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Speaker 1: Yea. Welcome to the Bloomberg Surveillance podcast. I'm Tom Keene

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Speaker 1: Jay Leye. We bring you insight from the best in economics, finance, investment,

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Speaker 1: and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud,

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Speaker 1: Bloomberg dot Com, and of course, on the Bloomberg That

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Speaker 1: Bank ofing the decision drops right now. Rates unchanged at

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Speaker 1: zero point five percent. The Bank of England's asset purchase

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Speaker 1: program also unchanged at four d and thirty five billion pounds.

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Speaker 1: The corporate bond target also left unchanged at ten billion pounds.

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Speaker 1: The headlines they cross as follows from thread Needle Street.

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Speaker 1: A vote of seven to two to keep interest rates

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Speaker 1: unchanged at zero point five in line with the previous decision.

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Speaker 1: The Bank of been seeing the inflation rate, calling faster

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Speaker 1: to reach the two percent goal in two years. Sterling

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Speaker 1: weakening into the decision over the last couple of weeks

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Speaker 1: as Governor Carney backed off from the idea of an

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Speaker 1: interest rate hike, and the economic data that came out

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Speaker 1: in the preceding couple of weeks confirmed that stance. Sterling

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Speaker 1: at the moment off the back of this decision one

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Speaker 1: pound but as you want dollar thirty five sixty two.

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Speaker 1: It rolls over too pretty much unchanged on the session

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Speaker 1: after trading higher a little bit earlier on. As far

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Speaker 1: as the market is pricing in the potential for a hike,

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Speaker 1: the money market in the UK pricing out a Bank

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Speaker 1: of England rate hike for twenty eighteen, that's the story then,

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Speaker 1: coming from the Bank of England, the Bank of England

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Speaker 1: and moving to leave rates unchanged at zero point five percent,

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Speaker 1: and UK money markets pricing out a Bank of England

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Speaker 1: rate hike foren so b I E leaving rate unchanged

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Speaker 1: the vote seven to two, and the Bank of England

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Speaker 1: seeing inflation, calling faster to reach two percent goal in

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Speaker 1: two years. Tom John, what does that headline means? Which

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Speaker 1: one prices out? That means they're not They're not predicting

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Speaker 1: a rate rise in two The money markets are a

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Speaker 1: longer price in a hike this year means That's exactly

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Speaker 1: what that means, after pricing in a hike after the

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Speaker 1: last inflation report. I want to bring your bloom blogs

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Speaker 1: narrow cha. It's Nara on the ground outside of Bank

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Speaker 1: of England Street, just just around a corner from thread Needles,

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Speaker 1: straight at the ladist headlines and era Yeah. John, So

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Speaker 1: my first takeaway from seeing these headlines is it's perhaps

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Speaker 1: less hawkish than some of the markets were expecting, right

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Speaker 1: because what we were looking with this vote split, someone

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Speaker 1: saying it could be a hawkish pushed the pound higher.

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Speaker 1: If we get a six three vote, we've got a

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Speaker 1: seven to to keep interest rates on hold today and

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Speaker 1: then the BOE seeing inflation cooling faster to reach the

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Speaker 1: two percent goal in two years. I would take a

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Speaker 1: slightly davish reading on that, also saying only limited tightening

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Speaker 1: needed in the coming years. However, it is still saying

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Speaker 1: that ongoing rate heights are required to control in a aation,

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Speaker 1: so that perhaps a little bit of balance coming in there.

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Speaker 1: But another key thing in the headlines is about this

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Speaker 1: a little bit of softness in the first quarter. So

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Speaker 1: the beer he seems to think that that was only

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Speaker 1: temporary and that we're going to see a little bit

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Speaker 1: more of a pickup in the second quarter and beyond.

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Speaker 1: I'm really pleased to say that we can bring in

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Speaker 1: Paul Tucker, now former Deputy Bank of England Governor, senior

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Speaker 1: fellow at Harvard and author of his new book Unelected Power.

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Speaker 1: The quest for legitimacy in central banking and the regulatory state. Paul,

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Speaker 1: great have you with us in New York. Thanks thanks

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Speaker 1: for having me here. So let's begin with the with

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Speaker 1: the book, the essence of the book, and we can

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Speaker 1: get away from the news flow of the Bank of

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Speaker 1: England for a moment. What is the essence of the book?

