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Speaker 1: This is Bloomberg day Break Weekend, our global look at

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Speaker 1: the top stories in the coming week from our day

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Speaker 1: Break anchors all around the world. Straight ahead on the

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Speaker 1: program of busy week for investors on Wall Street, Apple,

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Speaker 1: Microsoft leading the earnings cavalcade, and we'll also get a

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Speaker 1: FED decision and the January jobs report. I'm Tom Busby

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Speaker 1: in New York.

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Speaker 2: I'm callin Hedge in London, where we're looking ahead to

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Speaker 2: the Bank of Eglins first rate decision of twenty twenty four.

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Speaker 3: I'm Ryan Curtisy in Hong Kong. We look ahead to

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Speaker 3: China's BMI so weather recent support measures. He can turn

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Speaker 3: the tide in the Chinese too.

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Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend. The business

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Speaker 4: news you need to wrap up your week, available on Apple, Spotify,

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Speaker 4: the Bloomberg Business Appen everywhere you get your podcasts.

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Speaker 5: Good day to you.

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Speaker 1: I'm Tom Busby. We begin today's program with a very

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Speaker 1: busy week ahead for earnings on Wall Street. We'll hear

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Speaker 1: from more than one hundred companies in the S and

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Speaker 1: P five hundred with big tech leading the way. Results

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Speaker 1: from Apple, Microsoft, Amazon, Alphabet and Meta Platforms, among others.

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Speaker 5: For a closer look at.

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Speaker 1: What to expect from the two three trillion dollar giants

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Speaker 1: Apple and Microsoft. We're pleased to bring in anurag Rana,

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Speaker 1: senior tech analyst with Bloomberg Intelligence, now anorog. Let's start

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Speaker 1: with Apple, which has been a lot of headlines lately

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Speaker 1: for its new Vision Pro mixed reality headset, trouble with

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Speaker 1: the smart watch, app store commissions, challenges for the iPhone

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Speaker 1: sales in China. So what are you expecting to see

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Speaker 1: from Apple's Q one on Wednesday?

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Speaker 6: Listen. I hope they give some good news about China because,

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Speaker 6: as you said, you know, for I mean, it's an

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Speaker 6: amazing company. But all I can say is in lust

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Speaker 6: two months, all I've heard is just negative news come

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Speaker 6: out for Apple. So it's a you know, for their sake,

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Speaker 6: I hope they come out and give some good comments

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Speaker 6: about China and they can you know, grow the smartphones

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Speaker 6: in that particular market, because that is the single biggest

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Speaker 6: factor that can dictate how they're going to grow this year.

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Speaker 6: So that's that's that's forefront on our mind right now.

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Speaker 1: Well, we did get a surprise to the upside though

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Speaker 1: for twenty twenty three in iPhone sales in China though,

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Speaker 1: didn't We yes, But.

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Speaker 6: At the same time, I think expectations were so low.

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Speaker 6: But you know, I still have to see how things

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Speaker 6: shape up in twenty twenty four because you know, we

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Speaker 6: have seen that Quahwei's phone was doing pretty well around

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Speaker 6: the holidays, so we you know, we still need to

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Speaker 6: figure out how December shapes up.

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Speaker 1: And how about iPhone sales everywhere? Everywhere else but China.

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Speaker 6: See the problem with everywhere else is and I'm going

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Speaker 6: to talk about developed markets. You know, markets like the

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Speaker 6: US and Western Europe, it is relatively mature or I

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Speaker 6: would say stagnant. So when you see those markets, the

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Speaker 6: install base of the number of people to have phone,

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Speaker 6: that's only going to grow gradually, let's say in the

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Speaker 6: rate of about two to three percent. That's not much

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Speaker 6: to really, you know, boost the top line of the company.

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Speaker 6: It was really China as the growth growth engine right

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Speaker 6: now because when you look at the number of units there,

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Speaker 6: China has about one billion smartphones out there. Apple has

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Speaker 6: an you know, about an eighteen percent market share or

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Speaker 6: somewhere and that range. So we still have a long

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Speaker 6: way to go for Rabert to grow in that market.

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Speaker 6: And I think that really was was, you know, my

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Speaker 6: hope that if they can continue to grow well in China,

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Speaker 6: then the next big market over the next three to

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Speaker 6: five years is going to be India and so forth.

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Speaker 6: So that kind of gives you like a ten year

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Speaker 6: growth driver. But if China's going to slow down, you're

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Speaker 6: not going to see massive, massive growth there. Then it

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Speaker 6: brings down the growth rate of the entire company.

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Speaker 5: Yeah.

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Speaker 1: Wow, Well another possible generator of revenue the Vision Pro

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Speaker 1: mixed reality headset. What not yet, but there was a

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Speaker 1: burst of enthusiasm when when pre orders came out just

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Speaker 1: this past week.

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Speaker 5: But what do you see there?

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Speaker 6: Yeah, it's three thousand and five hundred dollars. I mean,

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Speaker 6: it's not a needle mover to me because you know,

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Speaker 6: to be very honest, how many how many units can

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Speaker 6: you sell any year? Let's say you sell half a

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Speaker 6: million units, that's about one billion dollars or one and

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Speaker 6: a half billion dollars in sales. So it's really not

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Speaker 6: it's not something that I think it's going to add

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Speaker 6: to the big top line of the company. Because remember

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Speaker 6: Apple's revenue bases four hundred billion dollars. So even if

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Speaker 6: you can go out and sell let's say one million units,

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Speaker 6: it's not one million is way above anybody is expecting.

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Speaker 6: That's like, you know, one percent of the revenue of

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Speaker 6: the less than one percent of the revenue of the

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Speaker 6: total company. So it's it's a lot of good discussion.

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Speaker 6: We'll have a lot of fun when it's out there

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Speaker 6: and people are going to play around with it, but

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Speaker 6: it's really not a needle mover when you look at

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Speaker 6: some financial analysis.

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Speaker 1: And another hit that Apple's taking is the regulatory challenges

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Speaker 1: to its commission on it to app developers on the

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Speaker 1: app store. What's the latest there, because that could yeah billions, right.

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Speaker 6: Yeah, yeah, that is I think the single biggest shoe

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Speaker 6: right now. It's just everything that's legal, legal challenges and

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Speaker 6: regulatory challenges around their app store and around the services

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Speaker 6: business in general. I mean not just the app store.

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Speaker 6: You know, the money that they receive from Google. There's

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Speaker 6: a lot of discussion around it, and I think that

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Speaker 6: is something that we spend most of our time looking into.

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Speaker 6: We recently had a webinar topic talking about this topic.

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Speaker 6: We have a podcast on it, so we you know,

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Speaker 6: we this is a this is a serious, serious stuff

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Speaker 6: because not is remember one thing. A dollar that you

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Speaker 6: generate on the app store probably has operating margins of

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Speaker 6: seventy five percent. This is very high margin business. So

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Speaker 6: if there are issues around you know, how much fees

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Speaker 6: can they charge, how much it's going to go down,

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Speaker 6: all sorts of stuff that really does have you know,

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Speaker 6: hamper not just the top line revenue, but also the

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Speaker 6: profitability of the company.

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Speaker 1: Oh boy, well, now let's move to Microsoft then, which

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Speaker 1: has made big bets on artificial intelligence and cloud computing,

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Speaker 1: and they see need to be paying off pretty well.

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Speaker 5: What do you think?

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Speaker 6: I think? You know, they are probably one of the

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Speaker 6: better positioned companies in technology right now in you know,

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Speaker 6: I would say in a holistic way because it's they

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Speaker 6: have so many businesses, but the really big driver, at

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Speaker 6: least for the near term, is going to be their

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Speaker 6: cloud infrastructure business. Now, if you look at you know,

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Speaker 6: open ai as a company, open AI's back end is

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Speaker 6: Microsoft's cloud infrastructure, so you use a lot more check GPT.

