WEBVTT - Inflation and Geopolitics Impact Markets 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business app, 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.080 us live on YouTube. 0:00:27.160 --> 0:00:30.280 We have great analysis now, particularly picking up the pieces 0:00:30.320 --> 0:00:34.280 of a Federal Reserve present and a Federal Reserve future. 0:00:34.880 --> 0:00:39.959 Joining a Sema Shah, she's chief Global Strategist, principal asset Management. 0:00:40.320 --> 0:00:43.640 To me, Seema, the heart of the debate whatever anyone 0:00:43.800 --> 0:00:47.600 thinks is a humility on the part of a central bank, 0:00:47.640 --> 0:00:51.400 including the Bank of England, of getting out front of 0:00:51.440 --> 0:00:55.320 the debate or waiting to see what the data hands you. 0:00:55.840 --> 0:00:59.880 That's called X post. How X post are central banks 0:01:00.160 --> 0:01:00.640 right now? 0:01:01.960 --> 0:01:04.399 Tom? Yeah, Look, it was an interesting interview and I 0:01:04.440 --> 0:01:06.319 think that you know, as you said, what we've seen 0:01:06.360 --> 0:01:09.520 from central banks everywhere is that they become very, very 0:01:09.560 --> 0:01:13.280 responsive to the data, which when you're confronting shocks like 0:01:13.360 --> 0:01:16.560 we've had in the last five to six years, it 0:01:16.600 --> 0:01:19.440 does make their job really difficult and it creates the risk, 0:01:19.520 --> 0:01:23.119 the higher risk of policy errors. I think what John 0:01:23.200 --> 0:01:24.720 was saying at the end of the interview there about 0:01:24.720 --> 0:01:28.400 the importance of creating discussion is absolutely right. I mean, 0:01:28.400 --> 0:01:32.119 in every single company, from an investors standpoint, we try 0:01:32.120 --> 0:01:37.200 and revisit the framework that we've created for our portfolio decisions. 0:01:37.520 --> 0:01:41.800 That's normal, particularly in a time where the circumstances, when 0:01:41.800 --> 0:01:44.280 the backdrop of the economy of the market is shifting, 0:01:44.600 --> 0:01:46.280 and I think for the last five sixes that is 0:01:46.319 --> 0:01:49.560 exactly what we're seeing, the kind of the increase in 0:01:49.600 --> 0:01:53.560 geopolitical risks, the focus and supply chains, things are shifting 0:01:53.720 --> 0:01:56.040 really really rapidly, and so we do need to revisit 0:01:56.080 --> 0:01:58.080 the framework, even if it's just a decide to stick 0:01:58.120 --> 0:01:58.680 with the same thing. 0:01:58.800 --> 0:02:01.680 And you are a wonderfully qualified for this question, then 0:02:02.080 --> 0:02:06.120 is it just simply that the US Central Bank has 0:02:06.200 --> 0:02:09.000 to move towards the heritage of a younger bank of 0:02:09.040 --> 0:02:12.480 England where there is more debate and more descent. 0:02:13.639 --> 0:02:15.760 I think that there is there's a line in this 0:02:15.880 --> 0:02:17.840 stand there. You know, we don't want to get to 0:02:17.840 --> 0:02:22.520 a point where there's so much disagreevent that actually is 0:02:22.560 --> 0:02:24.960 very difficult for markets to get to a point where 0:02:25.000 --> 0:02:27.280 they know the kind of direction that central banks are 0:02:27.320 --> 0:02:30.640 moving in. But at the same time having that active debate. 0:02:31.680 --> 0:02:33.920 I think I think it is important for vested at 0:02:33.919 --> 0:02:35.959 this time. We need to try and think through, for example, 0:02:36.000 --> 0:02:39.160 what is the impact of population growth, the impact of AI. 0:02:39.360 --> 0:02:40.720 Is it going to be disinflation or is it going 0:02:40.760 --> 0:02:43.839 to be inflationary? These are really really key questions that 0:02:43.919 --> 0:02:46.400 we ourselves are grappling with. They're trying to get an 0:02:46.400 --> 0:02:49.079 idea and understanding of how the Federal Reserve, the Bank 0:02:49.080 --> 0:02:51.760 of England, et cetera. Are considering it. I think is 0:02:51.800 --> 0:02:55.440 important as long as it doesn't spill into significantly greater volatility, 0:02:55.480 --> 0:03:00.000 which makes it difficult to understand how your portfolio decisions 0:03:00.120 --> 0:03:00.920 going to be impacted. 