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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the Bloomberg Day BAQT podcast. Good morning, It's Thursday,

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Speaker 2: the sixteenth of October. I'm Caroline hepkat in London and.

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Speaker 1: I'm Stephen Caroline Brussels. Coming up today, British officials revealed

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Speaker 1: that China has been accessing classified UK systems for at

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Speaker 1: least ten years.

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Speaker 2: A leading economic think tank says the Chancellor Rachel Reeves

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Speaker 2: needs a fifty billion pound buffer if she wants to

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Speaker 2: balance the UK's books in the years ahead.

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Speaker 3: Plus not such smart money.

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Speaker 1: Billionaire investor Ken Griffin says Generative AI isn't helping hedge

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Speaker 1: funds beat the market.

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Speaker 2: Let's start with a roundup of our top stories.

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Speaker 1: Chinese state actors have systematically compromised the UK government's classified

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Speaker 1: computer systems for more than a decade. Bloomberg has learned

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Speaker 1: China routinely accessed Britain's secret information, in one example by

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Speaker 1: purchasing a data center which held confidential intelligence. The news

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Speaker 1: comes as politicians in Westminster are debating if China is

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Speaker 1: a threat after a court case around alleged Chinese spies collapsed.

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Speaker 3: Leader of the Opposition Kenny.

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Speaker 1: Badenock says, the Prime Minister has questions to answer.

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Speaker 4: He cannot explain why he could not see this case through.

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Speaker 5: He should have seen this case through.

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Speaker 4: And let me be clear, mister speaker, about what has happened.

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Speaker 4: A serious case involving national security has collapsed because this government.

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Speaker 5: Is too weak to stand up to China now.

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Speaker 1: In response to the government says that the previous conservative

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Speaker 1: Conservative administration did to not desiccate designate China as a threat.

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Speaker 1: Several government officials who spoke to Bloomberg anonymously say the

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Speaker 1: scale of cybersecurity breaches show Beijing poses a significant threat

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Speaker 1: to national security. A recent breach of a major US

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Speaker 1: based cybersecurity provider has also been blamed on state backed

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Speaker 1: hackers from China. Chinese officials have not responded to Bloomberg's

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Speaker 1: requests for comment.

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Speaker 2: US Treasury Secretary Scott Bessent is suggesting a new pause

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Speaker 2: on tariffs for Chinese goods if the country stops its

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Speaker 2: plans for rare earth market dominance. The two countries have

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Speaker 2: both significantly ramped up their threats and sanctions over the

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Speaker 2: past week. The US Treasury Secretary also took aim at

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Speaker 2: one of China's top negotiators, calling him quote unhinged.

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Speaker 6: Perhaps the Vice Minister who showed up here with variancendiari

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Speaker 6: language on August twenty eighth has gone rogue instead quote,

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Speaker 6: China will cause global chaos if.

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Speaker 3: If the port shipping fees go through.

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Speaker 2: Bessend added that he wants to coordinate an international response

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Speaker 2: from democracies to undermine China's plans to control the rare

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Speaker 2: earth metals market. He added that market moves wouldn't influence him,

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Speaker 2: saying that the US won't negotiate with China quote because

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Speaker 2: the stock market is going down.

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Speaker 1: The UK's Chancellor Rachel Reeves needs to raise her fiscal

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Speaker 1: boffer five fold to have a better than even chance

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Speaker 1: of avoiding more tax rises and spending cuts. That's according

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Speaker 1: to the Institute for Fiscal Studies, which warns that restoring

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Speaker 1: the current nine point nine billion pound margin won't be

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Speaker 1: enough to balance the book's long term with more. Here's

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Speaker 1: Bimberg's Crispitz fifty billion.

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Speaker 7: That's the figure the IFS says is needed to avoid

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Speaker 7: what it calls a fiscal groundhog day, where the government

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Speaker 7: repeatedly faces pressure to tighten policy from one forecast to

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Speaker 7: the next by comparison, the leading economics think tank says

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Speaker 7: that restoring the government's current raiser thin headroom would still

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Speaker 7: only give Reeves a one in three chance of meeting

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Speaker 7: her pledge to balance spending long term. The analysis highlights

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Speaker 7: the scale of the challenge facing the Chancellor ahead of

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Speaker 7: what's expected to be a difficult budget later this month

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Speaker 7: in London. Chris Pitt Bloomberg Radio.

