WEBVTT - Powell Set to Lay Groundwork for Higher Rates 0:00:01.280 --> 0:00:05.640 This is Bloomberg business Week inside from the reporters and 0:00:05.840 --> 0:00:09.400 editors who bring you America's most trusted business magazine plus 0:00:09.480 --> 0:00:13.640 global business finance and tech news. The Bloomberg Business Week 0:00:13.680 --> 0:00:18.600 Podcast with Carol Masser and Tim Stenebec from Bloomberg Radio. 0:00:20.280 --> 0:00:22.479 All right, everybody, we're going to continue with some of 0:00:22.480 --> 0:00:25.119 what we just talked about in our simulcast Carol Masser 0:00:25.160 --> 0:00:27.760 along with Katie Greifeld live here on Bloomberg Business Week, 0:00:27.800 --> 0:00:30.880 on Bloomberg Radio, on YouTube, and on Bloomberg Originals, because, 0:00:30.880 --> 0:00:33.159 as we said, right, one of the key focal points 0:00:33.200 --> 0:00:36.680 for the markets for investors this week, Katie is Jay 0:00:36.720 --> 0:00:40.199 Powell heading to Capitol Hill two days of testimony. He'll 0:00:40.240 --> 0:00:41.960 have his statement and then he's going to get a 0:00:42.000 --> 0:00:45.120 slew questions right from members up on Capitol Hill, and 0:00:45.159 --> 0:00:47.280 we'll see what he has to say with us with 0:00:47.320 --> 0:00:49.920 some more thoughts on. This is Janelle Marte. She is 0:00:49.960 --> 0:00:53.000 Bloomberg News Economics and Federal Reserve reporter, joining us via 0:00:53.080 --> 0:00:56.120 zoom from New York City. Johannelle, good to have you 0:00:56.160 --> 0:00:58.920 here with Katie and myself. So we just talked about 0:00:58.920 --> 0:01:01.040 this with our TV colleague because we've all been over it. 0:01:01.840 --> 0:01:03.640 How is it that you guys are thinking about and 0:01:03.680 --> 0:01:06.520 how you are thinking about it? Specifically about what Jay 0:01:06.640 --> 0:01:09.200 Powell will be doing over the next couple of days. 0:01:10.560 --> 0:01:13.559 So Hi there, It's going to be a really important 0:01:14.319 --> 0:01:16.920 couple of days here that we will hear from how 0:01:18.000 --> 0:01:20.319 because it's probably going to be his last public remarks 0:01:20.360 --> 0:01:24.399 before the meeting, right, So I think what we're going 0:01:24.440 --> 0:01:28.000 to be watching or words expected of How is for 0:01:28.120 --> 0:01:31.600 him to echo what we've been seeing and hearing from 0:01:31.680 --> 0:01:34.080 some of his colleagues on the beat. So the message 0:01:34.120 --> 0:01:36.600 has really been, first of all, that they're not done 0:01:36.680 --> 0:01:40.960 raising interest rates. More rate increases to come, and I 0:01:41.000 --> 0:01:44.240 think some people have also been pointing out that they 0:01:44.360 --> 0:01:47.680 think interest rates or that they're prepared to take interest 0:01:47.800 --> 0:01:51.480 rates hire if we continue to see economic data come 0:01:51.520 --> 0:01:55.960 in really hot. Right, So we have seen really blockbuster 0:01:56.160 --> 0:02:01.640 jobs reports and inflation data shoring that it's elevated. And 0:02:01.800 --> 0:02:05.080 thankfully the Fed will have a few key reports coming 0:02:05.120 --> 0:02:07.760 in before they make that decision, and that's going to 0:02:07.800 --> 0:02:10.720 be very key to what they end up doing and 0:02:10.800 --> 0:02:13.839 also to what they signal in terms of the how 0:02:13.960 --> 0:02:16.360 high they think rates will have to go. So if 0:02:16.400 --> 0:02:19.840 we expect to hear from you know, classic Jerome Pal tomorrow, 0:02:20.040 --> 0:02:23.400 very measured, very thoughtful. I am curious, So what the 0:02:23.760 --> 0:02:27.320 bigger risk is here? What is the more likely risk 0:02:27.440 --> 0:02:29.960 at least you know, from the market's perspective, you know, 0:02:30.080 --> 0:02:33.880 is there a bigger risk that Jerome Pal accidentally sounds 0:02:33.960 --> 0:02:38.239 dovish or accidentally sounds hawkish once we actually start getting 0:02:38.240 --> 0:02:43.359 some questions. So I think the tone from what we've 0:02:43.400 --> 0:02:48.200 been getting from FED officials has been more hawkish than dovish, 0:02:48.320 --> 0:02:51.400 especially in