1 00:00:05,559 --> 00:00:08,039 Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the 2 00:00:08,039 --> 00:00:12,239 Speaker 1: global economy to you. China is about to shrink. That 3 00:00:12,360 --> 00:00:15,440 Speaker 1: was the sobering message from its later census, which suggests 4 00:00:15,440 --> 00:00:18,320 Speaker 1: the fertility rate has slowed even faster than the more 5 00:00:18,360 --> 00:00:21,959 Speaker 1: pessimistic forecasts had suggested. If it carries on like this, 6 00:00:22,040 --> 00:00:27,320 Speaker 1: the population will start to shrink in five years, earlier 7 00:00:27,360 --> 00:00:30,800 Speaker 1: than previously thought, and even the mighty Chinese Communist Party 8 00:00:30,840 --> 00:00:34,000 Speaker 1: seemed powerless to stop it. We're going to talk about 9 00:00:34,040 --> 00:00:37,000 Speaker 1: that and the great baby battle underway in countries across 10 00:00:37,040 --> 00:00:41,440 Speaker 1: Asia in a few minutes. Our reporter in Spain, Jeanette Newman, 11 00:00:42,080 --> 00:00:45,520 Speaker 1: also has a story from Valencia on a radical experiment 12 00:00:45,560 --> 00:00:47,920 Speaker 1: to help small businesses come through the next stage of 13 00:00:47,920 --> 00:00:52,120 Speaker 1: the pandemic, which also features my favorite bicycle helmets. So 14 00:00:52,240 --> 00:00:56,840 Speaker 1: we definitely have variety this week. But first, there are 15 00:00:56,840 --> 00:00:58,680 Speaker 1: lots of things in our daily lives that are being 16 00:00:58,720 --> 00:01:03,600 Speaker 1: transformed by new technology. But what about money? Is bitcoin 17 00:01:03,680 --> 00:01:07,000 Speaker 1: the future or perhaps one of the other cryptocurrencies that 18 00:01:07,040 --> 00:01:11,280 Speaker 1: have been causing such a speculative frenzy in recent months. Ah, 19 00:01:11,440 --> 00:01:13,240 Speaker 1: we wake up in a few years and fine, We're 20 00:01:13,280 --> 00:01:16,200 Speaker 1: still fond of old fashioned dollars and cents, and that 21 00:01:16,280 --> 00:01:21,440 Speaker 1: talk of digital currencies was just a fad. Well, one 22 00:01:21,440 --> 00:01:23,920 Speaker 1: person who's been thinking very hard about all of these 23 00:01:23,959 --> 00:01:28,120 Speaker 1: issues is Professor prasad now Senior Professor of Trade Policy 24 00:01:28,120 --> 00:01:31,640 Speaker 1: at Cornell University and a senior Fellow of Brookings, but 25 00:01:31,680 --> 00:01:35,039 Speaker 1: previously a senior official at the International Monetary Fund, and 26 00:01:35,200 --> 00:01:38,320 Speaker 1: most recently author of a book about to come out 27 00:01:38,600 --> 00:01:41,880 Speaker 1: called The Future of Money, How the Digital Revolution is 28 00:01:41,920 --> 00:01:48,240 Speaker 1: Transforming Currencies and Finance. Welcome Professor Prasadhwa, and thank you 29 00:01:48,280 --> 00:01:52,480 Speaker 1: for writing this extremely useful book. Given how much has 30 00:01:52,520 --> 00:01:55,200 Speaker 1: been happening, how much news we've had over the last 31 00:01:55,200 --> 00:01:59,240 Speaker 1: few months about digital currencies and crypto and the like, 32 00:01:59,760 --> 00:02:02,080 Speaker 1: We've got a lot to cover, but I guess we 33 00:02:02,080 --> 00:02:05,600 Speaker 1: should just start with the basic assertion running through your 34 00:02:05,600 --> 00:02:08,680 Speaker 1: book that this time really is different. You know, we 35 00:02:08,720 --> 00:02:11,799 Speaker 1: are looking at a major disruption in how we use 36 00:02:11,880 --> 00:02:15,920 Speaker 1: money and and even what money is. That's why it's Deephanie. 37 00:02:16,040 --> 00:02:17,840 Speaker 1: First of all, thanks for having me on your show, 38 00:02:17,880 --> 00:02:20,919 Speaker 1: and this is indeed a good time to take stock 39 00:02:21,000 --> 00:02:23,360 Speaker 1: of what is happening in the worlds of money and finance. 40 00:02:24,160 --> 00:02:26,120 Speaker 1: There has of course been a lot of interest in 41 00:02:26,240 --> 00:02:30,200 Speaker 1: bitcoin and the cryptocurrency revolutions set off. But I think 42 00:02:30,240 --> 00:02:33,040 Speaker 1: the real legacy of bitcoin is that it has come 43 00:02:33,080 --> 00:02:35,639 Speaker 1: at a point in time and digital payments are becoming 44 00:02:36,520 --> 00:02:41,160 Speaker 1: preponderant around the world, including in developing economies, and there 45 00:02:41,240 --> 00:02:44,440 Speaker 1: is a move towards digitization, which I think is going 46 00:02:44,480 --> 00:02:48,040 Speaker 1: to leave its mark on both money and finance. Very 47 00:02:48,080 --> 00:02:51,760 Speaker 1: few of us use actual cash any more physical cash, 48 00:02:51,800 --> 00:02:54,560 Speaker 1: that is, we tend to make payments with this wipe 49 00:02:54,560 --> 00:02:57,360 Speaker 1: of a credit card or a phone for that matter, 50 00:02:58,280 --> 00:03:00,200 Speaker 1: and I think we're going to see a bit coin 51 00:03:00,360 --> 00:03:04,000 Speaker 1: leave its legacy, even if Bitcoin does not endure in 52 00:03:04,080 --> 00:03:07,480 Speaker 1: that form, that we're going to have digital forms of payment, 53 00:03:08,040 --> 00:03:13,279 Speaker 1: either through central bank digital currencies with some countries are initiating, 54 00:03:13,880 --> 00:03:17,120 Speaker 1: or private digital payment systems intermediated in the form of 55 00:03:17,160 --> 00:03:21,480 Speaker 1: these cryptical currencies. One thing you say in the book 56 00:03:21,520 --> 00:03:24,680 Speaker 1: is that in a sense, it's not bitcoin that is 57 00:03:24,720 --> 00:03:28,800 Speaker 1: the transformation in itself, it's the underlying technology. So just 58 00:03:29,320 --> 00:03:33,720 Speaker 1: explain that a little bit. So the technology is a marvel, 59 00:03:33,960 --> 00:03:36,880 Speaker 1: and it's worth thinking about the origins of bitcoins. So 60 00:03:38,040 --> 00:03:41,720 Speaker 1: the Bitcoin white Paper was released by a creator or 61 00:03:41,760 --> 00:03:43,960 Speaker 1: creator as we don't know who that is to this day, 62 00:03:44,880 --> 00:03:48,600 Speaker 1: right around the time of the global financial crisis is onset, 63 00:03:49,280 --> 00:03:52,400 Speaker 1: So that was the time when trust in central banks 64 00:03:52,440 --> 00:03:57,760 Speaker 1: and governments in traditional financial institutions was at its lowest end, 65 00:03:58,560 --> 00:04:02,400 Speaker 1: and the notion of being able to undertake transactions in 66 00:04:02,440 --> 00:04:06,720 Speaker 1: a somewhat anonymous way using only digital identities and without 67 00:04:07,280 --> 00:04:10,680 Speaker 1: a central bank or a traditional commercial bank in being 68 00:04:10,720 --> 00:04:15,080 Speaker 1: involved was very alluring, and that is the remarkable aspect 69 00:04:15,080 --> 00:04:17,880 Speaker 1: of the technology. When you make a payment, either using 70 00:04:18,000 --> 00:04:21,039 Speaker 1: cash or using a credit or debit card, either a 71 00:04:21,080 --> 00:04:25,360 Speaker 1: central bank or a commercial bank is involved. What bitcoin 72 00:04:25,880 --> 00:04:29,719 Speaker 1: