WEBVTT - Growing Pains For China And An Exit From Credit Suisse

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<v Speaker 1>This is Bloomberg Daybake here for this Monday, the sixth

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<v Speaker 1>of March in London. Coming up today, growing pains, China's

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<v Speaker 1>five percent growth target offers little relief for the global economy.

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<v Speaker 1>There is a question about the future of the franchise,

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<v Speaker 1>the parting words of Paris Associates CIO, as they reportedly

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<v Speaker 1>sell their entire credit suite stake making ends meet. The

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<v Speaker 1>Chancellor looks to cap energy prices and freeze fuel duty

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<v Speaker 1>in next week's budget, showing out elsewhere, burning through billions,

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<v Speaker 1>and a twenty four million dollar question for CEOs. Those

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<v Speaker 1>are the stories we're looking at in today's papers. I'm

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<v Speaker 1>James Walcock Plus. Is London at risk of losing it's luster?

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<v Speaker 1>Brexit blues hit the capital's investment appeal. That's all straight

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<v Speaker 1>ahead on Bloomberg Daybreak Europe. The Business Views you need

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<v Speaker 1>to start your day in just one fifteen minute podcast

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<v Speaker 1>on Apples, Spotify, the Bloomberg Business app and everywhere you

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<v Speaker 1>get your podcasts. Good morning. I'm Lizzie Burden and I'm

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<v Speaker 1>Caroline Hike. Here are the stories that we're following today.

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<v Speaker 1>China has set its economic growth target for the year

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<v Speaker 1>at a round five percent. The goal was announced during

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<v Speaker 1>the National People's Congress that began on Sunday. Bloomberg's China

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<v Speaker 1>Economy of editor Jill Disis says it's a conservative target.

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<v Speaker 1>They want to be able to hit their target. I think,

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<v Speaker 1>you know, somewhere around five percent gives a Beijing quite

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<v Speaker 1>a lot of room to work with. But they also

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<v Speaker 1>want to They don't want to overstimulate the economy. They

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<v Speaker 1>kind of want to keep things on track, and ultimately,

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<v Speaker 1>I think what Beijing is looking for this year is

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<v Speaker 1>economic growth that's really going to be driven by a

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<v Speaker 1>rebound in demand. We'll be getting more of Jill's thoughts

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<v Speaker 1>in just a few minutes time. Economists had expected a

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<v Speaker 1>more ambitious target of above five percent in the wake

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<v Speaker 1>of rebounding consumer spending. Premier Leka Chang also said the

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<v Speaker 1>government will work to prevent what it calls the unregulated

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<v Speaker 1>expand of the property market. Now, Harris Associates has reportedly

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<v Speaker 1>sold its entire Staking Credit suiss, ending a decades long relationship.

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<v Speaker 1>The investment firms. CIO David Hero told The Financial Times

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<v Speaker 1>that quote, there is a question about the future of

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<v Speaker 1>the franchise. Those comments follow an interview with hero In

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<v Speaker 1>that Bloomberg did last August, in which he had this

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<v Speaker 1>warning for the Swiss Lander, but you can't keep doing

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<v Speaker 1>the same thing as they've been doing over the last

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<v Speaker 1>decade and get zero results. They have to put an

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<v Speaker 1>end to it. At some point. They either have to

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<v Speaker 1>fix it or to look for other options. That was

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<v Speaker 1>Harris associates CIO David hero speaking to Bloomberg's Fancy and

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<v Speaker 1>Laqua last August. Harris was the biggest shareholding Credit Suiss

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<v Speaker 1>for many years and halved it's ten percent holding towards

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<v Speaker 1>the end of twenty twenty two to five percent. San

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<v Speaker 1>Francisco FED President Mary Daily says rates need to head

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<v Speaker 1>higher and stay there for longer. In a speech Atton

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<v Speaker 1>University on Saturday, she had this to say. It's clear

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<v Speaker 1>there is more work to do in order to put

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<v Speaker 1>this episode of inflation high inflation behind us. Further policy

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<v Speaker 1>tightening maintained for a longer period will likely be necessary.

