:03,480 Speaker 7: So for both those reasons, and then we also add 474 00:25:03,480 --> 00:25:05,840 Speaker 7: in the fact that we have you know, this has 475 00:25:05,920 --> 00:25:09,159 Speaker 7: effects on people's health outcomes and people being sicker. So 476 00:25:09,680 --> 00:25:12,240 Speaker 7: three really big reasons there why I think both parties 477 00:25:12,280 --> 00:25:13,639 Speaker 7: are aware of this issue. 478 00:25:13,800 --> 00:25:17,520 Speaker 1: That was BCG's role Ruperral speaking to Bloomberg, Stephen Caroll 479 00:25:17,560 --> 00:25:20,880 Speaker 1: and Jack Siddits. So plenty of challenges then facing the 480 00:25:20,920 --> 00:25:23,520 Speaker 1: next government. But first of course we have to get 481 00:25:23,560 --> 00:25:27,159 Speaker 1: over the general election. We've been watching the performance of 482 00:25:27,200 --> 00:25:31,760 Speaker 1: the smaller parties too. Nigel Farag's Reform UK has been 483 00:25:31,800 --> 00:25:34,359 Speaker 1: creeping up in the polls, benefiting from the drop in 484 00:25:34,400 --> 00:25:38,200 Speaker 1: support for the Conservatives. The Liberal Democrats and the Greens 485 00:25:38,200 --> 00:25:42,000 Speaker 1: are also hoping to make gains. We'll have full coverage 486 00:25:42,040 --> 00:25:45,840 Speaker 1: and analysis of the election results on the fifth of July. 487 00:25:45,920 --> 00:25:49,320 Speaker 1: Here on Bloomberg Radio. I'm Caroline Hepge here in London. 488 00:25:49,400 --> 00:25:52,600 Speaker 1: You can catch us every weekday morning for Bloomberg Daybreak. 489 00:25:52,600 --> 00:25:55,160 Speaker 1: You're at beginning at six am in London. That's one 490 00:25:55,200 --> 00:25:56,399 Speaker 1: am on Wall Street. 491 00:25:56,520 --> 00:26:00,560 Speaker 2: John, all right, thanks Caroline, Justy Hen On Bloomberg DA Weekend, 492 00:26:00,840 --> 00:26:04,520 Speaker 2: we look ahead to Hong Kong's handover anniversary to China 493 00:26:04,920 --> 00:26:08,919 Speaker 2: and examine its current relationship with China. I'm John Tucker, 494 00:26:09,080 --> 00:26:23,320 Speaker 2: and this is Bloomberg. I'm John Tucker in New York 495 00:26:23,400 --> 00:26:25,399 Speaker 2: with your global look ahead at the top stories for 496 00:26:25,440 --> 00:26:28,480 Speaker 2: investors in the coming week. This coming July first marks 497 00:26:28,480 --> 00:26:31,480 Speaker 2: the twenty seventh year since the handover of Hong Kong 498 00:26:31,560 --> 00:26:34,920 Speaker 2: to China from British colonial rule. Let's get to Bloomberg 499 00:26:35,000 --> 00:26:38,040 Speaker 2: Daybreak Asia co host Brian Curtis and Doug Chrisner to 500 00:26:38,119 --> 00:26:40,720 Speaker 2: talk about the changes the city has been through. 501 00:26:41,240 --> 00:26:44,800 Speaker 3: John, The anniversary of the handover puts Hong Kong back 502 00:26:44,800 --> 00:26:48,760 Speaker 3: in the global spotlight. Establishment Day, as it's called here, 503 00:26:48,960 --> 00:26:50,919 Speaker 3: means different things to different people. 