the past month, where you know, maybe we 0:02:51.520 --> 0:02:54.840 thought six weeks ago that the economy was starting to slow, 0:02:55.280 --> 0:03:00.040 that inflation was coming down, and actually the last a 0:03:00.120 --> 0:03:02.679 couple of sense and data reports have shown us that 0:03:03.120 --> 0:03:06.080 the economy remains really strong, there's still a lot of 0:03:06.160 --> 0:03:10.080 demand for workers, and inflation is not slowing down at 0:03:10.080 --> 0:03:13.400 the pace that people expected. So I think the tone 0:03:13.400 --> 0:03:16.840 has been hawkish. I think we're likely to see more 0:03:16.960 --> 0:03:22.640 hawkishness from Howell, but again the message probably being that 0:03:22.680 --> 0:03:25.040 they're going to look at the data again, these key 0:03:25.080 --> 0:03:29.520 reports coming in before they make their decision, and what 0:03:29.600 --> 0:03:32.840 they don't want is for markets to start to believe 0:03:32.880 --> 0:03:35.400 that inflation is going to always stay this way for 0:03:35.520 --> 0:03:39.280 inflation expectations to become an anchor. So that's really the 0:03:39.360 --> 0:03:42.080 message that they've been trying to deliver is that we're 0:03:42.080 --> 0:03:43.840 going to do what it needs to have. We're going 0:03:43.880 --> 0:03:46.280 to do whatever it needs to be done to get 0:03:46.320 --> 0:03:49.520 inflation back down to our target. All right, So it 0:03:49.560 --> 0:03:52.120 sounds like, to be fair, it's a little bit more 0:03:52.160 --> 0:03:53.960 of the same, right, Yeah, we're sticking at that two 0:03:54.000 --> 0:03:57.400 percent target. We are going to continue to be data depended. 0:03:57.520 --> 0:03:59.800 We're gonna keep raising rates until we get it right. 0:04:00.400 --> 0:04:04.120 So I feel like it's going to be more of 0:04:04.160 --> 0:04:06.880 the same. Is there anything new that we could get 0:04:06.960 --> 0:04:12.280 in terms of tone or message, Joannelle from J Powell, Well, 0:04:12.320 --> 0:04:15.240 we do want to hear to see how he will 0:04:15.280 --> 0:04:19.200 be interpreting the data that comes in and when they 0:04:19.240 --> 0:04:21.680 need again in March. You have to remember, they'll be 0:04:21.800 --> 0:04:24.880 updating their projections for how high they think great rates 0:04:24.880 --> 0:04:27.560 will have to go. So we will be listening for 0:04:27.600 --> 0:04:32.640 any indication that the dot plot as it's called, is 0:04:32.680 --> 0:04:36.479 going to show higher terminal rates. So I think we're 0:04:36.480 --> 0:04:38.680 going to be listening for those kinds of clues, and 0:04:38.760 --> 0:04:42.200 the FED has at this meeting that very important tool. 0:04:42.320 --> 0:04:44.440 So even if they do decide to stick with twenty 0:04:44.480 --> 0:04:47.600 five basis points, which is what the market is expecting 0:04:48.040 --> 0:04:51.680 and what many officials have been saying that they prefer 0:04:53.000 --> 0:04:56.640 if they suggest that they're prepared to take or it's 0:04:56.720 --> 0:04:59.960 hire by showing that the dot plot, then they can 0:05:00.040 --> 0:05:02.800 still sends a very hot restage to us. Would it 0:05:02.839 --> 0:05:05.000 be like if they said they could go now back 0:05:05.040 --> 0:05:08.720 to fifty, that would be it would be huge, right, 0:05:08.800 --> 0:05:10.799 that would be a different message, like this whole idea 0:05:10.800 --> 0:05:13.840 of maybe going higher longer, Like I get it, like 0:05:14.000 --> 0:05:15.640 I feel like it's a sliding scale, right, do you 0:05:15.680 --> 0:05:18.680 feel like it's a little bit of a sliding scale potentially, Yeah, 0:05:18.720 --> 0:05:20.279 But if they jumped all of a sudden and said, 0:05:20.320 --> 0:05:22.560 well we might be able to we might need to 0:05:22.560 --> 0:05:25.400 do fifty at a meeting like that to me would 0:05:25.400 --> 0:05:28.040 be a bit of a shock, I think. So if 0:05:28.040 --> 0:05:30.760 you think about what's presiden, yeah, it would I mean, 0:05:30.800 --> 0:05:33.400 it would certainly be a shock. I would say, it's 0:05:33.440 --> 0:05:36.719 not what the market is effecting, though the market has 