Speaker 1: This is Bloomberg business Week inside from the reporters and
Speaker 1: editors who bring you America's most trusted business magazine, plus
Speaker 1: global business, finance and tech news. The Bloomberg Business Week
Speaker 1: Podcast with Carol Messer and Tim Stenebec from Bloomberg Radio.
Speaker 1: We've been talking about Ali Baba, certainly a name that
Speaker 1: is front and center today. It's up about fourteen percent
Speaker 1: as we speak, jumping. I think it's the biggest intra
Speaker 1: day climbed since January. It all has to do with
Speaker 1: plans to split into six units. So we want to
Speaker 1: get to the news and the impact it's having on
Speaker 1: the overall Chinese names at trade here in the United States.
Speaker 1: With more on the news, let's bring in Bloomberg News
Speaker 1: Equities reporter that follows the Chinese ADRs. The trade in
Speaker 1: the US is chen is here in our Bluemberg interactive
Speaker 1: broker studio. Ishan tell us about the news. First of all,
Speaker 1: I feel like it's interesting that Jack Mak comes back
Speaker 1: after missing for a year. That was yesterday and then
Speaker 1: we get this news today. So walk us through the
Speaker 1: news and maybe the significance of it. Yeah, great, great. First,
Speaker 1: thanks for having me today and you know, it's definitely
Speaker 1: a very interesting week for Ali Baba. Today. The news
Speaker 1: is showing it like a radical restructure and plan for
Speaker 1: Ali Blabba because and now it's going to split the
Speaker 1: whole business unit Empire into six individeo units including e commerce,
Speaker 1: cloud and also media, and it potentially pays the road
Speaker 1: for them to raise funds and eventually explore the IPOs
Speaker 1: of individeo units. So unlock's value that investors sees potentially right,
Speaker 1: and I think it's more than a lock value because
Speaker 1: you know what analysts and investors are telling me, they
Speaker 1: see it as a wing wing situation for Ali Baba
Speaker 1: and Beijing. So first of all, it's for sure like
Speaker 1: a lock value for investors if you look at do
Speaker 1: like a mass on the you know, some of parts
Speaker 1: of each individ units is treating like it should be
Speaker 1: way higher than currently where it is trading now. But
Speaker 1: also thinking about from the regulatory perspective, as we all
Speaker 1: know that Beijing over the past two years have been
Speaker 1: having this sweeping crackdown on the tag industry and the
Speaker 1: main concern was that, you know, the concentrated power of
Speaker 1: Ali Baba and many tag firms is not helpful or
Speaker 1: healthy in terms of competition or innovation in the industry.
Speaker 1: So now that Ali blahbla what is doing is to
Speaker 1: break the big empire into pieces, so in a way
Speaker 1: that should potentially is the concern from Beijing from the regulators,
Speaker 1: and this is a move also should you know, get
Speaker 1: the blessing from them. And it's great to have you
Speaker 1: hear each and because obviously you're one of our star
Speaker 1: reporters on the Equis team, but I also know this
Speaker 1: is a rare move right when you're thinking about technology
Speaker 1: companies specifically based in China. So what do you think
Speaker 1: this means for the industry and could potentially be template
Speaker 1: for other companies to follow. Yeah, that's a great question. Actually,
Speaker 1: I have seen analysts and investors saying this as a
Speaker 1: game changer for the industry going forward, and it could
Speaker 1: serve as a blueprint for other firms such as like
Speaker 1: JD dot Com, Tenson or bay Do to explore a
Speaker 1: similar paths. And Tenson could be a most most reasonable
Speaker 1: candidate here for a breakup because it has huge influence
Speaker 1: just as bah Bah, and it has different business lines. Actually,
Speaker 1: I already started to divestis some of the units, but
Speaker 1: still there are romantic entities could become standard long segments.
Speaker 1: Hen would Jack might have done this without the Chinese
Speaker 1: government kind of putting pressure on the internet sector. And
Speaker 1: I'm wondering if this if Ali Baba was in the
Speaker 1: United States, would US regulators you think, similarly been saying
Speaker 1: we've got to push for a breakup. I'm curious what
Speaker 1: analysts how they're weighing in on that, if they are,
Speaker 1: I'm I haven't seen enough reporting there, but it's a
Speaker 1: very good question. And I was saying, you brought up
Speaker 1: Jack Mah. I think it's interesting because this news today
Speaker 1: also callincidized with the news we saw yesterday that Jack
Speaker 1: mar was spotted back in China again after a year
Speaker 1: more than a year of like traveling or staying abroad.
