WEBVTT - China Unleashes Stimulus Blitz in Push to Hit Annual Growth Goal

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg

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<v Speaker 1>Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian

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<v Speaker 1>Curtis and myself for the stories, making news and moving

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<v Speaker 2>Joining us now on the program is Katia Dimitrieva, Bloomberg

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<v Speaker 2>Asia Economics correspondent, to take a closer look at the

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<v Speaker 2>PBOC briefing this morning. So I just ran through the

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<v Speaker 2>cutting of interest rates, the freeing up of banks to

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<v Speaker 2>loan more with the drop in the triple R. There

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<v Speaker 2>also lowering the down payment on second homes. One of

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<v Speaker 2>our correspondents is James Mager. I know him to be

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<v Speaker 2>a pretty sober individual. Katya, he says, my hands were

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<v Speaker 2>shaking as I sent the headlines out. What a bazooka

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<v Speaker 2>from the Central Bank. I don't think I've ever seen

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<v Speaker 2>such an announcement before in China. Katya Dmitrieva, do you agree?

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<v Speaker 3>Well, it's not only a big announcement, it also came

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<v Speaker 3>in about seven minutes, so you have one of the

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<v Speaker 3>top officials in China sitting down with the media. He said,

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<v Speaker 3>good morning, so good to see all of you. And then,

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<v Speaker 3>you know, seven minutes straight of just announcements of various

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<v Speaker 3>cuts to loan rates, to r rate that's how much

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<v Speaker 3>banks need to hold in reserve, to mortgage rates.

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<v Speaker 4>So there was.

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<v Speaker 3>Quite a lot. The question though, and I appreciate the

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<v Speaker 3>commentary on James, I know it was a definitely big

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<v Speaker 3>announcement from what compared to what we've seen from China recently.

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<v Speaker 3>The question is, you know how much it'll really impact

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<v Speaker 3>an economy that is so deep in a hole right

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<v Speaker 3>now in terms of consumer spending but also the effect

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<v Speaker 3>of deflation. You know, if you were announcing these policies

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<v Speaker 3>a year ago, a year and a half go, particularly

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<v Speaker 3>the housing market component, this would be a very positive development.

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<v Speaker 3>You know, you're seeing markets already reacting to the thoughts

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<v Speaker 3>of you know, the interest rate moving down, yield to

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<v Speaker 3>move down as well. So it would have been a

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<v Speaker 3>very big kind of Bazooka style which is the term

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<v Speaker 3>we use for this for China's fiscal stimulus at this

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<v Speaker 3>size would have had a bigger impact if you had

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<v Speaker 3>announced it a year, year and a half go now

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<v Speaker 3>not so sure. Not sure essentially if this is enough.

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<v Speaker 3>And we're already seeing some economists saying that.

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<v Speaker 1>You know, it's very interesting. I was looking at the

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<v Speaker 1>headlines one from the government that we will soon have

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<v Speaker 1>a release of six new measures to support MNA, which

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<v Speaker 1>I thought was very interesting, and that in my mind

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<v Speaker 1>goes right to the overcapacity story. Now, I know that's

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<v Speaker 1>a loaded term, so let's not use it. I'll put

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<v Speaker 1>it aside. But in one industry, let's say, and as example,

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<v Speaker 1>electric vehicles, where there's so much over capacity, is something

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<v Speaker 1>like this design to begin to intentionally make the economy

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<v Speaker 1>maybe a little bit more efficient, to shrink it just

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<v Speaker 1>a bit. Now, that could have second and third order

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<v Speaker 1>effects that might be unwelcomed.