0:05:36.760 --> 0:05:40.640 it priced in a small chance of that happening, and 0:05:40.880 --> 0:05:43.839 some officials, of course, have said the hockage. Officials have 0:05:43.920 --> 0:05:46.800 said that they wanted to be on the table. But 0:05:46.880 --> 0:05:49.479 again I think it's been clear from what we've heard 0:05:49.640 --> 0:05:53.720 that this measured approach, this twenty five basis point increment 0:05:53.920 --> 0:05:57.240 at this level, where where where it's are at this point, 0:05:57.760 --> 0:06:00.840 is what most of the artificials will prefer. However, I 0:06:01.279 --> 0:06:04.400 mean I don't think it's been taken off the table completely. 0:06:04.520 --> 0:06:06.839 And so again we'll be walking to see where we 0:06:06.880 --> 0:06:10.840 get from the economic data, not really this before this meeting, 0:06:10.880 --> 0:06:13.800 but in the coming meetings. So we're talking a lot 0:06:13.800 --> 0:06:16.640 about interest rates, which makes sense, that is, you know, 0:06:16.680 --> 0:06:21.360 their primary lever talk to us though about quantitative tightening, 0:06:21.360 --> 0:06:23.200 because in the background of all of this you do 0:06:23.240 --> 0:06:28.159 have the Fed's balance sheet shrinking. What is the thinking there, 0:06:28.200 --> 0:06:31.560 you know, should we expect Powell to get some questions 0:06:31.680 --> 0:06:34.719 on that dis quantitative tightening? Last three, at the end 0:06:34.760 --> 0:06:37.560 of twenty twenty three, what's the current thinking around the 0:06:37.600 --> 0:06:41.000 balance sheet? That's a really good point. So the FED 0:06:41.120 --> 0:06:44.040 has been reducing its balance sheet in their background, as 0:06:44.040 --> 0:06:47.119 they like to say, by up to ninety billion dollars 0:06:47.200 --> 0:06:51.200 a month, and it seems to be going fairly well. However, 0:06:51.839 --> 0:06:56.640 reserves the reserves to help at that big banks puld 0:06:56.640 --> 0:06:59.640 that the FED those reserves have been draining and there's 0:06:59.640 --> 0:07:04.120 been a lot of liquidity held in the reverse repot facility, 0:07:04.279 --> 0:07:08.720 which is a program that lets financial firms park some 0:07:08.839 --> 0:07:12.120 money with the fat overnight. So there's a little bit 0:07:12.160 --> 0:07:15.160 of concern among some people in the market that if 0:07:15.160 --> 0:07:17.640 this money is kind of stays in the reverse repot program, 0:07:17.960 --> 0:07:20.600 but you know, and reserves continue to drink, that the 0:07:20.680 --> 0:07:23.680 FED might then have to change course if we see 0:07:23.720 --> 0:07:27.080 reserves fall too low. But what we've heard from a 0:07:27.120 --> 0:07:29.360 BET official so far is that they they're aware of 0:07:29.360 --> 0:07:32.320 what's going on in the markets, they're watching it, and 0:07:32.480 --> 0:07:37.080 that they're prepared to make changes if necessary, but that 0:07:37.200 --> 0:07:40.000 for so far the program seems to be running smoothly. 0:07:40.080 --> 0:07:42.440 They're continuing with the balance sheet runoff, but they hope 0:07:42.480 --> 0:07:45.640 it will stay according to Plant. Of course, we could 0:07:45.720 --> 0:07:50.960 hear from some politicians, not policymakers, politicians on Capitol Hill, 0:07:51.320 --> 0:07:55.480 you know, questioning howl about that. And some people are 0:07:55.520 --> 0:07:57.920 obviously are not huge fans of the fed's big balance 0:07:57.960 --> 0:08:02.040 sheet because they see that it's been influencing maybe even 0:08:02.080 --> 0:08:05.160 the housing market in an unfair way, or they don't 0:08:05.200 --> 0:08:08.520 like the fad having you know so much, you know, 0:08:08.560 --> 0:08:12.480 snapping up so many assets. So I mean, it's certainly 0:08:12.480 --> 0:08:15.720 something that you'll get questions about, but for now, the 0:08:15.840 --> 0:08:18.880 message chest seemed to be that it's working. Janelle does 0:08:19.120 --> 0:08:22.640 does the strength in a continued strength, I should say, 0:08:22.640 --> 0:08:26.160 in the labor market, um plus the bounce back that 0:08:26.200 --> 0:08:29.400 we've seen in the equity market. Certainly again