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<v Speaker 1>Well Daily doesn't vote on policy this year, she is

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<v Speaker 1>part of the fomc's meetings and Discussions. Federal Reserve chair

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<v Speaker 1>During poll heads to Capitol Hill this week, where he's

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<v Speaker 1>expected to echo her view that more hikes are needed now.

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<v Speaker 1>With just over a week to go to the UK budget,

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<v Speaker 1>the chance of Jeremy Hunt faces a range of competing pressures,

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<v Speaker 1>but economic think tanks have warned that there's very little

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<v Speaker 1>headroom for permanent giveaways. Bloomberg Samuel Etienne reports strikes, the

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<v Speaker 1>cost of living crisis and a dangerously tight labor market

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<v Speaker 1>all calling for physical support. There are no easy answers

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<v Speaker 1>for a cast strapped chancellor. Although UK borrowing is running

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<v Speaker 1>well below official forecasts, a Resolution Foundation and IFS are

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<v Speaker 1>warning the government not to consider policies like fuel duty

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<v Speaker 1>or a drop in corporation tax. One think tank estimates

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<v Speaker 1>a state will need five billion pounds just to top

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<v Speaker 1>up public set to wages by two percent this year.

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<v Speaker 1>In London Samuelettian, Bloomberg, Daybreak, Europe SoftBank's arm is seeking

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<v Speaker 1>to raise at least eight billion dollars in a US

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<v Speaker 1>initial public offering. According to Reuters, the British chip designers

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<v Speaker 1>expected to confidentially submit paperwork for its IPO in late April.

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<v Speaker 1>Companies have been choosing to list outside the UK as

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<v Speaker 1>higher liquidity, larger access to capital, and better sentiment all

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<v Speaker 1>prove more attractive than going to London Stock Exchange. Okay,

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<v Speaker 1>those are a few of our top stories for you

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<v Speaker 1>this morning. So we've got the budget that comes up

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<v Speaker 1>next week. We also have the routers reporting around ARM

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<v Speaker 1>eight billion dollars expected to be raised by soft Bank.

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<v Speaker 1>But ARM is not going to list in London obviously,

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<v Speaker 1>is going to list in the United States. I think

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<v Speaker 1>that is a key blow. And there's a big piece

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<v Speaker 1>kind of science and technology and innovation that is supposedly

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<v Speaker 1>going to be part of the budget next week. Yeah,

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<v Speaker 1>the aims to make Britain as science superpower by the

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<v Speaker 1>end of the decade. It's Caroline. I think it might

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<v Speaker 1>be a case of closing the stable door after the

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<v Speaker 1>horse has bolted. You've seen armscrh. But maybe I'm being

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<v Speaker 1>a little too gloomy here. Yeah. Absolutely, I think that

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<v Speaker 1>you can't and shouldn't count London out. But having said that,

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<v Speaker 1>it won't be very viassuring that. Also on the terminal

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<v Speaker 1>of this morning, City is planning a new trading floor,

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<v Speaker 1>not in London but in Paris, doubling the number of

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<v Speaker 1>traders that they have in Paris. Yes, they've said London

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<v Speaker 1>is still the main hub, but apparently they're going to build, Yeah,

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<v Speaker 1>a much bigger office. And also I thought this was

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<v Speaker 1>quite interesting. It's not going to be the ros and

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<v Speaker 1>rows of trader desks. It's going to be pods, circular desks. Oh,

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<v Speaker 1>the post pandemic world, Caroline, Well, it'll be interesting to

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<v Speaker 1>see whether that development comes up in the discussions between

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<v Speaker 1>Emmanuel Macon and Richie Sunac when the British Prime Minister

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<v Speaker 1>heads across the channel for discussion as later this week

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<v Speaker 1>on Friday, can they reset relations with this windsor framework

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<v Speaker 1>in the bag? Oh, this is this Franco British summit

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<v Speaker 1>that is taking place. I hope you're going to be

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<v Speaker 1>there on the ground. I have the playing that you

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<v Speaker 1>might be okay up next shelling out elsewhere, burning through

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<v Speaker 1>billions at a twenty four million dollar question for CEOs.

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<v Speaker 1>Now The Paper review on blue Bird day Break Europe.

