WEBVTT - Leland Miller on Xi (Audio)

0:00:00.040 --> 0:00:01.520
<v Speaker 1>And I think we should pick up on what we've

0:00:01.560 --> 0:00:04.360
<v Speaker 1>seen from President She there too with our guests China

0:00:04.400 --> 0:00:07.280
<v Speaker 1>beij book See or Leland Leland Miller joining me here

0:00:07.280 --> 0:00:09.920
<v Speaker 1>on set. Great to see you in person after a

0:00:10.000 --> 0:00:12.280
<v Speaker 1>number of years of Leland. I mean, how did you

0:00:12.360 --> 0:00:14.760
<v Speaker 1>kind of read that view of China signing off on

0:00:14.800 --> 0:00:17.960
<v Speaker 1>the communic A condemning the war in Ukraine and President

0:00:18.079 --> 0:00:20.960
<v Speaker 1>She kind of I guess moving away a little there

0:00:21.000 --> 0:00:24.400
<v Speaker 1>from Moscow. I think it's blown out of proportion. Uh.

0:00:24.440 --> 0:00:26.279
<v Speaker 1>You know, China is much less of a factor in

0:00:26.320 --> 0:00:29.120
<v Speaker 1>the Ukraine debate than people make it out to be.

0:00:29.720 --> 0:00:33.640
<v Speaker 1>On the one hand, Uh, there's China supporting Russia rhetorically,

0:00:34.080 --> 0:00:37.120
<v Speaker 1>they're buying Russian oil and gas. On the other hand,

0:00:37.159 --> 0:00:40.560
<v Speaker 1>there's some big red lines, you know, central bank sanctions,

0:00:40.920 --> 0:00:44.360
<v Speaker 1>tech sector sanctions, uh, swift sanctions that that China is

0:00:44.400 --> 0:00:47.600
<v Speaker 1>not about to violate. So they have you know, stayed

0:00:47.640 --> 0:00:49.920
<v Speaker 1>in their box from that perspective. So, you know, I

0:00:49.960 --> 0:00:53.120
<v Speaker 1>think that the rhetorical differences between China pushing this or that,

0:00:53.200 --> 0:00:54.720
<v Speaker 1>I just don't think there's much of a factor as

0:00:54.760 --> 0:00:57.960
<v Speaker 1>people think. But we did see some kind of optimism

0:00:58.080 --> 0:01:00.920
<v Speaker 1>or euphoria. I would say about presidents in Boden meeting

0:01:00.920 --> 0:01:02.920
<v Speaker 1>earlier in the week, and I feel that that was

0:01:03.000 --> 0:01:05.600
<v Speaker 1>kind of what everybody was saying before we had the

0:01:05.640 --> 0:01:08.520
<v Speaker 1>tension in Poland, that we are starting to see some

0:01:08.600 --> 0:01:11.440
<v Speaker 1>kind of potential all front between the US and China

0:01:11.520 --> 0:01:13.920
<v Speaker 1>tensions at least, Well, it depends what an offer up is.

0:01:13.959 --> 0:01:16.120
<v Speaker 1>If an offer a means we are going to have

0:01:16.160 --> 0:01:18.720
<v Speaker 1>a meeting, everyone will smile and then we will not

0:01:18.840 --> 0:01:21.399
<v Speaker 1>have tensions deteriorate in the coming months. I think that's

0:01:21.440 --> 0:01:24.679
<v Speaker 1>a fair fair characterization. If it's a question of Okay, well,

0:01:24.680 --> 0:01:27.120
<v Speaker 1>we're going to change the direction of the of the

0:01:27.200 --> 0:01:29.720
<v Speaker 1>of the by ladder relationship in a in a different,

0:01:29.720 --> 0:01:31.880
<v Speaker 1>you know, different direction going forward, I don't think that's

0:01:31.880 --> 0:01:33.600
<v Speaker 1>going to happen. I think that there are too many

0:01:33.680 --> 0:01:38.800
<v Speaker 1>underlying issues, uh between the two superpowers that that that

0:01:39.440 --> 0:01:43.240
<v Speaker 1>you know, this is a temporary reprieve, Okay, temporary reprieve.