this month 0:08:29.560 --> 0:08:34.000 kind of give Jay Powell some breathing room to be 0:08:34.640 --> 0:08:38.200 more hawkish. As you guys were talking about earlier. It 0:08:38.400 --> 0:08:43.440 might so clearly there is some concern that the higher 0:08:43.520 --> 0:08:47.840 interest rates could hurt the labor market, could cause people 0:08:47.840 --> 0:08:50.360 to lose their jobs, and that might be something that 0:08:50.400 --> 0:08:52.840 we or it is something we've heard about the Democrats 0:08:52.880 --> 0:08:56.120 for example, who are you know, reminding power for example 0:08:56.240 --> 0:08:59.000 that hey, you also have a maximum employment man dates, 0:08:59.080 --> 0:09:01.600 So while you're worried about inflation, let's make sure that 0:09:01.640 --> 0:09:05.320 we don't cause undue pain to the economy. But if 0:09:05.320 --> 0:09:07.920 you get those kind of remarks, you'll be coming in 0:09:08.000 --> 0:09:10.240 and wonder worth you un employment rate it's at three 0:09:10.240 --> 0:09:14.200 point four percent, And again he said, we're seeing some 0:09:14.280 --> 0:09:18.240 of our rebound and equity markets, So I think that 0:09:18.280 --> 0:09:21.600 works in his favor. In that sense, But I think 0:09:21.640 --> 0:09:25.800 that he in some other sense that that they're watching wages, 0:09:26.040 --> 0:09:29.320 they're watching labor markets, and then you know, they are 0:09:29.360 --> 0:09:33.320 expecting probably some weakness in the labor market to take 0:09:33.360 --> 0:09:36.080 place before they can get their inflatient targets down to 0:09:36.120 --> 0:09:37.839 two percent. All right, couldn't leave it on that note. 0:09:37.880 --> 0:09:40.680 Joan al Marte Blueberg News Economics and Federal Reserve reporter, 0:09:40.800 --> 0:09:43.000 joining us via zoom from New York City ahead of 0:09:43.400 --> 0:09:45.800 Jay Palill getting ready to march up to Capital Hill 0:09:45.920 --> 0:09:49.000 for two days of testimony. What's kind of front and 0:09:49.000 --> 0:09:51.840 center for you. I'm interested, of course, to hear his 0:09:51.960 --> 0:09:54.439 comments on inflation, as we were just talking about. He's 0:09:54.440 --> 0:09:56.679 probably gonna stick to the script. But if you look 0:09:56.720 --> 0:09:59.720 at some of the measures of inflation expectations, I like 0:09:59.800 --> 0:10:02.680 to look at break evens in the bond market, those 0:10:02.679 --> 0:10:05.960 market based measures, they've been moving higher. You think about 0:10:05.960 --> 0:10:08.360 this big sell off that we've had across the treasury curve, 0:10:08.400 --> 0:10:11.160 A lot of that is coming from the break evens component. 0:10:11.240 --> 0:10:15.480 So the bond market is once again bracing for higher inflation. 0:10:15.520 --> 0:10:17.800 It's still very much top of mind. It seems like 0:10:17.840 --> 0:10:23.120 that immaculate disinflation narrative has sort of died off. So 0:10:23.280 --> 0:10:26.400 I mean, anytime Jerome Pale speaks, even if it's expected 0:10:26.440 --> 0:10:29.520 to stick to script, he's expected to say the same thing. 0:10:29.559 --> 0:10:33.320 It's still a big event, absolutely, and this is going 0:10:33.360 --> 0:10:35.320 to be it then before the next FED meeting in 0:10:35.400 --> 0:10:37.000 terms of what we hear from him. You know, you 0:10:37.000 --> 0:10:39.280 also had Libra cracking five percent for the first time, 0:10:39.400 --> 0:10:41.760 so a big global rate and I just think about 0:10:41.800 --> 0:10:45.520 the ECB's governing council member Robert Holtzman saying he backs 0:10:45.559 --> 0:10:47.840 half point interest rate hikes at every meeting through July. 0:10:48.160 --> 0:10:50.240 So it's a global story. And I think about the 0:10:50.320 --> 0:10:53.880 global impact of central banks continuing to raise rates. Carol Master, 0:10:53.960 --> 0:10:58.720 Katie Greifeld wet our Bloomberg Radio. You're listening to the 0:10:58.800 --> 0:11:02.719 Bloomberg Business Podcast. Catch us live week days from two 0:11:02.760 --> 0:11:06.360 to five pm Easter on Bloomberg Radio. The Bloomberg Business 0:11:06.360 --> 0:11:09.120 a band you two. You can also listen live