Speaker 1: Right um, the market of course took that also as
Speaker 1: a very positive sign because Beijing right now is pushing
Speaker 1: and saying that it wanted to support private enterprise to
Speaker 1: revive its economy, but it really needs to gain the
Speaker 1: confidence from the companies and investors after you know, a
Speaker 1: series of crackdowns of different industries. So now that Jack
Speaker 1: Mall is coming back and then with this split plan
Speaker 1: appeared to you know, pay road for you know, the
Speaker 1: company's future. These are all like a turning the sentiment
Speaker 1: of Ali blah blah, but also Chinese ado US in general. Yeah,
Speaker 1: they were all up today, right, or a lot of
Speaker 1: them were. And I know you've also covered different calls,
Speaker 1: say like with Marco Kolonovic over at JP Mortgage, he
Speaker 1: was talking about buying the dip on Chinese equities in
Speaker 1: this particular back even during right in early October, during
Speaker 1: that whole reopening type trade, and some of that had
Speaker 1: paid off. But are you seeing any other analysts kind
Speaker 1: of still calling for maybe still continuing to buy this
Speaker 1: or do you think it's run its course? Because it's
Speaker 1: interesting if you're looking at the right as far as
Speaker 1: how they've performed so far this year more probably kind
Speaker 1: of flat, not not really obviously so the big rally
Speaker 1: in the fil quarter right because on the JPM call
Speaker 1: we walked together on a story jazz and at that
Speaker 1: time I think the call the mancisis is about the reopening.
Speaker 1: But remember that reopened rally we have staying froll November
Speaker 1: last year, have fizzle outs a bit, especially after a
Speaker 1: quarter of you know, like Earning's prey. There's quite a
Speaker 1: bounce off of that low right, casino stocks in hotels, yeah,
Speaker 1: also like a travel related names, but it has already
Speaker 1: played out, so investors now at the point of they
Speaker 1: wanted to see, all what is the fundamental value of
Speaker 1: these companies. They are focused on the regulatories, certainty and certainty,
Speaker 1: but this news definitely help in terms of, you know,
Speaker 1: the regulatory perspect that's what I want to escation because
Speaker 1: I do feel like depending on I felt like we
Speaker 1: went through a period of even we start with the pandemic,
Speaker 1: you know, shut down, open up, like it was just
Speaker 1: kind of startling. And even with the tech sector, China
Speaker 1: has been very clear about wanting to be performing in
Speaker 1: the global economy on a higher tech level, like this
Speaker 1: is important to the global growth and the growth in
Speaker 1: China specifically, but there's a lot of oversight about privacy
Speaker 1: and data gathering. And I do wonder does a move
Speaker 1: like this come tech entrepreneurs in China and investors when
Speaker 1: it comes to investing in these names, or is it
Speaker 1: a reminder that China and Chinese officials could at any
Speaker 1: moment be like, you know what, I still don't like
Speaker 1: how big this company is or the impact it is
Speaker 1: and that they could move in. I'm just wondering if
Speaker 1: things are settling down in terms of that, right, I
Speaker 1: think that's a very good question. And back to the
Speaker 1: news here. I think one question investors are asking on
Speaker 1: today's news is where are like this potential in the
Speaker 1: video units or Spain offs of Ali Babago into a
Speaker 1: list in Hong Kong or in China the domester market
Speaker 1: because ever since you know, did the IPO debacle in
Speaker 1: New York, right, Beijing has been calling for the so
Speaker 1: called homecoming listing of Chinese companies. So these are reasonable
Speaker 1: speculations that even they break up and eventually list some
Speaker 1: of the units, maybe they offer the shares or it
Speaker 1: should the shares closer to home. So if they do that,
Speaker 1: what regulation absolutely say? What kind of message does that sense? Right?
Speaker 1: I think it's in line with where Beijing is pushing
Speaker 1: for more regulations in terms of the listing share offering,
Speaker 1: and they also wanted to give access to domestic investors
Speaker 1: to all them trade and all these you know national
Speaker 1: bit like bit tech firms. So maybe no listings in
Speaker 1: the US potential, Yeah, that's no. I just think it's
Speaker 1: really interesting in terms of the sector and how it's
Speaker 1: been playing out. Rye No, definitely, so really we don't
Speaker 1: have a ton of details yet right as well as
Speaker 1: the timetable could be moving forward on this because I'm
Speaker 1: sure investors are eaching to know. Yeah, yeah, I like
Speaker 1: today's I think the first step in terms of splitting
Speaker 1: up and couldn't potentially paved the road for a wave
Speaker 1: of IPOs, But we haven't seen any details in terms
Speaker 1: of timeline or you know what, what is the IPO
Speaker 1: plans for the individual units and still doing cost cutting
Speaker 1: to share up the bottom line, so that that's business
Speaker 1: as usual. Um, thank you so much. It's an important
Speaker 1: sector and I love talking about those Chinese names that
Speaker 1: trade here in the United States. Ishanshen, thank you so much.