504 00:26:51,160 --> 00:26:54,680 Speaker 13: Hong Kong's chief executive John Lee says the anniversary will 505 00:26:54,720 --> 00:26:57,679 Speaker 13: be a day filled with joy now. That will be 506 00:26:57,720 --> 00:27:00,280 Speaker 13: the case for many loyalists who see the return of 507 00:27:00,320 --> 00:27:03,600 Speaker 13: Hong Kong as a key moment in China's rise. 508 00:27:03,800 --> 00:27:05,840 Speaker 3: But for many others it will be a day of 509 00:27:05,840 --> 00:27:10,960 Speaker 3: frustration since the handover itself. In addition to celebration, July 510 00:27:11,080 --> 00:27:14,159 Speaker 3: first had been a day of peaceful protest for promises 511 00:27:14,200 --> 00:27:16,840 Speaker 3: not yet kept. It was a day when hundreds of 512 00:27:16,880 --> 00:27:20,480 Speaker 3: thousands of people would march from Victoria Park to Central 513 00:27:20,880 --> 00:27:24,359 Speaker 3: calling for more democracy. But all that changed in twenty 514 00:27:24,440 --> 00:27:28,560 Speaker 3: twenty when Beijing imposed a national security law. Since then, 515 00:27:29,119 --> 00:27:31,000 Speaker 3: no large protests have been allowed. 516 00:27:31,200 --> 00:27:34,760 Speaker 13: Meantime, Hong Kong has also faced challenges on the economic front. 517 00:27:34,800 --> 00:27:39,440 Speaker 13: The pandemic, the protest, and US China tensions all weakening 518 00:27:39,480 --> 00:27:43,639 Speaker 13: the economy. The property in stock markets have seen aggressive declines. 519 00:27:43,680 --> 00:27:47,080 Speaker 13: As an example, to Hanksang is down thirty six percent 520 00:27:47,119 --> 00:27:49,880 Speaker 13: over the past five years, and the region has seen 521 00:27:49,920 --> 00:27:53,400 Speaker 13: an exodus of local residents and foreign professionals. 522 00:27:54,040 --> 00:27:57,080 Speaker 3: So joining us now for some insights on where Hong 523 00:27:57,160 --> 00:27:59,800 Speaker 3: Kong is heading is Jenny Marsh Bloomberg Team leader for 524 00:27:59,880 --> 00:28:03,720 Speaker 3: Go Greater China ECO GOV and Alan Wong Bloomberg China 525 00:28:03,840 --> 00:28:08,680 Speaker 3: ECO Gov Editor. So, Jenny, let's start with you. Let's 526 00:28:08,760 --> 00:28:12,720 Speaker 3: examine really what's changed here since the handover. Freedom of 527 00:28:12,720 --> 00:28:16,320 Speaker 3: the press, the rule of law, the independence of the judiciary, 528 00:28:16,960 --> 00:28:21,920 Speaker 3: and political opposition all have been severely diminished. And a 529 00:28:21,960 --> 00:28:25,600 Speaker 3: recent example is Lord Assumption, one of the UK judges 530 00:28:25,640 --> 00:28:28,520 Speaker 3: who resigned from the Court of Final Appeal. He said, 531 00:28:28,520 --> 00:28:32,760 Speaker 3: the rule of law here has been quote profoundly compromised. 532 00:28:32,760 --> 00:28:36,280 Speaker 3: So my question to you is how much has the 533 00:28:36,359 --> 00:28:38,800 Speaker 3: high degree of autonomy actually been eroded? 534 00:28:39,560 --> 00:28:41,720 Speaker 10: As you say, there have been many ways in which, 535 00:28:41,760 --> 00:28:44,520 Speaker 10: you know, China has made this huge push over the 536 00:28:44,560 --> 00:28:46,400 Speaker 10: past four years to sort of really make sure that 537 00:28:46,440 --> 00:28:49,080 Speaker 10: it has Hong Kong under control in all the ways 538 00:28:49,080 --> 00:28:52,400 Speaker 10: that Chijing pink things matter. So you know, that is 539 00:28:52,440 --> 00:28:56,680 Speaker 10: sort of wiping out the opposition from the legislature, is 540 00:28:56,760 --> 00:28:59,720 Speaker 10: not having this sort of rumbunctious kind of free press 541 