Speaker 1: Welcome to the Bloomberg Penel podcast on Paul Swing You.
Speaker 1: Along with my co host Lisa Brahma wits each day
Speaker 1: we bring you the most noteworthy and useful interviews for
Speaker 1: you and your money, whether at the grocery store or
Speaker 1: the trading floor. Find a Bloomberg Penl podcast on Apple
Speaker 1: podcast or wherever you listen to podcasts, as well as
Speaker 1: at Bloomberg dot com. Earlier today, the European Commission cut
Speaker 1: its growth forecasts for the euro Area and slashed its projection,
Speaker 1: in particular for Germany, warning that escalating trade tensions threatened
Speaker 1: to make the outlook even worse. Not a huge surprise,
Speaker 1: and yet there definitely was a market response, with guilds
Speaker 1: going even lower in Germany. Joining us now Alberto Galla,
Speaker 1: partner in folio manager for the Algebras Macro Credit Fund
Speaker 1: as well as a Bloomberg Opinion calumnist. Alberto, what was
Speaker 1: your take on the European Commission's forecast that was cut
Speaker 1: yet again and the fact that the market moved on it.
Speaker 1: The European region is clearly um into a Japan like
Speaker 1: environment for growth, so we have had repetitive downgrades on
Speaker 1: growth over the last month with limited fiscal stimulus. Um.
Speaker 1: Only some countries have been able to do it, but
Speaker 1: the core countries remained very conservative. And we are in
Speaker 1: the run up to European elections at the end of
Speaker 1: this month, so that could be perhaps a game changer.
Speaker 1: UM we could see maybe after European elections some reaction
Speaker 1: to these luggish growth environment which we have had. But
Speaker 1: you know, so far it's just the ECB has been
Speaker 1: doing most of the stimulus and marty policy on its
Speaker 1: own cannot really lift growth. We have seen that across
Speaker 1: several countries. You actually end up having the opposite results.
Speaker 1: You go into liquidity trap if you only have monetary
Speaker 1: policy keeping interest rates negative for too long. So we
Speaker 1: need a fiscal boost, but we don't have the willingness.
Speaker 1: Germany is still on the sided, and the other countries
Speaker 1: don't have a lot of ammunition we better. You mentioned
Speaker 1: in Germany, and that's kind of what surprised me the
Speaker 1: most out of this morning's data, the e c B
Speaker 1: slashing the growth projection to just zero point five from
Speaker 1: one point one. What's really driving that deceleration in Germany.
Speaker 1: There is a number of theories, So I would say
Speaker 1: first there's been a global desileration with Chinese orders for
Speaker 1: UM for important goods including cars, you know, falling very
Speaker 1: sharply at the end of last year. This hasn't recovered.
Speaker 1: Then there's a second factor specific to Germany, which is Turkey.
Speaker 1: You know, the Turkish economies under pressure. UM. Turkey and
Speaker 1: Germany are very close import expert partners. You know, the
Speaker 1: President Erdogan is just called for the rerun of the
Speaker 1: Istanbul elections and this is creating a lot of volatility
Speaker 1: in the Turkish lira and in in generally in busines
Speaker 1: as flows to Turkey UM, which affects affects Germany being
Speaker 1: part of the supply chain UM. But there's also a
Speaker 1: lack of domestic demand UH in Europe. UM. There is
Speaker 1: a rebound from last year for short p M I
Speaker 1: have gone back to positive. We're not in a recession,
Speaker 1: but we also don't have a V shaped rebound. It's
Speaker 1: it's something between a U shaped and an L shaped rebound. Now,
Speaker 1: to re accelerate an economy in in an late stage
Speaker 1: in you know, in the late stage of an expansion, UM,
Speaker 1: you need some physical stimulus. You don't, it just doesn't
Speaker 1: happen on its own. Well, you know, if you just
Speaker 1: had a recession and you tend to grow much faster
Speaker 1: because you have pent up demand. You have you know,
Speaker 1: consumers that haven't spent for many years and companies that
Speaker 1: haven't invested. Here where the late at late stage of
Speaker 1: the cycle, and we need some some government top down
Speaker 1: decision um either from Germany or or broadly from China.