0:01:43.319 --> 0:01:45.240
<v Speaker 1>What we are looking for is a reprieve on the

0:01:45.240 --> 0:01:48.440
<v Speaker 1>economic front in China. When does that happen and do

0:01:48.520 --> 0:01:51.480
<v Speaker 1>we ever see China record the kind of pre pandemic

0:01:51.520 --> 0:01:54.760
<v Speaker 1>growth levels. Well, the tricky question because you've got two

0:01:54.760 --> 0:01:57.640
<v Speaker 1>different slowdowns going around right now on China's economy, you've

0:01:57.640 --> 0:02:00.280
<v Speaker 1>got a structural slowdown, which was you know, prime merely

0:02:00.360 --> 0:02:03.880
<v Speaker 1>driven by the deflation of the property sector, and that

0:02:04.080 --> 0:02:07.120
<v Speaker 1>is continuing and it's gonna continue going forward, and I

0:02:07.120 --> 0:02:09.240
<v Speaker 1>don't see an end to that anytime soon. You have

0:02:09.600 --> 0:02:12.519
<v Speaker 1>a bit of a restpit right now where conditions have

0:02:12.560 --> 0:02:14.639
<v Speaker 1>been very very tight and now they're easing up a

0:02:14.639 --> 0:02:16.520
<v Speaker 1>little bit in order to avery contagion. But then you're

0:02:16.520 --> 0:02:18.320
<v Speaker 1>going to continue on down the line once I think

0:02:18.600 --> 0:02:20.960
<v Speaker 1>things are stable. On the other hand, you also have

0:02:21.000 --> 0:02:24.440
<v Speaker 1>a cyclical slowdown which is primarily driven by the COVID

0:02:24.560 --> 0:02:28.120
<v Speaker 1>zero lockdowns. Uh. When COVID zero is rolled back, I

0:02:28.160 --> 0:02:30.840
<v Speaker 1>think you are going to have a an impressive bounce

0:02:30.880 --> 0:02:32.920
<v Speaker 1>back in the economy. It will also be the first

0:02:32.919 --> 0:02:36.320
<v Speaker 1>opportunity in a long time attractive opportunity for the government

0:02:36.360 --> 0:02:38.560
<v Speaker 1>to stimulate. So I think that you have the potential

0:02:38.680 --> 0:02:42.040
<v Speaker 1>that you know, cyclically, in the next year or so

0:02:42.200 --> 0:02:44.440
<v Speaker 1>that you'll have start to have a nice bounce back,

0:02:44.520 --> 0:02:47.480
<v Speaker 1>certainly a bounce in the data of very very low

0:02:47.600 --> 0:02:51.440
<v Speaker 1>basive basis of comparison. So you're gonna have a cyclical

0:02:51.480 --> 0:02:54.480
<v Speaker 1>bounce back. When COVID zero is past us, but the

0:02:54.480 --> 0:02:57.280
<v Speaker 1>structural slowdown will continue. So it's just a question of,

0:02:57.400 --> 0:02:59.000
<v Speaker 1>you know, how do you avoid being head faked that

0:02:59.040 --> 0:03:02.200
<v Speaker 1>one dynamic has happened, Yeah, but not both. And when

0:03:02.280 --> 0:03:06.200
<v Speaker 1>COVID zero does eventually disappear, you still have the underlying

0:03:06.240 --> 0:03:10.760
<v Speaker 1>property concerns. How I guess, um, welcome is that sixteen

0:03:10.800 --> 0:03:14.560
<v Speaker 1>point plan that was put forward to to support the sector. It's, uh,

0:03:14.600 --> 0:03:17.560
<v Speaker 1>it's a temporary reprieve. You know, it is it is uh,

0:03:17.800 --> 0:03:20.760
<v Speaker 1>you know, it's it's it's it's a the The idea

0:03:20.840 --> 0:03:23.720
<v Speaker 1>here was never that that chi Jin peg was going

0:03:23.760 --> 0:03:26.720
<v Speaker 1>to take property and just you know, flatline it down

0:03:26.720 --> 0:03:29.079
<v Speaker 1>to zero, uh, and just week and week and week