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<v Speaker 3>Yeah, it could make it more efficient, It could make

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<v Speaker 3>m and A could make the markets just a bit

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<v Speaker 3>more active. And this is something that the government has

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<v Speaker 3>been messaging for over a year now. You know, alongside

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<v Speaker 3>this view of high quality development, it's always oh, we

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<v Speaker 3>also want to support the equity market. We want to

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<v Speaker 3>support the markets. This could definitely do that. At the

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<v Speaker 3>same time, it's tough when you have a government, especially

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<v Speaker 3>this year, and at this point in the year, that's

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<v Speaker 3>messaging a five percent or about five percent growth target,

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<v Speaker 3>and you have companies and provinces and cities that are

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<v Speaker 3>incentivized to reach that target. So M and A and

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<v Speaker 3>purchasing other companies and perhaps growing their business that way,

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<v Speaker 3>Maybe that's not necessarily the priority. The priority is trying

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<v Speaker 3>to get to that five percent growth target by any

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<v Speaker 3>means necessary, and we've seen that impact across the board.

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<v Speaker 2>Some of this is targeted at companies and some is

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<v Speaker 2>targeted at consumers. Obviously, the refinancing tool for listed companies

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<v Speaker 2>and shareholders to buy back shares is something that's getting

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<v Speaker 2>some commentary in our Top Live blog. I'm curious whether

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<v Speaker 2>or not you think that this does actually move the

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<v Speaker 2>needle for the average consumer.

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<v Speaker 3>It's again, it's hard to say. I mean, it is

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<v Speaker 3>true that in China about ninety percent of people own

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<v Speaker 3>their homes. That's a big difference from other countries. So

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<v Speaker 3>if you cut the market rate on existing loans, then

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<v Speaker 3>you free up quite a bit of capital. But the

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<v Speaker 3>issue China is not necessarily that people lack money. I mean,

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<v Speaker 3>there's almost a record in savings right now. It's more

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<v Speaker 3>the ability or likelihood or interest in spending that money.

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<v Speaker 3>It's not clear that these policies so far are going

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<v Speaker 3>to make people feel more comfortable or stable about the market,

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<v Speaker 3>especially when doesn't really do much for the labor market.

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<v Speaker 3>I mean, that's been a key area of concern. You have,

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<v Speaker 3>you fun employment that's the highest all year. You've got

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<v Speaker 3>other indicators that are showing people are not getting raises,

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<v Speaker 3>people are getting cuts to their pay, people are losing

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<v Speaker 3>their jobs, even in the white collar space. None of

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<v Speaker 3>this really addresses that.

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<v Speaker 1>So, Kantia, if you're looking at the policy response today

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<v Speaker 1>kind of from outside of China, would you be a

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<v Speaker 1>little concerned that this is maybe going to add a

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<v Speaker 1>little bit of well more leverage. And I think maybe

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<v Speaker 1>if that is true, that there is going to be

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<v Speaker 1>a little bit of concern about that fact.

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<v Speaker 3>It's totally fair concerned to have in a country that's

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<v Speaker 3>already has such a high debt, when you know, compared

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<v Speaker 3>to other countries. I think it's not you know, China

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<v Speaker 3>doesn't really have a choice right now. This is sort

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<v Speaker 3>of a similar issue, and this is frankly why a

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<v Speaker 3>lot of officials have been hesitant to unveil these kinds

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<v Speaker 3>of moves up until now, up until sort of this

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<v Speaker 3>pain point where more and more Wall Street economists are

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<v Speaker 3>saying they're not going to reach five percent this year

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<v Speaker 3>and also revising lower their estimates for future growth, so

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<v Speaker 3>they kind of have no choice.

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<v Speaker 2>Gatia, thanks so much for joining us. So we'll be

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<v Speaker 2>watching the markets this morning and see how big the

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<v Speaker 2>impact is. Katia Dimitriev, Bloomberg Asia Economics Correspondent Again, just

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<v Speaker 2>very briefly, PBOC Governor Pangong Shong has announced these policies.

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<v Speaker 2>The announcement to lower the banks reserve ratio requirement by

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<v Speaker 2>fifty basis points, cutting the seven day reverse repo rate

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<v Speaker 2>by twenty basis points, and cutting the outstanding mortgage rate.