to 0:11:09.200 --> 0:11:13.319 our flagship New York station, Just say Alexa play Bloomberg 0:11:13.360 --> 0:11:18.440 elve and thirty. A lot of news, as you know, 0:11:18.480 --> 0:11:21.400 we've been talking about it already coming out of China overnight, 0:11:21.440 --> 0:11:25.480 most notably China's annual National People's Congress. The first Inspasioning 0:11:25.480 --> 0:11:28.040 brought an abrupt end to three years of crippling COVID 0:11:28.080 --> 0:11:31.319 zero restrictions has begun with a modest target for economic 0:11:31.360 --> 0:11:35.360 growth and few hints of past stimulus extravagance. There's other headlines, 0:11:35.360 --> 0:11:37.480 but let's get right to our guest. So it's great 0:11:37.480 --> 0:11:39.800 to have with us to really weed through all of 0:11:39.800 --> 0:11:43.880 the headlines. Eddie Brown former editorial director of Bloomberg New Economy. 0:11:43.920 --> 0:11:46.920 He's spent three decades in Asia as both China editor 0:11:46.920 --> 0:11:49.040 and calumnist for The Wall Street Journal. He leads the 0:11:49.120 --> 0:11:52.480 China Hub. He is a partner at Brunswick Group, and 0:11:52.800 --> 0:11:54.560 he joins us via zoom in New York City. Andy, 0:11:54.640 --> 0:11:57.920 good to have you here with Katie Greifeld and myself. 0:11:58.840 --> 0:12:02.520 How are you. I'm doing well, just got back from 0:12:02.520 --> 0:12:04.880 a trip to Beijing and Shanghai. It's great to be 0:12:05.040 --> 0:12:07.480 with you, Carol and Katy. Well, great to have you here. 0:12:07.520 --> 0:12:10.120 So tell us, because there's a bunch of headlines overnight, 0:12:10.120 --> 0:12:13.200 you know, putting out a growth forecast. What's front and center, 0:12:13.200 --> 0:12:15.000 and we'll tell us about your trip and kind of 0:12:15.040 --> 0:12:19.200 what was the mood and kind of general conversation. Yeah, upbeat. 0:12:20.120 --> 0:12:24.680 You know, consumption is up. Beijing is chop flo full 0:12:24.760 --> 0:12:27.640 of cars, impossible to move around the city. The shops 0:12:27.640 --> 0:12:33.280 are full, the restaurants are doing a roaring business. Shanghai similarly, 0:12:33.960 --> 0:12:38.520 but the airport pretty much deserted. The external part of 0:12:38.520 --> 0:12:42.760 the economy has not picked up. Problems with flights, problems 0:12:42.760 --> 0:12:48.360 with visas, very few foreigners in Beijing. That's not expected 0:12:48.360 --> 0:12:52.600 to pick up until sometime around the summer. That's interesting. Yeah, 0:12:52.640 --> 0:12:54.400 the fact that, you know, there's a lot of movement 0:12:54.440 --> 0:12:56.720 within the country, but in terms of people coming in 0:12:56.720 --> 0:12:59.840 and out, maybe not so much. Let's get to some 0:12:59.880 --> 0:13:02.240 of the numbers that came out overnight, because I feel 0:13:02.280 --> 0:13:05.880 like that really set the tone for trading both in 0:13:05.920 --> 0:13:08.520 Europe and at the start of the US session. So 0:13:09.120 --> 0:13:13.119 we look at the economic growth target around five percent 0:13:13.360 --> 0:13:16.520 for the year. I know that was a bit disappointing 0:13:16.559 --> 0:13:19.720 in terms of, you know, what people were expecting. How 0:13:19.760 --> 0:13:23.400 surprised were you to see a five percent handle? You know, 0:13:23.480 --> 0:13:27.360 I wasn't surprised in the slightest. I think it reflects 0:13:27.840 --> 0:13:31.320 two things. First of all, they wanted to set an 0:13:31.480 --> 0:13:35.880 undemanding target that they felt confident. They feel confident they 0:13:35.880 --> 0:13:39.199 can actually meet that's important for credibility, because they missed 0:13:39.200 --> 0:13:42.400 the growth target last year by a mile because of 0:13:43.640 --> 0:13:46.559 zero COVID. That's the first thing that I think. More 0:13:46.600 --> 0:13:50.400 to the point, it reflects the reality that China faces 0:13:50.520 --> 0:13:56.080 an awesome set of challenges, really tough, tough problems. I mean, 0:13:56.360 --> 0:13:58.760 the property market is still in the doll drums. That's 0:13:58.800 --> 0:14:04.920 twenty five percent of the economy. Local governments are bankrupt 0:14:06.040 --> 0:14:08.240 because they've spent all of their all of their budget 0:14:08.400 --> 0:14:13.439 on COVID testing and COVID quarantines and so on. Exports 0:14:13.440 --> 0:14:17.400 are drying up because of economic slowdown in the US, Europe, 0:14:17.480 --> 0:14:21.080 other advanced economies, and of course the US is killing 0:14:21.960 --> 0:14:28.320 China's high tech economy with these bands on semiconductors and 0:14:28.480 --> 0:14:33.200 sanctions against literally hundreds of some of China's leading tech companies. 