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Speaker 6: Microsoft makes more money off of it. So that's that's

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Speaker 6: the way you want to think about it. Last time,

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Speaker 6: when their cloud infrastructure numbers came out, they had about

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Speaker 6: three hundred three percentage points contribution from AI in general,

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Speaker 6: we think that number climbs throughout the year. That's an

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Speaker 6: area where we are most optimistic that it is going

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Speaker 6: to lead to a good recovery for Microsoft's organic growth

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Speaker 6: rate in the second half. We have already seen from

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Speaker 6: you know, results from IBM that things are actually looking

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Speaker 6: rosy for the tech industry and videos done well. TSMC

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Speaker 6: talked about a good year this in twenty twenty four.

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Speaker 6: So we feel confident that, you know, Microsoft growth rates

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Speaker 6: will improve as the year progressive because when you look

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Speaker 6: at overall technology spending, you know, companies have been under

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Speaker 6: investing for the last two years. You know, they really

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Speaker 6: did well the five years before that, but you know,

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Speaker 6: we have seen a pause in the last two years.

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Speaker 6: So we think twenty twenty four could be the year

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Speaker 6: where we see a revival in tech spending.

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Speaker 1: Well, let's talk just for a minute about Microsoft's gaming

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Speaker 1: division and reports last week that it's laying off nearly

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Speaker 1: two thousand workers at its recently acquired Activision, Blizzard unit,

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Speaker 1: and Xbox unit. Is this just a redundancy of jobs

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Speaker 1: or is it indicative of more trimming down at Microsoft?

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Speaker 6: Now it's just I mean, normally when you make a

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Speaker 6: very large acquisition. They bought Activision for sixty nine billion

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Speaker 6: dollars and Activision at the end of twenty twenty two

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Speaker 6: had thirteen thousand people. So when you look at the article,

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Speaker 6: I saw that that said they had about combined about

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Speaker 6: twenty two thousand people. So you would expect some redundancies

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Speaker 6: from an acquisition. That's the cost energies. Whenever you have duplication,

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Speaker 6: you will see a little bit of that. I don't

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Speaker 6: see that as an indication that the business conditions are bad.

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Speaker 6: This is more so right sizing and changing demondgin structure

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Speaker 6: of the company.

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Speaker 5: There is a lot to look forward to.

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Speaker 3: Well.

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Speaker 1: Our thanks to anaag Rana, Bloomberg Intelligence Senior Technology analyst.

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Speaker 1: Thank you for joining us. We now turn our attention

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Speaker 1: to the US economy. Two big events this week, a

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Speaker 1: two day FED meeting and a decision on interest rates.

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Speaker 1: Also the January jobs report, and for a preview, let's

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Speaker 1: bring in Michael McKee, Bloomberg International Economics and Policy correspondent. Michael,

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Speaker 1: thank you, and well let's start with that FOMC meeting.

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Speaker 1: And after three meetings in a row of leaving the

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Speaker 1: federal funds rate unchanged, what are you expecting to see

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Speaker 1: on Wednesday.

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Speaker 7: I'm expecting to see the Federal Open Market Committee leave

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Speaker 7: infrastrates unchanged four meetings in a row. We went into

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Speaker 7: the blackout period saying that they basically were looking at

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Speaker 7: not moving interest rates because they're waiting for more data

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Speaker 7: and so they're not going to surprise the markets that

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Speaker 7: we've gotten a lot more data that are interesting, but

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Speaker 7: they're not anything that would move the Fed to any

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Speaker 7: kind of emergency change in plans. But the question that

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Speaker 7: everybody's going to be asking is what about the March

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Speaker 7: meeting or what about the May meeting?

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Speaker 5: Jay Poll not going to.

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Speaker 7: Really answer those, but will he push back against the

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Speaker 7: market expectations of at least cut in May.

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Speaker 1: Well, let's talk about the data. Then that will lead

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Speaker 1: to what you expect to see unchanged. About the economy,

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Speaker 1: we got some pretty good encouraging news last week about inflation,

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Speaker 1: about jobs.

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Speaker 7: Yeah, the economic data that came in during the last week,

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Speaker 7: during the blackout period when we can't ask them about

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Speaker 7: it was extraordinarily strong. Fourth quarter GDP at three point

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Speaker 7: three percent, much higher than the anticipated number and not

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Speaker 7: down all that much from what we saw in the

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Speaker 7: third quarter. Consumer spending with strong business investment picked up,

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Speaker 7: and those would make the argument that the Fed wants

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Speaker 7: to keep interest rates unchanged for longer, except that the

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Speaker 7: inflation numbers have continued to go down, which suggests that

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Speaker 7: maybe they can cut So now it gives them even

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Speaker 7: more reason to say, we want more data to confirm

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Speaker 7: what we're seeing, because if they had to make a

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Speaker 7: great decision this time, it would be a close call.

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Speaker 1: And that more data that they're going to get we're

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Speaker 1: going to see on Friday.

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Speaker 7: Yeah, and that's kind of interesting because we're going to

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Speaker 7: see a slower job creation number, at least according to

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Speaker 7: what the Bloomberg consensus of the survey is one hundred

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Speaker 7: and sixty eight thousand. Now we'll see next week when

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Speaker 7: we get some additional data from ADP and the ism

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Speaker 7: numbers whether that changes people's But the unemployment rate is

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Speaker 7: expected to rise a little to three point eight percent

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Speaker 7: now the Fed is predicting that. But the wild card

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Speaker 7: here is remember all those storms we had earlier in January,

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Speaker 7: did they keep anyone from going to work? That's going

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Speaker 7: to be an interesting question because you basically only have

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Speaker 7: to show up or zoom in. I guess once during

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Speaker 7: the week and you're counted as employed. So some people

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Speaker 7: think that we may see this lower number because we

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Speaker 7: had weather interruptions. But it's pretty hard for weather to

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Speaker 7: make a huge difference in the overall number. So it's

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Speaker 7: going to be interesting to see what we get and

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Speaker 7: then what the Fed thinks of that. They want to

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Speaker 7: see a slow down. If we don't get it, then

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Speaker 7: that adds weight to the idea of higher for.

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Speaker 5: Longer, higher for longer.

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Speaker 1: Well, some jobs, certainly, I mean January is always volatile,

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Speaker 1: as you've said before, but some jobs like housing, you

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Speaker 1: have a big ice storm, I mean that just shuts

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Speaker 1: down for two weeks.

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Speaker 7: Yeah, well, it's going to be I hate to say

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Speaker 7: interesting again because I've been saying that a lot, but

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Speaker 7: it's going to be interesting again because we also got

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Speaker 7: new home sales last week and they were stronger than

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Speaker 7: anticipated in the month of December. But people don't go

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Speaker 7: out looking for houses when there's a lot of snow

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Speaker 7: on the ground or weather is bad or something like that.

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Speaker 5: So they just had the holiday.

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Speaker 7: So we may see a weather effect on that, and

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Speaker 7: also on construction building starts, because it's hard during a

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Speaker 7: blizzard to start digging a hole and putting up two

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Speaker 7: by fours. So there may be some weather affected data,

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Speaker 7: but it won't it won't be decisive for the fit.

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Speaker 5: Oh a lot to look forward to.

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Speaker 1: Well, our thanks to Michael McKee, Bloomberg International Economics and

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Speaker 1: Policy Correspondent, and coming up on Bloomberg day Break weekend,

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Speaker 1: we head to Europe for a preview of a policy

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Speaker 1: decision coming from the Bank of England.

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Speaker 5: I'm Tom Busby, and this is Blue.