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<v Speaker 2>Ben emmon Cio and founder at fed Watch Advisors. Ben,

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<v Speaker 2>thank you very much for coming on the show with us. Well,

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<v Speaker 2>I suppose if you believe in mark to market, the

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<v Speaker 2>FED would seem to have a lot of work to

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<v Speaker 2>do here and the way Neil Kashkari outlined it, as

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<v Speaker 2>you pointed out, the FED can cut one hundred and

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<v Speaker 2>fifty basis points in fairly short order. Are you in

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<v Speaker 2>that camp?

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<v Speaker 4>Yes? I am Brian and great to be back on

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<v Speaker 4>with you and dark though, first of all, it's not

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<v Speaker 4>the eighth anniversary of Day Make Asia Radio, right, and

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<v Speaker 4>we've been together on this show.

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<v Speaker 2>We hit nine years exactly last week, and I remember

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<v Speaker 2>you with us pretty much the.

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<v Speaker 4>Whole run exactly exactly. Oh not ys tare Y. So

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<v Speaker 4>but thank you very much to forget for having me back. Yes,

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<v Speaker 4>I am in that camp, and you know, the way

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<v Speaker 4>I come down to it is that I think that

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<v Speaker 4>by the way Neil Cascari outlines is a bit wonkish,

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<v Speaker 4>but the outlines are well, you got to really think

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<v Speaker 4>in real terms, right, accounting for inflation, and that was

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<v Speaker 4>I think the worry from war that came through on

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<v Speaker 4>Friday was like he saw this infflication that was cooling

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<v Speaker 4>off quicker. And where the fatales rate is currently even

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<v Speaker 4>after that first cut, there's a there's a pretty big

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<v Speaker 4>difference now in real terms, and they feel, and probably

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<v Speaker 4>rightfully so, that that's real rate. The respective rate is

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<v Speaker 4>still pressing a lot on the economy, even though we're

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<v Speaker 4>seeing some subtraction coming through, right, you know, the last

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<v Speaker 4>number of weeks, and there's a forward looking data and

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<v Speaker 4>so I think they build us this building and think

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<v Speaker 4>insurance against their own forecasters in they put the four

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<v Speaker 4>point four percent on the poor rate out there because

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<v Speaker 4>that's what they think that the rate will be. But

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<v Speaker 4>yet they're willing to cut faster in order to not

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<v Speaker 4>have that forecast material lines and they based upon that announceers.

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<v Speaker 4>But because carried us comparing the funds rate to the

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<v Speaker 4>expected inflation and trying adjust according to and on that basis, yes,

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<v Speaker 4>you could cut a little faster. It maybe means that

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<v Speaker 4>that is a nure and fifty base points in court

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<v Speaker 4>Coate short order.

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<v Speaker 1>We had a number of FED speakers today, including Austin Goulsby,

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<v Speaker 1>and he was saying that current policy rate and FED

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<v Speaker 1>funds is hundreds of basis points above neutral. Brian and

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<v Speaker 1>I were talking yesterday with a guest, I mean, I

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<v Speaker 1>know the neutral rate is largely theoretical. It can't be measured,

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<v Speaker 1>it's only estimated. We get that. Does it benefit the

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<v Speaker 1>conversation around monetary policy to talk about a neutral rate

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<v Speaker 1>and do you have a sense of where that may be?

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<v Speaker 4>Yeah, it does benefit up because you know, ultimately the

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<v Speaker 4>neutral rate is really were the Fed points to get

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<v Speaker 4>at where you know they essentially have achieved the mandate completely,

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<v Speaker 4>meaning Maggie, we have a soft lending now to get

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<v Speaker 4>to that man. But ultimately it's about price stability and

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<v Speaker 4>maximum employment. Right, So it may be at three three

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<v Speaker 4>and a half percent. I think the pandemic and the

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<v Speaker 4>rate is shock played out and all the stimulus and

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<v Speaker 4>then subsequent investment is taking place in near the stage,

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<v Speaker 4>you know, with the productivity that has come along with

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<v Speaker 4>that that I think the economy is at a higher

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<v Speaker 4>trend growth currently than it was pre pandemic, and that

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<v Speaker 4>is the reflection of the cowed neutral rate. So the

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<v Speaker 4>FAEDA spencials then close to three percent, the market is

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<v Speaker 4>pricing something like three in the quarter three and a

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<v Speaker 4>half percent. We'll probably get some sort of facility in there.