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Speaker 1: The essence of the book is that if you think

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Speaker 1: back over our lifetimes, all three of us, and the

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Speaker 1: lifetimes of many of the people listening to you, is

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Speaker 1: that more and more of the decisions that are taken

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Speaker 1: by government are taken by people who we didn't ellect.

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Speaker 1: And the central bankers have become the poster boys and

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Speaker 1: girls of this. But it goes well beyond that. Regulators

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Speaker 1: in almost every field, and the judges as well, the

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Speaker 1: judges in this country, the Ued states have always been powerful.

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Speaker 1: They're now powerful absolutely everywhere. And the book is about

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Speaker 1: how do we make this okay? How do we make

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Speaker 1: this okay for democracy and the things that we really

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Speaker 1: deeply believe about the way we should be governed? Well,

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Speaker 1: sir Dugger, the implication here being that it's not okay currently,

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Speaker 1: it's that we're we're taking risks we're taking risks. And

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Speaker 1: the last time the world was hit by anything as

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Speaker 1: bad as the recent financial crisis was obviously the Great Depression.

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Speaker 1: Who did the heavy lifting? Then President Roosevelt and the Congress?

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Speaker 1: Who did the heavy lifting this time? The Federal Reserve?

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Speaker 1: That time around who desire and the financial system redesigned

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Speaker 1: the financial system? Congress, Parliament in Westminster? Who redesigned it

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Speaker 1: this time? People like me and Mario drag Um, Tim Guydner,

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Speaker 1: Mark Harney Um. This is a big change, and so

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Speaker 1: I don't I don't regret the things that have been done.

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Speaker 1: I think we did a good job actually, But there

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Speaker 1: need to be limits on this. So let's talk about

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Speaker 1: the consequences. What are the negative potential consequences that you

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Speaker 1: explore in the book, Whether central banks end up making

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Speaker 1: decisions about who benefits and who doesn't, I mean distributional questions.

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Speaker 1: Part of the problem with que relying so heavily on

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Speaker 1: QUI is that it's been bad for people that rely

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Speaker 1: on the income from savings. It's been good for people

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Speaker 1: who are long financial assets and they've got richer, it's

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Speaker 1: not it's been pretty good for people on low incomes

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Speaker 1: because there's been less unemployment. Okay, just to push back

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Speaker 1: a little bit, some people would say, you're not seeing

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Speaker 1: yields spike higher in the US right now, even as

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Speaker 1: the US as a federal reserve moves away from its

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Speaker 1: unprecedented stimulus. Doesn't this mean mission accomplished, especially as inflation

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Speaker 1: moves towards its target. Doesn't seem whether benign I think,

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Speaker 1: I think they've done. I think they've done and aren't

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Speaker 1: doing a pretty good job. But but at what cost?

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Speaker 1: Two distortions in the economy, in this economy, more than

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Speaker 1: in the United Kingdom, UM, it would have been better

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Speaker 1: to have more fiscal stimulus UM some years ago, not now,

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Speaker 1: with expenditure on the infrastructure of the economy, improving the airport's,

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Speaker 1: improving the roads, things that visibly need doing, and with

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Speaker 1: a steepy Yoel curve throughout unless and less froth in

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Speaker 1: the financial markets, less reliance. The FETs had no choice.

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Speaker 1: By the way, if the politicians sit on their hands,

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Speaker 1: the FED must be the US cavalry. I think a

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Speaker 1: lot of our listeners will agree with you that this

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Speaker 1: Federal Reserve, in the actions of the last ten years,

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Speaker 1: have had incredible all effects on wealth distribution, and I

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Speaker 1: think for many people they're now thinking about what does

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Speaker 1: this mean for central bank independence? Could we see a

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Speaker 1: real challenge to central bank independence because of the power

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Speaker 1: they've accumulated over the last decade. Do you think that's possible. Yeah,

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Speaker 1: I think it's possible. I mean, the way we're governed

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Speaker 1: has a really basic thing, which is that when we're

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Speaker 1: fed up, we vote out the government. Yeah, we don't

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Speaker 1: vote out the central bankers. But the problem isn't so

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Speaker 1: much for the central bankers. It's the elected politicians have

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Speaker 1: got used and are attracted by sitting on their hands

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Speaker 1: knowing that the central banks will fill the void. I

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Speaker 1: mean that the deep message of the book to Congress,

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Speaker 1: to parliaments in Europe and around the world is step

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Speaker 1: up to the plate, do what only you can do. Well,

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Speaker 1: let's talk about some practical things the central banks can

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Speaker 1: do for themselves to protect themselves. We live in an era.

