1
00:00:00,520 --> 00:00:02,960
Speaker 1: Alright, let's get to our first guest of the hour,

2
00:00:03,080 --> 00:00:05,960
Speaker 1: and that is Alicia Gacia Herrera, a chief Asia Pacific

3
00:00:05,960 --> 00:00:09,360
Speaker 1: economist and the Texas joining us from Taipei. Before we

4
00:00:09,400 --> 00:00:11,959
Speaker 1: get I guess to the broader Asia picture, Alicia. Just

5
00:00:12,000 --> 00:00:13,920
Speaker 1: wanting to get your thoughts on what we heard there

6
00:00:13,960 --> 00:00:17,319
Speaker 1: from Elizabeth Warren. Is this aggressive tightening by the FAT

7
00:00:17,440 --> 00:00:23,360
Speaker 1: enough to tip the US into recession? Well, indeed, there

8
00:00:23,440 --> 00:00:25,200
Speaker 1: is a risk, and we all know that the risk

9
00:00:25,280 --> 00:00:28,840
Speaker 1: has been there. I frankly don't think Power said anything new,

10
00:00:29,960 --> 00:00:33,760
Speaker 1: Just the markets have been too complacent on later on

11
00:00:33,800 --> 00:00:36,280
Speaker 1: the latest inflation data, and that's what it is. You know,

12
00:00:36,360 --> 00:00:40,160
Speaker 1: markets do not like what's happening. So I guess Atlisabeth

13
00:00:40,200 --> 00:00:43,400
Speaker 1: Warren's call is well known. I mean, and the FED

14
00:00:43,479 --> 00:00:46,320
Speaker 1: has already said, yes, we know, we know we're going ahead,

15
00:00:46,560 --> 00:00:50,319
Speaker 1: same with the EASYB. So other measures will be need

16
00:00:50,400 --> 00:00:53,560
Speaker 1: to be taken on the physical side to to support

17
00:00:53,680 --> 00:00:59,880
Speaker 1: income without hurting, without putting additional inflation on on the table,

18
00:01:00,000 --> 00:01:03,120
Speaker 1: which is very very hard. What do those additional measures

19
00:01:03,120 --> 00:01:05,920
Speaker 1: look like in your view? I think you need to

20
00:01:05,920 --> 00:01:10,040
Speaker 1: do really targeted physical policies, and I think the US

21
00:01:10,080 --> 00:01:14,039
Speaker 1: example with COVID shows that that wasn't very targeted. That's

22
00:01:14,040 --> 00:01:16,560
Speaker 1: something that you can't afford, not even the Upan Union

23
00:01:16,720 --> 00:01:19,880
Speaker 1: for that matter. So I think we really need to

24
00:01:19,920 --> 00:01:23,160
Speaker 1: move to protect those that are hurt, not to protect everybody.

25
00:01:23,240 --> 00:01:26,679
Speaker 1: Otherwise we'll still have much more inflation going on. So

26
00:01:26,720 --> 00:01:30,479
Speaker 1: that's that's the trick. You say that inflation remains too

27
00:01:30,480 --> 00:01:32,959
Speaker 1: strong to change course. What is the impact here to

28
00:01:33,200 --> 00:01:35,560
Speaker 1: the dollar and therefore of course the impact and flow

29
00:01:35,560 --> 00:01:40,080
Speaker 1: and effect to Asia. Well, this is just a strong

30
00:01:40,120 --> 00:01:44,960
Speaker 1: dollar and this is a problem for two sets of

31
00:01:45,000 --> 00:01:48,040
Speaker 1: Asian countries. The first is obviously those that are you know,

32
00:01:48,240 --> 00:01:51,720
Speaker 1: kind of going in the opposite direction. Japan is the

33
00:01:51,720 --> 00:01:55,480
Speaker 1: most the most extreme case in the sense that not

34
00:01:55,600 --> 00:01:57,960
Speaker 1: because it's doing more, Chinese is doing more. Yeah, that's

35
00:01:57,960 --> 00:02:01,200
Speaker 1: the second case. It's captain rates, but Japan, while not

36
00:02:01,240 --> 00:02:04,360
Speaker 1: cutting rates, has an open capital account. So so the

37
00:02:04,520 --> 00:02:09,000
Speaker 1: end will suffer the most, followed by the remini being

38
00:02:09,160 --> 00:02:13,320
Speaker 1: as far as China will need to impose additional capital control.