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<v Speaker 4>If the fat cust rates further from here, as in

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<v Speaker 4>we're trying to get to some sort of neutral rate,

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<v Speaker 4>then we have to assess it that is truly neutral, right,

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<v Speaker 4>But that's what the market things currently and the Fed's

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<v Speaker 4>are too far away. Yeah, probably a good guide boasts

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<v Speaker 4>full for overheading with multi policy in the near two.

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<v Speaker 2>So there's the economy and what it's doing, and then

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<v Speaker 2>there's the market. We've got the S and P five hundred,

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<v Speaker 2>up just under twenty percent year to date. It gained

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<v Speaker 2>more than twenty percent last year, so two twenty percent years.

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<v Speaker 2>It's not unheard of, but it would naturally make some

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<v Speaker 2>people nervous, unless, of course, you consider that the year

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<v Speaker 2>before that, twenty twenty two, we were down more than

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<v Speaker 2>twenty five percent. So if you put these three years together,

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<v Speaker 2>you're up about eighteen percent over three years, and that's

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<v Speaker 2>below the average return on the S and P. So

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<v Speaker 2>I'm confused. Are we fully valued here or is there

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<v Speaker 2>more room to run?

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<v Speaker 4>Yeah, and it's amazing. It's a pretty complicated question because Brian,

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<v Speaker 4>because you know, on one hand, you can basis upon

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<v Speaker 4>the interest rate forecast, right, if we're going to go

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<v Speaker 4>low with interest rates, the mechanics are that, you know,

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<v Speaker 4>stock prices are going to go higher, right most most

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<v Speaker 4>of the time, you know, especially if you're in an

0:11:50.760 --> 0:11:53.680
<v Speaker 4>environment where the economy is actually doing fairly okay, and

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<v Speaker 4>all that lower interestrates do is just giving the economy

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<v Speaker 4>more of a push, right, So that should be reflected

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<v Speaker 4>into the mark it and that's sort of what happening.

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<v Speaker 4>On that basis we're not fully valued. We could actually

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<v Speaker 4>expand in the multiple by just simply higher price stock prices.

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<v Speaker 4>But if you think of like if we're still an

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<v Speaker 4>economy where there's risk of inflation, or risk of ejudging

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<v Speaker 4>the sharks, or risk of what we saw this summer,

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<v Speaker 4>right of a sudden unmind of leverage in the system.

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<v Speaker 4>You know, you are at a loftier level, so to speak,

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<v Speaker 4>and so it is vulnerable to the subsequent volatility that

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<v Speaker 4>could emerge, whether as will be the election. Not so sure.

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<v Speaker 4>It doesn't seem to be that the market supported by

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<v Speaker 4>the election. More again, something about unexpected coming through the

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<v Speaker 4>data or others sign judging the sharks, or about what

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<v Speaker 4>may take note that we do have some disruptions going

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<v Speaker 4>on in the supply chain. Again, you know, that may

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<v Speaker 4>be something that Marcus is paying attention to as one

0:12:49.400 --> 0:12:52.360
<v Speaker 4>one factor. So I think to somewhere up with the

0:12:52.440 --> 0:12:55.240
<v Speaker 4>market may look overvalued, but there's more room in the price,

0:12:55.679 --> 0:12:58.599
<v Speaker 4>especially if you think about interests, you know, declining in

0:12:58.640 --> 0:12:59.080
<v Speaker 4>the future.