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Speaker 2: France's Prime Minister Sebacia Lecornu may be able to survive

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Speaker 2: to no confidence motions. Today he won the backing of

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Speaker 2: the Socialist Party after announcing the suspension of contentious pension changes.

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Speaker 2: Lecorn Who's probable survival brings some respite from the recent

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Speaker 2: political turmoil that has driven up France's boring costs. The

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Speaker 2: government still faces major fiscal challenges, though Charlotte de Montpellier's

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Speaker 2: senior economists at IG has told Bloomberg the current situation

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Speaker 2: isn't much of a relief for markets.

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Speaker 5: Given the political landscape currently. I think we can expect.

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Speaker 2: That if it goes through, the budget will be.

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Speaker 5: More expansionary than this one, so it.

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Speaker 2: Means that the deficit to GDP ratio will be worse

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Speaker 2: than the one that is.

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Speaker 5: Currently the imph next year.

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Speaker 2: Charlotte de Montpellier's senior economists at ing speaking then, these

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Speaker 2: socialists have already warned that their decision not to Censulo

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Speaker 2: Corny today doesn't give the premier a blank check.

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Speaker 1: US President Donald Trump says he's authorized the CIA to

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Speaker 1: take covert action in Venezuela in order to stem a

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Speaker 1: flow of drugs and illegal migrants to the United States.

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Speaker 1: It confirms an earlier report in The New York Times,

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Speaker 1: which said the agency would be enabled to carry out

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Speaker 1: lethal operations in Venezuela and wider action in the Caribbean.

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Speaker 1: Speaking at the White House, Trump rebuff to reporters' question

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Speaker 1: on whether the CIA has the authority to take out

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Speaker 1: Venezuelan President Nicholas Maduro.

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Speaker 8: I think Venezuela is feeling heat, but I think a

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Speaker 8: lot of other countries are feeling heat too. We're not

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Speaker 8: going to let this country, our country, be ruined because

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Speaker 8: other people want to drop. As you say, their worst,

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Speaker 8: they have given us their worst, I.

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Speaker 1: Was President Trump, speaking as the US has already hit

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Speaker 1: half a dozen voats in the Southern Caribbean since the

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Speaker 1: start of September, saying the vessels were transporting drugs to America.

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Speaker 2: Now, Bloomberg understands that EU countries will begin debating next

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Speaker 2: week just how much preferential treatment to give European firms

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Speaker 2: bidding for public contracts.

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Speaker 5: Bloomberg's Mihil Kubala has more.

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Speaker 9: The EU is looking for ways to boost homegrown companies

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Speaker 9: and strengthen its industrial base, sources have told Bloomberg France

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Speaker 9: is leading the drive to prioritize European companies in public

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Speaker 9: contracts worth about two and a half trillion euros. That's

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Speaker 9: a market equivalent to about fifteen percent of the bloc's GDP.

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Speaker 9: The push is a way to counterbalance protection as US

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Speaker 9: trade policies or Chinnel's weaponization of certain raw materials. Still,

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Speaker 9: officials war that implementing the buy European approach could be

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Speaker 9: complex in some sectors. Defense, for example, the block is

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Speaker 9: still heavily reliant on American suppliers in Brussels.

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Speaker 1: Michael Kubala Bloomberg Radio, and those are your top stories

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Speaker 1: on the market. It's the MSCIS Specific Index seven tents

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Speaker 1: higher this morning. The NICK and Tokyo's up by one

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Speaker 1: point three percent. Eurostocks fifty futures down four tenths this morning,

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Speaker 1: as we're looking at the Bloomberg Dollar Spot Index, a

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Speaker 1: tenth of one percent weeker, the euros at one sixteen

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Speaker 1: fifty six, the tenure treasury yield holding steady at four

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Speaker 1: point zero two percent.

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Speaker 2: Well, in a moment, we'll bring you more on the

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Speaker 2: UK cybersecurity breach and also why Citadel's Ken Griffin isn't

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Speaker 2: impressed by.

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Speaker 5: AI, at least not yet.

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Speaker 2: There's also another story though here that's got our attention today.