turned out to do was to provide a solution whereby 73 00:04:29,760 --> 00:04:33,440 Speaker 1: you could have transactions being validated through what is called 74 00:04:33,480 --> 00:04:38,400 Speaker 1: a public consensus mechanism, and Bitcoin, although it is supposed 75 00:04:38,400 --> 00:04:44,039 Speaker 1: to be anonymous, actually provides remarkable transparency. Every transaction is 76 00:04:44,120 --> 00:04:46,279 Speaker 1: out there for the entire world to see on the 77 00:04:46,320 --> 00:04:51,159 Speaker 1: bitcoin blockchain. The distributed aspect is also very important. The 78 00:04:51,240 --> 00:04:56,040 Speaker 1: Bitcoin blockchain, which is a record, public ledger of all 79 00:04:56,120 --> 00:05:00,719 Speaker 1: the transactions using bitcoin, is maintained on multiple puters around 80 00:05:00,720 --> 00:05:04,479 Speaker 1: the world, so hacking a particular computer or even a 81 00:05:04,520 --> 00:05:08,320 Speaker 1: set of computers, or having some computers go down is 82 00:05:08,320 --> 00:05:10,440 Speaker 1: not going to affect the system. So in that sense, 83 00:05:10,760 --> 00:05:13,400 Speaker 1: the technology is going to really set off a revolution 84 00:05:13,440 --> 00:05:16,360 Speaker 1: in itself. So, just to be clear, you could have 85 00:05:16,400 --> 00:05:19,120 Speaker 1: the end of cash but still not have this kind 86 00:05:19,160 --> 00:05:22,520 Speaker 1: of structural change in how money works that you're talking 87 00:05:22,600 --> 00:05:26,400 Speaker 1: about for bitcoin and other things. What is really crucial 88 00:05:26,480 --> 00:05:29,040 Speaker 1: here is what role the government and central banks are 89 00:05:29,040 --> 00:05:32,799 Speaker 1: going to have, and bitcoin provided the allere of getting 90 00:05:32,839 --> 00:05:37,320 Speaker 1: away from all of that, essentially democratizing finance by making 91 00:05:37,360 --> 00:05:43,120 Speaker 1: finance available to anybody with no restrictions, with no censorship, 92 00:05:43,200 --> 00:05:48,800 Speaker 1: and without a trusted third party involved. That creates a 93 00:05:48,839 --> 00:05:52,320 Speaker 1: lot of risks, even while it does have certain benefits. Well, 94 00:05:52,320 --> 00:05:54,800 Speaker 1: it's funny you say, the allure of getting rid of 95 00:05:55,440 --> 00:05:57,640 Speaker 1: the role of the central bank or this kind of 96 00:05:57,640 --> 00:06:00,600 Speaker 1: central authority. Of course there will be there will be 97 00:06:00,640 --> 00:06:02,719 Speaker 1: a lot of people who would consider that to be 98 00:06:02,760 --> 00:06:07,000 Speaker 1: deeply attractive, that you don't have government somehow involved in 99 00:06:07,000 --> 00:06:09,839 Speaker 1: inherently at the center of finance, and of course many 100 00:06:09,839 --> 00:06:12,800 Speaker 1: other people who would say, hang on a minute, isn't 101 00:06:12,839 --> 00:06:16,680 Speaker 1: is a rather frightening world that you have no central figure. Um, 102 00:06:17,000 --> 00:06:19,359 Speaker 1: you don't have the kind of relationship of trust that 103 00:06:19,400 --> 00:06:22,520 Speaker 1: you have with a central bank. So you talked about 104 00:06:22,560 --> 00:06:25,599 Speaker 1: how some central banks and if Sweden is thinking about 105 00:06:25,720 --> 00:06:29,719 Speaker 1: having the e Krona, have talked about having central bank 106 00:06:29,960 --> 00:06:35,560 Speaker 1: digital currencies. What's what's the thinking behind that and how 107 00:06:35,600 --> 00:06:39,480 Speaker 1: would that be different from what we have now. Many 108 00:06:39,520 --> 00:06:42,920 Speaker 1: central banks that on the world are initiating their own 109 00:06:43,000 --> 00:06:47,520 Speaker 1: digital currencies are central bank digital currencies CBDCs. That is, 110 00:06:48,000 --> 00:06:52,039 Speaker 1: UM and CBDCs are being instituted in some economies because 111 00:06:52,080 --> 00:06:56,320 Speaker 1: they provide easy access to households and businesses to a 112 00:06:56,400 --> 00:07:00,000 Speaker 1: low cost digital payment system. In countries such as sweet 113 00:07:00,000 --> 00:07:03,200 Speaker 1: even there is a concern that having the entire payment 114 00:07:03,279 --> 00:07:07,000 Speaker 1: system in the hands of the private sector may be 115 00:07:07,160 --> 00:07:10,760 Speaker 1: good for efficiency and bring down costs, but it could 116 00:07:10,840 --> 00:07:15,600 Speaker 1: leave concerns about financial stability. At a time of financial panic, 117 00:07:16,000 --> 00:07:19,000 Speaker 1: you could have the entire payment system shutting down if 118 00:07:19,040 --> 00:07:21,720 Speaker 1: the government has no role in it. In a country 119 00:07:21,760 --> 00:07:25,239 Speaker 1: like China, there is a concern that the major digital 120 00:07:25,240 --> 00:07:29,120 Speaker 1: payment providers like Ali pay and which I Paid are 121 00:07:29,240 --> 00:07:33,560 Speaker 1: dominating the payment's market and making central bank money irrelevant. 122 00:07:34,000 --> 00:07:38,160 Speaker 1: So I think central banks ce UM CBDCs as a 123 00:07:38,240 --> 00:07:42,680 Speaker 1: tool for promoting financial inclusion, providing a backstop to the 124 00:07:42,760 --> 00:07:46,720 Speaker 1: private payment system, and creating a more level playing field 125 00:07:46,800 --> 00:07:50,600 Speaker 1: for other payment innovators rather than just a major players 126 00:07:50,600 --> 00:07:58,880 Speaker 1: who would also start providing efficient payment services. So what 127 00:07:58,920 --> 00:08:00,600 Speaker 1: would if if you live in a country where the 128 00:08:00,600 --> 00:08:03,600 Speaker 1: central bank is going down this route? What does that 129 00:08:03,840 --> 00:08:06,480 Speaker 1: look like in practice? Would you you would know when 130 00:08:06,480 --> 00:08:08,720 Speaker 1: you were using a central bank digital currency? I mean, 131 00:08:09,120 --> 00:08:12,920 Speaker 1: how would it be different. Technology now exists for each 132 00:08:12,960 --> 00:08:15,920 Speaker 1: household in an economy or each business to have an 133 00:08:15,960 --> 00:08:19,160 Speaker 1: account with the central bank and use central bank money 134 00:08:19,320 --> 00:08:22,600 Speaker 1: through that account. That could drive banks sort of business, 135 00:08:22,760 --> 00:08:24,480 Speaker 1: and you don't want to be in a position where 136 00:08:24,480 --> 00:08:27,800 Speaker 1: the central bank is now allocating credit in the economy. 