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Speaker 1: I think it's right Dally Goos phrasely some radical transparency,

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Speaker 1: and central bankers certainly live in an era of radical transparency.

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Speaker 1: We just sat through a news conference with Governor Carney.

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Speaker 1: There's only a number of years ago we didn't have

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Speaker 1: a regular news conference from the Federal Reserve. We now

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Speaker 1: hear from these individuals all the time. Do we have

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Speaker 1: too much transparency? Polled? And it's that part of the problem.

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Speaker 1: Transparency is important because the age of mystique has gone

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Speaker 1: and people would be angry and resentful. But whether it's

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Speaker 1: monetary policy or competition policy or utility regulation, the unelected

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Speaker 1: people need to focus their message on people at home, households,

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Speaker 1: businesses around and it's easy to get tied up in

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Speaker 1: what does the city of London want to know today?

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Speaker 1: What does Wall Street want to know today? And that's important.

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Speaker 1: I spent a lot of my career dealing with I

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Speaker 1: spend every morning doing that, but it's it's not the

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Speaker 1: most important thing. So do you talk to a lot

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Speaker 1: of politicians I talked to some around the world. Yeah,

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Speaker 1: in this country and elsewhere. Are you optimistake that really

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Speaker 1: anyone will change, that people will get off their hands.

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Speaker 1: So that's a great question, and it's a question I

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Speaker 1: often meet in this country. As though what I'm proposing

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Speaker 1: is for implementation next week. My experience of public office

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Speaker 1: is that is that you can change the climate of

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Speaker 1: opinion over a period of years. You really can. And

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Speaker 1: if I had any I had one criticism of the

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Speaker 1: Federal Reserve Um, it would be that they're not patient

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Speaker 1: enough and stick to a strategy of we will change

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Speaker 1: the climate of opinion around this and I think they

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Speaker 1: could do that. And you know, you need to drive

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Speaker 1: greater expectations of Congress. So, Paul Tucker, it wasn't so

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Speaker 1: long ago that many people were disappointed because they wanted

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Speaker 1: you to go from being the Deputy Boe Governor to

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Speaker 1: the governor of the Bank of England. There will be

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Speaker 1: a spot coming up in the summer of next year.

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Speaker 1: Would you be interested in filling that spot? Well, I

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Speaker 1: think I got lucky because I got to I got

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Speaker 1: to get to Harvard and I got to write this

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Speaker 1: book and it's been wonderful. I mean that your your

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Speaker 1: listeners can't see how long the book is. I can.

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Speaker 1: It covers a lot of territory. It's not just about

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Speaker 1: monetary policy and stuff. It's about all sorts of things

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Speaker 1: and I've absolutely loved it. And the big question for

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Speaker 1: me right now, other than marketing this book, is do

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Speaker 1: I have a second book in a book that I

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Speaker 1: really want to write. Well, we'd love to read it,

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Speaker 1: but it's there a future in central banking. For for Paul,

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Speaker 1: there's there's a future and kind of marketing this book, Tucker,

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Speaker 1: I could tell that you really wanted to be in

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Speaker 1: that seat that Mark Arney currently is in answering those questions.

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Speaker 1: I just can feel it. I think you're delusional. I

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Speaker 1: think you're delusional. I think your listeners should be disturbed

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Speaker 1: by this. I can tell. I can say from experience

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Speaker 1: speaking to many economists in the United Kingdom poll that

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Speaker 1: there are many people that would like you to fill

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Speaker 1: that seat in the summer of next year. And I

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Speaker 1: understand why you might not want to commit to to

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Speaker 1: anything in the future. And we're all going to enjoy

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Speaker 1: this book and hopefully there'll be more to compull. So

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Speaker 1: thank you very much for joining us. Well, thank you

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Speaker 1: Paul Tucker, the former Deputy Bank of England Governor, senior

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Speaker 1: fellow at Harvard and the author of his new book,

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Speaker 1: Unelected Power. The for legitimacy in central banking and the

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Speaker 1: regulatory state really important topically. It's just going to say

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Speaker 1: the same thing. This is so crucial, and it's not