0:03:01.880 --> 0:03:04.720 Suma, We're about to get a new chairman of the 0:03:04.880 --> 0:03:07.600 US Federal Reserve. How do you think the Federal Reserve 0:03:08.200 --> 0:03:11.119 will change its behavior if at all, or it's view 0:03:11.160 --> 0:03:13.800 as to interest rates, if at all going forward. 0:03:14.600 --> 0:03:17.840 Well, so there's a guess there's two parts of the conversation. 0:03:17.919 --> 0:03:20.000 There's going to be the cyclical the short term, and 0:03:20.040 --> 0:03:23.480 then there is so focusing mainly on the cyclicals. So 0:03:23.600 --> 0:03:26.720 what happens in the next six six to twelve months, 0:03:26.800 --> 0:03:28.639 just as there always has been, there has to be 0:03:28.720 --> 0:03:31.720 a focus on what are the economic conditions. So there 0:03:31.760 --> 0:03:35.360 may be this inclination, for example, as has been suggested, 0:03:35.920 --> 0:03:39.640 of kind of a move towards a preference for lower rates, 0:03:39.760 --> 0:03:43.000 but the economic conditions need to support that. And certainly 0:03:43.000 --> 0:03:45.320 where we are today with an economy which continues to 0:03:45.360 --> 0:03:48.200 be really strong, where the labor market has been surprising 0:03:48.240 --> 0:03:51.080 to the upside most recently, and then of course inflationary 0:03:51.080 --> 0:03:53.680 conditions both on the consumer side and on the producer 0:03:53.760 --> 0:03:56.000 side surprising to the upside. I think it's a really 0:03:56.040 --> 0:03:58.880 difficult environment for a central bank to be cutting interest 0:03:58.960 --> 0:04:02.120 rates with in mind, staying on hold and really taking 0:04:02.160 --> 0:04:04.560 the time to see how this plays out is probably 0:04:04.600 --> 0:04:08.960 the most likely, which suggests that even with the new 0:04:09.000 --> 0:04:11.880 head of the Fed, actually the policy impact is going 0:04:11.920 --> 0:04:13.480 to be quite minimal, at least in the near term. 0:04:14.400 --> 0:04:18.400 Sema, given that backdrop here, with all the crosswinds out 0:04:18.400 --> 0:04:21.800 there for investors to negotia, whether it's geopolitical issues in 0:04:21.839 --> 0:04:24.320 the Middle Easter or Ukraine, we've got the President Trump 0:04:24.360 --> 0:04:28.479 in China. What's the message you have for your global 0:04:28.920 --> 0:04:29.880 clients these days. 0:04:30.760 --> 0:04:33.440 Yeah, as you said, there's a number of different cross currents. 0:04:33.480 --> 0:04:36.200 So for investments what we've been pointing to is that, look, 0:04:36.520 --> 0:04:39.520 we do have confidence in the global economy. We can 0:04:39.560 --> 0:04:42.560 see pockets and weakness, and there is divergence with the 0:04:42.680 --> 0:04:46.320 US surprising to the upside and maybe Europe and Asia 0:04:46.560 --> 0:04:48.719 as any more exposed to the negative impact from the 0:04:48.720 --> 0:04:54.279 geolitical conflict. So global diversification is still key. Though There's 0:04:54.320 --> 0:04:57.000 going to be companies in Europe and in Asia who 0:04:57.040 --> 0:04:59.560 are going to be well positioned for this environment as 0:04:59.600 --> 0:05:01.880 well as take into account, of course, that very important 0:05:01.880 --> 0:05:04.680 secular force of AI. It is still a question of 0:05:04.680 --> 0:05:09.359 global diversification, both regions style gies and of course asset costs, 0:05:09.560 --> 0:05:12.599 because investors need to be open to the idea that 0:05:12.600 --> 0:05:15.520 there is a lot of volatility. We don't know what's 0:05:15.520 --> 0:05:17.640 going to come, so we need have that diversification, but 0:05:17.760 --> 0:05:20.280 also positioned for strength because the economic backdrop is still 0:05:20.320 --> 0:05:21.000 pretty resilient. 