137 00:08:28,240 --> 00:08:31,280 Speaker 1: So countries such as China and Sweden that are experimenting 138 00:08:31,280 --> 00:08:34,800 Speaker 1: with Serie dicis are going with a two tier system 139 00:08:34,800 --> 00:08:39,000 Speaker 1: where the digital wallets in which the central bank digital 140 00:08:39,640 --> 00:08:43,480 Speaker 1: uh dollars or you and reside are actually maintained by 141 00:08:43,480 --> 00:08:47,280 Speaker 1: the commercial banks side by side with their own intersparing 142 00:08:47,320 --> 00:08:51,080 Speaker 1: deposit accounts. So the CBDC is just like cash would 143 00:08:51,120 --> 00:08:56,280 Speaker 1: not be interstparing instruments, but now with the central bank 144 00:08:56,320 --> 00:08:59,199 Speaker 1: digital currency being in the form of token that can 145 00:08:59,240 --> 00:09:03,080 Speaker 1: be used across different payment platforms. So basically you could 146 00:09:03,160 --> 00:09:07,280 Speaker 1: use your central bank money across a variety of payment platforms, 147 00:09:07,360 --> 00:09:10,839 Speaker 1: again with the swipe of her phone. Um, so it 148 00:09:10,880 --> 00:09:14,160 Speaker 1: would be observation equivalent to using any other payment system, 149 00:09:14,200 --> 00:09:17,560 Speaker 1: except you would now be using central bank money. But 150 00:09:17,679 --> 00:09:20,160 Speaker 1: this also creates one issue that we may need to 151 00:09:20,400 --> 00:09:23,920 Speaker 1: consider the societal level. Do we really want to live 152 00:09:23,960 --> 00:09:27,440 Speaker 1: in a world where anytime I buy you a cup 153 00:09:27,480 --> 00:09:31,640 Speaker 1: of coffee, Stephanie, either a payment private payment provider, or 154 00:09:31,679 --> 00:09:34,400 Speaker 1: the government is going to know about it. Um, that's 155 00:09:34,400 --> 00:09:37,120 Speaker 1: going to be a slightly dystopian world we live in. 156 00:09:37,720 --> 00:09:40,520 Speaker 1: Central banks are going to great lengths to make the 157 00:09:40,520 --> 00:09:43,080 Speaker 1: case that they're going to have privacy protections in place, 158 00:09:43,559 --> 00:09:46,640 Speaker 1: but in my view, ultimately anything digital is going to 159 00:09:46,679 --> 00:09:49,400 Speaker 1: be traceable, and every central bank wants to make sure 160 00:09:49,400 --> 00:09:52,160 Speaker 1: it's money is not used for illegal purposes, so there 161 00:09:52,200 --> 00:09:56,600 Speaker 1: will be auditability and traceability. So whatever limited privacy we 162 00:09:56,679 --> 00:09:59,640 Speaker 1: have at this stage might very soon vanish well. And 163 00:09:59,679 --> 00:10:02,800 Speaker 1: of course that's why any self respecting criminal has always 164 00:10:02,880 --> 00:10:06,320 Speaker 1: used cash, because you don't have you don't have that 165 00:10:06,400 --> 00:10:08,520 Speaker 1: kind of traceability. I just want to come back to 166 00:10:08,559 --> 00:10:12,240 Speaker 1: you talked about the democratization of finance or than the 167 00:10:12,280 --> 00:10:15,600 Speaker 1: potential for this to do that. I mean historically, of course, 168 00:10:15,640 --> 00:10:20,480 Speaker 1: we have had periods where financial innovation have has brought 169 00:10:20,840 --> 00:10:24,480 Speaker 1: easier forms of financing to more and more people. We've 170 00:10:24,480 --> 00:10:27,120 Speaker 1: had sort of waves of that running through societies at 171 00:10:27,160 --> 00:10:31,319 Speaker 1: different times. And though it has made it possible for people, 172 00:10:31,520 --> 00:10:33,560 Speaker 1: say to buy their own homes who might not otherwise 173 00:10:33,600 --> 00:10:35,160 Speaker 1: have been und to do it, or have access to 174 00:10:35,200 --> 00:10:37,480 Speaker 1: borrowing at all that they might not have had, it 175 00:10:37,559 --> 00:10:39,880 Speaker 1: has tended to also leave a lot of those sort 176 00:10:39,880 --> 00:10:43,440 Speaker 1: of newly financially enfranchised people with a lot of risk 177 00:10:44,360 --> 00:10:47,760 Speaker 1: and have it blow up in a crisis of some sort. 178 00:10:47,880 --> 00:10:50,839 Speaker 1: I mean, if that's a risk here, how how can 179 00:10:50,880 --> 00:10:54,839 Speaker 1: we guard against that? There is a significant list. Stephanie're 180 00:10:54,920 --> 00:10:59,640 Speaker 1: right that the democratization of finance, while it is very 181 00:10:59,720 --> 00:11:03,360 Speaker 1: part sative sounding concept, does carry certain risks, and those 182 00:11:03,480 --> 00:11:07,520 Speaker 1: risks arise for a couple of reasons. In particular, digital 183 00:11:07,600 --> 00:11:11,920 Speaker 1: access is still quite unevenly distributed in many countries, and 184 00:11:12,000 --> 00:11:18,679 Speaker 1: financial literacy is certainly not prevalent, especially among the economically disadvantaged, 185 00:11:19,040 --> 00:11:22,160 Speaker 1: and we see that phenomenon even among people who ought 186 00:11:22,160 --> 00:11:27,320 Speaker 1: to be better informed. Um, the recent saga with Game Stop, 187 00:11:27,360 --> 00:11:30,439 Speaker 1: where there was a speculative frenzy that was fueled by 188 00:11:30,440 --> 00:11:33,520 Speaker 1: the robin Hood trading platform, which in principle made it 189 00:11:33,640 --> 00:11:37,120 Speaker 1: much easier for retail investors to be able to trade 190 00:11:37,800 --> 00:11:40,960 Speaker 1: both the stock and derivatives of this game stop company. 191 00:11:41,400 --> 00:11:44,360 Speaker 1: Certainly led to a speculative frenzy. And the problem in 192 00:11:44,440 --> 00:11:47,840 Speaker 1: that speculative frenzy, as in most others, is that retail 193 00:11:47,880 --> 00:11:50,840 Speaker 1: investors who came late to the party are the ones 194 00:11:50,880 --> 00:11:53,200 Speaker 1: who got burned. And of course we know we didn't 195 00:11:53,200 --> 00:11:54,920 Speaker 1: have to go far back. We only go back to 196 00:11:55,000 --> 00:11:58,480 Speaker 1: two thousand and eight to find very sophisticated, often very 197 00:11:58,520 --> 00:12:01,600 Speaker 1: senior members of the financial sector not understanding some of 198 00:12:01,640 --> 00:12:04,600 Speaker 1: the risks they were taking. So this is something that, um, 199 00:12:04,640 --> 00:12:09,760 Speaker 1: we've seen again and again. Finally, you've mentioned it a 200 00:12:09,760 --> 00:12:12,280 Speaker 1: few times already in this interview and in the book. 201 00:12:12,360 --> 00:12:16,400 Speaker 1: You keep coming back to trust as the basic glue 202 00:12:16,480 --> 00:12:19,520 Speaker 1: of the financial system and something that has also traditionally 203 00:12:20,240 --> 00:12:26,000 Speaker 1: supported any effective currency. Um, what's the future of of 204 00:12:26,000 --> 00:12:28,960 Speaker 1: of trust in this world and in this in this 205 00:12:29,040 --> 00:12:32,320 Speaker 1: new world that you paint m Are we going to 206 00:12:33,559 --> 00:12:36,840 Speaker 1: put the same kind of trust into these digital platforms 207 00:12:36,880 --> 00:12:40,319 Speaker 1: that we used to put into central banks, or are 208 00:12:40,360 --> 00:12:44,640 Speaker 1: we going to potentially end up with government actually more 209 00:12:44,760 --> 00:12:47,679 Speaker 1: involved in our lives, as you said, and more aware 210 00:12:47,720 --> 00:12:50,880 Speaker 1: of what we're doing. The great promise of bitcoin was 211 00:12:50,960 --> 00:12:55,439 Speaker 1: that it would replace trust in government institutions and traditional 212 00:12:55,600 --> 00:13:01,080 Speaker 1: financial institutions by essentially creating a public and census mechanism. 