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Speaker 1: something super simple or immediate, but it has changed the

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Speaker 1: way that our entire economy has been structured really fascat. Yeah,

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Speaker 1: and you see in elections political issues, whether it's the

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Speaker 1: UK of a Brexit here in the United States, that

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Speaker 1: central bank independence is is not something that can be

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Speaker 1: taken for granted because we do face a rule challenge

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Speaker 1: over the last couple of years. James Donald's going to

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Speaker 1: join us now Lazard Asset Management, head of Emerging Markets

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Speaker 1: and portfolio manager. James help us out how difficult is

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Speaker 1: it to navigate emerging markets at the moment? It is?

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Speaker 1: It is pretty difficult because you've got this very strong

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Speaker 1: period for the dollar, and uh, you've got certain markets

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Speaker 1: and you've named Argentina and Turkey, but I would also

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Speaker 1: add there have been other ones I think Philippines and Indonesia,

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Speaker 1: and there are other markets that have some of the

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Speaker 1: same characteristics that are being put under a lot of pressure,

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Speaker 1: and so one has to take these things into account,

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Speaker 1: particularly during a period like this. So it's a it's

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Speaker 1: a pretty difficult area UM to navigate right now. So James,

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Speaker 1: how are you navigating it? Well? UM, From from an

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Speaker 1: emerging market equity point of view, UM, we look at

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Speaker 1: macroeconomic and political risks and factor those into final price.

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Speaker 1: UM expectations, and so it's all part of our valuation process.

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Speaker 1: My point is, you know, given the fact that we've

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Speaker 1: gotten all of these dislocations, are you allocating big money

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Speaker 1: right now? Are you saying, you know what, right now

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Speaker 1: Turkey sold off so much, you can't lose if you

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Speaker 1: throw a little bit of money at Turkish financials, you know.

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Speaker 1: Or look at our Gentina given the fact that people

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Speaker 1: have pulled away so much and that the fundamentals still

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Speaker 1: look okay, you know what, let's go. Has there been

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Speaker 1: that kind of attitude it off? Well, we have a

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Speaker 1: long term time horizon, so we are invested in in

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Speaker 1: those markets to some degree. And uh and and we

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Speaker 1: think there are some really big opportunities there, and we

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Speaker 1: see the potential for a real stabilization in some of

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Speaker 1: these markets. I think Argentina has is a long way

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Speaker 1: there in terms of stabilization. I think there's some some

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Speaker 1: more works that has to take place in Turkey. But

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Speaker 1: but from from our vantage point, um, we think that

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Speaker 1: there should be a period of stabilization coming about relatively soon. James.

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Speaker 1: You see more stabilizingzation coming about on the equity side,

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Speaker 1: on the debt side, on the fex side. Where are

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Speaker 1: you looking for that stability? Well, I think, um, I

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Speaker 1: think in Argentina we should see some better currency stabilization.

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Speaker 1: I think the equity markets to a large degree have

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Speaker 1: been held back by the currency instability. So we've had

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Speaker 1: some stocks, for instance, some companies in Argentina that have

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Speaker 1: released fairly impressive results, but yet their stock prices have

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Speaker 1: faltered because of the currency situation. Um And I would

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Speaker 1: say the same thing is true to a large degree

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Speaker 1: in Turkey across that market, and investors, particularly foreign investors

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Speaker 1: are unprepared to to enter some of those stocks or

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Speaker 1: add to those positions without better visibility. In terms of

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Speaker 1: the currency stabilizing. What about emerging markets local currency versus

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Speaker 1: hard currency debt, Well, I think that in the immediate term,

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Speaker 1: clearly the local currencies are under some pressure. So opportunity

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Speaker 1: I think it does. I think it does. I think

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Speaker 1: it's a matter of how you move into that. I

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Speaker 1: think on an evaluation basis, I would say that that

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Speaker 1: emerging market local currency is is inexpensive, whereas hard currency

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Speaker 1: is relatively expensive. So, just taking a step back, one

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Speaker 1: thing that a lot of people have been concerned about

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Speaker 1: is that so much money has gone into emerging markets

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Speaker 1: debt and equity, frankly through e t f s, through

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Speaker 1: indexed funds, A lot of investors seeking it as an

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Speaker 1: alternative to US high yield bonds. The concern being if

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Speaker 1: you get a long enough stretch of weakness, you're going

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Speaker 1: to see massive outflows that indiscriminately punish all emerging markets.