Speaker 1: But we have seen that the Chinese stimulus is relatively
Speaker 1: smaller compared to what they did in on nine. So Alberto,
Speaker 1: as an investor, is this a time to stay away
Speaker 1: from European assets in particularly in Germany? Or from a
Speaker 1: credit standpoint, is this a positive because it means the
Speaker 1: ECB isn't going to be backing away from its stimulus
Speaker 1: anytime soon. So exactly, if you take Japan as an example,
Speaker 1: So what happened over fifteen years, twenty years? Rates remained
Speaker 1: relatively low. UM equities didn't do much. They you know,
Speaker 1: they kept going down. You could trade some rallies, but
Speaker 1: they kept going down. Credit was fine except the worst
Speaker 1: banks and corporates UH. Credit UH survived because once you
Speaker 1: are you know, the definition is you are in a UM.
Speaker 1: You're in a slow growth environment with persistent lower rates,
Speaker 1: companies kick the can. You may have don't be firms,
Speaker 1: don't be banks that survived because of lower rates. So
Speaker 1: essentially credit is okay in a Japan like environment, it's
Speaker 1: not extremely exciting. But actually in Europe you have yields
Speaker 1: which are you know, in dollar terms, close to high
Speaker 1: single digit sometimes double digit UM. You don't want to
Speaker 1: go in the lowest rated names in the you know,
Speaker 1: in the triple c's or lower rated smaller single bees.
Speaker 1: But overall the stimulus from this b will stay there,
Speaker 1: and that's part that's been part of our view. Where
Speaker 1: we go for growth. Where there's upside risk is some
Speaker 1: other countries outside of Europe, in emerging markets or in
Speaker 1: the US UM. But I think Europe for now seems
Speaker 1: very much in a very stable, lower rate environment, good
Speaker 1: for fixing, good for corporate bonds, not so good for
Speaker 1: equities in the medium term. So abrot to what extent
Speaker 1: is the ongoing Brexit uncertainty impacting the economies across your
Speaker 1: you know, we saw again that big down grade for German,
Speaker 1: Just wondering is that uncertainty still an issue a meaningful issue.
Speaker 1: I would say that in the investment world, in markets
Speaker 1: there has been a lot of fears. UM, there have
Speaker 1: been a lot of fears about Brexit and also European elections,
Speaker 1: so there's a lot of investors that are disengaged from Europe.
Speaker 1: So on the one hand, yes, fundamentals are not great.
Speaker 1: Growth is very slow compared to em or or the US,
Speaker 1: But on the other hand, positioning is very very light.
Speaker 1: According to the Bank America's Fund Managers Survey, short in
Speaker 1: European equities the most crowded trade across global portfolio managers.
Speaker 1: So if you have a bit of positive news, you
Speaker 1: can you know, prices can rise relatively quickly, both in
Speaker 1: in in in bonds and in UM in corporate bonds
Speaker 1: and in an inequities. So you know, we do have
Speaker 1: an unexciting fundamental view. We are stuck in a low
Speaker 1: growth f loor rate environment. But um there's also very
Speaker 1: little um lungs at the moment, so we sometimes like
Speaker 1: to be contrarian, we don't go into the warst areas.
Speaker 1: But there is still some value. And I think European
Speaker 1: elections are going to be a non event because the
Speaker 1: populace just may win a quarter of the European Parliament,
Speaker 1: but then all the other parties will we'll create a
Speaker 1: pro European coalition. In the end, you're in the European
Speaker 1: Parliament and the pro Europeans are the majority. Brexit will
Speaker 1: have to see what happens, you know, towards the end
Speaker 1: of the extension period in the in the second half
Speaker 1: of the year, after the summer um. We do think that,
Speaker 1: you know, the base case remains either a longer extension
Speaker 1: or a Norway style deal. So a deal soft deal,
Speaker 1: yea very good Alberto Gallo, thank you so much. Alberta,
Speaker 1: as a partner and portfolio manager for the Algebras Macro
Speaker 1: Credit Fund with about twelve point three billion pounds under management,
Speaker 1: is also a Bloomberg Opinion calumnist. Well, US and China
Speaker 1: trade negotiations are back on investors radar, that's for sure.