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Speaker 2: Perhaps I should say caught our eye haha. Could smart

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Speaker 2: glasses replace our smartphones?

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Speaker 1: I'm really glad that someone else has joined ludd Eyede's

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Speaker 1: corner with you and me, Caroline, who's essentially somewhat suspicious

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Speaker 1: of new technology.

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Speaker 3: This has been Burke.

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Speaker 1: Opinion column as Katherine Thorbeck has been writing about the

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Speaker 1: massive amounts of money that big tech companies are pouring

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Speaker 1: into developing smart glasses, doing things like making them look

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Speaker 1: better of course making them more functional. AIS helping with

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Speaker 1: that as well. She points to a recent survey of

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Speaker 1: eight con trees, which includes China, India and the US

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Speaker 1: stow and that forty eight percent of people were interested

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Speaker 1: in purchasing a pair of smart glasses in.

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Speaker 3: The next year.

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Speaker 1: The trust of Catherine's argument, though, was essentially they might

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Speaker 1: have the technopanies might have to go a bit further

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Speaker 1: to try and convince us that we need this technology.

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Speaker 2: Look, I think fifty to fifty is actually pretty good.

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Speaker 2: To my mind, is a bit kind of Ready Player

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Speaker 2: one or even Stephen They Live, which is a really

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Speaker 2: old movie reference. Basically, are we in this kind of

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Speaker 2: post privacy sort of world where you're going to wear

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Speaker 2: those smart glasses. I always thought that headphones might not

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Speaker 2: take off. They are absolutely ubiquitous. I'm surprised that people

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Speaker 2: wear them at all times of the day and night.

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Speaker 2: So maybe it's not so far fetched that people will

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Speaker 2: also wear tech on their faces on their glasses.

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Speaker 1: We need to draw two lists after this conversation. One

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Speaker 1: is pieces of technology we thought wouldn't take off but did.

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Speaker 1: Another is films that Stephen has not seen to get

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Speaker 1: reference in our conversations. You can read Captain's piece at

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Speaker 1: Bloomberg dot com Forward slash Opinion.

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Speaker 2: Okay, let's get to our top story here in the UK,

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Speaker 2: Chinese state actors have compromised classified UK government systems for

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Speaker 2: more than a decade. We now learn joining US is

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Speaker 2: our chief Asia correspondent Roslyn matheson Good Morning, Roz. Look

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Speaker 2: what do we know that about this security breach? What

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Speaker 2: information was accessed and also how.

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Speaker 10: This was our exclusive reporting which shows that they were

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Speaker 10: routinely and successfully accessing low and medium level classified information

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Speaker 10: for at least a decade. And this is things like

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Speaker 10: private communications, some diplomatic cables, discussion around government policy, so

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Speaker 10: it wasn't top secret information, but it was still classified

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Speaker 10: information and doing so it seems routinely, and one person

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Speaker 10: told us endlessly for about ten years without detection, and

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Speaker 10: some of it was potentially through a particular data center

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Speaker 10: that was sold to an entity that had a link

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Speaker 10: to China some time ago.

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Speaker 5: That's now been tightened up.

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Speaker 10: But the fact is that it seems like these Chinese

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Speaker 10: state actors were just coming in constantly and getting fairly

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Speaker 10: low level information, but information that's still class is classified

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Speaker 10: and information that could be used potentially against the UK

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Speaker 10: given it's about things like again that the formulation of

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Speaker 10: government policy ross.

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Speaker 1: This exclusive reporting is coming after the collapse of a

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Speaker 1: trial of two men accused of spying for China because,

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Speaker 1: according to prosecutors, successive British governments had declined to formally

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Speaker 1: designate China as a threat to national security.

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Speaker 3: Could that designation change now?

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Speaker 10: Well, there's obviously a bit of pressure again around there.