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Speaker 1: Are you concerned that we're hitting that tipping point given

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Speaker 1: the stronger dollar over the past few weeks, and that

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Speaker 1: you're going to see much bigger withdrawals. I think it

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Speaker 1: depends on the trajectory of interest rates in the US.

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Speaker 1: I think if interest rate look like they're going to

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Speaker 1: have to go up at a sharper degree than they

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Speaker 1: are or have been anticipated to um, and if we

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Speaker 1: have more than say four interest rate rises per annum

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Speaker 1: of basis points each and if we have much more

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Speaker 1: than that, that is going to be uh that is

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Speaker 1: going to attract money away from merging markets. But if

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Speaker 1: it's if it's more gradual in nature, my expectation would

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Speaker 1: be that this instability will start to to decrease and

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Speaker 1: we'll get some of this hot money that you talked

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Speaker 1: about out of the market. I think quite a lot

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Speaker 1: of it has already left the markets, and then we

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Speaker 1: probably see a fairly big opportunity. All right, So going forward,

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Speaker 1: I do want to hit on Argentina because it's this

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Speaker 1: kind of story. John and I were just talking about

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Speaker 1: how um they defaulted four times. We keep getting it

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Speaker 1: wrong to keep it. I mean, come on, why did

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Speaker 1: people even lend to them? And then a hundred year body.

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Speaker 1: I mean at the time they sold this and people

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Speaker 1: were like, really, who's going to buy that? And a

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Speaker 1: lot of people did, and sure enough it's trading below

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Speaker 1: ninety cents in the dollar. So are we just going

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Speaker 1: to see the same story over and over again with

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Speaker 1: Argentina or is this time really different? I would give

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Speaker 1: them um more of the benefit of the doubt on

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Speaker 1: this situation. I think the reason why they were able

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Speaker 1: to do that issue is because the Macar government has

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Speaker 1: a credible team and a credible plan. UM. I think

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Speaker 1: where they may have tripped up has been keeping interest

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Speaker 1: rates a bit lower than they should have uh and

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Speaker 1: and putting a tax on local currency debt. Those things

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Speaker 1: at the margin may have really worked against them, But

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Speaker 1: as far as I can see, it's a it's a

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Speaker 1: credible government with credible plans, and I think there's a

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Speaker 1: pretty good chance that they're going to be able to succeed.

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Speaker 1: Is it incredible central bank? Yes, I think it's a

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Speaker 1: credible central bank as well. I think I think because

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Speaker 1: I think that they have done a huge amount to

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Speaker 1: improve their information and their UM policies since the last government.

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Speaker 1: One has to remember that under the previous government there

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Speaker 1: was a real question March about the data that they

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Speaker 1: were using. The one thing I think you could critique

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Speaker 1: the central Bank over is that they kept rates lower

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Speaker 1: than they probably should have and that has has aggravated

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Speaker 1: this situation. So James, let me finish up with a

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Speaker 1: final question. If you say it's a credible one, is

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Speaker 1: it an independent one? Um? I would say, I think

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Speaker 1: you have to look at this in in in gray areas.

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Speaker 1: I think it's reciably independent. Um. You know, we we

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Speaker 1: nothing nothing in our world are very little in our world?

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Speaker 1: Is black and white? Very true. So I think there

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Speaker 1: is a degree of independence with that bank, certainly much

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Speaker 1: more than it used to have. UM and it uh

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Speaker 1: So I think that is a positive. James, great handle

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Speaker 1: us on a program a difficult time, and I'm sure

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Speaker 1: you've been terrifically busy, so thank you for giving us

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Speaker 1: some of your valuable time this morning on Bloomberg Surveillance.

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Speaker 1: James Donald, that's our asset management head of Emerging Market Center,

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Speaker 1: portfolio manager. I'm not sure how many people would agree

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Speaker 1: with how credible the ARGENTINUU Central Bank is at the moment, saying,

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Speaker 1: I mean you're seeing the piece of completely thought of that,

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Speaker 1: despite the fact that they raised interest rates to forty

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Speaker 1: and isn't that the problem Turkey has god as well

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Speaker 1: central band credibility At the moment, there has been a

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Speaker 1: lot going on around the world outside the US, as

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Speaker 1: Mike Pompeo heads to North Korea, given the fact that

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Speaker 1: China and the US are it appears to be heading

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Speaker 1: towards additional trade pressures. And then meanwhile, in ninety two

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Speaker 1: year old won the election in Malaysia. To help us

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Speaker 1: understand all of this, I am pleased to bring in

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Speaker 1: merethe Sumter Eurasia Group head of Research, strategy and Operations,

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Speaker 1: and my co host Pim Fox joins me as well.