0:03:29.120 --> 0:03:30.960
<v Speaker 1>and week, and you have to make sure that strong

0:03:31.000 --> 0:03:34.720
<v Speaker 1>firms are taken down. Supply Chaine remain uh, you know,

0:03:35.560 --> 0:03:38.600
<v Speaker 1>vibrant cash flow continues. And so what you do is

0:03:38.600 --> 0:03:40.040
<v Speaker 1>you you call the her, you get rid of we

0:03:40.400 --> 0:03:42.120
<v Speaker 1>rid of weak firms, and then you step in to

0:03:42.200 --> 0:03:44.760
<v Speaker 1>make sure that that things don't get worse. We're in

0:03:44.840 --> 0:03:47.120
<v Speaker 1>that period right now. We're you know, the idea that

0:03:47.280 --> 0:03:49.760
<v Speaker 1>a lot of Wall Street firms are are are echoing

0:03:49.840 --> 0:03:51.920
<v Speaker 1>right now that this is a game changer and property,

0:03:51.920 --> 0:03:53.640
<v Speaker 1>and we're going to revert back to the old model.

0:03:53.920 --> 0:03:56.560
<v Speaker 1>I think that's uh, that's extremely naive. We'll still looking

0:03:56.600 --> 0:03:59.760
<v Speaker 1>at what happened at the Party Congress. What did the

0:04:00.040 --> 0:04:02.600
<v Speaker 1>appointments to the Pulit Berro and Standing committee tell you

0:04:02.640 --> 0:04:06.920
<v Speaker 1>about she's plans that she this is the shijin pink

0:04:06.960 --> 0:04:10.080
<v Speaker 1>show that you know, the idea that that she is

0:04:10.120 --> 0:04:14.560
<v Speaker 1>not in full control was was disabused. Uh. The idea that, uh,

0:04:14.600 --> 0:04:17.480
<v Speaker 1>you know that that she is under significant pressure to

0:04:17.480 --> 0:04:20.960
<v Speaker 1>to pivot on big issues. I think that was disabused. Uh.

0:04:21.000 --> 0:04:23.120
<v Speaker 1>If you look going forward, you're you're going to see

0:04:23.200 --> 0:04:26.440
<v Speaker 1>him tweak policy. But there's there's there's no there's no

0:04:26.600 --> 0:04:30.320
<v Speaker 1>evidence that he sees the last two years as as

0:04:30.320 --> 0:04:33.760
<v Speaker 1>a mistake, as misguided, that he needs some sort of

0:04:34.120 --> 0:04:36.159
<v Speaker 1>you know, you turn from the direction he was going.

0:04:36.440 --> 0:04:38.919
<v Speaker 1>So I think that maybe we see a period of

0:04:38.920 --> 0:04:41.720
<v Speaker 1>a little bit of a little bit of experimentation on

0:04:41.800 --> 0:04:45.120
<v Speaker 1>COVID zero. We'll see how long continue in the winter, uh,

0:04:45.120 --> 0:04:46.960
<v Speaker 1>and and a little bit of easy and property. But

0:04:47.040 --> 0:04:49.920
<v Speaker 1>this doesn't changes from where we fundamentally have been going

0:04:49.960 --> 0:04:51.960
<v Speaker 1>for the last couple of years, which is a structural

0:04:52.000 --> 0:04:56.360
<v Speaker 1>slowdown into much slower levels of growth. So China's ambitions

0:04:56.400 --> 0:04:58.880
<v Speaker 1>to become the world's number one economy. I mean, how

0:04:58.960 --> 0:05:01.640
<v Speaker 1>much does that being effect it by COVID zera. It

0:05:01.720 --> 0:05:04.000
<v Speaker 1>might have been affected, but you know, the key, the

0:05:04.120 --> 0:05:06.760
<v Speaker 1>key takeaway from that should be to the extent that

0:05:06.880 --> 0:05:10.800
<v Speaker 1>China becomes the largest economy, Uh, it means it hasn't

0:05:10.839 --> 0:05:13.360
<v Speaker 1>been doing its jobs. It actually hurts China. It's a