39
00:02:13,400 --> 00:02:16,280
Speaker 1: That's going to be very costly for investors. Investors will

40
00:02:16,440 --> 00:02:21,120
Speaker 1: basically find the door, maybe maybe quickly enough, maybe not,

41
00:02:21,639 --> 00:02:25,320
Speaker 1: because otherwise stuck there. So in terms of in terms

42
00:02:25,400 --> 00:02:27,920
Speaker 1: of China. There and the divergence with what we're saying

43
00:02:27,919 --> 00:02:30,080
Speaker 1: with the FED and the and the stimulus from authorities

44
00:02:30,080 --> 00:02:33,800
Speaker 1: in China. How much is an interest rate of you know,

45
00:02:33,880 --> 00:02:37,639
Speaker 1: potentially three point seven from the FED a bad news

46
00:02:37,639 --> 00:02:43,480
Speaker 1: story for China. Well, we already at the negative Yell differential,

47
00:02:43,760 --> 00:02:47,919
Speaker 1: sovering your differential close to zero, sometimes a little bit

48
00:02:48,080 --> 00:02:53,000
Speaker 1: below zero, that's going to widen. And China receives about

49
00:02:53,040 --> 00:02:58,800
Speaker 1: four percent of total bond flows from the rest of

50
00:02:58,840 --> 00:03:00,720
Speaker 1: the world, so that for son is going to go.

51
00:03:00,840 --> 00:03:04,359
Speaker 1: It's not massive, even less than jgbs, but it does

52
00:03:04,480 --> 00:03:08,040
Speaker 1: indicate that that man is not going to come into China.

53
00:03:08,280 --> 00:03:11,680
Speaker 1: And it also indicates that which is the most important

54
00:03:11,720 --> 00:03:15,359
Speaker 1: part that residents, we'll try to find the door as well.

55
00:03:15,400 --> 00:03:18,840
Speaker 1: And this is unrecorded outflows, which China of course fears,

56
00:03:18,960 --> 00:03:21,760
Speaker 1: and and that's where the man is going to be

57
00:03:21,880 --> 00:03:24,799
Speaker 1: much more massive than just portfolio investments side from the

58
00:03:24,919 --> 00:03:27,120
Speaker 1: U S or known or anything that that like that.

59
00:03:27,200 --> 00:03:31,040
Speaker 1: It's about Chinese realizing that they're losing a lot by

60
00:03:31,120 --> 00:03:34,200
Speaker 1: keeping the money in China. So just just the PSA

61
00:03:34,320 --> 00:03:38,960
Speaker 1: need to tighten capital controls on outflows potentially further yes,

62
00:03:39,000 --> 00:03:42,640
Speaker 1: because there's no other way out the previously can't hy

63
00:03:42,760 --> 00:03:45,480
Speaker 1: grates can. I mean, the economy is in shambles, so

64
00:03:45,520 --> 00:03:47,920
Speaker 1: the only thing they can do is to tighten capital

65
00:03:47,960 --> 00:03:50,960
Speaker 1: controls on the way out. All right. We know there's

66
00:03:51,000 --> 00:03:54,200
Speaker 1: so many headwinds facing the China economy, the power crunch

67
00:03:54,240 --> 00:03:57,120
Speaker 1: one of the latest. What kind of further stimulus are

68
00:03:57,120 --> 00:03:59,280
Speaker 1: you're expecting to see and how target it does it

69
00:03:59,320 --> 00:04:03,680
Speaker 1: need to be? Now? Well, China has been trying to

70
00:04:03,760 --> 00:04:07,080
Speaker 1: stimulate both on the fiscal side, less on the monetary side.

71
00:04:07,160 --> 00:04:10,600
Speaker 1: The reason again the FED and how little room they have.

72
00:04:11,680 --> 00:04:14,280
Speaker 1: But on the fiscal side it hasn't really worked too much.

73
00:04:15,760 --> 00:04:19,320
Speaker 1: In infrastructure investment is growing at the rate of ten

74
00:04:19,320 --> 00:04:22,880
Speaker 1: to eleven. They would need twenty to reach the target,

75
00:04:23,000 --> 00:04:26,200
Speaker 1: and we're already you know, beyond that that five five

76
00:04:26,240 --> 00:04:29,080
Speaker 1: target cannot be reached. In that regard, I don't think

77
00:04:29,080 --> 00:04:31,839
Speaker 1: they will use so many bullets for the rest of

78
00:04:31,839 --> 00:04:36,040
Speaker 1: the year. They try to make it better for twenty three,

79
00:04:36,839 --> 00:04:40,520
Speaker 1: So I don't expect massive additional stimulus for the next

80
00:04:40,760 --> 00:04:43,400
Speaker 1: month to come. I think that the authorities recognized that

81
00:04:43,440 --> 00:04:48,880
Speaker 1: the target can't be reached. Alright, Alicia, we will continue.

82
00:04:48,920 --> 00:04:50,720
Speaker 1: In fact, we will thank you very much for your time.

83
00:04:50,720 --> 00:04:53,799
Speaker 1: Alicia Ga Sierra Herrero is Chief Asia Pacific Economist Athletics

84
00:04:53,880 --> 00:04:57,279
Speaker 1: as joining us from Taipei here on Bloomberg Daybreak Asia