Speaker 1: Definitely a risk off day today after a very volatile
Speaker 1: day yesterday, driven in part by some of the tariff concerns.
Speaker 1: To get the latest on what these may mean for
Speaker 1: the market, we welcome Matt Mally Matts, managing director and
Speaker 1: equity strategist at Miller tebec Um. Matt, thanks so much
Speaker 1: for joining us again taking a look at what's happened
Speaker 1: over the past couple of days following President Trump's tweets
Speaker 1: about the tariffs. Clearly the market is rightfully concerned about
Speaker 1: some of these issues. What is your call, Well, you know,
Speaker 1: it's funny. I I think that you know, yes, I
Speaker 1: totally agree they should be at least a little bit concerned.
Speaker 1: And we also have to look at what was the
Speaker 1: market doing before this came Before this news came out.
Speaker 1: I mean, this is negative news. And even if you
Speaker 1: believe that you know, we're we're going to get a
Speaker 1: deal eventually, Uh, the odds of that, odds of having
Speaker 1: a being it pushed out further or you know, more
Speaker 1: strains within that situation have bob the risen. And when
Speaker 1: you have a situation where the stock markets rally twenty
Speaker 1: five percent in just four months, had become quite overbought
Speaker 1: on a near term basis. Anyway, when you get negative news,
Speaker 1: it should pull back. And to be honest with you,
Speaker 1: yesterday's reaction where it rallied back so strongly, that made
Speaker 1: me a little worried about. But there's a little bit
Speaker 1: too much complacency in the market. I think this is
Speaker 1: a natural and healthy things that that that the market
Speaker 1: is coming back down and we could fall a little
Speaker 1: bit further again after rally. Not the worst thing in
Speaker 1: the world. Yeah, and we should note that actually the
Speaker 1: losses are deepening near session lows negative one point four
Speaker 1: percent on the NASDAC. I'm just wondering, uh, you know,
Speaker 1: you look at the technical underpinnings here and I'm wondering,
Speaker 1: if the trade talks were really fundamentally break down and
Speaker 1: put on ice for a while, how big of a
Speaker 1: down draft could we see. Well, I think it could be,
Speaker 1: you know, a fairly decent one. I mean, certainly in
Speaker 1: the uh uh, you know, kind of the five to
Speaker 1: seven p sent pullback. Uh. And even you know, in
Speaker 1: today's markets where where the you know, mechanized tracing, the
Speaker 1: algal mechanized trading and the algales and things like that
Speaker 1: have a big impact on the market, it could take
Speaker 1: even down towards correction territory. And the reason why I
Speaker 1: say that is it is it because a lot of
Speaker 1: the turnaround in or at least people literally looking for
Speaker 1: earnings to pick up on the second half, uh, And
Speaker 1: a lot of that has to do with with a
Speaker 1: you know, an agreement had being made sometime in the
Speaker 1: near future. So if that doesn't happen, some of those
Speaker 1: earnings forecasts are going to come down, and uh, I
Speaker 1: think that would put a little bit of a dent
Speaker 1: in the market. So, Matt, you're just talking about earnings.
Speaker 1: What is your takeaway from the first quarter here? Seems
Speaker 1: to have come in better than expected? Um? What is
Speaker 1: your take? Well, that is true and and and the
Speaker 1: one problem, of course, though is that they always beat expectations. Uh,
Speaker 1: this time a little bit more than expected and and
Speaker 1: and it's very good that it went from expectations of
Speaker 1: a negative earning season to one that is a positive one,
Speaker 1: which you know, takes an earnings recession off the table.