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Speaker 1: He is in the office bright and early. Meredith, thank

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Speaker 1: you so much for being here. I want to just

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Speaker 1: start with the big topic, which is China US relations

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Speaker 1: and Mike Pompeo's trip to North Korea. Can you talk

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Speaker 1: a little bit about what China has been doing behind

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Speaker 1: the scenes with respect to the to the US North

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Speaker 1: Korea negotiations, because President Trump keeps mentioning how great China

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Speaker 1: has been and how this factors into trade talks. Sure,

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Speaker 1: thanks so much for having me on, Lisa. So Beijing

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Speaker 1: has been watching very closely the interplay between President Trump

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Speaker 1: and Kim Jong un, and She Jumping himself has taken

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Speaker 1: great pains to ensure that China has not been left

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Speaker 1: out of those conversations. And so you will note that

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Speaker 1: She Jumping met with Kim Jong un uh in Dalian

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Speaker 1: um earlier this week to check in with that North

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Speaker 1: Korean leader and probably to align on what that North

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Speaker 1: Korean leader is looking to accomplish with his upcoming summit

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Speaker 1: with President Trump. I would also expect that She jimping

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Speaker 1: will look to meet with Kim Jong un following that

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Speaker 1: summit with President Trump. But this is what we call

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Speaker 1: in Chinese diplomacy book ending, which would position China to

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Speaker 1: try to influence the implementation of any of the decisions

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Speaker 1: um or agreements that may or may not be reached

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Speaker 1: at that at that upcoming meeting, Meredith, is there any

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Speaker 1: chance that the Chinese government will be able to leverage

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Speaker 1: this advance in the relationship between North Korea, South Korea,

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Speaker 1: and the United States into a change in US trade

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Speaker 1: policy because the United States has blocked the use of

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Speaker 1: US components in some of the manufacturing processes. For example,

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Speaker 1: Zte Corps has halted it's a major production line because

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Speaker 1: it can't get the components at once from the United States.

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Speaker 1: I would see a very little chance that there would

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Speaker 1: be a connection between Chinese support on North Korea and

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Speaker 1: a lessening of US pressure on China over its industrial

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Speaker 1: and trade policies. And that's simply because I think Washington

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Speaker 1: recognizes that Beijing needs Washington on North Korea just as

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Speaker 1: much as Washington needs teaching on North Korea, frankly, but

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Speaker 1: also because the long term game for both Washington and

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Speaker 1: Beijing is in the economic sphere, and Washington is treating

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Speaker 1: that with a great deal of seriousness and is not

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Speaker 1: looking to sacrifice what it would see as UM, you know,

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Speaker 1: working Americans economic future UM over some sort of progress

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Speaker 1: so that they would look to get with North Korea

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Speaker 1: and probably be able to get with North Korea with

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Speaker 1: Chinese support. So before we move on to Malaysia, which

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Speaker 1: is a fascinating story, I just want to get your

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Speaker 1: take on what the chances are that the US China

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Speaker 1: trade tensions will either get resolved with something that diffuses

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Speaker 1: the tensions or is likely to escalate to the point

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Speaker 1: of hampering global growth. What's your what's your take on

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Speaker 1: the odds of both these scenarios. Thanks Lisa. So so,

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Speaker 1: my sense is that we are likely to see a

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Speaker 1: at least a first round of implementation of cariiffs, both

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Speaker 1: Washington implementing tariffs on Chinese products in Beijing of course

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Speaker 1: retaliating UH perhaps you know, targeting US companies, if not

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Speaker 1: market access in US goods. UH. That is likely to

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Speaker 1: happen UM, and we're gonna be watching closely over the

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Speaker 1: summer UH as we inch closer to to those UH

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Speaker 1: to the implementation of those tarrifs. But this is really

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Speaker 1: not just about tariffs. Actually, I know markets are focused

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Speaker 1: on tariffs, but really the bigger game here is the