00:28:59,720 --> 00:29:01,560 Speaker 10: that we used to have. It's making sure that people 542 00:29:01,560 --> 00:29:04,080 Speaker 10: like Jimmy Laie, who had long been the thought in 543 00:29:04,120 --> 00:29:07,000 Speaker 10: the side of Beijing, are under control. Because of what 544 00:29:07,040 --> 00:29:09,560 Speaker 10: you have now Hong Kong, you know, there's is sort 545 00:29:09,560 --> 00:29:11,840 Speaker 10: of outside perception, I think that Hong Kong has become 546 00:29:11,960 --> 00:29:14,840 Speaker 10: another Chinese city, which I think out on the ground 547 00:29:14,960 --> 00:29:17,000 Speaker 10: is not what it feels like, kid. But for sure 548 00:29:17,440 --> 00:29:19,880 Speaker 10: there have been huge changes and sort of what you 549 00:29:19,920 --> 00:29:23,320 Speaker 10: can say here, what you can print, you know, and 550 00:29:23,400 --> 00:29:25,880 Speaker 10: the way that the political system works, and the result 551 00:29:25,920 --> 00:29:28,320 Speaker 10: of all of that has been that the Communist Party 552 00:29:28,320 --> 00:29:31,240 Speaker 10: feels that Hong Kong is now firmly under its control. 553 00:29:31,320 --> 00:29:33,280 Speaker 10: And for so many years, Hong Kong was given all 554 00:29:33,320 --> 00:29:35,800 Speaker 10: these freedoms to have the kind of street protests that 555 00:29:35,840 --> 00:29:38,400 Speaker 10: you laid out that were really kind of a symbol 556 00:29:38,440 --> 00:29:41,360 Speaker 10: of sort of what made Hong Kong so different from 557 00:29:41,400 --> 00:29:44,120 Speaker 10: mainland China, and the erasure of that sort of the 558 00:29:44,160 --> 00:29:47,160 Speaker 10: result is that in many ways, you know, Hong Kong 559 00:29:47,560 --> 00:29:50,520 Speaker 10: feels more similar to mainland China. But of course there 560 00:29:50,520 --> 00:29:52,520 Speaker 10: are still some really big differences here, and I think, 561 00:29:52,520 --> 00:29:55,440 Speaker 10: you know, chief among them is the fact that we 562 00:29:55,440 --> 00:29:57,960 Speaker 10: still have a free internet. And there have been cases 563 00:29:58,000 --> 00:29:59,960 Speaker 10: that sort of dip their tee into testing the limit 564 00:30:00,160 --> 00:30:03,120 Speaker 10: of that, such as the government's injunction on the Glory 565 00:30:03,160 --> 00:30:04,040 Speaker 10: to Hong Kong Song. 566 00:30:04,960 --> 00:30:05,800 Speaker 3: But overall, you. 567 00:30:05,720 --> 00:30:08,880 Speaker 10: Know, the internet here is still free there's still much 568 00:30:08,920 --> 00:30:11,440 Speaker 10: greater freedom of speech here than in mainland China. And 569 00:30:11,480 --> 00:30:14,040 Speaker 10: on the court, you know, there's still the common law 570 00:30:14,120 --> 00:30:16,920 Speaker 10: system here. It's a very different legal system to the 571 00:30:16,920 --> 00:30:19,360 Speaker 10: one in mainland China. And while you know, we are 572 00:30:19,400 --> 00:30:22,280 Speaker 10: seeing sort of the foreign judges backing off, they're pulling 573 00:30:22,320 --> 00:30:25,240 Speaker 10: away from the court final appeal because they don't feel 574 00:30:25,280 --> 00:30:27,080 Speaker 10: they can sort of uphold this system where the national 575 00:30:27,080 --> 00:30:30,000 Speaker 10: security cases are going through the courts. It is still 576 00:30:30,000 --> 00:30:32,960 Speaker 10: a very different legal system to mainland China. So you know, 577 00:30:33,000 --> 00:30:37,320 Speaker 10: I think overall we've seen the liberal freedoms that we 578 00:30:37,400 --> 00:30:39,960 Speaker 10: had here, the way you could push for democracy, all 579 00:30:39,960 --> 00:30:42,520 Speaker 10: that is over. It's a new era for Hong Kong. 580 00:30:42,920 --> 00:30:45,920 Speaker 10: So you know, essentially Jupe has it under his control. 