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Speaker 1: This is Bloomberg Daybreak Weekend, our global look ahead at

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Speaker 1: the top stories for investors in the coming week. I'm

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Speaker 1: Tom Busby in New York. Up later in our program

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Speaker 1: we get an update on the health of the Chinese economy.

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Speaker 1: But first, after the ECB and the Bank of Japan,

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Speaker 1: investors will be looking for their first clues about the

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Speaker 1: path for interest rates from the Bank of England in

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Speaker 1: the coming days. Markets are expecting the first move in

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Speaker 1: the summer, but Governor Andrew Bailey is not convinced the

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Speaker 1: fight against inflation is over just yet. For more, let's

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Speaker 1: go to London and bring in Bloomberg Daybreak eurobanker Caroline Hepger.

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Speaker 2: Tom the latest inflation figures for the UK showed an

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Speaker 2: optic in December, complicating the path ahead for the Bank

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Speaker 2: of England. Whilst the BOE was the first major global

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Speaker 2: central bank to start hiking interest rates, some analysts think

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Speaker 2: that it'll be the loss to start cutting. The question

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Speaker 2: of when is still the main preoccupation for markets, though

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Speaker 2: we've been discussing this with many of our guests on

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Speaker 2: Bloomberg Radio. Now here's what Charlotte Ryland, the head of

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Speaker 2: investment at CCLA Investment Management, told us about her expectations

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Speaker 2: for the Bank of England decision.

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Speaker 8: Clearly they were a little late to the party in

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Speaker 8: terms of sort of pushing the rates up. The UK

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Speaker 8: economy seems to be somewhat more inflationary than others, and

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Speaker 8: I imagine part of that is, you know, some of

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Speaker 8: the dislocations we've had from the back of Brexit, the

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Speaker 8: sort titled labor market that we have, which to do

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Speaker 8: with migration as well, so you know, it's been a

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Speaker 8: more difficult position for them, and it's clearly a much

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Speaker 8: more vulnerable economy in terms of you know, the consumer

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Speaker 8: as well. So it's a delicate to typrope theicult a

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Speaker 8: balance between the inflationary pressure and not completely derailing the economy.

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Speaker 2: So that's Charlotte Ryland's view. Now let's hit from Sam

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Speaker 2: Linton Brown from BNP Parryber. He's talked to us about

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Speaker 2: how the Bank of England is in a different position

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Speaker 2: to other major global central banks.

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Speaker 9: The Bank of England potentially could prove to be a

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Speaker 9: little bit more of an idiosyncratic narrative this year because

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Speaker 9: one could argue that the stickiness of inflation will prove

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Speaker 9: to be more persistent than elsewhere. Our central case is

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Speaker 9: that the Bank of England will begin cutting rates around

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Speaker 9: the middle of this year, cut by one hundred and

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Speaker 9: twenty five basis points. That's not too different to what

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Speaker 9: market's currently pricing. But I'd say if there's a risk

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Speaker 9: on the three ECB fed Bank of England where they

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Speaker 9: actually end up doing less tightening because of inflation or

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Speaker 9: less easy I should say because of inflation, I'd say

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Speaker 9: it's the Bank of England.

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Speaker 2: So that was Sam Linton Brown from BMP Parryber and

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Speaker 2: those are some of the views from the markets in

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Speaker 2: terms of the outlook for the Bank of England. On

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Speaker 2: the data front, headline inflation was four percent in December

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Speaker 2: for the UK. The PMI surveys for January brought better

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Speaker 2: than expected readings, but the manufacturing sector still in contraction.

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Speaker 2: So economists do widely expect the Bank of England to

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Speaker 2: hold interest rates at their next meeting at five and

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Speaker 2: a quarter of percent. So it is going to be

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Speaker 2: the post meeting press conference which is going to have

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Speaker 2: the potential to produce more answers. Perhaps. I've been discussing

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Speaker 2: that with our senior economics reporter, Philip Aldrich. I started

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Speaker 2: by asking him what he'll be watching out for in

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Speaker 2: the decision from Governor Andrew Bailey and colleagues.

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Speaker 10: Yeah, and I mean not just from Bailey, but so

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Speaker 10: the whole nine member rate setting committee will they make

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Speaker 10: their judgment. And the last meeting, which was about the

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Speaker 10: second week of December, three of them voted for rate risers,

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Speaker 10: the other six decided to cold rates. Now, since then,

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Speaker 10: the inflation numbers have come down more quickly than expected.

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Speaker 10: There's been a bit of a question of a few

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Speaker 10: questions about whether we're going to have a brief technical recession.

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Speaker 10: And these kind of messages or economic signals would suggest

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Speaker 10: that the bankingland needs to start thinking about rate cards,

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Speaker 10: and obviously that's what is happening in Europe at the

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Speaker 10: European Central Bank and at the FED. So there is

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Speaker 10: this So although we're not expecting anyone to well maybe

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Speaker 10: one member may vote for a rate cut, we're not

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Speaker 10: expecting the Committee as a whole to vote for a

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Speaker 10: rate cut. This is going to It's something which which

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Speaker 10: people are going to be looking out for for to

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Speaker 10: see whether the Bank is now sort of following the

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Speaker 10: other major central banks in sort of signaling that there

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Speaker 10: may be a change of direction.

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Speaker 6: Yeah.

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Speaker 2: Absolutely, And the Bank of England decision comes fairly swiftly

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Speaker 2: after the ECB interest rate decision. And yet is there

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Speaker 2: a difference, a kind of gap opening up between the

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Speaker 2: position of the UK and the Bank of England and

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Speaker 2: as you say, the FED and.

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Speaker 10: The ec well, the gap so the gap is it's

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Speaker 10: not on the rate where the rate policy is I mean,

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Speaker 10: obviously bank the Bank of England's up there with the

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Speaker 10: FED and higher than the ECB. The gap is in

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Speaker 10: in the future trajectory of policy. And the Fed has

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Speaker 10: signaled that they are considering rate cuts. The ECB has,

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Speaker 10: I mean the president of the ECB, Christine la Guard,

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Speaker 10: said that the June May you know, there may be

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Speaker 10: rate cuts starting in the summer, and obviously the market

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Speaker 10: is now pricing these rate cuts in for all three

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Speaker 10: central banks. What we are not, what we've not heard

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Speaker 10: from the Bank of England is any kind of hint

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Speaker 10: that they're going to move in this direction. So the

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Speaker 10: last communication they had was all about, you know, we

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Speaker 10: need to worry about potential for further inflation. We've got

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Speaker 10: to be vigilant these kind of you know, further tightening

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Speaker 10: maybe on the cards. Three people did vote for a

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Speaker 10: rate rise, so it's so there. So their language is

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Speaker 10: kind of out of step with the sort of consensus

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Speaker 10: thinking at the moment that you know, there have been

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Speaker 10: you know, wages are still being proving a little bit

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Speaker 10: stronger than we're expected. You know we've had we've had

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Speaker 10: in the very later stad we've had the pmis the

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Speaker 10: business activity numbers that they have been relatively strong, and

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Speaker 10: so that so, you know, markets are beginning to think

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Speaker 10: that there's not going to be just masses of rate

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Speaker 10: cuts over this year. But the bank has got to

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Speaker 10: start signaling that this this is something that is on

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Speaker 10: the agenda now.

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Speaker 2: In terms of the UK and you know, whether it's

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Speaker 2: in a special position or in a different position to others.

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Speaker 2: The Red Sea. How do we think about the inflationary

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Speaker 2: pressures coming from the Red Sea? Obviously the UK and

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Speaker 2: with the US and taking action against you know who,

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Speaker 2: the militants, you know, which is the thing that is

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Speaker 2: threatening shipping. Does that particularly affect the UK more than

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Speaker 2: other places?

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Speaker 10: No, the sort of the immediate effect on us is

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Speaker 10: the direct effect on us is not is not enormous.