213 00:13:01,120 --> 00:13:03,640 Speaker 1: I think what we have seen in the last few 214 00:13:03,679 --> 00:13:06,240 Speaker 1: years is that ultimately the government is still going to 215 00:13:06,280 --> 00:13:11,760 Speaker 1: have a crucial role. Cryptocurrencies and even stable coins, which 216 00:13:11,800 --> 00:13:16,320 Speaker 1: have their values linked to existing fear currencies, all actually 217 00:13:16,360 --> 00:13:18,840 Speaker 1: seemed to do a lot better when they get the 218 00:13:18,880 --> 00:13:21,640 Speaker 1: im perimeter of the government in some implicit form or 219 00:13:21,679 --> 00:13:26,120 Speaker 1: the other. Bitcoin actually did a lot better once um 220 00:13:26,240 --> 00:13:29,319 Speaker 1: the US Internal Revenue Service actually recognized it as a 221 00:13:29,400 --> 00:13:33,280 Speaker 1: financial asset that could be taxed. Bitcoin earners, we're not 222 00:13:33,320 --> 00:13:36,839 Speaker 1: happy about the taxes, but certainly were very happy that 223 00:13:36,920 --> 00:13:43,000 Speaker 1: this implicit government recognition actually helped the bitcoin community flower. 224 00:13:43,440 --> 00:13:47,320 Speaker 1: And ultimately you're going to need regulations for investor protection, 225 00:13:47,360 --> 00:13:51,200 Speaker 1: but also for these markets to move forward in a 226 00:13:51,240 --> 00:13:54,800 Speaker 1: stable way. Moreover, if you think about the promise of 227 00:13:54,840 --> 00:13:59,920 Speaker 1: decent allized finance and the ability to conduct transactions just electronically, still, 228 00:14:00,360 --> 00:14:04,240 Speaker 1: where the digital world meets the real world, you still 229 00:14:04,280 --> 00:14:07,839 Speaker 1: need the government to enforce property and contractual rights. Now, 230 00:14:07,840 --> 00:14:10,000 Speaker 1: the risk, of course, is that bitcoin may have set 231 00:14:10,080 --> 00:14:13,240 Speaker 1: up a set off a revolution which ends up, as 232 00:14:13,240 --> 00:14:17,560 Speaker 1: you suggested, Stephanie, with the government playing even more intrusive 233 00:14:17,640 --> 00:14:20,320 Speaker 1: roles in our lives. If central bank digital currencies do 234 00:14:20,480 --> 00:14:24,480 Speaker 1: take hold, we could lose any last vestige of privacy 235 00:14:24,480 --> 00:14:27,400 Speaker 1: to the government, and that would be a certainly a 236 00:14:27,480 --> 00:14:30,360 Speaker 1: dystopian future um and one that we should be very 237 00:14:30,360 --> 00:14:34,160 Speaker 1: concerned about. It's not obvious that private payment systems and 238 00:14:34,200 --> 00:14:37,240 Speaker 1: providers will be displaced by the government, but certainly one 239 00:14:37,280 --> 00:14:39,480 Speaker 1: can see this happening in a society, and we should 240 00:14:39,520 --> 00:14:42,640 Speaker 1: guard against that. This is such a I mean, it 241 00:14:42,760 --> 00:14:46,840 Speaker 1: is such a complicated and fast moving area, and you 242 00:14:46,920 --> 00:14:51,080 Speaker 1: have been such a calm and lucid guide to it. 243 00:14:51,160 --> 00:14:55,240 Speaker 1: Thank you very much, issue a product. It's been my pleasure, Stephanie. 244 00:14:55,280 --> 00:15:04,680 Speaker 1: Thank you so much for having me on. Well, that 245 00:15:04,760 --> 00:15:07,200 Speaker 1: was all very interesting, but many businesses in the US 246 00:15:07,280 --> 00:15:09,600 Speaker 1: and Europe haven't had the luxury of thinking about the 247 00:15:09,640 --> 00:15:12,480 Speaker 1: future over the past year and a half. They've been 248 00:15:12,480 --> 00:15:15,400 Speaker 1: mainly focused on surviving the week, and the threat of 249 00:15:15,440 --> 00:15:19,200 Speaker 1: bankruptcy still hangs over hundreds of thousands of small businesses 250 00:15:19,240 --> 00:15:23,440 Speaker 1: in Europe, though some bold experiments underwear in Spain and 251 00:15:23,480 --> 00:15:27,520 Speaker 1: France might make all the difference. Our Spain economy reporter 252 00:15:27,600 --> 00:15:31,000 Speaker 1: Jeanette Newman went to Valencia to eat payola and find 253 00:15:31,000 --> 00:15:49,080 Speaker 1: out more. M that's the sound of a chef turning 254 00:15:49,120 --> 00:15:52,560 Speaker 1: some brath rice and sat front into a Spanish culinary 255 00:15:52,600 --> 00:15:56,640 Speaker 1: treat pa. I'm in La Pepica, a restaurant that has 256 00:15:56,680 --> 00:15:59,080 Speaker 1: been serving pa in the city of Valencia for more 257 00:15:59,120 --> 00:16:03,240 Speaker 1: than a century. The recipes are traditional rice with vegetables, 258 00:16:03,440 --> 00:16:06,760 Speaker 1: rabbit and chicken. Peppe Ballagher is the third generation to 259 00:16:06,840 --> 00:16:09,440 Speaker 1: run this family restaurant. When he was a boy in 260 00:16:09,440 --> 00:16:12,520 Speaker 1: the nineteen fifties, he remembers Ernest Hemingway coming to dine 261 00:16:12,560 --> 00:16:15,680 Speaker 1: after bullfights. Hemingway would walk into the kitchen to taste 262 00:16:15,680 --> 00:16:21,720 Speaker 1: the paia or make himself as angria, and I've always 263 00:16:21,720 --> 00:16:24,160 Speaker 1: had the memory of this person who talked to everyone 264 00:16:24,320 --> 00:16:30,360 Speaker 1: and was really engaging. Lapapka has thrived as a temple 265 00:16:30,400 --> 00:16:33,440 Speaker 1: to tradition in Valencia, but some of those old ways 266 00:16:33,640 --> 00:16:37,080 Speaker 1: are threatening the survival of small European companies as they 267 00:16:37,120 --> 00:16:43,160 Speaker 1: emerge from the pandemic. I went to Valencia to learn 268 00:16:43,160 --> 00:16:46,480 Speaker 1: more about one of those problematic old habits companies over 269 00:16:46,560 --> 00:16:50,800 Speaker 1: reliance on banks for financing. That compares to the much 270 00:16:50,840 --> 00:16:53,440 Speaker 1: wider range of options open to businesses that are recovering 271 00:16:53,480 --> 00:16:57,480 Speaker 1: from the pandemic in the US, and financing is so 272 00:16:57,560 --> 00:17:02,280 Speaker 1: much more common, especially in continental of UM than than 273 00:17:02,440 --> 00:17:05,920 Speaker 1: cabin markets and markets financing, so that's a huge difference. 274 00:17:06,440 --> 00:17:10,840 Speaker 1: That's Katia langen Booker. She's a law professor at Frankfort University. 