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<v Speaker 1>The news you need to know from today's papers. Well, Carolina,

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<v Speaker 1>as I say, fresh from what looked like a pretty

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<v Speaker 1>good week for Rishie Sonak, he's planning to continue diplomacy

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<v Speaker 1>pushes with France's President Emmanuel mccron later this week. The Guardian,

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<v Speaker 1>The Times and The Mail all lead on the proposed

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<v Speaker 1>small boats changes that might come from that meeting, and

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<v Speaker 1>James Wolcock joins us in the studio Bright and Early

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<v Speaker 1>for a deeper look into some of the business stories

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<v Speaker 1>in the news today. James, let's start off by talking

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<v Speaker 1>about the interview in The Times with Shell's CEO. Yes, Lizzie,

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<v Speaker 1>I mean I want to put an application for a

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<v Speaker 1>pod where they go away. But Shell, it's the UK's

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<v Speaker 1>largest company, which made a record forty billion dollars last year,

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<v Speaker 1>so it's all the more worrying that their new boss

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<v Speaker 1>wealth to one that said Britain is less attractive and

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<v Speaker 1>investment destination for both the US and Europe because the

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<v Speaker 1>UK is failing to match them on his green energy subsidies. Now.

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<v Speaker 1>So this is fascinating because the UK is always stressed.

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<v Speaker 1>By leaving the EU, it could have be standing on

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<v Speaker 1>its own two feet, yet now it finds itself caught

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<v Speaker 1>between two juggernauts, the US on one side with three

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<v Speaker 1>hundred and seventy billion dollars incentives and the EU on

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<v Speaker 1>the other side saying they will match any incentives that

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<v Speaker 1>go to companies that aren't European. The UK and the

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<v Speaker 1>middle is sort of pushing for this free market ideology.

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<v Speaker 1>Grant Chaps in Davos called it dangerous. That's the UK

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<v Speaker 1>Business Secretary. But so the question now is that is

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<v Speaker 1>an ideological problem. Can they economically back it up? The

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<v Speaker 1>other thing I find fascinating here, it's worth pointing out

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<v Speaker 1>this is a large, multi billion dollars oil company that's

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<v Speaker 1>talking about going green and is pushing to try and

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<v Speaker 1>carbon neutralize, and its big push to try and be

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<v Speaker 1>at the four front of the green transition. The big

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<v Speaker 1>fear the Shell is saying is they would like to

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<v Speaker 1>invest in the UK, but if there's no money there,

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<v Speaker 1>they will get left behind. And the one thing I

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<v Speaker 1>want to sort of tease out here is that so

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<v Speaker 1>one said that the energy profits levy, the windfall tax

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<v Speaker 1>to your government is putting on profits, is disincentivizing investment.

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<v Speaker 1>Now that is completely different to what the previous CEO,

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<v Speaker 1>Bernard Looney says. So it's not all sort of you know,

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<v Speaker 1>black and white here. There is some layers of gray

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<v Speaker 1>mixed into. Okay, the ft are talking about a US

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<v Speaker 1>tech cash crunch. M Now, what is fascinating. Obviously we've

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<v Speaker 1>been talking about arm Carolina, but it's not all sort

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<v Speaker 1>of golden sunsets and uppitlets sort of valleys up over

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<v Speaker 1>in the US. There is a big trap here that

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<v Speaker 1>the ft are reporting on. And the way it goes

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<v Speaker 1>is you go to the US, you look for a

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<v Speaker 1>higher evaluation, you get it, and then you get a

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<v Speaker 1>load of cash and a lot of these sort of

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<v Speaker 1>big tech companies then burned through that cash and the

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<v Speaker 1>ft have run through the company's filings of the ninety

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<v Speaker 1>one companies that have reported last year and they burned

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<v Speaker 1>through twelve billion dollars. And the trap is now interest

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<v Speaker 1>rates are up. If you need a lot more cash

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<v Speaker 1>because you're still a developing company, how do you get it?