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Speaker 10: We don't we There was I can't remember the specific numbers,

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Speaker 10: but there was some economic study which showed that we

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Speaker 10: don't actually get that much of our imports directly directly

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Speaker 10: goods imports that are directly coming through the Red Sea

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Speaker 10: and the Sewers Canal, but there is this sort of second,

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Speaker 10: second round hit. So the stuff we are importing is

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Speaker 10: coming from countries which are going to be feeling the

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Speaker 10: effect of this or to a much larger degree. It

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Speaker 10: clearly is a risk. I mean, what we learned through

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Speaker 10: the COVID pandemic was that when supply chains get disrupted,

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Speaker 10: that can be an enormous cost to business, and that

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Speaker 10: that cost does get passed on and we have seen

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Speaker 10: indications of that and as so in the stronger PMI

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Speaker 10: data that came out this week. There was also evidence

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Speaker 10: that costs have started to rise again and the and

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Speaker 10: the acceleration in cost was notable. Now you could you

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Speaker 10: can draw the draw the correlation the causation from the

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Speaker 10: sort of red sea disruption in the HUTI. So it's

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Speaker 10: it is, it's definitely on something which people are being

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Speaker 10: their alert to the to the risk. And you probably

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Speaker 10: we're already potentially going to have a little increase in

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Speaker 10: the inflation numbers for January which are not out yet.

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Speaker 10: So if you have that and plus these worries about

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Speaker 10: the supply chain disruption, that you could start to get

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Speaker 10: people getting a bit nervous about the inflation beginning to

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Speaker 10: pick up again.

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Speaker 2: There's quite a big mismatch between market expectations for right

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Speaker 2: cuts from the Fed and the FED signaling bit sort

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Speaker 2: of less for the ECB. What's the picture for the

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Speaker 2: mask could expectations around the Bank of England versus what

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Speaker 2: we think they you know what they are planning and saying.

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Speaker 10: Yeah, so it's about a percentage point cut so for

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Speaker 10: this year and those cuts to start in May or June,

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Speaker 10: depending on I think it's around June now. But the

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Speaker 10: that is that is probably stronger than the Bank of

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Speaker 10: England would like. Now we are inflation is likely to

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Speaker 10: hit around two percent April May June time because we're

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Speaker 10: going to have a big drop in the energy price

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Speaker 10: cap and that that that fall in April, which it's

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Speaker 10: a staggered three monthly reset, that fall in April is

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Speaker 10: anticipated and it's expected to deliver this. You know, we

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Speaker 10: finally back to inflation target. You know, there are concerns

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Speaker 10: that it could then start accelerating later on, but the

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Speaker 10: Bank of England is not going to want to just say, oh,

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Speaker 10: we've hit two percent, right, job done, We're going to

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Speaker 10: get back down to you know, three percent super quick.

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Speaker 5: There.

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Speaker 10: You know, there are underlying pressures. You've got so and

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Speaker 10: core inflation which is still proving quite sticky.

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Speaker 2: We also have to think that this Bank of England

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Speaker 2: rate decision comes just a little bit ahead of the

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Speaker 2: budget the beginning of March. Let's think about what the

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Speaker 2: Chancellor is preparing to do. A lot of emphasis, a

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Speaker 2: huge amount of pressure on the government to cut taxes

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Speaker 2: from within their own party, from the sort of thinking

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Speaker 2: that Suna can hunt have. I mean, how are you

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Speaker 2: thinking about that? Could that be inflationary. How does that

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Speaker 2: play into the economic picture for Britain.

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Speaker 10: So for the Bank of England, they're not allowed to

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Speaker 10: sort of take government policy until it is government policy,

440
00:22:36,040 --> 00:22:38,159
Speaker 10: so people can assume what it would be. But so

441
00:22:38,160 --> 00:22:40,920
Speaker 10: we've got the March the sixth budget. You would expect

442
00:22:40,960 --> 00:22:43,600
Speaker 10: it's it's sort of it's a tried and tested political

443
00:22:43,640 --> 00:22:47,200
Speaker 10: playbook that you would cut taxes, give consumers and households

444
00:22:47,200 --> 00:22:49,399
Speaker 10: a boost and make everybody have there's a bit of

445
00:22:49,400 --> 00:22:52,440
Speaker 10: feel good factor going into the election and they've obviously

446
00:22:52,680 --> 00:22:55,720
Speaker 10: lagging in the polls terribly, so they need something. So

447
00:22:56,520 --> 00:22:58,840
Speaker 10: I mean, i'd assume if at the moment it looks

448
00:22:58,880 --> 00:23:01,280
Speaker 10: like the change in the sort of the rate forecast

449
00:23:01,760 --> 00:23:07,000
Speaker 10: has probably given the Chancellor something between five and ten billion,

450
00:23:07,040 --> 00:23:09,840
Speaker 10: I think Bloomberg economists Dan Hanson's got those sort of

451
00:23:09,920 --> 00:23:12,840
Speaker 10: numbers of headroom, and so I mean, I would assume

452
00:23:12,880 --> 00:23:17,240
Speaker 10: he's going to spend every penny of his headroom and more. Now,

453
00:23:17,240 --> 00:23:19,480
Speaker 10: partly the motivation for this is not just to give

454
00:23:19,520 --> 00:23:21,640
Speaker 10: people tax risers and make everyone feel better, but it's

455
00:23:21,640 --> 00:23:24,560
Speaker 10: also to draw this dividing line, this battleground with labor

456
00:23:25,040 --> 00:23:27,679
Speaker 10: and the more and the more money they spend. The

457
00:23:27,680 --> 00:23:31,359
Speaker 10: more money that the Conservatives spent within their fiscal rules

458
00:23:31,640 --> 00:23:34,840
Speaker 10: they they can, then they make it much more difficult

459
00:23:34,840 --> 00:23:36,720
Speaker 10: for Labor to press ahead with their sort of twenty

460
00:23:36,760 --> 00:23:40,120
Speaker 10: eight billion green investment plan without either having to ramp

461
00:23:40,160 --> 00:23:42,840
Speaker 10: borrowing up much more, or cut taxes or do something else.

462
00:23:43,080 --> 00:23:45,880
Speaker 10: And so it because of that commitment that the labor

463
00:23:45,920 --> 00:23:48,399
Speaker 10: has made, it becomes more it becomes much more tricky

464
00:23:48,400 --> 00:23:51,840
Speaker 10: for them. The smaller the headroom is that the government

465
00:23:51,960 --> 00:23:55,640
Speaker 10: leaves them, and so then their then their manifesto commitment

466
00:23:55,680 --> 00:23:58,119
Speaker 10: start to look a bit sketchy. So I mean, for

467
00:23:58,160 --> 00:24:01,080
Speaker 10: two reasons, for the feel good factor, for the political battle.

468
00:24:01,720 --> 00:24:03,919
Speaker 10: I'm expecting some big tax cuts, and obviously you know,

469
00:24:03,960 --> 00:24:06,760
Speaker 10: beyond that there will be some inflationary effect there. But

470
00:24:06,960 --> 00:24:09,639
Speaker 10: it's not I don't think that anyone would suggest that

471
00:24:09,760 --> 00:24:12,400
Speaker 10: it's going to be, you know the same as the Ukraine,

472
00:24:12,400 --> 00:24:15,120
Speaker 10: the post Ukraine kind of those kind of fears. It might,

473
00:24:15,359 --> 00:24:18,320
Speaker 10: it might slow the rate of rate cuts down, but

474
00:24:18,359 --> 00:24:19,760
Speaker 10: it wouldn't, you know, halt it.