Speaker 1: And that's good. But the my my concern a little
Speaker 1: bit here is that the guidance wasn't really raised. In fact,
Speaker 1: that it's come down a little bit for future quarters
Speaker 1: and we're really relying heavily on this, uh on a
Speaker 1: big fourth quarter where estimates are now at a plus
Speaker 1: eight and nine percent, where most of the other quarters
Speaker 1: are start of the second and third quarters are down
Speaker 1: in the one to three percent range. Uh So, Uh, yes,
Speaker 1: it's been a good earning season. Um, but I wouldn't
Speaker 1: like to see if much better, if we've been raising
Speaker 1: expectations a little bit more. And Lori Kelvicina over at
Speaker 1: RBC Capital had a really interesting point today saying that
Speaker 1: UH earnings really weren't even as good as many people
Speaker 1: are putting them out as because you did see the
Speaker 1: earnings per share beats UH. Seventy six percent of companies
Speaker 1: that have reported so far as something about that have
Speaker 1: beaten on the EPs side. On sales side, it's about
Speaker 1: half UH, and that's harder to engineer, whereas EPs were
Speaker 1: engineered by things like share buybacks, which were actually at
Speaker 1: the highest level post crisis in the first quarter. And
Speaker 1: I'm just wondering, from your perspective, how much of a
Speaker 1: sort of warning flag is that UH that companies pulled
Speaker 1: out all the stops in the first quarter and really
Speaker 1: cannot do a repeat of that when it comes to
Speaker 1: engineering the EPs beats later in the year. Yeah, I mean, obviously,
Speaker 1: you know, the quote unquote quality of earnings UH has
Speaker 1: been something that people were worried about for a while now.
Speaker 1: And the thing is, the quality of earnings were quite
Speaker 1: good last year, UM, and I say that they were
Speaker 1: worried about it, you know before you know, in two
Speaker 1: thousand and fourteen fifteen sixteen, we were worried about that. Uh.
Speaker 1: Last year they were you know, they were quite good.
Speaker 1: But now the quality again it seems to be more
Speaker 1: financial engineering. Now that the tax that has been pushed
Speaker 1: to the to the side, and now that will we
Speaker 1: get a problem again with this agreement on the tax side.
Speaker 1: It definitely lowers that, uh, not just the stated earnings,
Speaker 1: but the quality of earnings. And and again when the
Speaker 1: market has moved as much as it has, it doesn't
Speaker 1: just you know, uh, it doesn't necessarily mean that we're
Speaker 1: gonna have a disaster here, you know, any kind of
Speaker 1: a repeat of two thousand eight or two thousand, but
Speaker 1: it does begin to get people to worry about, you know,
Speaker 1: that we could have another a down draft something like
Speaker 1: we had in the fourth quarter. I'm not not calling
Speaker 1: for correction, but I wouldn't be surprised at all if
Speaker 1: we saw something in the five to seven percent range.
Speaker 1: Matt Malie, thank you so much for being with us.
Speaker 1: Matt Malie as chief equity strategist for Miller, Tabac and Co.
Speaker 1: Talking about market, it is time for a public service announcement.
Speaker 1: If you have a mother or a wife who has
Speaker 1: a children or a grandmother. This Sunday is Mother's Day.
Speaker 1: You might want to remember that. Paul Sweeney, what are
Speaker 1: you doing for Mother's Day? Um, we are having brunch
Speaker 1: and there'll probably be some type of flower thing involved,
Speaker 1: some type of flower gifting going on, a lot of
Speaker 1: people giving flowers. We are so lucky to have Chris McGann,
Speaker 1: chief executive officer of one flowers dot Com. I'm here
Speaker 1: with us in our bloombergett to Active Broker's studios. So, Chris,
Speaker 1: how important is Mother's Day to your business? Well? How
Speaker 1: important is Mother's Day to you? In other words, how
Speaker 1: many flowers am I hoping to get? I mean, you know,
Speaker 1: I'm one of those people. If my kids make a
Speaker 1: handmade card and they, you know, put some effort into it,
Speaker 1: I'll be happy. Well, we'll take it up a step.
Speaker 1: So some Mother's Days are very important holiday for our business.