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<v Speaker 1>And you could be caught into extreme cost cutting. You

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<v Speaker 1>could be snapped up by private equity, or you could

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<v Speaker 1>take out a pricey loan. One of their sort of

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<v Speaker 1>global auditors they spoke to you for the piece, summed

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<v Speaker 1>it up very well. Often when you were private, these

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<v Speaker 1>kind of things would be sort of behind closed doors

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<v Speaker 1>and could be done quite sort of gently. Now they're

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<v Speaker 1>having to face public markets when maybe their products wouldn't

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<v Speaker 1>be quite as ready as if they were, say an

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<v Speaker 1>emerging company to three decades ago. And finally, James the

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<v Speaker 1>Wall Street Journal has an interesting story about changes to

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<v Speaker 1>the way we talk about CEO pay. So normally, Lizzie,

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<v Speaker 1>when we talk to CEO pay, you get a snapshot,

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<v Speaker 1>you get here's their current salary and maybe here's a bonus.

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<v Speaker 1>But a lot of this is now being tied up

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<v Speaker 1>in stocks and shares. That's how a lot of them

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<v Speaker 1>make their money. And so the SEC, the US regulator,

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<v Speaker 1>has said, actually, we would like to see your compensation

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<v Speaker 1>actually paid, and you're calculating how much you're going to

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<v Speaker 1>get back in stocks and shares. Now, for Olivier the Push,

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<v Speaker 1>who is the CEO of the oil field services company Slumberge,

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<v Speaker 1>that is a twenty four million dollar difference. He has

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<v Speaker 1>paid a lot more when you take into account the

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<v Speaker 1>booming oil stocks. And if you go the other way,

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<v Speaker 1>the fastened out new equity awards for their CEO downiel

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<v Speaker 1>floor and is he lost nearly half his value because

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<v Speaker 1>of their tanking shares. So it's an interesting new way

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<v Speaker 1>that the SEC is sort of looking to calculate these things.

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<v Speaker 1>It's often been used by private ants for a very

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<v Speaker 1>long time, but it's intertantly how traders might react to

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<v Speaker 1>sort of having that big number in bold next to

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<v Speaker 1>the company's results. Yeah, I mean, I think the idea

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<v Speaker 1>has always been that it takes a long time, you know,

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<v Speaker 1>depending on when those stocks and shares you know where, Yeah,

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<v Speaker 1>when you take them effectively over time, how much they're

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<v Speaker 1>actually worth in reality. So yeah, I think that's quite

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<v Speaker 1>fascinating that there might be a big red number attached

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<v Speaker 1>to these CEOs. Thank you so much, James Orcott there

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<v Speaker 1>with a look at the newspapers are really a very

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<v Speaker 1>interesting round up. Let's also turn our attention though to

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<v Speaker 1>what happened over the weekend. China has set an annual

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<v Speaker 1>growth target of around five percent, rather than above that level.

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<v Speaker 1>The national budget was released on Sunday, suggests that fiscal

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<v Speaker 1>support will be restrained. Joining us now Aisboomberg's China Economy

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<v Speaker 1>editor Jill Dices, Jill, good morning, Thank you so much

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<v Speaker 1>for being with us. The key takeaways them from China's NPC,

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<v Speaker 1>these sort of political in quotes gathering over the weekend. Yes, um, well,

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<v Speaker 1>you know we'll start with the growth target and I'll

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<v Speaker 1>also just remind you that it's the NPC is going

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<v Speaker 1>to continue through this week where I think we're going

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<v Speaker 1>to see a lot more changes, including you know, maybe

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<v Speaker 1>some big shakeups at the high political you know, executive

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<v Speaker 1>levels where she's probably going to president. She is probably

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<v Speaker 1>going to consolidate as power more and sell some more allies.

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<v Speaker 1>But what we've seen already is that that growth target

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<v Speaker 1>that you mentioned in quite conservative, probably signaling that there's

0:11:45.559 --> 0:11:47.520
<v Speaker 1>not going to be a ton of stimulus coming out

0:11:47.520 --> 0:11:49.880
<v Speaker 1>of China this year, and we're seeing that kind of

0:11:49.920 --> 0:11:54.040
<v Speaker 1>reflected into commodity markets. Right. It's doesn't seem like China

0:11:54.240 --> 0:11:59.800
<v Speaker 1>is prepared toduce growth through you know, real estate, infrastructure,

0:11:59.800 --> 0:12:01.560
<v Speaker 1>those kinds of things, and instead it is probably going

0:12:01.640 --> 0:12:06.040
<v Speaker 1>to rely more on this consumer driven recovery that's already underway.