475
00:24:19,840 --> 00:24:22,440
Speaker 2: There is the nagging voice, I'll put it that way,

476
00:24:22,440 --> 00:24:25,960
Speaker 2: of the ifs the Institute for Fiscal Studies say the

477
00:24:26,000 --> 00:24:29,800
Speaker 2: government must be honest whichever stripe it is, that the

478
00:24:29,800 --> 00:24:31,960
Speaker 2: next government has to be honest with the state of

479
00:24:31,960 --> 00:24:35,760
Speaker 2: the public finances. I mean really a very kind of

480
00:24:35,880 --> 00:24:40,600
Speaker 2: strongly worded criticism that the tax and spending plans look

481
00:24:40,680 --> 00:24:44,359
Speaker 2: immensely difficult for Britain and that you know, the plans

482
00:24:44,400 --> 00:24:46,400
Speaker 2: have to be laid out clearly to the public.

483
00:24:47,160 --> 00:24:50,399
Speaker 10: Yeah, you know they've made this. I mean it's not

484
00:24:50,400 --> 00:24:52,119
Speaker 10: the first time that there are just a government to

485
00:24:52,160 --> 00:24:55,280
Speaker 10: be honest about the future trajectory for public finances. But

486
00:24:55,400 --> 00:24:59,800
Speaker 10: the absolutely beyond the election there as I think it

487
00:24:59,840 --> 00:25:04,760
Speaker 10: was obil's chair Richard Hughes said that there is no

488
00:25:04,880 --> 00:25:07,160
Speaker 10: detail on the planned spending cuts and this behind spending

489
00:25:07,200 --> 00:25:09,280
Speaker 10: cuts for the departments other than health and maybe one

490
00:25:09,320 --> 00:25:12,520
Speaker 10: or two other protected departments, we're effectively a return to austerity.

491
00:25:12,520 --> 00:25:15,280
Speaker 10: There's going to be real terms cuts and that in

492
00:25:15,400 --> 00:25:19,520
Speaker 10: an environment where everything is already sort of all the

493
00:25:19,560 --> 00:25:22,760
Speaker 10: public services are already crumbling to a degree, is it

494
00:25:23,000 --> 00:25:24,240
Speaker 10: Is it really conceivable?

495
00:25:24,400 --> 00:25:27,600
Speaker 2: So that was our senior economics reporter Philip Aldrick speaking

496
00:25:27,640 --> 00:25:29,880
Speaker 2: to me, and we will have of course full coverage

497
00:25:29,880 --> 00:25:33,040
Speaker 2: of the Bank of England's great decision on Thursday here

498
00:25:33,119 --> 00:25:36,040
Speaker 2: on Bloomberg. I'm Caroline Hepget here in London. You can

499
00:25:36,040 --> 00:25:38,879
Speaker 2: catch us every weekday morning for Bloomberg Daybreak. You at

500
00:25:38,920 --> 00:25:41,600
Speaker 2: beginning at six am in London. That's one am on

501
00:25:41,680 --> 00:25:42,280
Speaker 2: Wall Street.

502
00:25:42,560 --> 00:25:44,960
Speaker 1: Tom, all right, thanks to Bloomberg day Break. You're a banker,

503
00:25:45,119 --> 00:25:48,240
Speaker 1: Caroline Hepgar And coming up on Bloomberg Daybreak weekend, we

504
00:25:48,359 --> 00:25:50,800
Speaker 1: take you to Asia for a very busy week on

505
00:25:50,880 --> 00:25:54,600
Speaker 1: the economic front. There, I'm Tom Busby and this is Bloomberg.

506
00:26:05,040 --> 00:26:07,560
Speaker 1: I'm Tom Busby in New York with your global look ahead.

507
00:26:07,560 --> 00:26:09,600
Speaker 1: At the top stories for investors in the coming week.

508
00:26:10,160 --> 00:26:13,119
Speaker 1: China struggling to shore up its economy and halt a

509
00:26:13,200 --> 00:26:18,000
Speaker 1: six trillion dollar stock market route despite the best government efforts.

510
00:26:18,440 --> 00:26:21,160
Speaker 1: Now with more eco data coming out in the coming days,

511
00:26:21,200 --> 00:26:24,240
Speaker 1: Bloomberg Daybreak Asia co host Brian Curtis takes a look

512
00:26:24,240 --> 00:26:26,800
Speaker 1: at the overall picture of the Chinese economy.

513
00:26:27,000 --> 00:26:30,080
Speaker 3: Tom, we look forward to China's official PMIS in the

514
00:26:30,119 --> 00:26:32,880
Speaker 3: coming week. It might be a little early to see

515
00:26:32,920 --> 00:26:36,600
Speaker 3: a bounce in economic activity in China, but recent measures

516
00:26:36,680 --> 00:26:39,320
Speaker 3: rolled out by the Chinese government have sparked a little

517
00:26:39,400 --> 00:26:43,560
Speaker 3: more excitement about Chinese assets. The PBOC will for instance,

518
00:26:43,600 --> 00:26:46,879
Speaker 3: cut the bank's reserve requirements by fifty basis points on

519
00:26:46,920 --> 00:26:51,520
Speaker 3: February fifth. Bloomberg Economics called that a forceful response to

520
00:26:51,600 --> 00:26:54,880
Speaker 3: a slowing economy, and that the Central Bank was likely

521
00:26:54,920 --> 00:26:58,080
Speaker 3: to cut interest rates this quarter as well, all of

522
00:26:58,080 --> 00:27:02,560
Speaker 3: which Bloomberg Economics said would give a positive jolt to confidence.

523
00:27:03,080 --> 00:27:06,200
Speaker 3: Joining us for some insights about the challenges that China

524
00:27:06,320 --> 00:27:09,399
Speaker 3: is facing and getting the economy and the markets rolling

525
00:27:09,440 --> 00:27:15,240
Speaker 3: again is Jill deesis China Economy and Government editor at Bloomberg. Jill.

526
00:27:15,320 --> 00:27:18,760
Speaker 3: Earlier I spoke with Bloomberg economist Eric Chu, who covers

527
00:27:18,920 --> 00:27:21,240
Speaker 3: China and Hong Kong, and just to give us a

528
00:27:21,280 --> 00:27:24,359
Speaker 3: little bit more spice in our discussion, I wanted to

529
00:27:24,640 --> 00:27:27,600
Speaker 3: play some comments from him. I asked him if this

530
00:27:27,720 --> 00:27:30,040
Speaker 3: might do the trick to turn the economy around.

531
00:27:30,359 --> 00:27:32,880
Speaker 11: We think the positive move probably it's already too late,

532
00:27:33,080 --> 00:27:36,479
Speaker 11: you know, even in January. I think many of the markets,

533
00:27:36,560 --> 00:27:40,560
Speaker 11: including US, were expecting Central PBOC to cut the MPHO

534
00:27:40,640 --> 00:27:43,520
Speaker 11: raid last week, right, but they didn't deliver. I think

535
00:27:43,520 --> 00:27:46,920
Speaker 11: that's a big disappointment for the market and leading further

536
00:27:47,000 --> 00:27:49,520
Speaker 11: leading to you know, the store market tumbo over the

537
00:27:49,560 --> 00:27:52,800
Speaker 11: past week. So I think that might be one of

538
00:27:52,840 --> 00:27:55,399
Speaker 11: the reasons, you know, triggering the PBOC, you know, to

539
00:27:55,560 --> 00:27:59,320
Speaker 11: hasten the moves and trying to also give more confidence

540
00:27:59,359 --> 00:27:59,960
Speaker 11: to markets.

541
00:28:00,760 --> 00:28:04,159
Speaker 3: Eric j again from Bloomberg Economics, and I'm sitting with

542
00:28:04,280 --> 00:28:07,840
Speaker 3: Jill Diesis, who's China Economy and Government editor at Bloomberg.

543
00:28:08,200 --> 00:28:10,320
Speaker 3: So what do you make of that comment that perhaps

544
00:28:10,320 --> 00:28:11,880
Speaker 3: it's a little bit too little, too late.