Speaker 1: You know, if you really look at our business overall
Speaker 1: on an annual basis, because we're driven by such everyday
Speaker 1: occasions like birthdays, anniversaries, Mother's Day is only about six
Speaker 1: percent of our business. But if you look at the
Speaker 1: floral side of our business for this quarter, Mother's Day
Speaker 1: can counsel for about about consumer floral business in this
Speaker 1: quarter about fiscal fourth quarter. So it's an important day
Speaker 1: and it's an important day to celebrate. Yeah, well I'm
Speaker 1: looking I like to celebrate the stock. The stock is
Speaker 1: of about sixty eight percent this year. Of let's get
Speaker 1: down to the you know, the dollarsand cents in the stock.
Speaker 1: So I mean, even on a day when the markets
Speaker 1: down one and a half percent, your stock is up
Speaker 1: one and a half percent. So what's the story behind
Speaker 1: your company's great stock race performance this year? I think
Speaker 1: it's driven mostly by mothers investing in our stock right now,
Speaker 1: and take it back to the sentimental I don't think so.
Speaker 1: But really what's been happening and what we the investment
Speaker 1: community is recognizing that we're doing what we said we
Speaker 1: were going to do and we laid out for the
Speaker 1: last couple of years. Actually, when we've been accelerating our growth.
Speaker 1: We took the growth rate from three percent two years
Speaker 1: ago to four percent. This year, we came out, we
Speaker 1: guided the five to seven percent growth. We raised our
Speaker 1: guidance after the holiday season to seven to eight percent.
Speaker 1: We just raised our guidance again two weeks ago to
Speaker 1: the high end of that range. So our growth rate
Speaker 1: is accelerating as customers are becoming more and more aware
Speaker 1: of our family of brands and ordering from more than
Speaker 1: one brand. What's the highest margin aspect of your business?
Speaker 1: The food? The Flowers going may food side of our business,
Speaker 1: we're probably get in the mid to hire uh to
Speaker 1: up at range margin. The one in a hundred of
Speaker 1: Flowers business is usually around that thirty. That's where it's
Speaker 1: going to stay. But really the higher margin products are
Speaker 1: goingmet food side for us. I'm looking at the p
Speaker 1: g O function on the Bloomberg terminal, which gives a
Speaker 1: breakdown of kind of where your revenue comes from, and
Speaker 1: I was shocked to see that the gourmet food and
Speaker 1: get baskets is over fifty percent of your business and
Speaker 1: Flowers are about forty of your business. Is a time
Speaker 1: to rename the company? Because you're more than Flowers, You're
Speaker 1: kind of all year round, lots of gifts and sat foods. Yeah,
Speaker 1: that's right, But we get that question all the time, Paul,
Speaker 1: should we rename the company? As we've become really this
Speaker 1: company of celebrations. But when we look at it from
Speaker 1: a marketing perspective, we have such iconic brands, especially the
Speaker 1: two lead ones one in a hundred flowers dot com,
Speaker 1: Harry and David, and they bring in such great traffic.
Speaker 1: We'd only be renaming it really for the investment community.
Speaker 1: And I think one hundred Flowers and Harry and David
Speaker 1: both has such brand equity, will stay with this multi
Speaker 1: brand strategy. I love the idea also though of calling
Speaker 1: it to order something is also an athema to people
Speaker 1: under a certain age. But just do it online. So
Speaker 1: it's not only is it also more food than than
Speaker 1: it is flowers, but also the concept of one hundred
Speaker 1: is probably going to be obsolete in about ten years.
Speaker 1: So I mean, from that perspective, how much of the
Speaker 1: how much of the sales come online? Well, we're predominantly
Speaker 1: an e commerce driven company, and even if you look
Speaker 1: at one eight hundred of Flowers brand itself, of the
Speaker 1: businesses e commerce mobile commerce driven. So I think the
Speaker 1: brand has become so well known most younger people don't
Speaker 1: even realize it was named after a telephone number. So
Speaker 1: all right, I'll go back sentimental a little bit more.