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Speaker 1: forthcoming investment restrictions that we're looking to see with the

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Speaker 1: US tightening um Scyphius reforms and regulations as well as

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Speaker 1: looking at ways to block Chinese investment in strategic sectors,

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Speaker 1: were likely to see Beijing also retaliating kind that will

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Speaker 1: probably have a larger fundamental impact on the economic trajectories

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Speaker 1: of these two countries. If you just look at the

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Speaker 1: number of the amount of tariffs that are currently on

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Speaker 1: the table under consideration, if the US is going to

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Speaker 1: implement you know, the fifty billion or hundred fifty billion

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Speaker 1: of tariffs, um is that going to hurt China? Yeah?

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Speaker 1: But is it going to undermine Chinese growth? No? On

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Speaker 1: what we're seeing with some of the economic projections, um uh,

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Speaker 1: such an implementation of terrors will likely take anywhere from

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Speaker 1: point three to point five percent off of Chinese growth,

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Speaker 1: So enough to raise some eyebrows, but not enough to

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Speaker 1: really shake China off course. Well, last year, the US

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Speaker 1: ran a three hundred and seventy five billion dollar merchandise

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Speaker 1: trade deficit with China, and the chief Chinese trade negotiation

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Speaker 1: them negotiating the economic envoy I believe the name is

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Speaker 1: Lou He is scheduled to arrive in Washington in the

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Speaker 1: coming days. Do you believe that it's possible that the

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Speaker 1: Chinese will come forward with a proposal to purchase more

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Speaker 1: China American goods that will help offset that trade deficit.

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Speaker 1: So yes, Leo Jo's trip to Washington next week is

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Speaker 1: certainly something that everybody should be watching. He is the

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Speaker 1: economic muse of Hijin Ping. He is the person that

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Speaker 1: is perhaps most closely associated with UH the industrial policies

434
00:26:05,080 --> 00:26:09,640
Speaker 1: and practices that are of most concerned to Washington. So

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00:26:09,720 --> 00:26:12,520
Speaker 1: certainly having him show up in Washington is indeed a

436
00:26:12,560 --> 00:26:15,679
Speaker 1: good thing. But will that visit and will his offerings

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00:26:15,720 --> 00:26:23,200
Speaker 1: be enough to offset becoming tariffs? My sense is probably not. Uh.

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00:26:23,320 --> 00:26:26,000
Speaker 1: Leo Hoo, Hi Jumping and other Chinese leaders are pretty

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00:26:26,000 --> 00:26:28,840
Speaker 1: clear and what Washington is asking for now, following last

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00:26:28,840 --> 00:26:33,560
Speaker 1: week's delegation of an unprecedented seven US Cabinet members and

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00:26:34,000 --> 00:26:38,520
Speaker 1: UM government officials to Beijing UH to unroll sort of

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00:26:38,640 --> 00:26:42,160
Speaker 1: Washington's demands of China. I would see this as Leo

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00:26:42,240 --> 00:26:45,560
Speaker 1: Hoo coming to Washington to sort of outline the parameters

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00:26:45,600 --> 00:26:48,919
Speaker 1: of what those negotiations should be, perhaps to pressure President

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00:26:48,920 --> 00:26:52,119
Speaker 1: Trump or asked him to delay the on thought of

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00:26:52,280 --> 00:26:56,800
Speaker 1: tariffs until negotiations have been given a broader chance. But

447
00:26:56,880 --> 00:26:59,919
Speaker 1: because the golf between what Washington is expecting, and what

448
00:27:00,119 --> 00:27:02,960
Speaker 1: China is willing to do is so vast. My sense

449
00:27:03,040 --> 00:27:04,639
Speaker 1: is that we're going to have to see a first

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00:27:04,720 --> 00:27:07,679
Speaker 1: round of tariffs before both sides will be ready to

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00:27:07,760 --> 00:27:10,480
Speaker 1: come to the negotiating table and really try to get

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00:27:10,480 --> 00:27:13,800
Speaker 1: a sense of whether there could be a solution to

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00:27:13,880 --> 00:27:17,280
Speaker 1: the current trade tensions and standoffs. Meredith, I do want

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00:27:17,320 --> 00:27:19,960
Speaker 1: to get to the Malaysian elections because this was a

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00:27:20,040 --> 00:27:26,000
Speaker 1: huge upset. This was the pushing out of office elected