0:12:59.600 --> 0:13:02.920
<v Speaker 1>You know, our colleagues has spoke with the noted strategist

0:13:03.200 --> 0:13:05.240
<v Speaker 1>ed Yardenny earlier in the day. Maybe you had a

0:13:05.360 --> 0:13:08.200
<v Speaker 1>chance to see this on the Bloomberg terminal, and he

0:13:08.280 --> 0:13:12.080
<v Speaker 1>said that the basically, the decision that we had last

0:13:12.120 --> 0:13:14.720
<v Speaker 1>week to go fifty basis points has lifted the odds

0:13:14.760 --> 0:13:18.480
<v Speaker 1>of an outright melt up inequities, and he likened it

0:13:18.480 --> 0:13:20.160
<v Speaker 1>to what we saw on the dot com bubble. I

0:13:20.200 --> 0:13:22.800
<v Speaker 1>mean that that sounds a little concerning to me. Is

0:13:23.559 --> 0:13:24.400
<v Speaker 1>does he have a point?

0:13:26.160 --> 0:13:29.240
<v Speaker 4>Yeah, he does, because the melt up obviously is the issue, right,

0:13:29.400 --> 0:13:32.240
<v Speaker 4>is that that's the sort of getting really a sprint

0:13:32.280 --> 0:13:35.280
<v Speaker 4>to the finish here. That we've been on a pretty

0:13:35.280 --> 0:13:37.320
<v Speaker 4>good run here for the last couple of years and

0:13:37.360 --> 0:13:39.920
<v Speaker 4>a lot of charts out that the bullmarkt young and

0:13:39.960 --> 0:13:42.040
<v Speaker 4>it could have a lot more to go. But what

0:13:42.080 --> 0:13:44.400
<v Speaker 4>he's talking about is more like you get to sprint

0:13:44.600 --> 0:13:47.880
<v Speaker 4>at the end. And look, let's face it, we do

0:13:47.960 --> 0:13:50.199
<v Speaker 4>have an AI boom, so to speak, and there's a

0:13:50.200 --> 0:13:51.920
<v Speaker 4>lot of data out on it at much to spend

0:13:51.960 --> 0:13:55.480
<v Speaker 4>on it and maybe now being invested again. But there's

0:13:55.520 --> 0:13:58.240
<v Speaker 4>some form of fraud there that we can't deny that

0:13:58.520 --> 0:14:00.439
<v Speaker 4>and so that's where we have to work. That's what

0:14:00.600 --> 0:14:02.960
<v Speaker 4>Jors talking about. Did you get amount of ben the

0:14:03.000 --> 0:14:06.800
<v Speaker 4>frost of the AI, you know, spending may may be ons.

0:14:07.360 --> 0:14:10.320
<v Speaker 2>He also warned that central bankers should be careful here

0:14:10.800 --> 0:14:14.280
<v Speaker 2>with aggressive rate GUIDs because he thought inflation could resurface,

0:14:14.320 --> 0:14:17.680
<v Speaker 2>and he highlighted that both candidates and the presidential election

0:14:17.840 --> 0:14:22.240
<v Speaker 2>are proposing policies that could trigger inflation. So an interesting

0:14:22.320 --> 0:14:24.960
<v Speaker 2>look there from Ed Yardnny and an interesting look from

0:14:24.960 --> 0:14:28.520
<v Speaker 2>Ben Emmons joining us from FED Watch Advisories.

0:14:33.240 --> 0:14:39.320
<v Speaker 5>Bloomberg Opinion Informed Perspectives, an expert data driven commentary on breaking.

0:14:39.040 --> 0:14:43.200
<v Speaker 1>News time for Bloomberg Opinion. And we are joined now

0:14:43.280 --> 0:14:46.760
<v Speaker 1>by opinion columnist Minchin Pei, who is writing about China's

0:14:46.760 --> 0:14:50.480
<v Speaker 1>economic recovery. He's saying the game isn't over for China,

0:14:50.840 --> 0:14:55.040
<v Speaker 1>but it's garbage time. Mention joins us from southern California.