0:14:34.280 --> 0:14:37.080 So Andy, you know this is a government as you 0:14:37.120 --> 0:14:40.640 well know that they do kick in the stimulus when needed. 0:14:40.680 --> 0:14:42.680 As you said, they've spent a lot of money already. 0:14:42.960 --> 0:14:45.280 Will they not if things start to come and get 0:14:45.320 --> 0:14:48.480 into trouble, will they not jump started again with more stimulus? 0:14:49.480 --> 0:14:53.200 You know that game is over. It's so played out. 0:14:53.320 --> 0:14:55.680 They're getting less and less bang for their buck. When 0:14:55.720 --> 0:14:59.960 it comes to infrastructures, China simply doesn't need more infrastruct 0:15:00.080 --> 0:15:02.920 sure or that much more infrastructure, at least at this 0:15:03.000 --> 0:15:07.240 stage of its development. The housing markets, they say, so 0:15:07.280 --> 0:15:09.800 that's that was the normal playbook, right, I mean, you know, 0:15:09.920 --> 0:15:13.120 you kind of fire up the furnaces, get the steel 0:15:13.120 --> 0:15:17.560 mills rolling again, bill bridges and opera houses and highways 0:15:17.680 --> 0:15:21.680 and apartment blocks. That doesn't work. It's going to be 0:15:21.680 --> 0:15:25.560 the consumer that does the heavy lifting this time around, 0:15:25.560 --> 0:15:30.720 which for the global economy translates something like great for LVMH, 0:15:30.880 --> 0:15:35.080 great for Diagio, great for all the consumer luxury companies 0:15:35.080 --> 0:15:37.000 sell and their their business, by the way, is going 0:15:37.120 --> 0:15:40.680 gangbusters in China right now and cascading down not just 0:15:40.720 --> 0:15:43.280 the first tier cities, second tier cities, but also now 0:15:43.320 --> 0:15:47.120 down to the third tier cities. Very strong consumer rebound. 0:15:47.480 --> 0:15:51.120 Not so good if you're a HBHP or a VALE. 0:15:52.040 --> 0:15:54.200 And that I mean the fact that they really want 0:15:54.200 --> 0:15:56.760 the consumer to drive this. You have to wonder what 0:15:56.880 --> 0:16:01.600 the inflationary effects are there, the sort of ripple effects 0:16:01.600 --> 0:16:03.640 of that could look like. But talk to us a 0:16:03.680 --> 0:16:06.920 little bit about that focus on the consumer. I mean, 0:16:07.000 --> 0:16:10.880 how does China, how does Beijing actually, you know, make 0:16:10.920 --> 0:16:15.080 sure it's the consumer that's driving that growth. You know, 0:16:15.160 --> 0:16:17.360 they have to turn around the drivers. Now it's all 0:16:17.400 --> 0:16:21.440 about the consumer. And to do that, they're going to 0:16:21.520 --> 0:16:24.000 have to retool their whole economy. They're going to have 0:16:24.040 --> 0:16:27.520 to put basically, put more money in people's pockets, and 0:16:27.560 --> 0:16:32.480 that is going to mean a redistribution of income away 0:16:32.520 --> 0:16:36.560 from local governments, away from the state sector, towards the household. 0:16:36.560 --> 0:16:38.880 Now that could be indirect. It could mean, you know, 0:16:38.920 --> 0:16:44.320 pumping more money into education, into healthcare, into childcare, or 0:16:44.320 --> 0:16:47.320 it could mean outright grants. But one way or another, 0:16:48.040 --> 0:16:51.360 China has to shift the drivers of growth decisively, you know. 0:16:51.400 --> 0:16:53.240 And some of the other headlines that came out, Andy, 0:16:53.240 --> 0:16:56.000 I'm sure you saw them. China looking to boost high 0:16:56.040 --> 0:17:00.480 end manufacturing, that's one thing, and then also kind of 0:17:00.920 --> 0:17:03.040 leaning on and putting more pressure on their own private 0:17:03.120 --> 0:17:07.400 sector to play a bigger role in establishing technology independence. 