275 00:17:11,560 --> 00:17:14,240 Speaker 1: There's no reason to say bank financing is bad in 276 00:17:14,280 --> 00:17:16,679 Speaker 1: any way. It's just as always the combination of the 277 00:17:16,720 --> 00:17:20,359 Speaker 1: two is where we would like to go. Selling stock, 278 00:17:20,600 --> 00:17:24,120 Speaker 1: issuing debt to investors, and other financing options known broadly 279 00:17:24,160 --> 00:17:27,119 Speaker 1: as capital markets. These tools aren't as widespread on the 280 00:17:27,119 --> 00:17:30,080 Speaker 1: continent as they are in the US. That's a problem 281 00:17:30,160 --> 00:17:32,720 Speaker 1: is Europe's small firms emerged from the pandemic and need 282 00:17:32,760 --> 00:17:36,879 Speaker 1: to invest and restructure their debts. European Union leaders have 283 00:17:36,960 --> 00:17:39,840 Speaker 1: talked for years about the need for deeper capital markets, 284 00:17:39,880 --> 00:17:43,360 Speaker 1: particularly in the South and in smaller countries. They've also 285 00:17:43,400 --> 00:17:45,320 Speaker 1: talked for years about the need to join up those 286 00:17:45,359 --> 00:17:49,080 Speaker 1: disparate markets into a capital markets union, but they've never 287 00:17:49,119 --> 00:17:55,640 Speaker 1: got very far. Why one hurdle is that small businesses 288 00:17:55,680 --> 00:17:59,159 Speaker 1: themselves are sometimes reluctant to let go of tradition. They 289 00:17:59,160 --> 00:18:03,119 Speaker 1: don't like the idea outside investors. They feel all letting 290 00:18:03,119 --> 00:18:05,840 Speaker 1: an outsider in and I don't really want that, and 291 00:18:05,920 --> 00:18:08,600 Speaker 1: it's better, you know, I know my banker, I've been 292 00:18:08,640 --> 00:18:13,240 Speaker 1: you know, doing business with them forever. Another hurdle is 293 00:18:13,280 --> 00:18:16,119 Speaker 1: the supply of funds. One issues that banks in Europe 294 00:18:16,119 --> 00:18:17,960 Speaker 1: have a lot of power to turn on and off 295 00:18:18,000 --> 00:18:20,960 Speaker 1: the financing tab I spoke to all funds, so are 296 00:18:21,040 --> 00:18:24,439 Speaker 1: hard from investment from Okendo Capital I Madrid. The banks 297 00:18:24,800 --> 00:18:27,840 Speaker 1: in the US. Everything is really specialized. Here are banks 298 00:18:27,880 --> 00:18:31,880 Speaker 1: big of credit cards. They do uh capital h leases, 299 00:18:32,359 --> 00:18:36,440 Speaker 1: they do working capital financing, they will finance your exports, 300 00:18:36,840 --> 00:18:40,600 Speaker 1: they will manage your payments. To ensure those powerful banks 301 00:18:40,600 --> 00:18:44,119 Speaker 1: didn't cut off funding during this crisis, European government's launched 302 00:18:44,160 --> 00:18:47,199 Speaker 1: loan guarantee programs. The power and reach of banks has 303 00:18:47,240 --> 00:18:50,320 Speaker 1: been an asset, channeling cheap loans backed by the state 304 00:18:50,440 --> 00:18:53,920 Speaker 1: to companies in need. The programs ensured that many companies 305 00:18:53,960 --> 00:18:57,159 Speaker 1: got the funds they needed to cover basic expenses, but 306 00:18:57,240 --> 00:19:00,080 Speaker 1: in the end it's still dead. People are starting a 307 00:19:00,119 --> 00:19:03,320 Speaker 1: worry that some bankruptcies have just been delayed. What if 308 00:19:03,320 --> 00:19:06,160 Speaker 1: banks are willing to restructure some loans or don't lend 309 00:19:06,280 --> 00:19:09,080 Speaker 1: some firms that need to invest to bounce back. Banks, 310 00:19:09,240 --> 00:19:11,640 Speaker 1: after all, have their own balance sheets to focus on. 311 00:19:12,520 --> 00:19:15,000 Speaker 1: I spoke to Carlos Ferrando and Valencia to learn what 312 00:19:15,040 --> 00:19:18,120 Speaker 1: the lack of financing options means for companies emerging from 313 00:19:18,119 --> 00:19:20,880 Speaker 1: the pandemic. He runs close to the startup that makes 314 00:19:20,880 --> 00:19:24,840 Speaker 1: water bottles and patented a collapsible helmet. You can reduce 315 00:19:24,960 --> 00:19:28,040 Speaker 1: the volume of the helmet like more than in less 316 00:19:28,040 --> 00:19:32,520 Speaker 1: than one second. No, he's collapsed. No, it's about hamlet. 317 00:19:32,800 --> 00:19:35,560 Speaker 1: When Carlos started his company several years ago, you've got 318 00:19:35,560 --> 00:19:37,800 Speaker 1: a taste for how hard it can be to get financing. 319 00:19:38,320 --> 00:19:40,479 Speaker 1: He says. It's tough for banks to understand the startup 320 00:19:40,480 --> 00:19:45,240 Speaker 1: business model. The risk team from the balance is the 321 00:19:45,320 --> 00:19:48,240 Speaker 1: same if the sp we the startup none with a restaurant. 322 00:19:49,320 --> 00:19:52,040 Speaker 1: It this is my This is a reality that is 323 00:19:52,080 --> 00:19:55,320 Speaker 1: happening here in his pain today. So turtles end up 324 00:19:55,320 --> 00:19:58,600 Speaker 1: stopping many startups from growing. You cannot go to other countries. 325 00:19:58,720 --> 00:20:03,359 Speaker 1: You cannot increase your your your your sales team, or 326 00:20:03,359 --> 00:20:07,199 Speaker 1: your marketing or your digital marketing. No, and then you 327 00:20:07,280 --> 00:20:10,000 Speaker 1: start to get smaller and this is a black hole. 328 00:20:11,040 --> 00:20:13,800 Speaker 1: Carlos was lucky and eventually got funding from Spanish venture 329 00:20:13,880 --> 00:20:16,439 Speaker 1: capital firms and a bank. He sells his helmets at 330 00:20:16,440 --> 00:20:19,400 Speaker 1: the Museum of Modern Arts design store. He sold close 331 00:20:19,440 --> 00:20:23,360 Speaker 1: to bottles to major companies, including Google. Then the pandemic 332 00:20:23,440 --> 00:20:26,439 Speaker 1: hit and funding dried up. Closker tried to pivot and 333 00:20:26,480 --> 00:20:29,560 Speaker 1: sell face masks. It didn't go well. He tapped some 334 00:20:29,640 --> 00:20:33,160 Speaker 1: stay back loans. It wasn't enough. In mind, with such 335 00:20:33,200 --> 00:20:37,359 Speaker 1: a good broad with such a good producde, we were 336 00:20:37,560 --> 00:20:41,520 Speaker 1: a thread to lose the company. Valencia's regional financing agency 337 00:20:41,600 --> 00:20:44,040 Speaker 1: came to the rescue. It gave close to a type 338 00:20:44,040 --> 00:20:46,680 Speaker 1: of equity loan that isn't considered debt and bolsters the 339 00:20:46,720 --> 00:20:50,760 Speaker 1: firm's balance sheet that's encouraged banks to keep lending. Carlos 340 00:20:50,760 --> 00:20:53,320 Speaker 1: says he considered leaving Valencia until the agency helped him 341 00:20:53,320 --> 00:20:57,600 Speaker 1: restructure his balance sheet. I know because the support of government. 342 00:20:58,200 --> 00:21:00,440 Speaker 1: I would love to to to pay in the present 343 00:21:00,440 --> 00:21:04,280 Speaker 1: of the Texas Here in the future. The man behind 344 00:21:04,280 --> 00:21:07,280 Speaker 1: these clever solutions for thousands of small companies like Kloska 345 00:21:07,440 --> 00:21:10,760 Speaker 1: and La Pepica is Manuel Uwica. He's the head of 346 00:21:10,800 --> 00:21:14,760 Speaker 1: Valencia's finance agency. Before Manuel joined the agency, he was 347 00:21:14,760 --> 00:21:18,760 Speaker 1: a finance professor. Now he's putting years of academic expertise 348 00:21:18,800 --> 00:21:21,920 Speaker 1: to work to ensure that viable firms survived the pandemic. 