581 00:30:46,000 --> 00:30:49,440 Speaker 10: But now the question really is can Hong Kong continue 582 00:30:49,480 --> 00:30:52,080 Speaker 10: to walk that fine line? You know, where where does 583 00:30:52,120 --> 00:30:54,800 Speaker 10: it end? Is this the Hong Kong that Tjinping wants 584 00:30:54,840 --> 00:30:55,720 Speaker 10: or is there more to come? 585 00:30:56,000 --> 00:30:58,800 Speaker 13: So the rights that you're describing there have been pretty 586 00:30:58,840 --> 00:31:01,680 Speaker 13: much enshrined in the Many Constitution, the basic law. But 587 00:31:01,800 --> 00:31:05,200 Speaker 13: now as I understand it, the national security law from 588 00:31:05,280 --> 00:31:08,960 Speaker 13: China is above where the basic law had been. So 589 00:31:09,000 --> 00:31:11,400 Speaker 13: allan is there a case to be made that in 590 00:31:11,480 --> 00:31:14,880 Speaker 13: some way Beijing is violating the terms of the handover. 591 00:31:15,760 --> 00:31:18,800 Speaker 14: Some foreign governments have definitely made that case, saying that 592 00:31:19,400 --> 00:31:22,240 Speaker 14: well China did with Hong Kong by imposing the National 593 00:31:22,240 --> 00:31:25,080 Speaker 14: Security Law is a violation of the Sign of British 594 00:31:25,160 --> 00:31:28,920 Speaker 14: Joint Declaration that saw Hong Kong return to Chinese rule 595 00:31:29,120 --> 00:31:32,480 Speaker 14: back in nineteen ninety seven. China would claim that it 596 00:31:32,560 --> 00:31:35,600 Speaker 14: has every right to protect its national security. But I 597 00:31:35,640 --> 00:31:38,800 Speaker 14: think for observers what's important is that when they look 598 00:31:38,840 --> 00:31:41,600 Speaker 14: at Hong Kong and see the headlines, they're seeing that 599 00:31:41,920 --> 00:31:45,160 Speaker 14: the July one March has been curbed and the annual 600 00:31:45,240 --> 00:31:50,240 Speaker 14: June fourth commemoration of the Tenement Square massacre was also curbed. 601 00:31:50,480 --> 00:31:55,240 Speaker 14: So those events were only allowed in Hong Kong across China, 602 00:31:55,840 --> 00:31:58,720 Speaker 14: and they for a long time was seen as a 603 00:31:58,720 --> 00:32:03,040 Speaker 14: symbol of Hong Kong's freedom and that distinct they distinguish 604 00:32:03,560 --> 00:32:06,760 Speaker 14: Hong Kong from the rest of China. So that's now gone, 605 00:32:06,880 --> 00:32:10,880 Speaker 14: and so if you look at why they created this 606 00:32:11,000 --> 00:32:14,080 Speaker 14: one country, two systems framework for Hong Kong's return to 607 00:32:14,160 --> 00:32:18,680 Speaker 14: Chinese rule, those distinctions are being erased and it's no 608 00:32:18,760 --> 00:32:23,200 Speaker 14: wonder that people question if China's action amounts to a 609 00:32:23,280 --> 00:32:26,160 Speaker 14: violation of the spirit, if not the letter, of the 610 00:32:26,200 --> 00:32:27,520 Speaker 14: initial design. 