0:17:07.440 --> 0:17:10.560 So they are leaning on a lot of different areas 0:17:10.600 --> 0:17:14.200 to kind of jump start their economy. Yeah, the private sector, 0:17:14.240 --> 0:17:16.960 this is the interesting one. And really it's the contradiction 0:17:17.040 --> 0:17:20.399 that right at the heart of Jimping's plan to revive 0:17:20.440 --> 0:17:22.840 the economy, and to revive the economy, they have to 0:17:22.840 --> 0:17:27.560 revive the confidence of the private sector. These guys create 0:17:27.800 --> 0:17:30.680 just about all the new jobs in China, and they've 0:17:30.720 --> 0:17:33.720 been pummeled for the last three years, pommeled by the 0:17:33.760 --> 0:17:37.080 COVID lockdowns, by the assault on the private sector, on 0:17:37.119 --> 0:17:41.000 the big tech platforms, on whole industries like after school education, 0:17:41.320 --> 0:17:44.800 on the real estate sector. Some of the big developers 0:17:44.800 --> 0:17:51.640 in an extreme distress. So so that simple. But at 0:17:51.640 --> 0:17:55.600 the same time, Sijimping wants the party in control of everything, 0:17:55.720 --> 0:17:59.399 top down control, and that is going to be a 0:17:59.600 --> 0:18:03.440 big feature of the next five years of Si Jingping's governance. Now, 0:18:03.640 --> 0:18:06.480 the private sector looking at that and saying, Okay, where 0:18:06.520 --> 0:18:08.880 do we fit in? Where do we fit in here? 0:18:08.880 --> 0:18:11.560 They don't believe that the punishment is over. They like 0:18:11.680 --> 0:18:14.560 the ratterick, this rattering about yeah, we believe in you guys, 0:18:14.600 --> 0:18:18.000 private sector. The markets are open and so on, but 0:18:18.040 --> 0:18:22.440 they're not seeing any action right now, and they're very skeptical. 0:18:22.720 --> 0:18:25.240 Of course, we've seen a big boom in the reopening 0:18:25.240 --> 0:18:28.240 trade in the market. What I'm hearing from Chinese fund 0:18:28.280 --> 0:18:31.480 managers Chinese entrepreneurs from at least some of them is 0:18:31.760 --> 0:18:34.719 this is an opportunity to sell, and some of them 0:18:34.720 --> 0:18:38.800 are telling me it's a lost chance to sell. Wow, Okay, 0:18:38.880 --> 0:18:40.960 interesting because I was thinking about, all right, you know, 0:18:41.000 --> 0:18:43.440 we're hearing all these headlines, saw these headlines ever the weekend. 0:18:43.480 --> 0:18:46.199 But I think about, you know, the missing you know, 0:18:46.320 --> 0:18:49.239 top investment banker in China, and I feel like from 0:18:49.320 --> 0:18:51.359 day to day you can get news out of China 0:18:51.440 --> 0:18:55.000 that says wait, Chinese you know, officials want more oversight 0:18:55.080 --> 0:18:58.000 of various industries, and I feel like sometimes it changes 0:18:58.040 --> 0:19:00.199 from day to day and I don't know quite what 0:19:00.400 --> 0:19:03.280 to trust at this point. Bottom line, Andy, I mean 0:19:03.320 --> 0:19:06.400 the Chinese government, as you said, more oversight, no doubt 0:19:06.400 --> 0:19:11.760 about it, more oversight more of of course, we haven't 0:19:11.760 --> 0:19:17.520 talked about the big government reorganization that is going to 0:19:17.560 --> 0:19:20.399 be under way. This is where C. Jimping gets his 0:19:20.480 --> 0:19:25.600 third term as president, a ceremonial title. Really he already 0:19:25.600 --> 0:19:29.119 has real power through his position as ahead of the party, 0:19:29.119 --> 0:19:32.199 and of course he got pretty much unlimited tenure in 0:19:32.240 --> 0:19:34.080 that job at the end of last year, and now 0:19:34.119 --> 0:19:36.919 he's going to put all of his loyalists in the 0:19:37.040 --> 0:19:40.960 key positions within the state apparatus. That means the Premier, 0:19:41.040 --> 0:19:43.800 the Vice executive Vice Premier in charge of the economy, 0:19:43.800 --> 0:19:47.280 the head of the Central bank, finance, ministry, judiciary, and 0:19:47.320 --> 0:19:50.080 so on and so forth. But they're all going to 0:19:50.119 --> 0:19:54.400 be working very much under this top down party led system. 