Speaker 1: And I think we should pick up on what we've
Speaker 1: seen from President She there too with our guests China
Speaker 1: beij book See or Leland Leland Miller joining me here
Speaker 1: on set. Great to see you in person after a
Speaker 1: number of years of Leland. I mean, how did you
Speaker 1: kind of read that view of China signing off on
Speaker 1: the communic A condemning the war in Ukraine and President
Speaker 1: She kind of I guess moving away a little there
Speaker 1: from Moscow. I think it's blown out of proportion. Uh.
Speaker 1: You know, China is much less of a factor in
Speaker 1: the Ukraine debate than people make it out to be.
Speaker 1: On the one hand, Uh, there's China supporting Russia rhetorically,
Speaker 1: they're buying Russian oil and gas. On the other hand,
Speaker 1: there's some big red lines, you know, central bank sanctions,
Speaker 1: tech sector sanctions, uh, swift sanctions that that China is
Speaker 1: not about to violate. So they have you know, stayed
Speaker 1: in their box from that perspective. So, you know, I
Speaker 1: think that the rhetorical differences between China pushing this or that,
Speaker 1: I just don't think there's much of a factor as
Speaker 1: people think. But we did see some kind of optimism
Speaker 1: or euphoria. I would say about presidents in Boden meeting
Speaker 1: earlier in the week, and I feel that that was
Speaker 1: kind of what everybody was saying before we had the
Speaker 1: tension in Poland, that we are starting to see some
Speaker 1: kind of potential all front between the US and China
Speaker 1: tensions at least, Well, it depends what an offer up is.
Speaker 1: If an offer a means we are going to have
Speaker 1: a meeting, everyone will smile and then we will not
Speaker 1: have tensions deteriorate in the coming months. I think that's
Speaker 1: a fair fair characterization. If it's a question of Okay, well,
Speaker 1: we're going to change the direction of the of the
Speaker 1: of the by ladder relationship in a in a different,
Speaker 1: you know, different direction going forward, I don't think that's
Speaker 1: going to happen. I think that there are too many
Speaker 1: underlying issues, uh between the two superpowers that that that
Speaker 1: you know, this is a temporary reprieve, Okay, temporary reprieve.
Speaker 1: What we are looking for is a reprieve on the
Speaker 1: economic front in China. When does that happen and do
Speaker 1: we ever see China record the kind of pre pandemic
Speaker 1: growth levels. Well, the tricky question because you've got two
Speaker 1: different slowdowns going around right now on China's economy, you've
Speaker 1: got a structural slowdown, which was you know, prime merely
Speaker 1: driven by the deflation of the property sector, and that
Speaker 1: is continuing and it's gonna continue going forward, and I
Speaker 1: don't see an end to that anytime soon. You have
Speaker 1: a bit of a restpit right now where conditions have
Speaker 1: been very very tight and now they're easing up a
Speaker 1: little bit in order to avery contagion. But then you're
Speaker 1: going to continue on down the line once I think
Speaker 1: things are stable. On the other hand, you also have
Speaker 1: a cyclical slowdown which is primarily driven by the COVID
Speaker 1: zero lockdowns. Uh. When COVID zero is rolled back, I
Speaker 1: think you are going to have a an impressive bounce
Speaker 1: back in the economy. It will also be the first
Speaker 1: opportunity in a long time attractive opportunity for the government
Speaker 1: to stimulate. So I think that you have the potential
Speaker 1: that you know, cyclically, in the next year or so
Speaker 1: that you'll have start to have a nice bounce back,
Speaker 1: certainly a bounce in the data of very very low
Speaker 1: basive basis of comparison. So you're gonna have a cyclical
Speaker 1: bounce back. When COVID zero is past us, but the
Speaker 1: structural slowdown will continue. So it's just a question of,
Speaker 1: you know, how do you avoid being head faked that
Speaker 1: one dynamic has happened, Yeah, but not both. And when
Speaker 1: COVID zero does eventually disappear, you still have the underlying
Speaker 1: property concerns. How I guess, um, welcome is that sixteen
Speaker 1: point plan that was put forward to to support the sector. It's, uh,
Speaker 1: it's a temporary reprieve. You know, it is it is uh,
Speaker 1: you know, it's it's it's it's a the The idea
Speaker 1: here was never that that chi Jin peg was going
Speaker 1: to take property and just you know, flatline it down
Speaker 1: to zero, uh, and just week and week and week
Speaker 1: and week, and you have to make sure that strong
Speaker 1: firms are taken down. Supply Chaine remain uh, you know,
Speaker 1: vibrant cash flow continues. And so what you do is
Speaker 1: you you call the her, you get rid of we
Speaker 1: rid of weak firms, and then you step in to
Speaker 1: make sure that that things don't get worse. We're in
Speaker 1: that period right now. We're you know, the idea that
Speaker 1: a lot of Wall Street firms are are are echoing
Speaker 1: right now that this is a game changer and property,
Speaker 1: and we're going to revert back to the old model.