611 00:32:27,480 --> 00:32:31,520 Speaker 3: The protesters were calling for that which was promised, as 612 00:32:31,520 --> 00:32:34,880 Speaker 3: I mentioned earlier, And you wonder whether or not you 613 00:32:34,920 --> 00:32:37,560 Speaker 3: know what was the catalyst for china feeling is though 614 00:32:37,600 --> 00:32:40,080 Speaker 3: that they had gone too far. And I'm also curious 615 00:32:40,120 --> 00:32:42,440 Speaker 3: alan whether or not you think that the US and 616 00:32:42,520 --> 00:32:47,320 Speaker 3: the UK and others actually hurt the political aspirations of 617 00:32:47,360 --> 00:32:50,000 Speaker 3: Hong Kong protesters by being so supportive. I know that 618 00:32:50,040 --> 00:32:52,520 Speaker 3: sounds funny, but some would make that claim. 619 00:32:52,680 --> 00:32:55,280 Speaker 14: I think it's a legitimate claim, and some you know, 620 00:32:55,320 --> 00:32:59,360 Speaker 14: a question that I'm sure historians will will ask themselves 621 00:32:59,360 --> 00:33:02,560 Speaker 14: going forward. The China and Hong Kong authorities, they have 622 00:33:03,040 --> 00:33:06,480 Speaker 14: now branded the twenty nineteen protests as some sort of 623 00:33:06,520 --> 00:33:11,240 Speaker 14: a color revolution, which you know generally means that you know, 624 00:33:11,320 --> 00:33:15,160 Speaker 14: people trying to topple the Communist Party. There would be 625 00:33:15,200 --> 00:33:17,240 Speaker 14: a crime, you know, in many places. But I mean, 626 00:33:17,640 --> 00:33:20,800 Speaker 14: any reporter in Hong Kong covering those events could tell 627 00:33:20,800 --> 00:33:24,080 Speaker 14: you that, you know, people weren't out there. Most people 628 00:33:24,080 --> 00:33:27,240 Speaker 14: weren't out there to try to overthrow their government. Most 629 00:33:27,280 --> 00:33:30,440 Speaker 14: of them were responding to what they saw as police 630 00:33:30,440 --> 00:33:34,880 Speaker 14: abuse in their enforcement action against protesters, as well as 631 00:33:34,920 --> 00:33:37,360 Speaker 14: a demand for greater freedoms in electing their own leaders 632 00:33:37,400 --> 00:33:38,360 Speaker 14: and lawmakers. 633 00:33:38,800 --> 00:33:41,480 Speaker 13: Let's talk a little bit about the demographic shift. We 634 00:33:41,640 --> 00:33:43,920 Speaker 13: have been alluding to the fact that there has been 635 00:33:43,920 --> 00:33:47,040 Speaker 13: a bit of a brain drain happening, while at the 636 00:33:47,040 --> 00:33:49,760 Speaker 13: same time, from what I'm understanding, the World Bank is 637 00:33:49,760 --> 00:33:53,760 Speaker 13: saying that Hong Kong has the world's lowest fertility rate 638 00:33:53,880 --> 00:33:58,080 Speaker 13: and nearly thirty percent of the population will be sixty 639 00:33:58,080 --> 00:34:01,920 Speaker 13: five or above by twenty forty. So, Jenny, is there 640 00:34:02,080 --> 00:34:04,200 Speaker 13: a kind of a crisis happening when you look at 641 00:34:04,200 --> 00:34:05,040 Speaker 13: the demographics. 