0:05:21.040 --> 0:05:23.680 All I know, Seman, you're lifting the market. Semashaw, thank 0:05:23.720 --> 0:05:28.239 you so much, Chief Global Strategist, Principal asset manager. Stay 0:05:28.240 --> 0:05:32.120 with us. More from Bloomberg Surveillance coming up after this. 0:05:39.360 --> 0:05:42.960 You're listening to the Bloomberg Surveillance podcast. Catch us Live 0:05:43.040 --> 0:05:46.040 weekday afternoons from seven to ten am E's durn Listen 0:05:46.080 --> 0:05:49.640 on Applecarplay and Android Otto with the Bloomberg Business app, 0:05:49.839 --> 0:05:51.560 or watch us live on YouTube. 0:05:51.720 --> 0:05:52.400 This is a joy. 0:05:52.440 --> 0:05:55.960 Pop Quincy is a really wonderful perspective for JP Morgan, 0:05:56.000 --> 0:05:58.919 as mister Diamond has made clear he desires to build 0:05:58.920 --> 0:06:01.800 out Europe and build out are huge plans for the 0:06:01.920 --> 0:06:06.080 London platform Global adad of equities JP Morgan Asset Management. 0:06:06.279 --> 0:06:08.760 I'm going to steal some thunder from Sweeney because Sweeney 0:06:08.839 --> 0:06:13.280 nailed this fourteen months ago. A shift to emerging markets, 0:06:13.560 --> 0:06:16.919 a shift out of America that's not popular right now. 0:06:16.800 --> 0:06:21.120 Is no, the emerging markets have shown tremendous signs of life. 0:06:21.360 --> 0:06:24.360 When I look around our investment team, the most optimism 0:06:24.400 --> 0:06:29.200 I find is on our emerging market desks. Really yeah, So, look, 0:06:29.440 --> 0:06:32.360 you've got markets that massively underperform the US and the 0:06:32.440 --> 0:06:35.440 cumulative underperformance from the peak in twenty ten to the 0:06:35.480 --> 0:06:37.560 trough it was only eighteen months ago. Is there around 0:06:37.560 --> 0:06:40.840 eighty percent and we made back I don't know ten 0:06:40.920 --> 0:06:42.800 fifteen percent of that so a little bit. So there's 0:06:43.120 --> 0:06:45.560 just based on historical comparisons, is a long way to go. 0:06:45.920 --> 0:06:49.120 But look, investing in stocks is about earnings fundamentally, and 0:06:49.240 --> 0:06:52.240 earnings growth in emerging markets was really strong last year. 0:06:52.360 --> 0:06:54.240 It's even stronger this year. 0:06:54.279 --> 0:06:57.159 We've got earnings up fort north of forty percent for 0:06:57.200 --> 0:07:01.240 the emerging market for zero for zero, and you're not 0:07:01.320 --> 0:07:04.000 paying particularly high price for that. So there's a lot 0:07:04.000 --> 0:07:05.880 to be excited about in emerging markets right now. 0:07:05.920 --> 0:07:07.919 Where in particular, I mean, when I think emerging markets, 0:07:07.920 --> 0:07:10.360 I feel like I have to start with China. 0:07:10.440 --> 0:07:12.760 I know it's a big part of the MSCI. 0:07:12.280 --> 0:07:15.520 The biggest where in emerging markets it gets the attention 0:07:15.560 --> 0:07:16.560 of the GP Moorgan asset. 0:07:17.480 --> 0:07:21.240 Actually, China is no longer the biggest part of the MCI, 0:07:21.440 --> 0:07:22.280 so Taiwan has. 0:07:22.160 --> 0:07:24.600 A higher I did not know that well. 0:07:24.760 --> 0:07:28.480 And in that statistic you see, of course, the trade 0:07:28.480 --> 0:07:31.200 that's dominating just about everything in global equities at the moment, 0:07:31.240 --> 0:07:34.120 which is the AI investment boom. Now that is having 0:07:34.120 --> 0:07:37.440 a huge impact on emerging markets, particularly this year as 0:07:37.440 --> 0:07:40.720 the boom has sort of spilled away from the hyperscalers 0:07:40.720 --> 0:07:45.280 into the memory stocks, semiconductors. They're obviously very highly represented 0:07:45.280 --> 0:07:47.840 in emerging markets. They're booming, But there's more to emerging 0:07:47.840 --> 0:07:49.040 markets than just technology. 