Speaker 1: She's Bloomberg News Equities reporter. She follows the Chinese ADRs
Speaker 1: that trade in the US. Jenning us here in our
Speaker 1: Bloomberg Interactive broke or studio looking at shares of Ali
Speaker 1: Baba right now, still higher on the day, just off
Speaker 1: their best levels of the session again of about thirteen
Speaker 1: point eight percent. And we did talk earlier about the
Speaker 1: Nasdack Golden Dragon. That index also higher on the day,
Speaker 1: largely because of the moves that we saw in Ali Baba,
Speaker 1: that index is up about three point four percent. Just
Speaker 1: so definitely that whole sector, as we talked about earlier,
Speaker 1: definitely some outperformance. It's definitely for sure and something that
Speaker 1: investors are definitely going to keep their eyes on, especially
Speaker 1: like we're talking about as far as when it comes
Speaker 1: to even with these Chinese listed US stocks in the US,
Speaker 1: how they've been outperforming at last quarter but obviously underperforming
Speaker 1: this year. You're listening to the Bloomberg Business Week podcast.
Speaker 1: Catch US live weekday afternoons from three to six Eastern
Speaker 1: Listen on Bloomberg dot com, the Ion Radio app, and
Speaker 1: the Bloomberg Business or watch US live on YouTube. Jess,
Speaker 1: here's the startling statistics about one profession. For those in it,
Speaker 1: some forty six percent would not recommend it as a career.
Speaker 1: Only thirty three percent feel fairly compensated. Ninety three percent
Speaker 1: think the shortage in their field will only get worse.
Speaker 1: So those are pretty rough numbers. They are. And when
Speaker 1: I know what profession you're about to talk about, and
Speaker 1: this is something that was pivotal, especially it always is pivotal,
Speaker 1: but especially in the wake of the pandemic. Absolutely, we're
Speaker 1: talking about nursing, which, as you said, we were reminded
Speaker 1: was so crucial to get us through the COVID pandemic.
Speaker 1: So let's get more on the state of nursing. Great
Speaker 1: to have back with us, Doctor aman Abuse. She's CEO
Speaker 1: and co founder at Incredible Health. Her company connects hospitals
Speaker 1: with nurses and other healthcare workers. She joins us via
Speaker 1: zoom from Austin, Texas. Doctor Abuse, Nice to be checking
Speaker 1: in with you again. How are you. I'm good. Thank
Speaker 1: you so much for having me. Hey, so listen, I
Speaker 1: shared with our audience and viewers some of us totistics.
Speaker 1: Tell us about your State of the Nursing Report, which
Speaker 1: I believe was just released today. Yeah, I was released
Speaker 1: to date. It's our fourth annual report, and we use
Speaker 1: hiring data from over seven hundred thousand nurses in our
Speaker 1: in our network on the Incredible Health platform, and then
Speaker 1: we surveyed an additional three thousand two So as far
Speaker 1: as just the main findings, I'd love to start off
Speaker 1: with some good news. Actually, there's been some improvements since
Speaker 1: last year. So eighty percent of nurses plan to stay
Speaker 1: in the in their field until retirement, which is a
Speaker 1: big increase. It was only at fifty five percent last year.
Speaker 1: And then there's also been a ten percent degrease in
Speaker 1: the number of nurses who are planning to leave their
Speaker 1: current roles this year. So that's that means that turnover
Speaker 1: will hopefully be improving in the next twelve months too.
Speaker 1: Can we can we ask you why that good news?
Speaker 1: Why do you think those numbers have improved, because I
Speaker 1: know they were pretty dismal when we were talking to
Speaker 1: you before they were think, I think the main reason
Speaker 1: is that the pandemic and the intensity of it has
Speaker 1: subsided a bit. And then we're also through the tridemic.