642 00:34:05,280 --> 00:34:07,800 Speaker 10: Absolutely, you know, it's not just Hong Kong. Hong Kong's 643 00:34:07,840 --> 00:34:10,399 Speaker 10: sort of trend of this aging population is in line 644 00:34:10,400 --> 00:34:13,120 Speaker 10: with what we're seeing in other parts of Asia, you know, Japan, 645 00:34:13,239 --> 00:34:16,640 Speaker 10: South Korea and increasingly China having similar problems. But in 646 00:34:16,680 --> 00:34:19,319 Speaker 10: Hong Kong it is acute and it hasn't been helped 647 00:34:19,320 --> 00:34:22,319 Speaker 10: by the political problems. In the past few years. You know, 648 00:34:22,880 --> 00:34:25,600 Speaker 10: there's been a big sort of exodus of talent overseas. 649 00:34:26,040 --> 00:34:29,439 Speaker 10: The UK has this visa program now which has seen 650 00:34:29,600 --> 00:34:32,479 Speaker 10: you know, tens of thousands of Hong Kong's leave. Most 651 00:34:32,520 --> 00:34:35,200 Speaker 10: of those are young people, exactly the kind of people 652 00:34:35,239 --> 00:34:37,080 Speaker 10: you know, from an economic point of view, that you'd 653 00:34:37,120 --> 00:34:39,600 Speaker 10: want to keep in the city. That's an issue for 654 00:34:39,640 --> 00:34:41,680 Speaker 10: the Hong Kong government, you know. At the same time, 655 00:34:41,719 --> 00:34:44,120 Speaker 10: in terms of sort of overall population, we did see 656 00:34:44,120 --> 00:34:47,279 Speaker 10: this big exodus during COVID and in the wake of 657 00:34:47,400 --> 00:34:50,480 Speaker 10: the protests and when the UK and other nations such 658 00:34:50,520 --> 00:34:54,000 Speaker 10: as Canada opened up visa programs. The government says now 659 00:34:54,040 --> 00:34:56,640 Speaker 10: that the population actually has sort of replenished back to 660 00:34:56,680 --> 00:34:59,080 Speaker 10: sort of the figures we were at pre COVID. By think, 661 00:34:59,120 --> 00:35:02,239 Speaker 10: what you have seen is a demographic shift, and so 662 00:35:02,360 --> 00:35:05,040 Speaker 10: where we did sort of you know, lose people, people 663 00:35:05,080 --> 00:35:07,239 Speaker 10: from Midland China have come in and sort of replaced 664 00:35:07,800 --> 00:35:10,560 Speaker 10: those parts of the population. It's hard to know exactly 665 00:35:10,600 --> 00:35:14,320 Speaker 10: how many foreigners have left. We don't have the latest 666 00:35:14,360 --> 00:35:16,480 Speaker 10: census figures on that which would tell us, but I 667 00:35:16,480 --> 00:35:18,680 Speaker 10: think just anecdotally, you know, when you look at some 668 00:35:18,719 --> 00:35:21,400 Speaker 10: of the schools and the private members clubs, it feels 669 00:35:21,480 --> 00:35:24,120 Speaker 10: like those institutions which rely on ITX perhaps are sort 670 00:35:24,160 --> 00:35:27,560 Speaker 10: of they're reporting fewer foreigners in their ranks. 671 00:35:27,680 --> 00:35:30,040 Speaker 3: I think many people expect a lot of Mainlanders to 672 00:35:30,080 --> 00:35:33,400 Speaker 3: be coming here and perhaps to help on that front, 673 00:35:33,440 --> 00:35:37,280 Speaker 3: to provide younger people here. You need only walk around 674 00:35:37,320 --> 00:35:40,680 Speaker 3: Central and getting the elevators, and it seems like mostly 675 00:35:40,719 --> 00:35:43,800 Speaker 3: what you hear is Mandarin these days. I was told 676 00:35:44,440 --> 00:35:47,360 Speaker 3: a long time ago, right in fact, right at the handover, 677 00:35:47,760 --> 00:35:49,799 Speaker 3: that Hong Kong was on its way to becoming an 678 00:35:49,840 --> 00:35:52,480 Speaker 3: important regional city in China, but it would lose its 679 00:35:52,480 --> 00:35:56,400 Speaker 3: status as a regional powerhouse and indeed a global powerhouse. 