0:07:49.880 --> 0:07:52.880 So let me just go back to Taiwan in the 0:07:53.040 --> 0:07:54.400 MSCI is bigger than China. 0:07:54.840 --> 0:07:55.040 Yeah. 0:07:55.400 --> 0:07:57.680 Wow, So that must be an interesting discussion with President 0:07:57.760 --> 0:07:59.960 Trump and President in g It's like, wait a minute, 0:08:00.440 --> 0:08:03.280 I mean, Taiwan can stand on its own in many 0:08:03.360 --> 0:08:07.360 different ways. So from an investment perspective, how do you 0:08:07.360 --> 0:08:09.679 think about some of the other parts of the globe, 0:08:09.680 --> 0:08:12.160 Because we saw in twenty twenty five, while the US 0:08:12.160 --> 0:08:14.720 secondary markets did very well, a lot of the rest 0:08:14.760 --> 0:08:17.160 of the world did a lot better. Here is that 0:08:17.200 --> 0:08:19.640 trade still on? Is that rest of the world trades 0:08:19.720 --> 0:08:20.920 still play. 0:08:21.000 --> 0:08:23.360 Yeah, so there was a big catch up last year. 0:08:23.400 --> 0:08:25.240 As you point out. I think what happened last year 0:08:25.680 --> 0:08:28.760 is that European investors remembered they have a European market 0:08:28.760 --> 0:08:31.440 they have to pay attention to. And you know what 0:08:31.480 --> 0:08:34.040 we've seen really from many investors in Europe over the 0:08:34.080 --> 0:08:37.679 last fifteen years, understandably, is all the attention being on 0:08:37.720 --> 0:08:40.920 the United States when US stocks dropped in the first 0:08:40.920 --> 0:08:44.000 half of last year in euro terms, when European markets 0:08:44.000 --> 0:08:46.480 started doing better, then attention switched back to Europe. We 0:08:46.480 --> 0:08:48.600 saw Europeans keeping some more of their money at home, 0:08:48.760 --> 0:08:50.600 and we saw the same thing in Asia as well. 0:08:51.160 --> 0:08:53.679 How's the dollar linkage here? What's the correlation? You're off 0:08:53.760 --> 0:08:58.760 dxy or bbdxy or you guys handled the ADXY and 0:08:58.920 --> 0:09:01.319 X I believe, I mean, what's the correlation here? Of 0:09:01.440 --> 0:09:04.360 I need I need to see a weaker dollar to 0:09:04.440 --> 0:09:05.600 make this equation work. 0:09:05.720 --> 0:09:07.120 Yeah, you need at least a flat dollar. 0:09:07.160 --> 0:09:09.760 I think our emerging markets team would say that the 0:09:09.760 --> 0:09:12.160 macro indicator that they pay the most attention to is 0:09:12.160 --> 0:09:14.840 a dollar. A really strong dollar just sucks the life 0:09:14.880 --> 0:09:17.120 out of the emerging markets. So as long as it's 0:09:17.160 --> 0:09:19.040 flat or down, then that then that's fine, and the 0:09:19.080 --> 0:09:20.640 other other fundamentals come into play. 0:09:20.720 --> 0:09:22.640 You're too young to remember this, but in my youth, 0:09:22.720 --> 0:09:27.040 emerging markets was a concrete company and maybe the telephone company. 0:09:27.600 --> 0:09:31.640 Total discussion in a given say South East Asia country, 0:09:32.040 --> 0:09:34.719 how do you diversify across them? You don't buy just 0:09:34.760 --> 0:09:36.000 two stocks, do you? No? 0:09:36.400 --> 0:09:39.160 Look, I think first of all, we look at emerging 0:09:39.280 --> 0:09:39.680 US state. 0:09:40.080 --> 0:09:40.280 Yeah. 0:09:40.400 --> 0:09:43.160 Look, you look at things by industry, not country. Primarily 0:09:43.480 --> 0:09:45.839 in the emerging markets a little more. Country factors can 0:09:45.840 --> 0:09:48.880 play into But and at the moment, of course, it's 0:09:48.920 --> 0:09:51.400 about AI and tech and then the and then the rest. 0:09:51.559 --> 0:09:54.679 But the rest, there's a defense theme. There's a recovery 0:09:54.679 --> 0:09:57.320 in the financial sector of Latin America. There's more going 0:09:57.360 --> 0:09:59.520 on across the emerging markets than just a boom in 0:09:59.559 --> 0:10:01.319 memory set in conductor stocks. 0:10:02.600 --> 0:10:05.640 Energy. I got oil on one hundred bucks around the world. 