545
00:28:12,680 --> 00:28:15,160
Speaker 12: Well, I think that at this point the whole thing

546
00:28:15,400 --> 00:28:19,040
Speaker 12: with this economic slowdown really comes down to confidence, right,

547
00:28:19,119 --> 00:28:23,240
Speaker 12: confidence in the economy, confidence among investors that the government

548
00:28:23,240 --> 00:28:25,320
Speaker 12: can really turn things around. And I think that's a

549
00:28:25,440 --> 00:28:29,359
Speaker 12: very fair point. I mean, look, we've seen over the

550
00:28:29,440 --> 00:28:33,080
Speaker 12: past year several measures that the government has taken to

551
00:28:33,119 --> 00:28:37,400
Speaker 12: try to get activity going again, to try to restore confidence.

552
00:28:37,520 --> 00:28:41,200
Speaker 12: We saw a very unusual sovereign bond issuance from the

553
00:28:41,240 --> 00:28:44,440
Speaker 12: middle of October of last year, trying to you know,

554
00:28:44,480 --> 00:28:48,200
Speaker 12: get that out to fund more infrastructure projects, more construction,

555
00:28:48,320 --> 00:28:50,920
Speaker 12: get things going again. We saw various measures to try

556
00:28:50,920 --> 00:28:53,960
Speaker 12: to help restore confidence in the property sector, whether that

557
00:28:54,040 --> 00:28:57,040
Speaker 12: included you know, lowering some mortgage rates, trying to encourage

558
00:28:57,080 --> 00:29:00,760
Speaker 12: people to start buying homes again, incentify them in that way,

559
00:29:00,800 --> 00:29:03,560
Speaker 12: and we really haven't seen anything that's led to a

560
00:29:03,560 --> 00:29:06,880
Speaker 12: more meaningful turnaround in what's happening in the economy. I

561
00:29:06,880 --> 00:29:10,000
Speaker 12: think that's really just been underscored over the past few

562
00:29:10,000 --> 00:29:12,120
Speaker 12: weeks with how much more of a sell off we've

563
00:29:12,160 --> 00:29:14,560
Speaker 12: seen in the stock market, right, I Mean that's sort

564
00:29:14,560 --> 00:29:17,480
Speaker 12: of really really underscores that issue with sentiment here. So

565
00:29:17,520 --> 00:29:20,240
Speaker 12: it's difficult to see what exactly the government can do

566
00:29:20,360 --> 00:29:23,280
Speaker 12: to restore that level of confidence, but it does seem

567
00:29:23,320 --> 00:29:26,120
Speaker 12: clear at least, or the at least the message that

568
00:29:26,200 --> 00:29:29,160
Speaker 12: investors are sending is that what has been done so

569
00:29:29,240 --> 00:29:31,680
Speaker 12: far isn't enough. And I guess we're all just not

570
00:29:31,760 --> 00:29:34,040
Speaker 12: really sure where to go from here, given.

571
00:29:33,760 --> 00:29:36,480
Speaker 3: The property crisis has cut pretty deep. I mean, it's

572
00:29:36,520 --> 00:29:40,320
Speaker 3: the main source of wealth for a lot of Chinese households.

573
00:29:40,680 --> 00:29:42,280
Speaker 3: Is it the type of thing that we think could

574
00:29:42,280 --> 00:29:45,640
Speaker 3: be turned around quickly? And is it just that investors

575
00:29:45,680 --> 00:29:46,680
Speaker 3: should be more patient?

576
00:29:47,160 --> 00:29:49,800
Speaker 12: Well, I think at this point the Chinese economy is

577
00:29:49,880 --> 00:29:53,720
Speaker 12: really kind of undergoing a pretty structural change, right, And

578
00:29:53,760 --> 00:29:57,240
Speaker 12: I think that a lot of top polity makers have

579
00:29:57,440 --> 00:30:00,920
Speaker 12: acknowledged that that the sector real estate, which used to

580
00:30:00,960 --> 00:30:03,200
Speaker 12: be you know, used to comprise a quarter, if not

581
00:30:03,280 --> 00:30:07,520
Speaker 12: a third, of all GDP in the world's second largest

582
00:30:07,520 --> 00:30:09,720
Speaker 12: economy just isn't really ever going to get back there,

583
00:30:09,760 --> 00:30:12,880
Speaker 12: and so there's a lot of focus among top officials

584
00:30:12,880 --> 00:30:16,200
Speaker 12: about what exactly needs to become these new drivers of growth,

585
00:30:16,200 --> 00:30:21,040
Speaker 12: whether that's putting more into new energy. Electric vehicles is

586
00:30:21,080 --> 00:30:23,840
Speaker 12: a really promising area, of renewables is a really promising area,

587
00:30:23,920 --> 00:30:26,880
Speaker 12: But obviously that kind of thing takes a lot of time.

588
00:30:27,040 --> 00:30:28,959
Speaker 12: I think that if you're an investor, you want to

589
00:30:29,040 --> 00:30:32,760
Speaker 12: see more progress on getting activity going again. You want

590
00:30:32,800 --> 00:30:34,920
Speaker 12: to see some indication that you're at least going to

591
00:30:34,960 --> 00:30:38,160
Speaker 12: get households to start spending again. But ultimately, yes, I

592
00:30:38,160 --> 00:30:41,480
Speaker 12: think it's difficult when you're seeing some of these more

593
00:30:41,480 --> 00:30:44,840
Speaker 12: immediate issues with a deep fallout from the property crisis,

594
00:30:46,240 --> 00:30:49,120
Speaker 12: you know, not necessarily translating into an immediate fix, and

595
00:30:49,200 --> 00:30:52,800
Speaker 12: knowing that those longer term transitional phases are still obviously

596
00:30:53,160 --> 00:30:54,560
Speaker 12: quite a bit of a ways off.

597
00:30:55,440 --> 00:30:58,760
Speaker 3: And there is also a little bit of contrast between

598
00:30:59,240 --> 00:31:01,800
Speaker 3: some of these measures that have been put in place

599
00:31:02,160 --> 00:31:05,239
Speaker 3: or called for by the government and then you know

600
00:31:05,400 --> 00:31:09,720
Speaker 3: tightness from the regulators. For instance, when the PBOC made

601
00:31:09,760 --> 00:31:13,200
Speaker 3: the announcement about cutting the triple R. We also had

602
00:31:13,280 --> 00:31:16,480
Speaker 3: another story on the Bloomberg Terminal about how Chinese officials

603
00:31:17,000 --> 00:31:20,400
Speaker 3: are being told in the provinces that this belt tightening

604
00:31:20,840 --> 00:31:24,440
Speaker 3: posture by President Shijen Ping is here to stay and

605
00:31:24,480 --> 00:31:27,280
Speaker 3: that leaders are just going to have to get used

606
00:31:27,320 --> 00:31:30,680
Speaker 3: to it. The norm is going to be frugality. Now

607
00:31:30,960 --> 00:31:35,120
Speaker 3: that's not necessarily something negative, but it contrasts a little

608
00:31:35,120 --> 00:31:37,640
Speaker 3: bit with wanting to get the animal spirits going right.

609
00:31:37,720 --> 00:31:39,480
Speaker 12: I think that those do contrast with each other, but

610
00:31:39,480 --> 00:31:45,560
Speaker 12: they're ultimately still two different strains. So from the regulatory perspective, yes,

611
00:31:45,640 --> 00:31:48,880
Speaker 12: we've seen obviously over the past few years, an incredible

612
00:31:48,920 --> 00:31:53,840
Speaker 12: crackdown on various sectors, reigning in big tech, reigning in,

613
00:31:54,080 --> 00:31:56,760
Speaker 12: you know, the education sector, all of these different areas.

