1 00:00:00,120 --> 00:00:02,960 Speaker 1: Our guest is George Sun, head of Global Markets for 2 00:00:03,040 --> 00:00:07,280 Speaker 1: Greater China at BNP Pariba. George. One way to look 3 00:00:07,320 --> 00:00:09,479 Speaker 1: at it is a headline in the South John Morning 4 00:00:09,520 --> 00:00:14,000 Speaker 1: Post that President She is looking too fresh faces to 5 00:00:14,200 --> 00:00:17,720 Speaker 1: confront this new term. And so there are a number 6 00:00:17,800 --> 00:00:21,840 Speaker 1: of security individuals in the UH in the sort of 7 00:00:21,920 --> 00:00:25,759 Speaker 1: top seven ranking here, UM, people with experience and science 8 00:00:25,800 --> 00:00:30,400 Speaker 1: and technology and security, but not so much in the economy. UM. 9 00:00:30,440 --> 00:00:32,839 Speaker 1: I'm interested in your take on that, and I know 10 00:00:32,920 --> 00:00:36,360 Speaker 1: you think not much will change, but it implies something, 11 00:00:36,400 --> 00:00:41,040 Speaker 1: doesn't it. Thank you? Good morning, Thanks Brian. UM. Well, UM, 12 00:00:41,080 --> 00:00:42,920 Speaker 1: there are four gentlemen who are in charge of the 13 00:00:42,920 --> 00:00:45,919 Speaker 1: economic policy during the last five years who have moving on. 14 00:00:45,960 --> 00:00:49,159 Speaker 1: They're retiring, So Lee hutch Hung the Premier lead the 15 00:00:49,159 --> 00:00:53,320 Speaker 1: economics are Egong PBOC governor and Quose Reaching the banking regulator. 16 00:00:53,479 --> 00:00:55,600 Speaker 1: So a new set of economic leaders are going to 17 00:00:55,680 --> 00:00:58,400 Speaker 1: need to be rolled out UM in due course to 18 00:00:58,440 --> 00:01:02,720 Speaker 1: implement President She's economic policies going forward. As you said, 19 00:01:02,960 --> 00:01:06,720 Speaker 1: the top seven standing committee members of the Politburo UM 20 00:01:06,959 --> 00:01:12,520 Speaker 1: are are more from different regions, either Beijing, guang Gong, Shanghai, 21 00:01:13,040 --> 00:01:15,640 Speaker 1: or from ideology or anti corruption so they're not They 22 00:01:15,680 --> 00:01:19,000 Speaker 1: have not been focused purely on the economy. UM. What's 23 00:01:19,040 --> 00:01:22,319 Speaker 1: interesting is that presidency during his speech at the beginning 24 00:01:22,319 --> 00:01:25,360 Speaker 1: of the Congress, he focused on economic development as well 25 00:01:25,400 --> 00:01:29,400 Speaker 1: as national security, whereas UH some people have been thinking 26 00:01:29,440 --> 00:01:32,399 Speaker 1: maybe he would focus more on only a national security. 27 00:01:32,440 --> 00:01:34,839 Speaker 1: So he talked about a few things. He talked about 28 00:01:34,920 --> 00:01:38,520 Speaker 1: promoting the real economy rather than the financial economy. UM 29 00:01:38,680 --> 00:01:44,000 Speaker 1: talked about making China more powerful manufacturing, transportation, aerospace, internet, 30 00:01:44,480 --> 00:01:49,240 Speaker 1: digital economy. UH participant talked about self sufficiency. I think 31 00:01:49,240 --> 00:01:51,040 Speaker 1: he where he's very This is where the economy and 32 00:01:51,120 --> 00:01:56,760 Speaker 1: national security come in. Self self sufficiency in terms of food, energy, UH, 33 00:01:56,880 --> 00:02:00,880 Speaker 1: natural resources really possible, though, I mean, given China's reliance 34 00:02:00,920 --> 00:02:04,440 Speaker 1: on the outside world, UM more so than other regions. 