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Speaker 10: So this is something that's come up for many years,

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Speaker 10: and not just under this administration. Is you have China

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Speaker 10: hawks in various governments saying that the UK needs to

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Speaker 10: move forward and do this. And obviously the fact that

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Speaker 10: this case was seen to have collapsed in part because

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Speaker 10: of the UK not using this designation has brought it

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Speaker 10: back into the conversation. But you can see from some

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Speaker 10: of the witness statements that we're given from bureaucrats at

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Speaker 10: least is that they couch this as a complex relationship

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Speaker 10: with China, between the China and UK, and that they

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Speaker 10: say that the UK is ready to confront China, it's

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Speaker 10: ready to compete with China, but also it does want

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Speaker 10: an economic relationship with China, and just points again to

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Speaker 10: that type rope that many UK governments seem to walk,

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Speaker 10: and that the Starma government certainly is very much walking,

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Speaker 10: is that it wants that door open to China, it

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Speaker 10: needs that economic relationship and so you've got to make

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Speaker 10: political calculations out of that.

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Speaker 2: And yet this is in a complex, you know, global situation.

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Speaker 2: It also comes as US authorities have issued these warnings

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Speaker 2: about significant cyber threat because of a breach of a

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Speaker 2: major US based cybersecurity provider F five. They call it

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Speaker 2: a catastrophic breach. And again this is something that is

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Speaker 2: blamed on state backed hackers from China. So there's also

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Speaker 2: a broader concern and it's about you know, the US

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Speaker 2: China relation and the UK US China relationship.

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Speaker 10: Well, that's right, and in fact the UK has been

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Speaker 10: caught up in this because there's been warnings issued here

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Speaker 10: because of customers potentially have been breached in the UK,

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Speaker 10: not just in the US. And some of these are

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Speaker 10: really big companies and they use some of these systems,

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Speaker 10: and you know, the reporting shows that these hackers possibly

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Speaker 10: stole parts of source code which are used in application services,

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Speaker 10: again by very big companies, and so you've had warnings

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Speaker 10: to companies across the US but also in the UK

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Speaker 10: that they need to go and check their systems and

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Speaker 10: they're going to be seeing if there's been any infiltration.

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Speaker 10: And so certainly that has also come across here doubt

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Speaker 10: will be part of the conversation about how countries not

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Speaker 10: to see UK, but the US and well, frankly everywhere

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Speaker 10: are handling this proliferation of cyber attacks that come from

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Speaker 10: China actors, but also from actors all around the world,

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Speaker 10: and how do you bulletproof your systems and also how

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Speaker 10: do you respond to the fact that often it's state

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Speaker 10: barked rols.

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Speaker 3: Have we heard any thing from China about all of this, It's.

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Speaker 5: Interesting they've been pretty quiet.

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Speaker 10: I mean they did when the case was dropped against

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Speaker 10: these two people in the UK, they did say it

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Speaker 10: showed the case was without merit. And they've also there's

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Speaker 10: been a few editorials in China state media in recent

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Speaker 10: days saying that this shows that there's just an unnecessary

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Speaker 10: level of paranoia, as they call it in the UK

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Speaker 10: about China, and there are people who are tempting to

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Speaker 10: use all of this to try and cause problems in

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Speaker 10: the relationship. But you haven't had a lot of very

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Speaker 10: public comments made from China specifically about this by case

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Speaker 10: with the two being dropped, and perhaps they just want

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Speaker 10: to let that be because again, China has its own

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Speaker 10: incentive to have the relationship stay on and improved footing

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Speaker 10: with the UK again mostly around train and investment.

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Speaker 2: Okay, Rolls, thank you so much for being with us.

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Speaker 2: That is our chief Asia correspondent rose In Mathison, thank

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Speaker 2: you stay with us. More from Bloomberg daybaqube coming up

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Speaker 2: after this.

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Speaker 1: What's Citadel's Cam Griffin is the I just big name

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Speaker 1: and finance to weigh in on the subject of artificial

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Speaker 1: intelligence as companies have been investing massive amounts of money

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Speaker 1: in the technology, but the debate over what returns it

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Speaker 1: can provide is continuing. Cam Griffin saying that AI isn't

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Speaker 1: meaningfully affecting hedgephones so far. Our reporter to out bios

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Speaker 1: here with more details.

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Speaker 3: TIA. What is Cam Griffin's view on this? Then?

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Speaker 5: Yeah, it's interesting.

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Speaker 11: So he was speaking at an investors conference in New

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Speaker 11: York and he made his views on this issue pretty clear. Essentially,

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Speaker 11: he says there are ways that AI can help enhance productivity,

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Speaker 11: but when it comes to actually helping hedge funds beat

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Speaker 11: the market and generate alpha, he thinks it falls short.