349 00:21:23,840 --> 00:21:25,880 Speaker 1: I mean we need to do it otherwise I mean 350 00:21:25,920 --> 00:21:30,800 Speaker 1: the this, this company is gonna be bankrupt. Manuell's agency 351 00:21:30,840 --> 00:21:33,960 Speaker 1: has also contributed millions of euros to restructuring fund that 352 00:21:34,040 --> 00:21:36,919 Speaker 1: will be run by Okendo, the investment firm. We heard 353 00:21:36,960 --> 00:21:39,720 Speaker 1: all phones of talk about banks earlier. They're all putting 354 00:21:39,760 --> 00:21:41,680 Speaker 1: money on the on the big companies, on the best 355 00:21:41,680 --> 00:21:45,800 Speaker 1: performing company. So the good businesses which are struggling uh nobody, 356 00:21:45,840 --> 00:21:48,640 Speaker 1: Nobody looks after them. And and Manuela has been quick 357 00:21:48,680 --> 00:21:52,640 Speaker 1: to support that. There are people like us UH that 358 00:21:52,880 --> 00:21:55,320 Speaker 1: invest in in those types of instruments and those type 359 00:21:55,320 --> 00:22:01,280 Speaker 1: of situation. There's an important of happening in France too, 360 00:22:01,640 --> 00:22:04,840 Speaker 1: on a greater scale. Frances in the process of rolling 361 00:22:04,840 --> 00:22:07,960 Speaker 1: out a twenty billion euro fund to provide financing too 362 00:22:08,000 --> 00:22:11,800 Speaker 1: small and medium sized companies. Banks will issue equity loans 363 00:22:11,920 --> 00:22:15,200 Speaker 1: to around twelve thousand French companies. The banks will keep 364 00:22:15,240 --> 00:22:17,480 Speaker 1: some of those loans on their balance sheet and spin 365 00:22:17,520 --> 00:22:20,320 Speaker 1: off the rest into a fund. That fund is partially 366 00:22:20,320 --> 00:22:23,119 Speaker 1: guaranteed by the French state, that makes it less risky 367 00:22:23,160 --> 00:22:27,560 Speaker 1: for investors. Alberto nvo Potro founded in Boni's a credit 368 00:22:27,640 --> 00:22:30,680 Speaker 1: rating firm for smaller businesses. His company will analyze the 369 00:22:30,720 --> 00:22:34,040 Speaker 1: default risk of some of those French companies. This program 370 00:22:34,160 --> 00:22:40,720 Speaker 1: alone twice the size of the private marketing fronts and 371 00:22:40,720 --> 00:22:44,960 Speaker 1: and twelve thousand companies is four time more than the 372 00:22:44,960 --> 00:22:49,280 Speaker 1: companies that have today in France access to some sort 373 00:22:49,320 --> 00:22:52,159 Speaker 1: of private debt private equity. The fund is expected to 374 00:22:52,240 --> 00:22:55,359 Speaker 1: draw new types of investors, such as insurance companies and 375 00:22:55,400 --> 00:22:59,200 Speaker 1: investment firms based outside France. In the past, they haven't 376 00:22:59,200 --> 00:23:01,119 Speaker 1: been able to easily beat on the prospects of so 377 00:23:01,160 --> 00:23:05,280 Speaker 1: many small French companies. These are players that didn't used 378 00:23:05,359 --> 00:23:09,000 Speaker 1: to play in this market, so they're bringing insurance companies 379 00:23:09,160 --> 00:23:12,159 Speaker 1: directly into this market and this is new. In the 380 00:23:12,200 --> 00:23:15,280 Speaker 1: short term, this fund should help provide financing the companies 381 00:23:15,520 --> 00:23:18,240 Speaker 1: so that they recovered from the pandemic and invest. The 382 00:23:18,359 --> 00:23:22,160 Speaker 1: longer term play is to shape a copy side market 383 00:23:22,200 --> 00:23:25,600 Speaker 1: for these compex Many hurdles remain to develop a deep 384 00:23:25,640 --> 00:23:28,879 Speaker 1: capital market in Europe. The pandemic, though, has triggered a 385 00:23:28,920 --> 00:23:32,439 Speaker 1: shift in places like Valencia and France. New tools are 386 00:23:32,480 --> 00:23:35,720 Speaker 1: important so that European startups like Closca can get off 387 00:23:35,720 --> 00:23:39,480 Speaker 1: the ground and so traditional firms like Lapepka can last 388 00:23:39,480 --> 00:24:01,159 Speaker 1: another one years. Jeanette Newman, Bloomberg News m H and 389 00:24:01,160 --> 00:24:04,760 Speaker 1: those conhapsible bicycle hermits really are very good. My sister 390 00:24:04,800 --> 00:24:09,600 Speaker 1: gave me one for my birthday. Best present ever. Now. 391 00:24:09,640 --> 00:24:13,480 Speaker 1: It's often said that demography is destiny. How quickly your 392 00:24:13,520 --> 00:24:16,240 Speaker 1: population is growing and how old it is can have 393 00:24:16,240 --> 00:24:19,160 Speaker 1: an enormous impact on what kind of country you live 394 00:24:19,200 --> 00:24:22,520 Speaker 1: in and how fast you grow. The US and much 395 00:24:22,560 --> 00:24:25,280 Speaker 1: of Europe has been grappling with the consequences of people 396 00:24:25,280 --> 00:24:28,880 Speaker 1: living longer for some time, but probably no country has 397 00:24:28,880 --> 00:24:32,879 Speaker 1: seen such a dramatic shift in its demographic fortunes in 398 00:24:32,880 --> 00:24:37,200 Speaker 1: the last few years as China. The latest Chinese censors 399 00:24:37,400 --> 00:24:39,280 Speaker 1: brought this out very clearly, and I thought it was 400 00:24:39,320 --> 00:24:42,119 Speaker 1: a good opportunity to get more from our chief Asia 401 00:24:42,160 --> 00:24:45,800 Speaker 1: economist Chang Shu in Hong Kong and Bloomberg's senior Asia 402 00:24:45,880 --> 00:24:50,360 Speaker 1: Economy reporter, Michelle jam Risco in Singapore. So Chang, Michelle, 403 00:24:50,520 --> 00:24:54,000 Speaker 1: thanks for staying up to talk to me. And there's 404 00:24:54,480 --> 00:24:58,720 Speaker 1: long been discussion about China's one child policy and how 405 00:24:58,800 --> 00:25:03,280 Speaker 1: that had had put it on course for a pretty 406 00:25:03,400 --> 00:25:08,680 Speaker 1: challenging time demographically, we've had this this latest census changing 407 00:25:08,720 --> 00:25:14,480 Speaker 1: were there any surprises there? Indeed, the demographic issues in 408 00:25:14,560 --> 00:25:18,280 Speaker 1: China have been discussed for some time, but the latest 409 00:25:18,320 --> 00:25:22,600 Speaker 1: census still brought some surprises. It really shows how acute 410 00:25:22,840 --> 00:25:28,280 Speaker 1: the demographic challenges have become. The latest censors put the 411 00:25:28,400 --> 00:25:32,360 Speaker 1: Chinese population at one point four billions later, up from 412 00:25:32,400 --> 00:25:35,439 Speaker 1: a decade ago, but the growth rate was very slow, 413 00:25:35,640 --> 00:25:40,360 Speaker 1: point five percent on average each year in the past decades, 414 00:25:40,640 --> 00:25:44,560 Speaker 1: down from the previous decades. And the biggest surprise in 415 00:25:44,600 --> 00:25:48,080 Speaker 1: the way is the fertility rate. It was estimated at 416 00:25:48,160 --> 00:25:53,080 Speaker 1: one point three in twenty That would place China close 417 00:25:53,160 --> 00:25:57,040 Speaker 1: to the low fertility case in the United Nations projections. 418 00:25:57,560 --> 00:26:02,520 Speaker 1: In such scenario, China's population started to decline around twenty 419 00:26:03,000 --> 00:26:07,639 Speaker 1: five that's much earlier than the government anticipated. In a 420 00:26:07,920 --> 00:26:14,120 Speaker 1: twenty seventeen and again twenty nineteen reports, government reports, the 421 00:26:14,359 --> 00:26:19,040 Speaker 1: population peak was put at around twenty thirty so this 422 00:26:19,280 --> 00:26:26,320 Speaker 1: situation is really much more serious than previously anticipated. That's amazing. 