0:14:55.120 --> 0:14:58.920
<v Speaker 1>Always a pleasure and the timing is absolutely perfect. As

0:14:58.960 --> 0:15:03.280
<v Speaker 1>we speak here, minshe in PBOC Governor Penggonsen as a

0:15:03.320 --> 0:15:07.160
<v Speaker 1>conducting a news conference with two other officials, and they

0:15:07.160 --> 0:15:12.320
<v Speaker 1>are outlining what is clearly just a massive program from

0:15:12.360 --> 0:15:15.000
<v Speaker 1>the Central Bank to stimulate the Chinese economy. I want

0:15:15.040 --> 0:15:17.120
<v Speaker 1>you to weigh in, what do you feel about this?

0:15:18.320 --> 0:15:21.400
<v Speaker 6>Well, certainly they try to end the so called garbage time.

0:15:22.240 --> 0:15:25.920
<v Speaker 6>The sentiments in China are really bad. I'm no economist,

0:15:26.080 --> 0:15:30.080
<v Speaker 6>but based on what I have read, the real problem

0:15:30.120 --> 0:15:35.680
<v Speaker 6>for China is not monetary policy, is actually low demand,

0:15:35.800 --> 0:15:43.160
<v Speaker 6>consumer demand in particular. So this policy lower interest rate

0:15:43.960 --> 0:15:48.640
<v Speaker 6>and doing other things probably is good, but not going

0:15:48.680 --> 0:15:52.040
<v Speaker 6>to make a big difference. That is not a bazunka.

0:15:52.320 --> 0:15:55.160
<v Speaker 6>One of your colleagues said it was a bazuka. I

0:15:55.200 --> 0:16:03.400
<v Speaker 6>think that's a pistol rather than in the bluka. Because

0:16:03.640 --> 0:16:07.200
<v Speaker 6>China right now is in a liquidity trap.

0:16:08.480 --> 0:16:10.480
<v Speaker 4>The money there's.

0:16:10.360 --> 0:16:13.680
<v Speaker 6>Just massive build above debt, so the money you pump

0:16:14.240 --> 0:16:17.800
<v Speaker 6>into the system is just used to pay off debt

0:16:18.760 --> 0:16:21.520
<v Speaker 6>rather than to buy stuff.

0:16:21.440 --> 0:16:22.200
<v Speaker 4>Or do stuff.

0:16:23.560 --> 0:16:26.080
<v Speaker 2>Yeah, for people who haven't read the piece, I can

0:16:26.120 --> 0:16:29.160
<v Speaker 2>just summarize it quickly in saying that the collapse of

0:16:29.160 --> 0:16:31.720
<v Speaker 2>the real estate sector has really been a big part

0:16:31.720 --> 0:16:34.960
<v Speaker 2>of this problem for the average person in China. It's

0:16:35.280 --> 0:16:40.400
<v Speaker 2>shrunk their wealth considerably and it's hurt their consumption. But

0:16:40.440 --> 0:16:42.840
<v Speaker 2>what's interesting is you say that the malaise goes a

0:16:42.920 --> 0:16:47.280
<v Speaker 2>lot deeper and has political roots to it, that they

0:16:47.360 --> 0:16:50.480
<v Speaker 2>just don't have as much confidence now in President Shijen

0:16:50.560 --> 0:16:53.720
<v Speaker 2>Ping as they did maybe when we saw other ructions,

0:16:53.760 --> 0:16:56.280
<v Speaker 2>like in the late nineties, because at that time they

0:16:56.280 --> 0:16:58.720
<v Speaker 2>had a lot of confidence in the then premier at

0:16:58.760 --> 0:17:01.440
<v Speaker 2>Jerome g tell us a little bit more about these

0:17:01.440 --> 0:17:02.800
<v Speaker 2>political issues.