Speaker 1: What are the most popular flowers for Mother's Day? That's
Speaker 1: how sentimental? Yet that's impressive. So for Mother's Day, I
Speaker 1: think we see mix of vibrant colors. So it's roses, lilies, daisies, carnations,
Speaker 1: which have made a nice comeback, which are one of
Speaker 1: my favorites. They last forever, I love them. But really
Speaker 1: a mix of vibrant colors. And one of the great
Speaker 1: products that we sell is called Mother's Embrace and it's
Speaker 1: named after what's the most comforting thing you can get
Speaker 1: from your mom but a hug. So we turn that
Speaker 1: around and one of our creative one of our creative
Speaker 1: florists and Stafford, Virginia, Devil and Reid, created this Mother's
Speaker 1: Embrace product and it's just a fantastic product, one of
Speaker 1: our top selling. What are you getting your wife? Flowers? Actually?
Speaker 1: This this this Mother's Day, I won't be because we'll
Speaker 1: be celebrating my daughter's graduation from William and Mary. So no,
Speaker 1: so I won't be able to have flowers there. Well,
Speaker 1: well down Williamsburg, Virginia. What's the growth area for you?
Speaker 1: The growth area is both really right now, all three
Speaker 1: areas of our business are growing. The gourmet food side
Speaker 1: is growing nicely to consume, a floral business is growing.
Speaker 1: What's driving the gomet food side is the acquisition of
Speaker 1: Harry and David that we did a number of years ago.
Speaker 1: You take a business like Harry and David that went
Speaker 1: through a bankruptcy, was stagnant for three years. Coming out
Speaker 1: of the bankruptcy, we we put it on our platform.
Speaker 1: We take out over twenty million dollars of operating costs
Speaker 1: doing so, and now we have the e commerce business
Speaker 1: Joe growing about eight right now. That's that shows the
Speaker 1: benefits of the platform for growth that we've created. Well,
Speaker 1: my favorite study here is about twenty million stems for
Speaker 1: Mother's Day alone will be delivered. That's a lot, some
Speaker 1: of them to the Sweeney House hopefully yea Christmas can
Speaker 1: President CEO Flowers dot com does trade on the NaSTA
Speaker 1: act onto the symbol f LWS. Based in Long Island.
Speaker 1: Joining us here in our Bloomberg Interactive Broker studio, Chris,
Speaker 1: thanks so much for joining us. Well. US markets are
Speaker 1: going lower led by the NAZAC down one point six percent,
Speaker 1: driven really by the increasing question around whether the US
Speaker 1: and China will come to a trade agreement after all.
Speaker 1: Joining US, I'm very pleased to say, is Dr Henry Wong.
Speaker 1: He is founder and president of the Center for China
Speaker 1: and Globalization based in Beijing, but joining us here in
Speaker 1: our boombergadda active broker studios in New York. Dr Wong,
Speaker 1: thank you so much for being here. Just how much
Speaker 1: of a disagreement seems to be going on right now
Speaker 1: between the US and China that's impeding some sort of
Speaker 1: trade trade pact here. Thank you, thank you for having me.
Speaker 1: I actually I think that all along we have been
Speaker 1: seeing President Trump giving tweets and Secretary Lightheiser and the
Speaker 1: minutul talking about all positive news about negotiations. If according
Speaker 1: to the Secretary, that has been done well, I think
Speaker 1: that's already very great achievement. So so so I think
Speaker 1: that there may be some finalizing when they put into
Speaker 1: the printing and put into the details, that could be
Speaker 1: a little I think still negotiation going on on the
Speaker 1: final awarding of that. So I think that probably needs
Speaker 1: both and oak sides to really take the wisdom and leadership,
Speaker 1: you know, a role in finalize they Still I think
Speaker 1: it's it will be highly irresponsible to to to really
Speaker 1: uh to not having this do because not only the
Speaker 1: business community in China and the US wants days, but
Speaker 1: also the rest of the world and whole world is
Speaker 1: highly watching on this. I don't think both countire can
Speaker 1: forward now that trade tiiff war going on, and I
Speaker 1: think this this, this final differences could be solved, you know,
Speaker 1: Cervier consultation and a friend that they discussion rather than
Speaker 1: really hostile and the maker, you know, force people to
Speaker 1: the corner, which I think with backfire maybe in the end.