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Speaker 11: And when talking about his own shop Citadel, Griffin said

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Speaker 11: that AI hasn't replaced meaningful research. This isn't the first time,

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Speaker 11: he's made sort of skeptical comments about AI. He's previously

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Speaker 11: called it a limited tool when it comes to investment analysis,

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Speaker 11: and has typically downplayed fears that the tech could replace

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Speaker 11: human jobs in the past. So fundamentally he thinks that

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Speaker 11: it's unlikely to create widespread change, So it will have impact,

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Speaker 11: but not perhaps in the profound way that others in

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Speaker 11: the industry have come to expect.

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Speaker 3: Well, that's the thing.

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Speaker 2: It's a lively debate in the industry, and one you know,

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Speaker 2: with a lot of money potentially resting on it.

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Speaker 5: What are the other views?

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Speaker 11: So this view definitely does set Griffin apart from his peers.

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Speaker 11: I mean, just take the example of JP Morgan CEO

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Speaker 11: Jamie Diamond. He recently said that the Bank spends two

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Speaker 11: billion dollars a year developing AI technology, but also crucially

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Speaker 11: that they save the same amount because of the tech.

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Speaker 11: He was speaking to Bloomberg last week and he was

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Speaker 11: very clear about just how impactful he thinks that AI

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Speaker 11: is and how impactful it could be in the future.

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Speaker 11: He said the Bank already has hundreds of use cases

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Speaker 11: for it and only expects that to grow, and in

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Speaker 11: terms of its impact in the world, he compared it

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Speaker 11: to something like the printing press, so hugely significant in

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Speaker 11: terms of history and its impact.

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Speaker 5: On the future.

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Speaker 11: But we have also heard from multiple others in the

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Speaker 11: world of financial services. They've praised AI, and that includes

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Speaker 11: a former Treasury Secretary Larry Summers. He called the emergence

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Speaker 11: of AI a moment of stunning technological possibility. In the UK,

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Speaker 11: there's also been Charlie Nunn, the CEO of Lloyd's Bank,

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Speaker 11: he said the AI is core to the firm's operations,

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Speaker 11: and just recently Golden Sachs CEO David Solomon released a

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Speaker 11: vision statement about how the company is going to reorganize

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Speaker 11: itself to fully benefit from AI. So in terms of

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Speaker 11: the financial services sector at least, Griffin seems to be

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Speaker 11: certainly in the minority here.

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Speaker 3: Outside of the financial industry though too.

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Speaker 1: But I mean, what do we know about the broader

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Speaker 1: effects that AI is already having on the economy.

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Speaker 11: Well, there are mixed opinions about this, so you know,

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Speaker 11: on the one hand, there are some that argue that

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Speaker 11: the productivity gains from AI will result in faster and

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Speaker 11: certainly more sustainable economic growth. For example, recently, Federal Reserve

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Speaker 11: Governor Christopher Waller said that AI will be a huge

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Speaker 11: boost to the economy.

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Speaker 12: Aside from questions about how AI's gained will be distributed,

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Speaker 12: there's a more fundamental matter of how they will be measured.

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Speaker 3: Even at a macro level.

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Speaker 12: Are using AI to increase productivity, that's the payoff for

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Speaker 12: a profit maximizing firm. This gain in producing more output

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Speaker 12: with the same inputs is counted in gross domestic product

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Speaker 12: and as a result you're getting more output the same

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Speaker 12: number of inputs. Productivity per unit of input goes up,

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Speaker 12: and that raises GDP and productivity growth.

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Speaker 11: So the Fed's Christopher Waller, they're talking about the payoff

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Speaker 11: from AI, but not everyone agrees with this entirely. There

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Speaker 11: are specific concerns about the impact of AI on the

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Speaker 11: labor market, particularly entry level jobs that could be vulnerable.

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Speaker 11: Bloomberg reporting actually from this summer concluded that even if

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Speaker 11: the technology only eliminates one fifth of new graduate jobs

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Speaker 11: over the next five years, that would still have major

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Speaker 11: ramifications for a generation of young workers and also for

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Speaker 11: the economy. So there is both anxiety and optimism about

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Speaker 11: a potential impact.

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