0:17:02.360 --> 0:17:03.080
<v Speaker 4>That you see.

0:17:03.760 --> 0:17:08.240
<v Speaker 6>Oh yes, I think there are really two issues for

0:17:08.280 --> 0:17:11.000
<v Speaker 6>the average people. They think they've given the government enough

0:17:11.040 --> 0:17:13.840
<v Speaker 6>time to show that it has a better game plan.

0:17:15.119 --> 0:17:17.879
<v Speaker 6>They have not seen one because the economy is just

0:17:17.920 --> 0:17:21.399
<v Speaker 6>stuck in neutral for now for the better part of

0:17:21.560 --> 0:17:23.840
<v Speaker 6>eighteen months. So that is.

0:17:25.520 --> 0:17:26.600
<v Speaker 4>So the government.

0:17:26.240 --> 0:17:31.800
<v Speaker 6>Actually has to do something that changes the perception and sentiments.

0:17:32.040 --> 0:17:36.159
<v Speaker 6>The other is that they doubt whether sheating pain will

0:17:36.800 --> 0:17:42.680
<v Speaker 6>change costs. He might do some technical adjustment, but there

0:17:42.720 --> 0:17:46.880
<v Speaker 6>is no end in sight of the end of his tenure.

0:17:47.400 --> 0:17:53.199
<v Speaker 6>He effectively has made himself a lifetime ruler. So people say, well,

0:17:53.240 --> 0:17:56.119
<v Speaker 6>in the past, at least a leader will be there

0:17:56.200 --> 0:17:58.879
<v Speaker 6>for ten years and then we have a chance for

0:17:59.400 --> 0:18:03.560
<v Speaker 6>real change. But no such possibility exists at a moment.

0:18:04.240 --> 0:18:07.520
<v Speaker 1>So there's no way for the party to put pressure

0:18:07.520 --> 0:18:08.879
<v Speaker 1>on him to change course.

0:18:08.920 --> 0:18:13.560
<v Speaker 6>Here, no way, no way, Because now China essentially has

0:18:13.640 --> 0:18:18.520
<v Speaker 6>centralized personalized leadership at the top. Most of the top

0:18:18.560 --> 0:18:23.760
<v Speaker 6>people are chooging things friends or allies, So how are

0:18:23.760 --> 0:18:26.160
<v Speaker 6>they going to put pressure on that patriot?

0:18:28.240 --> 0:18:30.640
<v Speaker 2>You know, it's interesting though with people in China, I think,

0:18:31.119 --> 0:18:36.160
<v Speaker 2>like Americans, they tend to be opportunistic and confident about

0:18:36.200 --> 0:18:38.840
<v Speaker 2>the future, and they put a lot of faith in

0:18:39.560 --> 0:18:44.040
<v Speaker 2>education and Chinese culture, and that's something that sort of

0:18:44.760 --> 0:18:49.280
<v Speaker 2>supersedes to a certain degree political leadership in China. Is

0:18:49.320 --> 0:18:50.879
<v Speaker 2>there a way that you can see kind of an

0:18:50.960 --> 0:18:54.560
<v Speaker 2>organic reflowering of optimism and if so, what might lead

0:18:54.560 --> 0:18:54.840
<v Speaker 2>to that?

0:18:56.000 --> 0:18:58.719
<v Speaker 6>I think it would take a while, because China is

0:18:58.800 --> 0:19:03.680
<v Speaker 6>now caught in this cycle, the their cycle, the lealistic cycle.

0:19:03.960 --> 0:19:06.760
<v Speaker 6>Probably five six years from now, we don't know how

0:19:06.800 --> 0:19:09.320
<v Speaker 6>long it will take, but I think if the economy

0:19:09.720 --> 0:19:14.400
<v Speaker 6>recovers on its own organically, then the sentiments will change.