423 00:26:26,359 --> 00:26:29,080 Speaker 1: So that's it's basically it's taken five years off the 424 00:26:29,080 --> 00:26:32,439 Speaker 1: forecast for when the population was gonna was going to peak, 425 00:26:32,560 --> 00:26:35,880 Speaker 1: from from twenty thirty to twenty five means extraordinary. Looking 426 00:26:35,880 --> 00:26:38,600 Speaker 1: at this as an economist, what does that mean for 427 00:26:38,760 --> 00:26:42,240 Speaker 1: China's growth rate? Because obviously we know that China is 428 00:26:42,240 --> 00:26:45,840 Speaker 1: going to be going from this very dramatic fast growth 429 00:26:45,880 --> 00:26:49,000 Speaker 1: period for several decades. We know that it's going to slow. 430 00:26:49,080 --> 00:26:51,400 Speaker 1: But does it mean it's going to slow that much 431 00:26:51,440 --> 00:26:58,760 Speaker 1: more dramatically. Yes, that does mean the demographic trained well 432 00:26:59,080 --> 00:27:04,119 Speaker 1: turned into a negative contribution to China's growth. The working 433 00:27:04,240 --> 00:27:07,720 Speaker 1: population has to already started to decline. The share of 434 00:27:07,840 --> 00:27:12,480 Speaker 1: the working age population failed to six or three percent 435 00:27:12,600 --> 00:27:16,879 Speaker 1: in twenty from seven percent a decade ago. If we 436 00:27:16,960 --> 00:27:22,560 Speaker 1: look at international comparison, China's employment growth was already slower 437 00:27:22,760 --> 00:27:27,439 Speaker 1: than what other major economies experienced as similar income levels. 438 00:27:28,400 --> 00:27:32,640 Speaker 1: This suggests the slowdown in labor growth is an increasing 439 00:27:32,760 --> 00:27:37,080 Speaker 1: challenge for China to break through the middle income TRAPP 440 00:27:37,720 --> 00:27:43,119 Speaker 1: and UM and UH. If not dealt with, that really 441 00:27:43,240 --> 00:27:48,480 Speaker 1: would stop China rise into a developed economy status. Now 442 00:27:48,520 --> 00:27:51,280 Speaker 1: we know that that the government's pretty concerned about this, 443 00:27:51,480 --> 00:27:53,960 Speaker 1: and it has changed its one child policy. In fact, 444 00:27:54,000 --> 00:27:55,600 Speaker 1: I saw that it's gone from not only being able 445 00:27:55,640 --> 00:27:58,439 Speaker 1: to have too but maybe have three children. Is that 446 00:27:58,560 --> 00:28:02,560 Speaker 1: going to come faster to reduce the challenges you've just 447 00:28:02,600 --> 00:28:06,200 Speaker 1: been talking about. Yeah, I mean that might not come 448 00:28:06,280 --> 00:28:09,919 Speaker 1: fast enough. And certainly there's three child policy itself is 449 00:28:09,960 --> 00:28:14,680 Speaker 1: not sufficient to tend the tight The relaxation you talked 450 00:28:14,680 --> 00:28:19,240 Speaker 1: about in twenty sixteen to allow two children only resulted 451 00:28:19,400 --> 00:28:22,680 Speaker 1: in a very short term post to childbirth, and birth 452 00:28:22,800 --> 00:28:25,800 Speaker 1: jumped to just for two years in twenty sixteen seventeen, 453 00:28:26,280 --> 00:28:31,159 Speaker 1: but then quickly dropped again. So the latest relaxation to 454 00:28:31,440 --> 00:28:35,560 Speaker 1: three children may not really move the needle much or 455 00:28:36,119 --> 00:28:41,400 Speaker 1: for any sustained period. The the officials at the National 456 00:28:41,440 --> 00:28:46,240 Speaker 1: Statistics Bureau of Statistics said the average number of desired 457 00:28:46,400 --> 00:28:49,920 Speaker 1: children is about at one point eight certainly below too, 458 00:28:50,920 --> 00:28:54,160 Speaker 1: so China will have to do more, much more, all 459 00:28:54,200 --> 00:28:58,320 Speaker 1: sort of france employment attacks and housing policies to reduce 460 00:28:58,400 --> 00:29:03,240 Speaker 1: financial and time burden for raising children, Increasing mobility and 461 00:29:03,480 --> 00:29:07,160 Speaker 1: raising the retirement age is really critical for the country's 462 00:29:07,320 --> 00:29:11,120 Speaker 1: long term growth. Out book. I mean, it's interesting because 463 00:29:11,120 --> 00:29:13,560 Speaker 1: it's the same challenge that lots of countries, certainly across Europe. 464 00:29:13,560 --> 00:29:17,160 Speaker 1: You have. Italy has got a shrinking population now and 465 00:29:17,280 --> 00:29:20,959 Speaker 1: has made great efforts to try and effectively bribe families 466 00:29:21,040 --> 00:29:24,040 Speaker 1: to have more children, has not had so much success. 467 00:29:24,080 --> 00:29:26,080 Speaker 1: In France, they seem to have been a bit more 468 00:29:26,200 --> 00:29:29,400 Speaker 1: successful at maintaining the fertility rate. And I don't. They 469 00:29:29,400 --> 00:29:31,920 Speaker 1: often say that's because of the fine wine and fine food. 470 00:29:32,280 --> 00:29:34,160 Speaker 1: But Michelle, I'm risk let me, let me bring you 471 00:29:34,200 --> 00:29:36,400 Speaker 1: in here. I'm interested in whether there are other countries 472 00:29:37,000 --> 00:29:40,680 Speaker 1: around the region that are concerned about the fertility rates 473 00:29:40,840 --> 00:29:45,840 Speaker 1: and whether actually COVID has done anything to change the conversation. Yes, certainly, certainly. 474 00:29:45,880 --> 00:29:48,200 Speaker 1: I mean, I think several have endured this struggle for 475 00:29:48,240 --> 00:29:51,600 Speaker 1: many years, even before COVID. And outside of China, so 476 00:29:51,600 --> 00:29:55,960 Speaker 1: South Korea, Thailand, Singapore, Taiwan, and of course Japan. I'll 477 00:29:56,000 --> 00:29:59,560 Speaker 1: i'll really stand out. South Korea appears to be clinging 478 00:29:59,560 --> 00:30:02,280 Speaker 1: to the world it's lowest fertility rate, and several of 479 00:30:02,320 --> 00:30:05,520 Speaker 1: the others are in that territory as well, and Japan's 480 00:30:05,560 --> 00:30:10,560 Speaker 1: population could plunge another fifteen percent by according to UN estimates, 481 00:30:10,600 --> 00:30:13,680 Speaker 1: so COVID, as it has on many other issues, has 482 00:30:13,720 --> 00:30:16,080 Speaker 1: made a bad situation so much worse. We saw a 483 00:30:16,120 --> 00:30:19,720 Speaker 1: lot more record lows in fertility rates last year, and 484 00:30:20,160 --> 00:30:22,200 Speaker 1: there is hope that some of the demographic damage of 485 00:30:22,240 --> 00:30:24,800 Speaker 1: the past year will be temporary. But the question still 486 00:30:24,840 --> 00:30:27,520 Speaker 1: remains on how to tackle this long term trend that 487 00:30:27,600 --> 00:30:30,880 Speaker 1: was cemented even before the pandemic. I think governments are 488 00:30:30,880 --> 00:30:34,480 Speaker 1: finding that it's quite difficult to work against cultural and 489 00:30:34,520 --> 00:30:37,720 Speaker 1: behavioral norms, and they've often joked about how difficult it 490 00:30:37,800 --> 00:30:39,960 Speaker 1: is just to convince people to have more babies. And 491 00:30:40,200 --> 00:30:43,320 Speaker 1: Singapore Prime Minister Lesia and Loon mentioned this in an 492 00:30:43,320 --> 00:30:45,200 Speaker 1: interview with our own editor and a chief a couple 493 00:30:45,200 --> 00:30:48,800 Speaker 1: of years ago. Our Type Hay Bureau chief recalls all 494 00:30:48,840 --> 00:30:51,400 Speaker 1: the press briefings with the former