35 00:02:04,600 --> 00:02:06,640 Speaker 1: I think what you're not seeing in China is maybe 36 00:02:06,680 --> 00:02:08,639 Speaker 1: what you're seeing in Europe right now. For example, you're 37 00:02:08,639 --> 00:02:12,960 Speaker 1: not seeing the heavy reliance UH causing an energy crisis 38 00:02:13,000 --> 00:02:16,520 Speaker 1: in UH in Europe, UH in in in China. Actually 39 00:02:16,520 --> 00:02:19,799 Speaker 1: it's it is getting energy from Russia and other areas 40 00:02:19,840 --> 00:02:23,959 Speaker 1: of the world as well, but it actually, UM, what 41 00:02:24,200 --> 00:02:26,800 Speaker 1: you're really seeing is not a supply problem in China 42 00:02:26,840 --> 00:02:29,080 Speaker 1: it's more of a demand problem. Actually, you see consumer 43 00:02:29,120 --> 00:02:32,200 Speaker 1: demands slowing down quite a lot. Um. Uh. You know, 44 00:02:32,280 --> 00:02:34,639 Speaker 1: the GDP number wasn't released last week, but hopefully it'll 45 00:02:34,680 --> 00:02:37,680 Speaker 1: be released later this week. Uh. It may show consumer 46 00:02:37,960 --> 00:02:41,760 Speaker 1: consumer confidence, consumer spending may have bottomed out. But this 47 00:02:41,800 --> 00:02:43,880 Speaker 1: is where they really need the economy to, uh to 48 00:02:43,919 --> 00:02:46,519 Speaker 1: pick up a bit. I think. Um. Uh, it was 49 00:02:46,560 --> 00:02:50,160 Speaker 1: five point four percent growth last time last month for 50 00:02:50,200 --> 00:02:52,880 Speaker 1: consumer spending, but they need that to pick up stronger 51 00:02:53,000 --> 00:02:56,200 Speaker 1: for the economy to recover very quickly. What do you 52 00:02:56,200 --> 00:02:59,680 Speaker 1: expect that GDP number to be when we get it? Good? 53 00:02:59,760 --> 00:03:01,880 Speaker 1: Quite and um, you know, in the second quarter it 54 00:03:02,000 --> 00:03:04,760 Speaker 1: was basically flat. It was basically zero and the second quarter. 55 00:03:05,040 --> 00:03:08,800 Speaker 1: Economists were expecting something over three percent for the third quarter, 56 00:03:09,080 --> 00:03:11,080 Speaker 1: and we suspect it will be somewhere in that area. 57 00:03:11,680 --> 00:03:14,799 Speaker 1: But that brings the whole year looking like about three 58 00:03:14,800 --> 00:03:17,679 Speaker 1: percent or even a little bit less. So at that rate, Uh, 59 00:03:17,840 --> 00:03:22,160 Speaker 1: he's not gonna Um, they're not gonna reach what he targeted. Actually, Um, 60 00:03:22,360 --> 00:03:25,360 Speaker 1: so they're gonna need more stimulus. And George, we were 61 00:03:25,400 --> 00:03:29,240 Speaker 1: talking about she's economic a gender and in a way, 62 00:03:29,240 --> 00:03:33,320 Speaker 1: this really cements this idea of common prosperity, a redistribution 63 00:03:33,560 --> 00:03:36,400 Speaker 1: of wealth in a more equitable way. So what does 64 00:03:36,400 --> 00:03:39,560 Speaker 1: this mean for international investors as they look across the 65 00:03:39,640 --> 00:03:43,320 Speaker 1: landscape in China. Oh, that that's a very good question. Actually, 66 00:03:43,320 --> 00:03:45,440 Speaker 1: I think there's gonna have to be a balance for 67 00:03:45,520 --> 00:03:49,600 Speaker 1: the president She's administration between the common prosperity but also 68 00:03:50,040 --> 00:03:53,520 Speaker 1: his implicit economic growth that he's looking for. He actually 69 00:03:53,840 --> 00:03:56,840 Speaker 1: reiterated the goal of raising the per capita income in 70 00:03:56,920 --> 00:03:59,160 Speaker 1: China to that of a mid tier advanced country by 71 00:03:59,160 --> 00:04:02,680 Speaker 1: two five. That means, if you do some math, that means, uh, 72 00:04:02,840 --> 00:04:05,720 Speaker 1: Chinese GDP has to grow somewhere around four point seven 73 00:04:05,800 --> 00:04:07,880 Speaker 1: or even five percent a year from now until two 74 00:04:07,760 --> 00:04:10,920 Speaker 1: thirty five. So they're gonna have to put some first 75 00:04:10,920 --> 00:04:13,400 Speaker 1: some stimulus in place next year, but they're going to 76 00:04:13,480 --> 00:04:16,520 Speaker 1: have to develop some areas that satisfy both the economic 77 00:04:16,520 --> 00:04:19,240 Speaker 1: growth and the common prosperity. So what are some areas 78 00:04:19,279 --> 00:04:21,480 Speaker 1: that this could be satisfied. I think he's going to 79 00:04:21,560 --> 00:04:25,719 Speaker 1: focus on things like, um uh, modernizing the medical industry. 