0:10:05.720 --> 0:10:05.920 Here. 0:10:06.000 --> 0:10:08.320 What are you guys doing with energy? I know it's 0:10:08.360 --> 0:10:09.920 a small part of the S and P five hundred, 0:10:09.960 --> 0:10:12.920 but the way we've had a monster move in energy, Yeah. 0:10:12.760 --> 0:10:14.440 Well it's a growing part of the S and P 0:10:14.480 --> 0:10:14.960 five hundred. 0:10:15.000 --> 0:10:17.839 Again, we've got profits, you know what, up sixty seventy 0:10:17.880 --> 0:10:21.480 percent this year. One of the things that we focus 0:10:21.520 --> 0:10:24.319 on in energy and gives us sort of more comfort. 0:10:24.440 --> 0:10:27.040 It's not so much excited about the commodity price itself, 0:10:27.080 --> 0:10:29.720 because to the extent we know anything, and it's very 0:10:29.760 --> 0:10:31.760 hard to know a lot about commodity prices. We wouldn't 0:10:31.760 --> 0:10:34.559 be that excited about that. But the companies themselves these 0:10:34.600 --> 0:10:37.320 days just do such a better job of generating cash, 0:10:37.480 --> 0:10:40.679 looking after the balance sheets, returning money to shareholders, and 0:10:40.720 --> 0:10:42.920 that discipline's still there even in the face of this 0:10:43.160 --> 0:10:45.400 big move we've seen in oil prices. You look at 0:10:45.400 --> 0:10:48.680 the statements from the first quarter they're staying conservative and 0:10:48.720 --> 0:10:50.559 that's good for long term shareholder returns. 0:10:50.640 --> 0:10:52.200 Can I ask about an individual start? 0:10:52.320 --> 0:10:55.959 Yeah, I'm to answer it, but we'll give it so afterthought, 0:10:56.040 --> 0:10:58.160 I'm trying to teach you about the equity market, and 0:10:58.160 --> 0:11:01.920 I'm like, after the come on, buy shares, Apple, buy Microsoft, 0:11:02.000 --> 0:11:03.520 buy this, you know by. 0:11:03.840 --> 0:11:08.599 Netflix or whatever she wants. Jolly Bee in the Philippines 0:11:09.120 --> 0:11:12.240 down fifty three percent from the peak. How do you 0:11:12.280 --> 0:11:15.960 avoid the jolly bees of the emerging market? 0:11:16.520 --> 0:11:18.200 There's always going to be a couple of jolly bees 0:11:18.200 --> 0:11:21.080 in any portfolio, right, That's part of that, That's part 0:11:21.080 --> 0:11:21.679 of the life. 0:11:24.120 --> 0:11:26.040 As an equity investor. I mean, I think where we 0:11:26.080 --> 0:11:29.319 would be look. One of the big things. 0:11:29.080 --> 0:11:31.360 We're looking out for, obviously, is when you see this 0:11:31.480 --> 0:11:34.640 level of enthusiasm we've got for semiconductors at the moment, 0:11:34.920 --> 0:11:37.160 are we setting ourselves up for a giant jolly be 0:11:37.320 --> 0:11:40.760 type experience? And the thing that we when you get 0:11:40.760 --> 0:11:42.760 a big momentum move like this, we think there's three 0:11:42.760 --> 0:11:47.559 things to watch for. Stretch valuations, rising volatility, and peaking 0:11:47.600 --> 0:11:51.880 earnings estimates. So far valuations sort of mixed, price to 0:11:51.920 --> 0:11:54.920 earnings low actually, but anything else high price, the sales 0:11:54.960 --> 0:11:57.360 price to boom. The companies are making so much money, 0:11:57.480 --> 0:11:59.600 they're earning the valuations. Most of the memory stocks are 0:11:59.600 --> 0:12:04.640 still on digit multiples. Volatility, Yes, going up, earningamentum so strong. 0:12:05.040 --> 0:12:06.719 I got to do a sales job here. Yeah. One 0:12:06.760 --> 0:12:09.560 hundred and fourteen percent of Americans go to Saint Andrews 0:12:09.679 --> 0:12:12.199 up in Scotland's right because that's where the Prince of 0:12:12.240 --> 0:12:15.400 Wales met the Princess of Coxine. Give us a sales 0:12:15.480 --> 0:12:19.640 job and you were. University of Durham. It's spectacular, isn't it. 0:12:19.679 --> 0:12:20.320 The history. 