0:12:06.080 --> 0:12:09.920
<v Speaker 1>So what we've seen out of some data, especially in February,

0:12:10.080 --> 0:12:12.400
<v Speaker 1>is that spending is really picking up now that they've

0:12:12.480 --> 0:12:16.360
<v Speaker 1>dropped all those COVID controls. COVID zero's gone. People are

0:12:16.400 --> 0:12:18.679
<v Speaker 1>you know, finally able to leave their houses and spend

0:12:18.679 --> 0:12:21.280
<v Speaker 1>more money again. Um. And it seems like that's probably

0:12:21.280 --> 0:12:24.120
<v Speaker 1>where China is gonna, you know, hope that that growth

0:12:24.120 --> 0:12:27.040
<v Speaker 1>picks up. So yeah, I think probably a bit disappointing,

0:12:27.240 --> 0:12:29.800
<v Speaker 1>um that this this target wasn't more aggressive, um. But

0:12:29.880 --> 0:12:32.400
<v Speaker 1>that does kind of indicate that uh, um, you know,

0:12:32.440 --> 0:12:35.040
<v Speaker 1>it's it's it's we're going to be better than last year,

0:12:35.040 --> 0:12:38.560
<v Speaker 1>but not is uh you know, not extremely strong. But Jill,

0:12:38.640 --> 0:12:40.520
<v Speaker 1>they missed the target last year. So I wonder how

0:12:40.600 --> 0:12:43.360
<v Speaker 1>much of a case of under promising and over delivering

0:12:43.400 --> 0:12:47.120
<v Speaker 1>this is trying to restore Beijing's credibility and also how

0:12:47.200 --> 0:12:50.560
<v Speaker 1>much the hangover effect will be for international investors who

0:12:50.600 --> 0:12:54.959
<v Speaker 1>are hoping to be boosted by Chinese recovery. Oh yes,

0:12:55.080 --> 0:12:57.640
<v Speaker 1>I mean absolutely this is on the minds of everybody

0:12:57.640 --> 0:13:00.880
<v Speaker 1>in Beijing. Like Beijing does not like missing their targets whatsoever.

0:13:00.960 --> 0:13:02.559
<v Speaker 1>Last year, as you mentioned, it was a pretty big

0:13:02.600 --> 0:13:05.240
<v Speaker 1>miss um. So I guess what this target does do

0:13:05.320 --> 0:13:07.160
<v Speaker 1>is it gives them more flexibility. I mean, if you

0:13:07.240 --> 0:13:10.400
<v Speaker 1>say around five percent, um. You know, China also does

0:13:10.400 --> 0:13:12.160
<v Speaker 1>that thing a lot of the time where it's like, oh,

0:13:12.160 --> 0:13:14.319
<v Speaker 1>like we'll give you a range of where we want to, um,

0:13:14.360 --> 0:13:16.160
<v Speaker 1>you know, how we want growth to perform, all that

0:13:16.240 --> 0:13:17.960
<v Speaker 1>kind of stuff. And I think that, um, this at

0:13:18.040 --> 0:13:21.160
<v Speaker 1>least shows that if you know, the economy does grow

0:13:21.200 --> 0:13:23.440
<v Speaker 1>by five point five percent this year, maybe even you know,

0:13:23.559 --> 0:13:26.560
<v Speaker 1>six percent of things really really pick up, then you know,

0:13:26.559 --> 0:13:30.400
<v Speaker 1>they'll they'll certainly um uh you know, they'll certainly match that.

0:13:30.520 --> 0:13:33.320
<v Speaker 1>But yeah, I think that ultimately it's it's it's just

0:13:33.800 --> 0:13:37.400
<v Speaker 1>kind of shows that maybe, UM, China is also probably

0:13:37.400 --> 0:13:40.480
<v Speaker 1>a bit worried about what those international risks are looking like.