Speaker 1: I think that's uh, that's extremely naive. We'll still looking
Speaker 1: at what happened at the Party Congress. What did the
Speaker 1: appointments to the Pulit Berro and Standing committee tell you
Speaker 1: about she's plans that she this is the shijin pink
Speaker 1: show that you know, the idea that that she is
Speaker 1: not in full control was was disabused. Uh. The idea that, uh,
Speaker 1: you know that that she is under significant pressure to
Speaker 1: to pivot on big issues. I think that was disabused. Uh.
Speaker 1: If you look going forward, you're you're going to see
Speaker 1: him tweak policy. But there's there's there's no there's no
Speaker 1: evidence that he sees the last two years as as
Speaker 1: a mistake, as misguided, that he needs some sort of
Speaker 1: you know, you turn from the direction he was going.
Speaker 1: So I think that maybe we see a period of
Speaker 1: a little bit of a little bit of experimentation on
Speaker 1: COVID zero. We'll see how long continue in the winter, uh,
Speaker 1: and and a little bit of easy and property. But
Speaker 1: this doesn't changes from where we fundamentally have been going
Speaker 1: for the last couple of years, which is a structural
Speaker 1: slowdown into much slower levels of growth. So China's ambitions
Speaker 1: to become the world's number one economy. I mean, how
Speaker 1: much does that being effect it by COVID zera. It
Speaker 1: might have been affected, but you know, the key, the
Speaker 1: key takeaway from that should be to the extent that
Speaker 1: China becomes the largest economy, Uh, it means it hasn't
Speaker 1: been doing its jobs. It actually hurts China. It's a
Speaker 1: sign of weakness because it means that there is a
Speaker 1: still a reliance or political sensitivity on heating high levels
Speaker 1: of growth. What chij and Ping has been doing, and
Speaker 1: this is this is the positive side of of what
Speaker 1: he's been doing in the restructure of the economy is
Speaker 1: he has been looking at the high levels of debt
Speaker 1: that are needed in order to fund property, to fund infrastructure,
Speaker 1: to fund all these other things and saying these are unsustainable.
Speaker 1: China going forward needs to be have slower growth, but
Speaker 1: healthier growth, and that will that will invigorate China and
Speaker 1: the Chinese economy to the extent that you know, he
Speaker 1: falls for the idea that you know, we have to
Speaker 1: ramp up growth in order to to to beat the
Speaker 1: United States, and this ridiculous g d P race. I
Speaker 1: think that that is a that is a negative sign
Speaker 1: for for Chinese governance. How investible is China? And it's
Speaker 1: to all these head winds because I mean, you can
Speaker 1: kind of argue that there's been a bit of a
Speaker 1: pomo rally happening in the last couple of weeks. Look,
Speaker 1: you know, the question is how much of this rally
Speaker 1: or people who have been waiting to unload assets? Uh?
Speaker 1: You know. So look, look, there is um China is
Speaker 1: investable if you if you have a really sophisticated operation
Speaker 1: and understand what's going on, if you're if you're watching
Speaker 1: you know, so Chinese social media for rumors, you know,
Speaker 1: if you're you know, if you're in New York and
Speaker 1: you're guessing what's going on in the ground in Shanghai. Now,
Speaker 1: these are not the ways to do business. You can't
Speaker 1: operate in China that like that anymore. Uh. And so
Speaker 1: you know, you have to be very very careful and UH.
Speaker 1: Sophisticated individual, sophisticated funds, uh, sophisticated sophisticated companies can operate
Speaker 1: on the ground. But it is a far cry from
Speaker 1: from the environment we were used to seeing. For the
Speaker 1: last couple of decades, Leyland has been an absolute pleasure
Speaker 1: and particularly to see you after a number of years
Speaker 1: of China Beige Book see Leyland Miller with me here