Central Bank governor there, 495 00:30:51,440 --> 00:30:54,880 Speaker 1: who would exhort his young reporters in briefings to to 496 00:30:55,000 --> 00:30:57,000 Speaker 1: go home and get married and have children. But none 497 00:30:57,040 --> 00:31:00,840 Speaker 1: of this seems to work. It is because we've had 498 00:31:01,560 --> 00:31:03,480 Speaker 1: most of the time when we talk about Asia, or 499 00:31:03,520 --> 00:31:05,760 Speaker 1: when we think indeed about the twenty one century and 500 00:31:05,800 --> 00:31:08,160 Speaker 1: what it's going to look like, we've tended to think 501 00:31:08,240 --> 00:31:10,959 Speaker 1: it will be the Asian century, that the march of 502 00:31:11,080 --> 00:31:15,360 Speaker 1: Asia is unstoppable. But if Asian economies continue to face 503 00:31:15,400 --> 00:31:19,320 Speaker 1: this demographic challenge, if populations continue to shrink, I mean, 504 00:31:19,360 --> 00:31:22,440 Speaker 1: does that really put some of that at risk? Does 505 00:31:22,480 --> 00:31:25,960 Speaker 1: it really stop Asia's development at some level? Well, I 506 00:31:26,000 --> 00:31:28,080 Speaker 1: think that's the big question. But that's what we're starting 507 00:31:28,120 --> 00:31:31,160 Speaker 1: to see cracks and a lot of these measurements, and 508 00:31:31,160 --> 00:31:33,920 Speaker 1: and not just the tapline growth figures though those are 509 00:31:34,400 --> 00:31:36,920 Speaker 1: certainly focused on and a lot of these discussions, but 510 00:31:36,960 --> 00:31:39,440 Speaker 1: there's a lot of long term repercussions of these aging 511 00:31:39,520 --> 00:31:42,720 Speaker 1: societies and low fertility rates UM. One other measure that 512 00:31:42,760 --> 00:31:45,040 Speaker 1: we look at a lot is the dependency ratio, the 513 00:31:45,480 --> 00:31:48,480 Speaker 1: lack of younger residents available to care for the elderly, 514 00:31:48,480 --> 00:31:52,240 Speaker 1: which certainly is a strain on government pension and healthcare systems, 515 00:31:52,280 --> 00:31:55,640 Speaker 1: but also of course the cultural and a personal strain UM. 516 00:31:55,760 --> 00:31:58,640 Speaker 1: Labor markets are getting a rude awakening fewer working age 517 00:31:58,680 --> 00:32:01,600 Speaker 1: residents and automation and not moving fast enough to fill 518 00:32:01,600 --> 00:32:05,480 Speaker 1: the void. Some institutions, like universities that banked on certain 519 00:32:05,560 --> 00:32:09,800 Speaker 1: enrollment numbers will now see strains when those applicants don't materialize, 520 00:32:10,320 --> 00:32:13,160 Speaker 1: and there's an interesting one. In South Korea, the shrinking 521 00:32:13,160 --> 00:32:16,440 Speaker 1: population there is a concern, especially for the military, which 522 00:32:16,480 --> 00:32:20,040 Speaker 1: is still an arms standoff with its northern neighbor. Military 523 00:32:20,080 --> 00:32:23,280 Speaker 1: officials are turning to robots for help, reasoning that, you know, 524 00:32:23,400 --> 00:32:26,760 Speaker 1: losses of robot soldiers are less tragic anyway. But you know, 525 00:32:26,840 --> 00:32:29,520 Speaker 1: any of these solutions, Um, you know, as we said, 526 00:32:29,640 --> 00:32:33,360 Speaker 1: it's it's very difficult, and these institutions and aspects of 527 00:32:33,400 --> 00:32:37,120 Speaker 1: society are certainly understrain. But less we think it's all 528 00:32:37,160 --> 00:32:40,080 Speaker 1: downhill for Asia's population. And of course we should always 529 00:32:40,080 --> 00:32:43,600 Speaker 1: also be reminded that you can't you shouldn't generalize about 530 00:32:43,680 --> 00:32:47,200 Speaker 1: such an incredibly varied continent. UM. I think you found 531 00:32:47,200 --> 00:32:49,680 Speaker 1: a couple of economies in Asia that are actually have 532 00:32:49,720 --> 00:32:53,000 Speaker 1: got too many babies. Well, that's right, and there's two 533 00:32:53,080 --> 00:32:56,600 Speaker 1: notable exceptions in this category, and then they're very different 534 00:32:56,600 --> 00:32:59,240 Speaker 1: from each other, I would say too, But that's Indonesia 535 00:32:59,280 --> 00:33:01,880 Speaker 1: and the Philippine. UM. Indonesia has been a bit more 536 00:33:02,040 --> 00:33:05,320 Speaker 1: vocal recently about needing to resolve this. We we had 537 00:33:05,320 --> 00:33:07,280 Speaker 1: a story just a few months ago about the government 538 00:33:07,720 --> 00:33:11,240 Speaker 1: doubling down and efforts to push later marriages. Family planning 539 00:33:11,560 --> 00:33:14,920 Speaker 1: enhance birth control UH officials. They're arguing that such a 540 00:33:15,000 --> 00:33:19,440 Speaker 1: rapid pace of population growth threatens the living standard in 541 00:33:19,480 --> 00:33:22,560 Speaker 1: the Philippines. There are some other real cultural debates on 542 00:33:22,600 --> 00:33:26,160 Speaker 1: how to address the situation. Religion also comes into play there, 543 00:33:26,160 --> 00:33:29,680 Speaker 1: where the majority Catholic country hasn't been quick to embrace 544 00:33:29,720 --> 00:33:32,280 Speaker 1: the thought of having fewer children per family, and birth 545 00:33:32,320 --> 00:33:35,880 Speaker 1: control isn't very well available or supported, so, especially among 546 00:33:35,920 --> 00:33:39,720 Speaker 1: lower income individuals, lack of access to birth control, healthcare, 547 00:33:39,800 --> 00:33:44,520 Speaker 1: and education has resulted in more unwanted or unexpected pregnancies, 548 00:33:44,600 --> 00:33:48,080 Speaker 1: which also have spiked during the pandemic. So there's been 549 00:33:48,120 --> 00:33:49,960 Speaker 1: less traction than the Philippines and how to get to 550 00:33:49,960 --> 00:33:53,600 Speaker 1: a more desirable pace of population growth. But both countries 551 00:33:53,600 --> 00:33:57,040 Speaker 1: are are in that different camp as as opposed to 552 00:33:57,080 --> 00:34:00,120 Speaker 1: the majority of of these other countries we discussed, and 553 00:34:00,200 --> 00:34:02,240 Speaker 1: as you said, COVID sort of throwing a lot of 554 00:34:02,280 --> 00:34:05,040 Speaker 1: these issues up into the air in an interesting way 555 00:34:05,480 --> 00:34:08,719 Speaker 1: in many places. Well, Michelle dan Risco Chang Shoo. Thank 556 00:34:08,760 --> 00:34:21,080 Speaker 1: you very much. So that's it for this episode of Stephanomics. 557 00:34:21,120 --> 00:34:24,040 Speaker 1: Will be back next week. In the meantime, please rate 558 00:34:24,080 --> 00:34:27,080 Speaker 1: the show and follow our economics on Twitter for more 559 00:34:27,160 --> 00:34:30,359 Speaker 1: news and analysis during the week from Bloomberg Economics. This 560 00:34:30,400 --> 00:34:33,440 Speaker 1: episode was produced by Magnus Hendrickson, with special thanks to 561 00:34:33,480 --> 00:34:37,920 Speaker 1: Professor Hua Prasad, Jeanette Newman, Chang Shoe, and Michelle jam Risco. 562 00:34:38,200 --> 00:34:41,400 Speaker 1: Mike Sasso is executive producer of Stephonomics and the head 563 00:34:41,440 --> 00:34:43,720 Speaker 1: of Bloomberg Podcast is Francesca Levy.