0:12:20.440 --> 0:12:24.320 Look, it's a great university in an absolutely beautiful town. 0:12:24.360 --> 0:12:27.200 If you haven't visited Durham, anyone visiting the UK, it 0:12:27.240 --> 0:12:30.480 is Durham. Yes, you can see the city in a day. 0:12:30.520 --> 0:12:34.320 There's a Norman cathedral, a Norman castle. It's just a 0:12:34.360 --> 0:12:35.400 beautiful place to visit. 0:12:35.520 --> 0:12:37.320 It leads worldwide in Arabic studies. 0:12:37.360 --> 0:12:38.360 I believe this one too. 0:12:38.440 --> 0:12:40.760 Yeah, this is great, Paul, Thank you so much. Foquency 0:12:40.800 --> 0:12:45.040 with a small bank, JP Morgan, asset Manager, Global Ahead 0:12:45.040 --> 0:12:48.120 of Equities. Wonderful for you to visit us, stay with us. 0:12:48.400 --> 0:12:51.760 More from Bloomberg Surveillance coming up after. 0:12:51.440 --> 0:13:01.920 This you're listening to the Blue Blomberg Surveillance Podcast. Catch 0:13:02.000 --> 0:13:05.080 us live weekday afternoons from seven to ten am Eastern 0:13:05.240 --> 0:13:08.480 Listen on Apple Karplay and Android Otto with the Bloomberg 0:13:08.520 --> 0:13:11.240 Business app, or watch us live on YouTube. 0:13:11.400 --> 0:13:15.080 She is definitive out of Michigan with her view of China. 0:13:15.400 --> 0:13:19.080 We look back to the giants of Jonathan Spence, orable Shell, 0:13:19.600 --> 0:13:22.600 and so wonderfully all of that has been taken by 0:13:22.640 --> 0:13:27.320 Elizabeth Economy holding court at the Hoover Institution, Hargrove, Senior Fellow, 0:13:27.559 --> 0:13:32.559 this of course at Stanford University. I'm really taken back, 0:13:33.000 --> 0:13:39.160 Elizabeth by the cursory review of President Xi and his 0:13:39.360 --> 0:13:43.640 moment in China. You wrote of a third revolution, Ji 0:13:43.760 --> 0:13:47.560 Jimping and the new Chinese state. How's he doing? 0:13:49.760 --> 0:13:52.200 Okay, So we're starting off with the big, big question. 0:13:53.160 --> 0:13:57.960 Look, I think Shedenping is doing very well given Shedenping's ambitions. 0:13:58.000 --> 0:13:59.800 I think if you look at what he started off 0:13:59.840 --> 0:14:02.240 to do, you know when he came into power back 0:14:02.240 --> 0:14:04.800 at the end of twenty twelve, and you fast forward 0:14:04.840 --> 0:14:07.840 to today, you know he has consolidated power in his 0:14:07.880 --> 0:14:10.720 own hands. He's increased the role of the party. He 0:14:10.880 --> 0:14:14.559 certainly has set out major Chinese ambitions on the global 0:14:14.559 --> 0:14:17.439 stage and has made progress on achieving them. He wanted 0:14:17.520 --> 0:14:20.880 China to be a leading technology and economic power on 0:14:20.920 --> 0:14:23.000 the global stage, and he's achieved that as well. So 0:14:23.320 --> 0:14:25.960 I think when he looks back again, according to his 0:14:26.000 --> 0:14:27.760 own metrics, he's done extremely well. 0:14:28.120 --> 0:14:32.200 I've studied the geography of Taiwan. How does a pro 0:14:32.560 --> 0:14:37.880 like you respond to his stridency over Taiwan being the 0:14:38.040 --> 0:14:41.440 major issue? How does that is it ninety miles? I 0:14:41.480 --> 0:14:44.280 don't know. It's like from here, it's like from here 0:14:44.320 --> 0:14:49.080 to downtown Elizabeth economy. How do you respond to the 0:14:49.200 --> 0:14:51.280 Chinese discussion of Taiwan. 0:14:52.280 --> 0:14:57.720 So I'm actually quite relieved by the fact that, yes, 0:14:57.840 --> 0:15:00.880 Tgenping has raised this as sort of the central issue 0:15:00.920 --> 0:15:05.240 for Beijing, which we already knew. But the response from 0:15:05.320 --> 0:15:07.920 the United States has been very muted, and so all 0:15:07.960 --> 0:15:10.480 we've seen thus far coming out of the summit is 0:15:10.520 --> 0:15:14.360 a statement by the Chinese side. There's been no acknowledgment 0:15:14.960 --> 0:15:17.920 by the US side that we take this on board 0:15:17.960 --> 0:15:21.160 and somehow are going to change our position or our 0:15:21.200 --> 0:15:24.040 approach to Taiwan. And I think that's something that many 0:15:24.040 --> 0:15:27.560 people in the national security space. Many in Congress, even 0:15:27.600 --> 0:15:31.000 probably members of the president's own cabinet, were concerned about 0:15:31.040 --> 0:15:33.320 So I think it's fine that she didn'tin raises this 0:15:33.680 --> 0:15:35.600 as the number one issue for China. 