Speaker 1: So dr One, you mentioned that both sides, certainly from
Speaker 1: the business community, would like to have a trade deal
Speaker 1: done in China. From the Chinese perspective, Um, is that
Speaker 1: consistent with what the government wants? Is the government and
Speaker 1: business are they on the same page or is there
Speaker 1: just a fundamental problem from the government's perspective about some
Speaker 1: of the bigger issues about trade. I think it's it's
Speaker 1: finally clear enough in China, you know, after this Tradelo
Speaker 1: has already started for a year or not in its
Speaker 1: friction going on, and we all go through ups and
Speaker 1: downs and uh and the rollercoaster of both economies. And
Speaker 1: I think particularly in China, I think we um, you know,
Speaker 1: I have our councilors for a lunchier time. I think
Speaker 1: the government actually foreign spokesperson said that, you know, we
Speaker 1: want the stability, We want to be responsible, We want
Speaker 1: to really finish this deal. We want to be reasonable
Speaker 1: to not until Chinese beings, but also US and the
Speaker 1: rest of the war. So so I think the governors
Speaker 1: in the same wavelens with the business community, and I
Speaker 1: think that's not only for Chinese perspective, but also for
Speaker 1: the US perspective as well. So Robert light Hazard, the
Speaker 1: chief negotiator for the US with China over some of
Speaker 1: these trade parameters, he came out and he confirmed that
Speaker 1: there is some sort of back peddling by the Chinese
Speaker 1: government on some agreements that they had made previously, including
Speaker 1: changing Chinese law having to do with intellectual property, among
Speaker 1: other things. I'm just wondering if that's true. That seems
Speaker 1: like a more fundamental breach that perhaps everybody wants to
Speaker 1: deal in sis saying Kumbai yah, but it's going to
Speaker 1: be very hard to get beyond. Yes, you know, I'm
Speaker 1: not involving in the detail of this, but for what
Speaker 1: I heard, you know, what the secretary is said, Uh
Speaker 1: that you know, uh possible. But but there's also a
Speaker 1: culture issue there, you know, like if as Chinese law
Speaker 1: is already there then if you want to change that,
Speaker 1: it takes you know, takes the process. I mean, the
Speaker 1: national paper's con has to go through that, and then
Speaker 1: that a lot of consens consensus building. So it's not
Speaker 1: acting absolute to say immediately it can be done. Not
Speaker 1: So I think if there's a macadium there to to
Speaker 1: walk towards that direction, let's give a little a patient
Speaker 1: on that, not really push you know, right away and
Speaker 1: you know, or interpret that is a refused. So I
Speaker 1: think that's probably important. This is really an interesting point
Speaker 1: dr wrong and I think it's it's one that that
Speaker 1: that we really need to emphasize, which is uh, Robert Leitheiser,
Speaker 1: President Trump. They have not been talking with leh Is recently, right,
Speaker 1: so this has been over you know, through other people
Speaker 1: or or not necessarily discussed. Could this just simply be
Speaker 1: a communication error where the Chinese government said, well, we
Speaker 1: can't change the law overnight, uh, you know, and then
Speaker 1: then they're saying, well, you guys are back peddling, and
Speaker 1: that's the breaching communication. Absolutely, that's that's quite possible. I mean,
Speaker 1: from from my experience and talking with the people in
Speaker 1: the in the multinational past, there could be a culture
Speaker 1: misinterpretation sometimes taken only the process to do things in China,
Speaker 1: like I can give examples, you know, I mean the
Speaker 1: Foreign Investment law just passed in March. It takes quite
Speaker 1: a while to discuss that. So so they don't mention
Speaker 1: China twenty five anymore. They are actually saying, you know,
Speaker 1: they got guaranteed the form right of and there's no
Speaker 1: force technology transfer and if IPR violation will be punished,
Speaker 1: would be persecuted. That'd been written into the law. So
Speaker 1: you see, Chinese law is also accommodating a lot of
Speaker 1: complaints that multinational West country complain us, particularly in the past.