0:19:15.119 --> 0:19:17.879
<v Speaker 6>The other is that, as I said, the government really

0:19:17.920 --> 0:19:21.080
<v Speaker 6>needs to a lot, But the problem is that the

0:19:21.119 --> 0:19:24.760
<v Speaker 6>government does not have a lot of dry powder that

0:19:24.800 --> 0:19:25.520
<v Speaker 6>can be used.

0:19:26.040 --> 0:19:28.480
<v Speaker 1>So if you had to speculate a little bit on

0:19:28.560 --> 0:19:31.439
<v Speaker 1>what the reaction of the population in China might be,

0:19:31.800 --> 0:19:36.720
<v Speaker 1>if we have considerably more weakness, no recovery in the

0:19:36.760 --> 0:19:41.800
<v Speaker 1>property market, persistent deflation in the economy, and just overall

0:19:41.880 --> 0:19:45.240
<v Speaker 1>weak sentiment, I mean, isn't that a way for the

0:19:45.240 --> 0:19:49.360
<v Speaker 1>government to begin to kind of maybe second guess itself

0:19:49.400 --> 0:19:51.600
<v Speaker 1>and change course, or do you think they would be

0:19:51.720 --> 0:19:55.119
<v Speaker 1>unmoved The leadership would be unmoved under those circumstances.

0:19:56.359 --> 0:19:59.680
<v Speaker 6>I think the leadership will have to react if, for example,

0:19:59.760 --> 0:20:04.199
<v Speaker 6>we're have much higher levels of unemployment right now, the

0:20:04.359 --> 0:20:08.320
<v Speaker 6>latest number on use unemployment is about nineteen percent. That

0:20:08.600 --> 0:20:13.800
<v Speaker 6>is very high. And if because low consumer sentiment can

0:20:13.880 --> 0:20:23.480
<v Speaker 6>create a self in reinforcing feedback loop, less income, more insecurity,

0:20:23.600 --> 0:20:26.560
<v Speaker 6>less spending, so the economy will simply get worse and worse.

0:20:27.160 --> 0:20:30.800
<v Speaker 6>So I think if the government does not do anything,

0:20:30.880 --> 0:20:35.960
<v Speaker 6>this is what we can predict, we can count on happening.

0:20:36.680 --> 0:20:39.879
<v Speaker 6>I think a critical thing is what happens on November sixth,

0:20:40.560 --> 0:20:44.399
<v Speaker 6>of six years, the US election, because the government is

0:20:44.480 --> 0:20:49.040
<v Speaker 6>saving what little fiscal power that it has in the

0:20:49.080 --> 0:20:54.119
<v Speaker 6>case Trump gets re elected and flaps huge terrors on China,

0:20:54.520 --> 0:20:58.760
<v Speaker 6>and then China will use its fiscal resources to stimulate

0:20:58.800 --> 0:20:59.960
<v Speaker 6>the economy.

0:21:00.119 --> 0:21:00.920
<v Speaker 2>For that, the.

0:21:00.920 --> 0:21:05.200
<v Speaker 6>Government wants to just wait. They don't have much longer

0:21:05.240 --> 0:21:07.360
<v Speaker 6>to wit. So I guess we can see some action

0:21:07.480 --> 0:21:08.280
<v Speaker 6>at the end of the year.

0:21:08.359 --> 0:21:10.040
<v Speaker 1>Well, we had some action today and we can talk

0:21:10.080 --> 0:21:12.840
<v Speaker 1>more about that momentarily. Mentioned it's always a pleasure Mention

0:21:13.000 --> 0:21:16.640
<v Speaker 1>pay Bloomberg opinion columnists joining us here on Daybreak as.

0:21:18.680 --> 0:21:22.080
<v Speaker 2>This is the Bloomberg Daybreak Asia podcast, bringing you the

0:21:22.160 --> 0:21:25.640
<v Speaker 2>stories making news and moving markets in the Asia Pacific.

0:21:25.880 --> 0:21:29.000
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0:21:29.040 --> 0:21:32.879
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0:21:40.200 --> 0:21:41.600
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