614
00:31:56,800 --> 00:31:58,720
Speaker 12: I think that that's you know, sort of one one

615
00:31:58,760 --> 00:32:01,840
Speaker 12: piece of this. Obviously, property is another part of that,

616
00:32:01,920 --> 00:32:04,920
Speaker 12: going back to, you know, here of the three red lines,

617
00:32:05,600 --> 00:32:07,840
Speaker 12: and we've seen sort of this fallout in terms of

618
00:32:07,880 --> 00:32:13,320
Speaker 12: how much confidence investors, businesses, Foreign investment in particular has

619
00:32:13,400 --> 00:32:16,040
Speaker 12: really sort of eroded over the over the past few years.

620
00:32:16,120 --> 00:32:18,040
Speaker 12: I think that you know, the government has also has

621
00:32:18,080 --> 00:32:22,080
Speaker 12: tried to send multiple messages saying that, you know, they

622
00:32:22,080 --> 00:32:25,000
Speaker 12: want to be a little bit more you know, discerning

623
00:32:25,040 --> 00:32:27,920
Speaker 12: about regulatory policy. They don't want to catch as many

624
00:32:27,920 --> 00:32:30,280
Speaker 12: people by surprise. But they're obviously still kind of struggling

625
00:32:30,360 --> 00:32:32,000
Speaker 12: with that, right. I mean, you just have to go

626
00:32:32,080 --> 00:32:35,600
Speaker 12: back to December, so not too long ago, when there

627
00:32:35,720 --> 00:32:39,920
Speaker 12: was a surprise gaming regulation that was announced and then

628
00:32:40,400 --> 00:32:42,880
Speaker 12: caused a pretty severe stock drop for ten cents and

629
00:32:42,960 --> 00:32:45,360
Speaker 12: some other major tech giants really sort of sent some

630
00:32:45,440 --> 00:32:47,040
Speaker 12: jitters through the markets there. So I think that on

631
00:32:47,080 --> 00:32:51,240
Speaker 12: that side of things, the government still hasn't quite figured

632
00:32:51,240 --> 00:32:54,240
Speaker 12: out how to guide people through this idea that the

633
00:32:54,320 --> 00:32:56,920
Speaker 12: regular Tory crackdown is easing up, or at least that

634
00:32:56,920 --> 00:32:59,719
Speaker 12: they're going to better telegraph how exactly some regulations are

635
00:32:59,720 --> 00:33:02,320
Speaker 12: coming in place. I think that on the monetary policy side,

636
00:33:02,320 --> 00:33:05,760
Speaker 12: at least, which this is what you saw recently from

637
00:33:05,800 --> 00:33:10,200
Speaker 12: the PBOC, is there actually in a really difficult position

638
00:33:10,240 --> 00:33:12,880
Speaker 12: as well. I mean, Eric was just saying a couple

639
00:33:12,960 --> 00:33:16,920
Speaker 12: of minutes ago that they disappointed earlier in January saying

640
00:33:16,920 --> 00:33:20,720
Speaker 12: that they weren't going to cut policy rates even though

641
00:33:20,720 --> 00:33:25,160
Speaker 12: that was very widely expected. And now they're trying to.

642
00:33:25,240 --> 00:33:27,160
Speaker 12: They sort of front ran this triple R cut, this

643
00:33:27,240 --> 00:33:30,320
Speaker 12: reserve requirement ratio cut. We really haven't seen that ever before.

644
00:33:30,080 --> 00:33:33,080
Speaker 3: For well, and this was more dramatic fifty basis points say,

645
00:33:33,160 --> 00:33:35,920
Speaker 3: even when they were thinking about cutting the interest rate,

646
00:33:35,960 --> 00:33:37,800
Speaker 3: it was only like ten basis points, right, and then

647
00:33:37,800 --> 00:33:40,320
Speaker 3: we got nothing. So it's a little surprising. It's at

648
00:33:41,000 --> 00:33:44,280
Speaker 3: a little bit underwhelming, I think two investors. However, in

649
00:33:44,320 --> 00:33:46,200
Speaker 3: this past week we saw a little bit of a

650
00:33:46,200 --> 00:33:50,240
Speaker 3: pickup in appetite four Chinese assets. Is it sustainable?

651
00:33:51,240 --> 00:33:53,200
Speaker 12: Well, I think we have to see where else the

652
00:33:53,240 --> 00:33:55,800
Speaker 12: PBOC really goes at these measures, right. I actually thought

653
00:33:55,800 --> 00:33:58,880
Speaker 12: what was really interesting from this PBOC press conference with

654
00:33:58,960 --> 00:34:02,680
Speaker 12: the governor was not just that you see this reserve

655
00:34:02,720 --> 00:34:06,200
Speaker 12: requirement ratio cut being front ran bigger than expected, but

656
00:34:06,240 --> 00:34:08,839
Speaker 12: also it really seemed like they were focusing a lot

657
00:34:08,880 --> 00:34:13,640
Speaker 12: more on structural policies to kind of guide credit into

658
00:34:13,920 --> 00:34:16,799
Speaker 12: more of their favored sectors. So, in addition to the

659
00:34:16,800 --> 00:34:21,440
Speaker 12: triple R cut, Pengong Sheng, the PBOC governor, also announced

660
00:34:22,719 --> 00:34:25,239
Speaker 12: that they were cutting some re lending rates so that

661
00:34:25,280 --> 00:34:28,480
Speaker 12: they could, you know, better benefit make it easier to

662
00:34:28,600 --> 00:34:31,399
Speaker 12: loan to I think the agricultural sector was one. They

663
00:34:31,400 --> 00:34:33,920
Speaker 12: were setting up a new credit market to promote credit

664
00:34:34,000 --> 00:34:37,040
Speaker 12: for green divisions, elderly care, that kind of thing. So

665
00:34:37,120 --> 00:34:41,399
Speaker 12: you're actually seeing in some ways the Central Bank go

666
00:34:41,520 --> 00:34:43,360
Speaker 12: all the way back. You know, you'd have to go

667
00:34:43,400 --> 00:34:46,000
Speaker 12: back several years, I think to this idea that they're

668
00:34:46,120 --> 00:34:49,640
Speaker 12: more interested in using monetary policy tools to direct credit

669
00:34:49,680 --> 00:34:52,040
Speaker 12: themselves to certain sectors. I don't think that's something that

670
00:34:52,040 --> 00:34:54,520
Speaker 12: we've really seen from the Central Bank in quite a while.

671
00:34:54,840 --> 00:34:57,759
Speaker 3: They brought in the use of commercial property loans for developers.

672
00:34:57,800 --> 00:34:59,919
Speaker 3: Now this would be new money, I guess, being able

673
00:34:59,920 --> 00:35:02,480
Speaker 3: to go to developers to help them pay off some

674
00:35:02,560 --> 00:35:06,640
Speaker 3: of their debts. Is that consistent with the previous theme.