0:15:35.920 --> 0:15:38.720 What's critical is how we then address. 0:15:38.320 --> 0:15:39.520 It, Elizabeth. 0:15:39.520 --> 0:15:43.840 Typically when a US president goes to China in particular, 0:15:43.920 --> 0:15:47.000 the expectations are fairly high that there's going to be 0:15:47.040 --> 0:15:50.600 some material agreements, some material discussions. Do we have any 0:15:50.600 --> 0:15:53.520 of those expectations for this summit? We haven't heard much 0:15:53.720 --> 0:15:54.160 so far. 0:15:55.480 --> 0:15:59.560 I mean, I'm actually pretty pleased by what's come out. 0:16:00.400 --> 0:16:03.200 I think we went in with sort of three big 0:16:03.200 --> 0:16:06.760 buckets of issues. You know, First, we wanted some mechanisms 0:16:06.840 --> 0:16:09.200 for stabilizing the relationship, and I think here the two 0:16:09.240 --> 0:16:11.960 countries were aligned, and there's the talk about the Board 0:16:12.000 --> 0:16:13.960 of Trade and the Board of Investment. I think Board 0:16:14.000 --> 0:16:16.520 of Trade is further along than the Board of Investment. 0:16:16.840 --> 0:16:18.760 But basically this is going to be an area where 0:16:18.760 --> 0:16:20.960 the two sides will come together and try to make 0:16:21.000 --> 0:16:23.920 progress in nonsensitive areas of trade. 0:16:24.000 --> 0:16:25.720 So fine, check that box. 0:16:26.360 --> 0:16:29.160 Second, I think you know, the President wanted big short 0:16:29.240 --> 0:16:32.480 term purpose purchases, and I think you know we've seen, 0:16:32.640 --> 0:16:34.640 there's going to be soybeans, there's going to be planes, 0:16:34.680 --> 0:16:35.160 there's going. 0:16:35.160 --> 0:16:38.440 To be beef, maybe energy. He'll get these big purchases. 0:16:38.800 --> 0:16:40.880 And then finally, and I think this is the most 0:16:40.880 --> 0:16:46.040 important area, the bigger strategic areas so Iran, Ai and 0:16:46.080 --> 0:16:49.840 again on the Taiwan front. No acknowledgement on our side 0:16:49.840 --> 0:16:52.480 that we're prepared to change our position, but we did 0:16:52.480 --> 0:16:54.960 get the Chinese to acknowledge on Iran that they want 0:16:54.960 --> 0:16:57.720 the Straight or wormos open. They don't think Iran should 0:16:57.760 --> 0:17:01.240 profit once the Straight is open, and they don't think 0:17:01.240 --> 0:17:03.400 you're wrong should have a nuclear weapon. So we have 0:17:03.520 --> 0:17:06.520 to see whether or not we can make China actually 0:17:06.560 --> 0:17:11.320 translate that agreement into action to pressure pressure Iran. But 0:17:11.400 --> 0:17:14.879 I think it's a very positive, very positive turn of events. 0:17:14.920 --> 0:17:17.520 We welcome all of you across America, around the world. 0:17:17.560 --> 0:17:22.240 It is Bloomberg Surveillance on YouTube. Subscribe to Bloomberg Podcast 0:17:22.320 --> 0:17:25.160 Air a Marie Horden coming up from Beijing. But we're 0:17:25.160 --> 0:17:29.199 thrilled to bring you. Elizabeth Economy of Stanford University and 0:17:29.280 --> 0:17:33.439 their Hoover Institution. Her book years ago, The River Runs Black, 0:17:33.640 --> 0:17:38.440 was a definitive graduate school study that was hugely successful 0:17:38.760 --> 0:17:43.800 on the environmental impact of China. Liz, in your wonderful 0:17:43.840 --> 0:17:47.480 effort of a few years ago, the world according to China, 0:17:47.760 --> 0:17:52.520 you close with a China reset. How does China reset 0:17:52.560 --> 0:17:54.520 after President Trump? 