80 00:04:26,080 --> 00:04:29,360 Speaker 1: Uh so medical devices. UM. I think you're gonna see 81 00:04:29,360 --> 00:04:32,239 Speaker 1: financial support. There was recently at one point seven trillion 82 00:04:32,240 --> 00:04:36,039 Speaker 1: women b uh discount loans made to the medical industry, 83 00:04:36,279 --> 00:04:40,640 Speaker 1: including you know, modernizing equipment like ventilators, e c G, defibrillator, 84 00:04:40,760 --> 00:04:43,520 Speaker 1: CT scans, things like that. You're also going to see 85 00:04:43,520 --> 00:04:46,520 Speaker 1: a big focus on renewable energies. That that satisfies the 86 00:04:46,560 --> 00:04:49,640 Speaker 1: common people by providing e V vehicles and batteries, but 87 00:04:49,720 --> 00:04:52,240 Speaker 1: also it allows China to try to become one of 88 00:04:52,240 --> 00:04:55,320 Speaker 1: the top producers and consumers of e V and renewable 89 00:04:55,360 --> 00:04:59,320 Speaker 1: energy around the world. So what critics would say is 90 00:04:59,320 --> 00:05:02,240 Speaker 1: that we're approached sing um this notion of one man 91 00:05:02,320 --> 00:05:05,839 Speaker 1: rule and that UM people would be worried that nobody 92 00:05:05,880 --> 00:05:09,640 Speaker 1: would tell she if he's heading in the wrong direction. UM. 93 00:05:09,720 --> 00:05:12,400 Speaker 1: So that sounds like a political question, But let's let's 94 00:05:12,400 --> 00:05:16,360 Speaker 1: look at it from from UH an investing standpoint. Does 95 00:05:16,400 --> 00:05:19,560 Speaker 1: it raise the risk of investing in China? And if so, 96 00:05:19,600 --> 00:05:23,000 Speaker 1: in what way? Um? Yeah, that's uh. I think you 97 00:05:23,000 --> 00:05:25,560 Speaker 1: could view it this way. Perhaps, UH, this third term 98 00:05:25,640 --> 00:05:28,200 Speaker 1: for a president she is will be a continuation of 99 00:05:28,240 --> 00:05:31,320 Speaker 1: his policies that he's already put into place. He's already 100 00:05:31,320 --> 00:05:35,800 Speaker 1: talked about common prosperity. Um. He talked about the property sector. 101 00:05:35,839 --> 00:05:38,640 Speaker 1: So if you use as an example, UM, yes, Indeed, 102 00:05:38,680 --> 00:05:41,520 Speaker 1: the both the bond and equity investors in the property 103 00:05:41,520 --> 00:05:45,680 Speaker 1: sector have suffered actually because prices have fallen. But if 104 00:05:45,680 --> 00:05:48,880 Speaker 1: you look at it from a more national perspective, UM, 105 00:05:49,000 --> 00:05:50,960 Speaker 1: I think, uh, it feels like the government is trying 106 00:05:51,000 --> 00:05:53,640 Speaker 1: to nationalize or make the property sector utility so that 107 00:05:53,720 --> 00:05:56,600 Speaker 1: there will be more affordable housing for the masses. So 108 00:05:56,680 --> 00:05:59,400 Speaker 1: that doesn't necessarily mean the financial markets will performed particularly 109 00:05:59,440 --> 00:06:01,640 Speaker 1: well in those areas, but it does mean that the 110 00:06:01,760 --> 00:06:04,839 Speaker 1: real economy, the real people will have something, uh, we'll 111 00:06:04,839 --> 00:06:07,320 Speaker 1: have an asset to to live in. So I think 112 00:06:07,600 --> 00:06:09,719 Speaker 1: you're gonna have to start without to start