675
00:35:07,160 --> 00:35:10,040
Speaker 12: Yes, well, I think it's consistent with the direction that

676
00:35:10,120 --> 00:35:12,160
Speaker 12: it seems that the Central Bank has kind of been going,

677
00:35:12,200 --> 00:35:14,759
Speaker 12: at least over the past few months. So again, you know,

678
00:35:14,800 --> 00:35:18,759
Speaker 12: we saw much longer term change or shift from the

679
00:35:18,800 --> 00:35:21,520
Speaker 12: PBOC to build more of an interest rate cord or

680
00:35:22,160 --> 00:35:24,920
Speaker 12: you know, addressed policy rates rather than some of these

681
00:35:24,960 --> 00:35:27,319
Speaker 12: other structural policies. I think that's begun to change over

682
00:35:27,360 --> 00:35:30,520
Speaker 12: the past few months. We didn't one thing that we

683
00:35:30,600 --> 00:35:33,440
Speaker 12: didn't see out of this recent press conference with the PBOC,

684
00:35:33,840 --> 00:35:38,640
Speaker 12: was you know, turning to other types of tools. There's

685
00:35:38,719 --> 00:35:41,600
Speaker 12: there's this one called pledged supplemental lending, which is essentially

686
00:35:41,600 --> 00:35:44,440
Speaker 12: funneling money into policy banks so that they can you know,

687
00:35:44,480 --> 00:35:47,560
Speaker 12: help fund you know, property related sectors in particular. We

688
00:35:47,600 --> 00:35:50,120
Speaker 12: didn't see that too much, although they have been making

689
00:35:50,200 --> 00:35:52,160
Speaker 12: use of that tool recently. So I do think that,

690
00:35:52,719 --> 00:35:54,560
Speaker 12: you know, even if you're seeing a shift, something that's

691
00:35:54,560 --> 00:35:57,000
Speaker 12: been happening at least over the past couple of months.

692
00:35:57,200 --> 00:35:59,760
Speaker 3: Let's go back to Bloomberg economist Derek you for a moment.

693
00:36:00,040 --> 00:36:02,800
Speaker 3: I asked him about the mix that we've seen between

694
00:36:03,000 --> 00:36:05,080
Speaker 3: fiscal and monetary stimulus.

695
00:36:05,160 --> 00:36:08,920
Speaker 11: The monetary easing itself, you know, even interestury, CRD triple

696
00:36:09,000 --> 00:36:12,640
Speaker 11: ar cuds. Yeah, that's give you something, but not that huge.

697
00:36:12,719 --> 00:36:15,759
Speaker 11: I think our view is the fiscal side needs to

698
00:36:15,800 --> 00:36:18,479
Speaker 11: do more compared to last year, because I think even

699
00:36:18,719 --> 00:36:22,200
Speaker 11: PBOC steps up easing, it's still to be you know, incremental.

700
00:36:22,800 --> 00:36:26,239
Speaker 11: Somebody is calling for PBOC to cutting trity to zero, right, so,

701
00:36:26,360 --> 00:36:29,839
Speaker 11: but I don't think people are going to move that aggressively.

702
00:36:30,239 --> 00:36:33,440
Speaker 11: So still on the monetary side, we don't expect a

703
00:36:33,600 --> 00:36:37,120
Speaker 11: huge boost to the growth. More it's from the fiscal side,

704
00:36:37,160 --> 00:36:41,239
Speaker 11: and fundamentally, I think even with those more physical stimulus

705
00:36:41,280 --> 00:36:44,520
Speaker 11: that's probably still not enough. I think fundamentally it's the

706
00:36:44,640 --> 00:36:48,640
Speaker 11: policy direction. It's a policy you know, orientation that's most

707
00:36:48,680 --> 00:36:50,279
Speaker 11: important for the market right now.

708
00:36:50,640 --> 00:36:54,720
Speaker 3: So we're talking about some monetary stimulus measures, some fiscal

709
00:36:54,760 --> 00:36:59,799
Speaker 3: stimulus measures, and then communication measures are building confidence. Of

710
00:36:59,840 --> 00:37:02,120
Speaker 3: the those three, what do you see as most important, Jill.

711
00:37:02,000 --> 00:37:05,719
Speaker 12: I will say on the fiscal stimulus side, that's obviously

712
00:37:05,760 --> 00:37:09,200
Speaker 12: I think going to become more important this year. There's

713
00:37:09,200 --> 00:37:12,400
Speaker 12: a growing consensus among a lot of economists, including obviously

714
00:37:12,400 --> 00:37:16,400
Speaker 12: Bloomberg Economics, that there does need to be more fiscal stimulus.

715
00:37:16,719 --> 00:37:19,320
Speaker 12: Maybe we aren't going to see the type of massive

716
00:37:19,360 --> 00:37:22,560
Speaker 12: stimulus that we saw in the aftermath of the financial crisis,

717
00:37:22,560 --> 00:37:24,879
Speaker 12: where you just see tons and tons of money being

718
00:37:24,880 --> 00:37:27,200
Speaker 12: pumped into the economy, but we do know that, you know,

719
00:37:27,239 --> 00:37:32,000
Speaker 12: officials are discussing various measures. Bloomberg News reported very recently

720
00:37:32,080 --> 00:37:36,000
Speaker 12: that there's some debate over the issuance of some additional

721
00:37:36,280 --> 00:37:38,960
Speaker 12: special sovereign debt to sort of fund some infrastructural projects.

722
00:37:39,000 --> 00:37:42,239
Speaker 12: So there are funding avenues there, But ultimately a lot

723
00:37:42,280 --> 00:37:44,920
Speaker 12: of those reports haven't really moved the needle much, right,

724
00:37:45,000 --> 00:37:47,000
Speaker 12: So I think that brings it back to this idea

725
00:37:47,040 --> 00:37:51,040
Speaker 12: of that communication issue. I mean, whatever policymakers are saying

726
00:37:51,160 --> 00:37:54,560
Speaker 12: right now, clearly markets aren't really taking that as you know,

727
00:37:54,640 --> 00:37:57,200
Speaker 12: any kind of you know, reason to be more confident

728
00:37:57,239 --> 00:37:59,200
Speaker 12: in the long term. You might see some little jolts

729
00:37:59,200 --> 00:38:01,720
Speaker 12: here and there in terms of markets, maybe the Pongong

730
00:38:01,760 --> 00:38:06,200
Speaker 12: Shing comments, you know, just just recently did boost you know,

731
00:38:06,239 --> 00:38:09,400
Speaker 12: equity markets for you know, a couple of hours or

732
00:38:09,440 --> 00:38:11,239
Speaker 12: a day or what have you. But yes, I think

733
00:38:11,239 --> 00:38:14,920
Speaker 12: that it's more about that idea of how do you

734
00:38:15,000 --> 00:38:18,560
Speaker 12: project that level of confidence in that policy direction, how

735
00:38:18,600 --> 00:38:21,359
Speaker 12: do you present a clear vision to the public, to

736
00:38:21,400 --> 00:38:25,080
Speaker 12: your investors about where this economy is going. That's really

737
00:38:25,080 --> 00:38:25,960
Speaker 12: what we need to see here.

738
00:38:26,080 --> 00:38:28,440
Speaker 3: Jill, thank you so much for joining us. Jill desis

739
00:38:28,560 --> 00:38:32,600
Speaker 3: China Economy and Government editor at Bloomberg. I'm Brian Curtis

740
00:38:32,719 --> 00:38:35,440
Speaker 3: along with Doug Chrisner. You can catch us every weekday

741
00:38:35,480 --> 00:38:38,359
Speaker 3: here for Bloomberg Day Break Asia, beginning at nine am

742
00:38:38,360 --> 00:38:41,360
Speaker 3: in Hong Kong and eight pm on Wall Street.

743
00:38:41,880 --> 00:38:45,439
Speaker 1: Tom Well, our thanks to Bloomberg's Daybreak Asia co host

744
00:38:45,520 --> 00:38:47,880
Speaker 1: Brian Curtis, and that does it for this edition of

745
00:38:47,920 --> 00:38:50,799
Speaker 1: Bloomberg day Break Weekend. Join us again Monday morning at

746
00:38:50,800 --> 00:38:53,120
Speaker 1: five am Wall Street Time for the latest on markets

747
00:38:53,120 --> 00:38:55,480
Speaker 1: overseas and the news you need to start your day.

748
00:38:55,960 --> 00:38:59,000
Speaker 1: I'm Tom Husby. Stay with us. Top stories and global

749
00:38:59,000 --> 00:39:00,759
Speaker 1: business headlines are coming right