0:05:13.400 --> 0:05:15.279
<v Speaker 1>sign of weakness because it means that there is a

0:05:15.400 --> 0:05:19.159
<v Speaker 1>still a reliance or political sensitivity on heating high levels

0:05:19.160 --> 0:05:21.560
<v Speaker 1>of growth. What chij and Ping has been doing, and

0:05:21.560 --> 0:05:23.560
<v Speaker 1>this is this is the positive side of of what

0:05:23.600 --> 0:05:25.839
<v Speaker 1>he's been doing in the restructure of the economy is

0:05:25.880 --> 0:05:28.240
<v Speaker 1>he has been looking at the high levels of debt

0:05:28.600 --> 0:05:32.640
<v Speaker 1>that are needed in order to fund property, to fund infrastructure,

0:05:32.680 --> 0:05:35.520
<v Speaker 1>to fund all these other things and saying these are unsustainable.

0:05:36.160 --> 0:05:39.279
<v Speaker 1>China going forward needs to be have slower growth, but

0:05:39.400 --> 0:05:42.839
<v Speaker 1>healthier growth, and that will that will invigorate China and

0:05:42.839 --> 0:05:46.600
<v Speaker 1>the Chinese economy to the extent that you know, he

0:05:46.680 --> 0:05:48.640
<v Speaker 1>falls for the idea that you know, we have to

0:05:48.760 --> 0:05:51.440
<v Speaker 1>ramp up growth in order to to to beat the

0:05:51.520 --> 0:05:54.839
<v Speaker 1>United States, and this ridiculous g d P race. I

0:05:54.880 --> 0:05:56.760
<v Speaker 1>think that that is a that is a negative sign

0:05:56.839 --> 0:06:00.160
<v Speaker 1>for for Chinese governance. How investible is China? And it's

0:06:00.160 --> 0:06:01.640
<v Speaker 1>to all these head winds because I mean, you can

0:06:01.720 --> 0:06:03.240
<v Speaker 1>kind of argue that there's been a bit of a

0:06:03.240 --> 0:06:06.560
<v Speaker 1>pomo rally happening in the last couple of weeks. Look,

0:06:07.120 --> 0:06:09.279
<v Speaker 1>you know, the question is how much of this rally

0:06:09.360 --> 0:06:11.960
<v Speaker 1>or people who have been waiting to unload assets? Uh?

0:06:12.120 --> 0:06:15.440
<v Speaker 1>You know. So look, look, there is um China is

0:06:15.520 --> 0:06:19.160
<v Speaker 1>investable if you if you have a really sophisticated operation

0:06:19.200 --> 0:06:22.200
<v Speaker 1>and understand what's going on, if you're if you're watching

0:06:22.640 --> 0:06:25.200
<v Speaker 1>you know, so Chinese social media for rumors, you know,

0:06:25.240 --> 0:06:27.440
<v Speaker 1>if you're you know, if you're in New York and

0:06:27.440 --> 0:06:29.839
<v Speaker 1>you're guessing what's going on in the ground in Shanghai. Now,

0:06:29.880 --> 0:06:32.159
<v Speaker 1>these are not the ways to do business. You can't

0:06:32.160 --> 0:06:35.160
<v Speaker 1>operate in China that like that anymore. Uh. And so

0:06:35.279 --> 0:06:37.599
<v Speaker 1>you know, you have to be very very careful and UH.

0:06:38.120 --> 0:06:43.680
<v Speaker 1>Sophisticated individual, sophisticated funds, uh, sophisticated sophisticated companies can operate

0:06:43.720 --> 0:06:46.039
<v Speaker 1>on the ground. But it is a far cry from

0:06:46.080 --> 0:06:47.919
<v Speaker 1>from the environment we were used to seeing. For the

0:06:47.960 --> 0:06:50.320
<v Speaker 1>last couple of decades, Leyland has been an absolute pleasure

0:06:50.360 --> 0:06:52.559
<v Speaker 1>and particularly to see you after a number of years

0:06:52.600 --> 0:06:55.159
<v Speaker 1>of China Beige Book see Leyland Miller with me here