680 00:35:57,040 --> 00:35:59,440 Speaker 3: Is that where we're heading, Jenny, or can it be 681 00:35:59,480 --> 00:36:00,000 Speaker 3: turned around? 682 00:36:00,440 --> 00:36:02,160 Speaker 10: I'm not sure that is where it's heading, I think 683 00:36:02,520 --> 00:36:05,080 Speaker 10: because people maybe expected China to sort of liberalize more 684 00:36:05,120 --> 00:36:07,960 Speaker 10: than it has done, but that doesn't seem to be 685 00:36:08,000 --> 00:36:10,520 Speaker 10: the way that China is trending. Particularly, you know, it's 686 00:36:10,560 --> 00:36:12,640 Speaker 10: changing things sort of gets into sort of more of 687 00:36:12,680 --> 00:36:16,399 Speaker 10: a confrontation with the US. So, you know, Hong Kong 688 00:36:16,440 --> 00:36:19,279 Speaker 10: is at a very important conduit flow of money between 689 00:36:19,320 --> 00:36:21,560 Speaker 10: the mainland and the rest of the world. The biggest 690 00:36:21,600 --> 00:36:23,600 Speaker 10: problem for Hong Kong, I think, is that China's own 691 00:36:23,640 --> 00:36:26,640 Speaker 10: economy is slowing down, so there's less of that money 692 00:36:26,840 --> 00:36:29,120 Speaker 10: flowing and you know, that is really one of the 693 00:36:29,160 --> 00:36:31,880 Speaker 10: biggest drags for Hong Kong right now. And then in 694 00:36:31,960 --> 00:36:34,520 Speaker 10: terms of you know, the regional powerhousing it, I think 695 00:36:34,560 --> 00:36:37,120 Speaker 10: it's the same point. You know, once there's more money 696 00:36:37,120 --> 00:36:38,680 Speaker 10: to be made in China again, I think Hong Kong 697 00:36:38,680 --> 00:36:41,920 Speaker 10: will flourished. The other problem Hong Kong has, though, is 698 00:36:41,960 --> 00:36:45,439 Speaker 10: that its own geopolitical ties with Western countries are also 699 00:36:45,520 --> 00:36:48,239 Speaker 10: quite strained. And I think what that wouldn't stop people 700 00:36:48,239 --> 00:36:50,680 Speaker 10: from doing from living here and doing business. What they 701 00:36:50,680 --> 00:36:53,760 Speaker 10: worry about is their unpredictability, you know, are their feathers 702 00:36:53,800 --> 00:36:56,399 Speaker 10: sort of you know, will be more sanctions on leaders here, 703 00:36:56,400 --> 00:36:58,520 Speaker 10: Will that create a backlash from Hong Kong, or Hong 704 00:36:58,600 --> 00:37:00,920 Speaker 10: Kong lose more of it specialty just around the world. 705 00:37:01,280 --> 00:37:04,000 Speaker 10: That sort of adds sensibility, which I think is a 706 00:37:04,080 --> 00:37:06,959 Speaker 10: risk to the city's future as a financial hub, no. 707 00:37:06,920 --> 00:37:08,920 Speaker 13: Doubt about that. I mean, we know Hong Kong for 708 00:37:08,960 --> 00:37:11,840 Speaker 13: that reason being a kind of a gateway into China. 709 00:37:11,960 --> 00:37:15,200 Speaker 13: But is there a move allen underway to try to 710 00:37:15,280 --> 00:37:19,640 Speaker 13: diversify the economy in any way away from financial services, 711 00:37:19,680 --> 00:37:20,720 Speaker 13: away from banking. 