0:19:54.520 --> 0:19:58.399 C jimping. The overall direction of travel is very clear. 0:19:58.640 --> 0:20:02.159 He wants to harden the he wants to build up 0:20:02.160 --> 0:20:05.200 the country's technological base because he believes there's going to 0:20:05.240 --> 0:20:08.960 be a long term, arduous struggle against the United States, 0:20:09.640 --> 0:20:11.640 and he wants the party to be in charge of that. 0:20:11.800 --> 0:20:14.639 And frankly, the private sector are going to have to 0:20:14.680 --> 0:20:17.400 get with the program. And I just swim make sure 0:20:17.400 --> 0:20:18.960 I heard it right. Did you say people were saying 0:20:18.960 --> 0:20:20.359 like this is the last time to get out of 0:20:20.359 --> 0:20:23.640 the market, the Chinese market just quickly. Yeah. People are 0:20:23.640 --> 0:20:27.600 not convinced that this is sustainable. And what they've all 0:20:27.640 --> 0:20:29.840 been predicting is sure there's going to be a relief 0:20:29.920 --> 0:20:33.000 rebound when they finally lift CUP, which they've done lifted 0:20:33.000 --> 0:20:35.920 COVID zero. But some of the people that I'm talking 0:20:35.960 --> 0:20:39.080 to as saying, we don't have long term confidence a 0:20:39.280 --> 0:20:42.440 market rebound now is a chance to sell. All right, well, 0:20:42.480 --> 0:20:45.560 we certainly have seen that play out in the Chinese trade. 0:20:45.560 --> 0:20:48.600 Here of those ADRs in the US coming off some 0:20:48.640 --> 0:20:51.440 of their highs Andy thank you. As Owey's Andy Brown, 0:20:51.480 --> 0:20:54.640 partner at Brunswick Group joining us Zoom from New York City, 0:20:54.840 --> 0:20:57.800 understands the Chinese market. As we said, spent some thirty 0:20:57.880 --> 0:21:00.239 years in Asia's both China editor and calmness the Wall 0:21:00.280 --> 0:21:03.560 Street Journal and former Bloomberg colleague. As former editorial director 0:21:03.600 --> 0:21:06.320 at Bloomberg New Economy China, I feel like it's a 0:21:06.359 --> 0:21:12.400 big question mark. This is Bloomberg business Week Inside from 0:21:12.400 --> 0:21:15.560 the reporters and editors who bring you America's most trusted 0:21:15.640 --> 0:21:19.800 business magazine, plus global business, finance and tech news. The 0:21:19.920 --> 0:21:24.440 Bloomberg Business Week Podcast with Carol Messer and Tim Stenebec 0:21:24.800 --> 0:21:30.280 from Bloomberg Radio. All Right, so, Katie, we've talked about 0:21:30.280 --> 0:21:33.320 some pretty heavy stuff, just talk crypto, we've talked fed. 0:21:34.080 --> 0:21:35.840 We thought we'd just kind of take a step back 0:21:35.880 --> 0:21:39.560 here and take a look into something like the global 0:21:39.640 --> 0:21:43.680 toy market, because it's massive. It reached early one hundred 0:21:43.720 --> 0:21:46.080 and seventy one billion in twenty twenty two, so last 0:21:46.160 --> 0:21:49.040 year and by one forecast by Imark Group forecast to 0:21:49.080 --> 0:21:51.720 reach two hundred and sixty seven point nine billion by 0:21:51.880 --> 0:21:54.720 twenty twenty eight, So good voice to talk about it. 0:21:54.760 --> 0:21:58.280 Elizabeth Werner is a QVC guesthout, someone who has followed 0:21:58.280 --> 0:22:01.320 and tracked the global toy industry. She joins us via 0:22:01.400 --> 0:22:04.320 zoom from Maryland. Elizabeth, good to have you here with 0:22:04.400 --> 0:22:09.040 Katie and myself. You did just attend Fest West, which 0:22:09.080 --> 0:22:11.040 I don't know. I wasn't very familiar with it, but 0:22:11.080 --> 0:22:14.040 it is a massive toy trade show. Tell us a 0:22:14.040 --> 0:22:17.040 little bit about what you saw, because I feel like 0:22:17.040 --> 0:22:20.480 it's coming on the heels of a disappointing forecast from 0:22:20.520 --> 0:22:23.840 Hasbro that we got last month. So tell us about 0:22:23.920 --> 0:22:28.040 kind of the mood and what was being talked about. Yeah, so, actually, 0:22:28.240 --> 0:22:30.560 thank you for having me. First of all, the mood 0:22:30.680 --> 0:22:34.160 was really great and really festive. It's really been great 0:22:34.200 --> 0:22:37.200 for us as an industry to get back together in person, 0:22:37.520 --> 0:22:39.960