0:17:56.359 --> 0:17:58.520 So, I think the thing to bear in mind with 0:17:58.640 --> 0:18:03.680 this and the sort of meeting between presidency and President 0:18:03.720 --> 0:18:07.679 Trump is that I think Secretary of State Rubio really 0:18:07.760 --> 0:18:10.840 defined the relationship pretty well when he said, look, we're 0:18:10.840 --> 0:18:13.640 going to look for areas of cooperation, but we each 0:18:13.640 --> 0:18:16.479 have our own areas of interest. They're going to conflict, 0:18:16.520 --> 0:18:18.720 They're going to continue to conflict, and we want to 0:18:18.760 --> 0:18:20.120 manage the relationship. 0:18:20.200 --> 0:18:20.960 And so I think the. 0:18:21.560 --> 0:18:24.760 Goal here is largely the same as it's been, you know, 0:18:25.160 --> 0:18:27.840 for two decades or more, which is sort of a 0:18:27.960 --> 0:18:32.320 managed competition, managed strategic competition. The only question is whether 0:18:32.400 --> 0:18:35.159 or not the conflict they're sort of greater occupies a 0:18:35.160 --> 0:18:37.600 greater amount of space than the areas of cooperation. 0:18:38.280 --> 0:18:39.760 You know, we're going to continue. 0:18:39.359 --> 0:18:42.359 To have a lot of frictions, and President she is 0:18:42.400 --> 0:18:45.080 going to continue to do just what presidentc wants to 0:18:45.160 --> 0:18:49.680 advance Chinese interests how he defines Chinese national interests, irrespective 0:18:49.680 --> 0:18:53.240 of whatever the United states says or does during this summit. 0:18:53.760 --> 0:18:56.480 Elizabeth, I think for many of our viewers, many of 0:18:56.520 --> 0:18:59.840 our listeners, President she is the only leader that they've 0:19:00.080 --> 0:19:03.560 are known in China. Give us just a sense of 0:19:03.880 --> 0:19:07.159 what his position is today. How do you think about 0:19:07.640 --> 0:19:09.880 that position three, five, ten years from now. 0:19:11.480 --> 0:19:14.680 So, I mean, what makes presidency different from a number 0:19:14.680 --> 0:19:17.560 of leaders who have come before him in China is 0:19:17.720 --> 0:19:20.600 just the degree of power that he's managed to consolidate 0:19:20.720 --> 0:19:23.720 into his own hands and the extent to which he's 0:19:24.119 --> 0:19:27.240 managed to translate the vision for China both at home 0:19:27.359 --> 0:19:30.200 and on the global stage that you know, he articulated 0:19:30.400 --> 0:19:31.560 fourteen years ago. 0:19:31.960 --> 0:19:33.320 I think critically, he's. 0:19:33.160 --> 0:19:36.680 Coming upon you know, what will be probably his fourth 0:19:36.880 --> 0:19:40.399 five year term as General Secretary of the Communist Party, 0:19:40.520 --> 0:19:43.760 likely president of the country, and so you know, this 0:19:43.880 --> 0:19:45.320 is he's you know. 0:19:45.240 --> 0:19:47.080 People will say he's president for life. 0:19:47.880 --> 0:19:50.600 I think he will step back probably and won't have 0:19:50.640 --> 0:19:53.480 a fifth five year term, but will remain as sort 0:19:53.520 --> 0:19:55.800 of chairman of the party so he can continue to 0:19:55.920 --> 0:19:59.920 exert control. But really the degree to which he's concer 0:20:00.040 --> 0:20:05.119 validated power I think was unexpected by people either outside 0:20:05.240 --> 0:20:06.879 China or frankly inside China. 0:20:08.000 --> 0:20:11.120 I look, Liza, where we are, and I go back 0:20:11.119 --> 0:20:14.920 to our misjudgment of our intelligence of the Soviet Union 0:20:15.000 --> 0:20:18.959 years ago. Do we have intelligence on China? Or are 0:20:19.000 --> 0:20:22.440 we as blind looking at Beijing, Shanghai and the rest. 0:20:22.800 --> 0:20:26.840 There's submarine threat, et cetera. Are we as blind as 0:20:26.880 --> 0:20:28.120 we were with Gorbashev? 0:20:30.119 --> 0:20:32.920 I mean, I think are we as blind? 0:20:33.560 --> 0:20:37.159 I think the challenge now is Chijinping has made China 0:20:37.359 --> 0:20:41.080 more opaque rather than less of paque as his tenure 0:20:41.119 --> 0:20:44.639