thinking about 113 00:06:09,720 --> 00:06:13,200 Speaker 1: which areas of the economy satisfy the policy going forward 114 00:06:13,200 --> 00:06:16,440 Speaker 1: and could have a good performance in the UH in 115 00:06:16,520 --> 00:06:20,000 Speaker 1: the financial markets. For example, technology, I think with the 116 00:06:20,120 --> 00:06:24,279 Speaker 1: US putting heavy restrictions now on semiconductors, UH, whether it's 117 00:06:24,400 --> 00:06:28,200 Speaker 1: chips or manufacturing equipment or even human capital going to China, 118 00:06:28,400 --> 00:06:32,679 Speaker 1: China will have to grow their homegrown technology companies. And actually, 119 00:06:32,800 --> 00:06:35,760 Speaker 1: if you look at the since Biden announced this new 120 00:06:35,800 --> 00:06:39,840 Speaker 1: semiconductor regulation a few weeks ago, the China's China's Index, 121 00:06:39,839 --> 00:06:42,679 Speaker 1: which is very heavy on homegrown tech companies that's actually 122 00:06:42,760 --> 00:06:45,760 Speaker 1: rallied since that announcement because they know that uh more 123 00:06:45,839 --> 00:06:49,000 Speaker 1: investments will have to be poured into that sector. Well, 124 00:06:49,040 --> 00:06:52,920 Speaker 1: President she has absolute passed, so surely he can fix 125 00:06:52,960 --> 00:06:58,200 Speaker 1: the property crisis as a strike. Now, I think it 126 00:06:58,760 --> 00:07:02,120 Speaker 1: doesn't mean that's what you means fixed the property uh 127 00:07:02,240 --> 00:07:04,520 Speaker 1: bond or equity prices. I think what it might I 128 00:07:04,520 --> 00:07:07,839 Speaker 1: think where we see where what what might happen is um, 129 00:07:07,880 --> 00:07:10,920 Speaker 1: there might be a requirement for the property developer tycoons 130 00:07:10,920 --> 00:07:14,160 Speaker 1: have pledge more assets against their existing debt. The state 131 00:07:14,160 --> 00:07:16,960 Speaker 1: owned banks may start providing more fund funding as we've 132 00:07:17,000 --> 00:07:20,480 Speaker 1: seen to finish the construction on these uncompleted but already 133 00:07:20,520 --> 00:07:24,000 Speaker 1: purchased properties. UH, and probably you'll see these uh big 134 00:07:24,160 --> 00:07:26,679 Speaker 1: s o E property companies start buying up the assets 135 00:07:26,680 --> 00:07:30,160 Speaker 1: of week or or bankrupt property at developer. I gotta 136 00:07:30,200 --> 00:07:32,920 Speaker 1: ask you briefly the neat case reporting that we've seen 137 00:07:32,960 --> 00:07:35,800 Speaker 1: another intervention on the en in Japan and we did 138 00:07:35,840 --> 00:07:39,120 Speaker 1: see that huge bounce for the end. UH is that sustainable? 139 00:07:39,200 --> 00:07:41,720 Speaker 1: What happens next? Yeah? I mean out of all the 140 00:07:41,840 --> 00:07:44,360 Speaker 1: central banks, I think the up until now, up until 141 00:07:44,400 --> 00:07:47,160 Speaker 1: the intervention, UH late last week b O J was 142 00:07:47,240 --> 00:07:50,200 Speaker 1: really the most silent of of all the central banks. 143 00:07:50,280 --> 00:07:53,160 Speaker 1: So I think, uh, they're going to defend that one 144 00:07:53,160 --> 00:07:55,720 Speaker 1: fifty mark. It looks like um and I think that 145 00:07:55,760 --> 00:07:58,400 Speaker 1: you'll probably see that as a bit of a line 146 00:07:58,560 --> 00:08:01,240 Speaker 1: in the sand. But whether that's sustainable for the long term, 147 00:08:01,280 --> 00:08:04,280 Speaker 1: I think it depends on the economic growth prospects over 148 00:08:04,320 --> 00:08:07,640 Speaker 1: in Japan. Alright, George soun Heat of Global Markets, Great 149 00:08:07,640 --> 00:08:10,400 Speaker 1: at China at BMP Parabou, thanks so much for joining us.