Speaker 1: So I think, you know, the attigies of Chinese always,
Speaker 1: you know, they are very a common y thing. As
Speaker 1: a matter of I think that to to black you know,
Speaker 1: to frankly say oh China is delying or restow, I
Speaker 1: don't think that that is two If they are ready
Speaker 1: grade in principle, let's find out detail how to implement that,
Speaker 1: rather than say, oh, China has been uh you know,
Speaker 1: taking all the things back. So that may be for
Speaker 1: the political purpose, I mean, very very useful and generate
Speaker 1: a lot of hype on that, but but it's not
Speaker 1: I don't think it's a real situation, probably so dr wrong.
Speaker 1: Just be clear that the two big issues is I
Speaker 1: think the that we understand it our intellectual property, uh,
Speaker 1: forced transfer, technology trans transfer. That seems to be the
Speaker 1: area where there's either disagreement or there's no agreement. What
Speaker 1: is the stance of China on those two key issues.
Speaker 1: Are you saying that they will be addressed? Well, actually,
Speaker 1: you know, China just passed the law and the last
Speaker 1: National People's Congress which in March, and that in no
Speaker 1: new investment law. China has a stupid In that law
Speaker 1: there will be normal forced time transferred and not allow
Speaker 1: any any government at any level. And also on the
Speaker 1: i PR to like the property protection and then there
Speaker 1: will be no violace. Cannot be a violation of that,
Speaker 1: cannot be forcetanking transfer if if anybody doing that to
Speaker 1: be punished, to prosecute it. So that already written into
Speaker 1: Chinese law past in much this year. So you can
Speaker 1: see Chinese attitudes towards that. It is quite forescoming actually
Speaker 1: not avoiding those kind of you know challenges. One of
Speaker 1: the big other issues is enforcement of the agreement. And
Speaker 1: I'm wondering, you know, you're saying Dr Wong that this
Speaker 1: could be a communication error and law takes a while
Speaker 1: to change, But what's sort of the recourse if the
Speaker 1: law doesn't change in time? Yeah, No, I think that.
Speaker 1: I I think that the government is now it's very serious.
Speaker 1: I read there's going to be a pub because a
Speaker 1: hundred people to come. It's very very very real. All
Speaker 1: the details going to be problely backed up, and you know,
Speaker 1: looking into the final really in the conclusion of this too,
Speaker 1: but very seriously. Is such a large delegation, and I
Speaker 1: think that to you know, let's put it there, we
Speaker 1: have we have not on the US, but those international
Speaker 1: commitities to watch this. This is such a high profile
Speaker 1: trade fiction and we have a you know, World Intellectual
Speaker 1: Property Organization, we have you know WT. All those people
Speaker 1: are watching this. So so I don't think that if
Speaker 1: China deliberately saying something and then it said, oh, we
Speaker 1: need to take it back, I don't think China, you know,
Speaker 1: it's still of course honor its commitments and and so whatever.
Speaker 1: I think one, if finalizing is still there could be
Speaker 1: a lot of discussion going on. And also there's a
Speaker 1: culture differences, uh, in terms of understanding of each other.
Speaker 1: But I think in the end um the world needs this,
Speaker 1: the Chinese needs, the US needs, and multinational needs. After all,
Speaker 1: you know, the U. S Company have a six or
Speaker 1: eight thousand of them in China making five billion revenue
Speaker 1: a year. I mean, both sides much larger than the
Speaker 1: than than the deficit. And China and US actually expert
Speaker 1: to US US Martina accounts half of that. So so
Speaker 1: that's right, Dr Henry Wan. Thank you so much. Dr
Speaker 1: Wang as founder and president of the Center for China
Speaker 1: and Globalization giving us his thoughts on the ongoing trade
Speaker 1: negotiations between the United States and China. Trade delegation arrives
Speaker 1: later this week from China to Washington. Thanks for listening
Speaker 1: to the Bloomberg P and L podcast. You can subscribe
Speaker 1: and listen to interviews at Apple Podcasts or whatever podcast
Speaker 1: platform you prefer. Paul Sweeney, I'm on Twitter at pt Sweeney.
Speaker 1: I'm Lisa abram Woyit's I'm on Twitter at Lisa abram
Speaker 1: woits one before the podcast. You can always catch us
Speaker 1: worldwide on Bloomberg Radio.