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00:27:26,040 --> 00:27:28,640
Speaker 1: official that had been in for decades and bringing in

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00:27:28,680 --> 00:27:31,600
Speaker 1: a ninety two year old leader. We're seeing a lot

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00:27:31,640 --> 00:27:34,920
Speaker 1: of pressure on some of the assets in Malaysia with

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00:27:35,000 --> 00:27:39,600
Speaker 1: some analysts, for example in Nomura reviewing is recommendation to

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00:27:39,680 --> 00:27:43,480
Speaker 1: buy assets in Malaysia because of this vote. Can you

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00:27:43,520 --> 00:27:47,280
Speaker 1: give us some color on what this means for the region,

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00:27:47,560 --> 00:27:51,120
Speaker 1: for Malaysia and why this came a such a huge surprise.

463
00:27:52,119 --> 00:27:55,880
Speaker 1: I would say it's a shock more so than a surprise. Uh.

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00:27:56,359 --> 00:27:59,719
Speaker 1: Even though Urasia Group's call was that we were definitely

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00:27:59,760 --> 00:28:03,240
Speaker 1: see a lessening of support for Prime Minister Niji, but

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00:28:03,400 --> 00:28:07,919
Speaker 1: no one saw uh Dr Maha tears uh sweep of

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00:28:07,960 --> 00:28:11,320
Speaker 1: the elections because all of the cards were played against

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00:28:11,400 --> 00:28:15,720
Speaker 1: him and the opposition party that we're looking to compete

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00:28:15,720 --> 00:28:19,000
Speaker 1: with unknown UM the ruling party, and the ruling being

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00:28:19,359 --> 00:28:23,320
Speaker 1: UH coalition in Malaysia. So think about this election in

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00:28:23,400 --> 00:28:27,760
Speaker 1: two ways. UH. It's both positive for markets and that

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00:28:27,880 --> 00:28:32,920
Speaker 1: you have a revitalization of an important Asian democracy where

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00:28:33,080 --> 00:28:36,240
Speaker 1: you're going to see a return to a more rigorous

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00:28:36,320 --> 00:28:41,560
Speaker 1: rule of law, probably improved governance as the system of

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00:28:41,600 --> 00:28:44,680
Speaker 1: governance UM and favors that were put in place by

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00:28:45,120 --> 00:28:48,200
Speaker 1: Prime Minister Najib is going to be dismantled. So that's

477
00:28:48,280 --> 00:28:52,440
Speaker 1: that's positive. But from a market's perspective, on the negative,

478
00:28:53,080 --> 00:28:56,600
Speaker 1: you do have, with Nijib's sideline and power, a lot

479
00:28:56,600 --> 00:29:00,520
Speaker 1: of the fiscal reforms that he was championing and leading

480
00:29:00,560 --> 00:29:04,200
Speaker 1: on are likely to backtrack as well, so Dr Maha

481
00:29:04,280 --> 00:29:06,520
Speaker 1: tire when he has torn in, we expect that he's

482
00:29:06,520 --> 00:29:09,160
Speaker 1: probably going to roll back the g S T which

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00:29:09,280 --> 00:29:12,600
Speaker 1: is unpopular domestically but an important source of revenue for

484
00:29:12,640 --> 00:29:15,640
Speaker 1: that country. We also expect that he's probably going to

485
00:29:15,960 --> 00:29:19,240
Speaker 1: increase populous spending and probably look to review some of

486
00:29:19,280 --> 00:29:23,720
Speaker 1: the infrastructure projects that Niji put in place. Riting with China,

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Speaker 1: thank you so much, for joining us. Unfortunately we have

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Speaker 1: to leave it there with better run. Meredith Sumter, Eurasia

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Speaker 1: Group Head of Research, Strategy and Operations, talking about North Korea, China,

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00:29:33,920 --> 00:29:44,560
Speaker 1: US and Malaysia. Thanks for listening to the Bloomberg Surveillance podcast.

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Speaker 1: Subscribe and listen to interviews on Apple Podcasts, SoundCloud, or

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00:29:50,000 --> 00:29:54,320
Speaker 1: whichever podcast platform you prefer. I'm on Twitter at Tom

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Speaker 1: Keane before the podcast. You can always catch us worldwide.

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Speaker 1: I'm Bloomberg Radio