0:13:40.520 --> 0:13:43.120
<v Speaker 1>I mean, you know, as growth kind of drops off elsewhere,

0:13:43.240 --> 0:13:46.679
<v Speaker 1>is demand is waning in places like the US and Europe. Um,

0:13:46.760 --> 0:13:50.440
<v Speaker 1>you know, exports uh, major major contributor to the Chinese

0:13:50.440 --> 0:13:52.520
<v Speaker 1>economy is probably not going to do um, you know,

0:13:52.559 --> 0:13:56.280
<v Speaker 1>it's probably gonna underperform this year. UM. These officials are

0:13:56.320 --> 0:13:58.720
<v Speaker 1>looking out for those kinds of effects too, UM. And

0:13:58.760 --> 0:14:00.839
<v Speaker 1>I think that that's probably presenting some some risks that

0:14:00.840 --> 0:14:03.760
<v Speaker 1>they're concerned about as well. He also did mention the

0:14:03.800 --> 0:14:06.440
<v Speaker 1>shake up that could come in terms of those top

0:14:06.520 --> 0:14:10.800
<v Speaker 1>roles under she the regulatory overhang. Those also quite crucial.

0:14:11.400 --> 0:14:15.400
<v Speaker 1>Is she's sort of industry by industry crackdown. Actually overall

0:14:15.440 --> 0:14:18.600
<v Speaker 1>does that continue? Yeah, we'll see. I think we've been

0:14:18.640 --> 0:14:22.120
<v Speaker 1>getting some conflicting ideas about what exactly that's going to

0:14:22.160 --> 0:14:25.040
<v Speaker 1>look like. UM. Now premiere La Kishang. He gave his

0:14:25.360 --> 0:14:28.800
<v Speaker 1>final address as a premiere yesterday, talking about the GDP

0:14:28.920 --> 0:14:30.840
<v Speaker 1>targets and the government work report, and he kind of

0:14:31.120 --> 0:14:34.040
<v Speaker 1>you know, suggested that you know, they're going to be

0:14:34.080 --> 0:14:37.480
<v Speaker 1>regulating real estate for example, Um, they don't want to.

0:14:37.600 --> 0:14:40.840
<v Speaker 1>They want to prevent like unregulated expansion of the market. Um.

0:14:41.000 --> 0:14:43.320
<v Speaker 1>But ultimately, you know, was saying that they wanted to

0:14:43.320 --> 0:14:46.640
<v Speaker 1>boost market expectations and confidence for private businesses for example,

0:14:46.640 --> 0:14:49.600
<v Speaker 1>which I think investors have traditionally taken at least over

0:14:49.640 --> 0:14:51.280
<v Speaker 1>the past couple of years as a sign that oh,

0:14:51.320 --> 0:14:53.960
<v Speaker 1>maybe they're maybe they're easing off the crackdown. But at

0:14:53.960 --> 0:14:56.480
<v Speaker 1>the same time, I think back to last week when

0:14:56.600 --> 0:14:59.760
<v Speaker 1>President she was talking about, you know, um, wanting to

0:15:00.240 --> 0:15:03.040
<v Speaker 1>roll up plans for deepening structural reform and you know,

0:15:03.080 --> 0:15:06.280
<v Speaker 1>tightening things for the financial sector and you know, exercising

0:15:06.320 --> 0:15:08.480
<v Speaker 1>more control over technology and stuff. So it does seem

0:15:08.480 --> 0:15:12.720
<v Speaker 1>like there is some element of that regulatory overhang that's

0:15:12.720 --> 0:15:14.600
<v Speaker 1>still existing there. So I don't know that we're done

0:15:14.600 --> 0:15:16.800
<v Speaker 1>with that quite yet, but it does seem that at

0:15:16.840 --> 0:15:19.160
<v Speaker 1>least the government understands that they need to strike some

0:15:19.240 --> 0:15:22.320
<v Speaker 1>kind of a balance between you know, boosting that confidence

0:15:22.560 --> 0:15:26.440
<v Speaker 1>that the market house and them. But then also what

0:15:26.520 --> 0:15:30.240
<v Speaker 1>are they whatever they're doing with the regulatory sector. This

0:15:30.360 --> 0:15:33.360
<v Speaker 1>is Bloomberg Daybreak Europe, your morning brief on the stories

0:15:33.440 --> 0:15:36.520
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