712 00:37:20,960 --> 00:37:25,000 Speaker 14: Hong Kong is certainly trying to diversify. For the longest time, 713 00:37:25,160 --> 00:37:27,600 Speaker 14: is always put all its X in one basket, which 714 00:37:27,640 --> 00:37:31,200 Speaker 14: is China. But in its effort to diversify, it's still 715 00:37:31,239 --> 00:37:34,719 Speaker 14: trying to position itself as the gateway between China and 716 00:37:34,760 --> 00:37:37,600 Speaker 14: the rest of the world. But where it's making more 717 00:37:37,600 --> 00:37:41,520 Speaker 14: effort now is in the Middle East, in Southeast Asia 718 00:37:41,560 --> 00:37:44,440 Speaker 14: and South Asia. And I believe the Chief Executive just 719 00:37:44,480 --> 00:37:49,080 Speaker 14: mentioned that the government will will tap Latin America as 720 00:37:49,120 --> 00:37:52,760 Speaker 14: well in trying to pitch Hong Kong as a destination 721 00:37:52,800 --> 00:37:56,160 Speaker 14: for the investment and access to the Chinese market in 722 00:37:56,200 --> 00:38:01,000 Speaker 14: other areas. For example, tourism, Hong Kong is not realizing 723 00:38:01,040 --> 00:38:04,440 Speaker 14: that it can't count on Chinese tourists forever and is 724 00:38:04,480 --> 00:38:09,360 Speaker 14: trying to attract tourists from highest spending countries, for example Japan. 725 00:38:09,800 --> 00:38:12,959 Speaker 14: So this is relatively new because of Chinese tourism. When 726 00:38:13,000 --> 00:38:17,000 Speaker 14: the Chinese economy was performing while and growing rapidly, they 727 00:38:17,040 --> 00:38:19,600 Speaker 14: were big spenders in Hong Kong. They represent the biggest 728 00:38:20,000 --> 00:38:23,319 Speaker 14: slies of the Hong Kong tourism pie. But now with 729 00:38:23,440 --> 00:38:26,000 Speaker 14: the slow down in a Chinese economy and the uncertain 730 00:38:26,040 --> 00:38:30,000 Speaker 14: future with its economic growth, Hong Kong officials are thinking 731 00:38:30,040 --> 00:38:33,760 Speaker 14: about alternative sources of tourism which make up a sizeable 732 00:38:33,880 --> 00:38:36,520 Speaker 14: part of the economy and the local labor markets. 733 00:38:37,040 --> 00:38:39,239 Speaker 3: Alan, thank you so much for joining us. Alan Wong, 734 00:38:39,280 --> 00:38:43,200 Speaker 3: Bloomberg China Eco GOOV editor and Jenny Marsh Bloomberg team 735 00:38:43,239 --> 00:38:47,000 Speaker 3: leader for Greater China EGOGOV with us here on this 736 00:38:47,040 --> 00:38:50,640 Speaker 3: look at Hong Kong on Establishment Day as it approaches 737 00:38:50,719 --> 00:38:54,160 Speaker 3: in the coming week. I'm Brian Curtis along with Doug Krisner. 738 00:38:54,480 --> 00:38:57,800 Speaker 3: You can catch us every weekday here for Bloomberg Daybreak Asia, 739 00:38:57,880 --> 00:39:00,840 Speaker 3: beginning at eight am in Hong Kong at eight pm 740 00:39:00,840 --> 00:39:01,600 Speaker 3: on Wall Street. 741 00:39:01,880 --> 00:39:04,600 Speaker 2: John all right, thanks Brian and Doug, and that does 742 00:39:04,640 --> 00:39:07,600 Speaker 2: it for this edition of Bloomberg Daybreak Weekend. Join us 743 00:39:07,640 --> 00:39:10,360 Speaker 2: again Monday morning at five am Wall Street time for 744 00:39:10,400 --> 00:39:13,600 Speaker 2: the latest on markets overseas and the news you need 745 00:39:13,680 --> 00:39:16,080 Speaker 2: to start your today. I'm John Tucker. Stay with us. 746 00:39:16,120 --> 00:39:20,560 Speaker 2: Top stories global business headlines are coming up right now.