Speaker 1: You know, there was r RSB flu time period two,
Speaker 1: so you know they're looking their nurses are a little
Speaker 1: more optimistic about the long term in the future, their
Speaker 1: future careers. It was a nurse in my neighborhood, m
Speaker 1: a neighbor who she was like, I'm done, I'm done,
Speaker 1: wouldn't go like just because it was just too much
Speaker 1: UM coming at her. So I can totally relate. UM
Speaker 1: walk us through some of the numbers though that weren't
Speaker 1: so great. Yeah, I know. So now having said that,
Speaker 1: even with that, some of that good news that's a
Speaker 1: little bit more longer term looking that they want to
Speaker 1: stay in their careers in the long term, there there's
Speaker 1: still a lot of frustration about what's going on currently
Speaker 1: with understaffing, would burnout and with pay. So, you know,
Speaker 1: more than sixty two percent of the nurses say they're
Speaker 1: not hopeful for the next generation of nurses and forty
Speaker 1: six percent would actually not recommend a career in nursing. Um.
Speaker 1: When asked about, you know, staffing shortages, ninety three percent
Speaker 1: of the respondent said that they expect they are experiencing
Speaker 1: the nursing shortage getting even worse and so and they
Speaker 1: have all set over seventy percent have pointed to inadequate
Speaker 1: staffing being one of their top concerns. What I'm wondering about, Oh,
Speaker 1: I was curious about as far as what could be
Speaker 1: done to help healthcare workers feel more supported. Yeah, there's
Speaker 1: there's quite a bit that all of us can that
Speaker 1: all of us can do for for the hospital executives
Speaker 1: in particular, they can definitely invest more in career advancement,
Speaker 1: that more training opportunities for nurses so they're encouraged to
Speaker 1: stay in their health system. There's also quite a bit
Speaker 1: more work that needs to happen with providing more flexible scheduling,
Speaker 1: so allowing nurses to pick pick not just full time roles,
Speaker 1: but also part time roles, and not only twelve hour
Speaker 1: shifts but also four hours and eight hour shifts and
Speaker 1: weekend shift options, just so they can fit work into
Speaker 1: their into their into their lives a little easier. And
Speaker 1: then you know there of course, like the other big
Speaker 1: trend that we're seeing is with wages. You know, wages
Speaker 1: has increased overall. We're seeing a fourteen percent increase in
Speaker 1: sign on bonuses, in the use of sign on bonuses overall,
Speaker 1: and the actual amount of sign on bonuses has also
Speaker 1: was that ever a thing. Years ago. I had a
Speaker 1: sister who was a nurse. I don't remember her. I
Speaker 1: we're talking about a sign on bonus. It wasn't a
Speaker 1: thing at all. We've also seen the actual hourly rate increase.
Speaker 1: I think the reason it's become a thing is because,
Speaker 1: you know, there's a huge supply shortage here right There's
Speaker 1: a huge demands supply demand and balance, and as a result,
Speaker 1: because we don't have enough workers, wages will go up.
Speaker 1: So as far as kind of piecing all of this together.
Speaker 1: Are there more nurses that are planning now to actually
Speaker 1: stay in this rule a year from now versus obviously before,
Speaker 1: because you were explaining all those statistics now, So if
Speaker 1: they are planning to stay, does that potentially bode well, Yeah,
Speaker 1: it bodes well that they're more likely to stay. Now,
Speaker 1: keep in mind the turnover still high, right, the turnover
Speaker 1: annually is at twenty two percent, but thankfully much smaller
Speaker 1: percentage of nurses are looking to leave the field altogether.
Speaker 1: You know, one of the things that I remember, doctor
Speaker 1: obvious Dade from I think we talked last time, what's
Speaker 1: the average I hate that word, what's the average nurse make?
Speaker 1: But what's the average salary in nursing? It's about ninety
Speaker 1: three thousand naturally okay, natural average obviously varies dramatically by state. Yeah, no,
Speaker 1: I right, lots of variations. And I know we've talked about,
Speaker 1: as you said, there's not necessarily a lot of people
Speaker 1: coming into this profession. Once again, is it, you know,
Speaker 1: opening up immigration and I know we've talked about this
Speaker 1: in the past. Is that the fix? What's the fix
Speaker 1: in terms of encouraging people to enter and I often
Speaker 1: find that it's a lot of people from other countries
Speaker 1: that are nursing. So there's two keyball nucks that are
Speaker 1: happening in the US. Number one is that nursing school.
Speaker 1: So there's there's tens of thousands of Americans on wait
Speaker 1: lists to get into nursing schools, but the nursing schools
Speaker 1: cannot handle more capacity, and so we need to expand
Speaker 1: nursing full capacity in this country and train more nurses.
Speaker 1: And then there's another ball in that happening right after
Speaker 1: nursing school. And then there's not enough programs at hospitals
Speaker 1: and other other employers that train nurses to become more specialized.
Speaker 1: And so both of those are the two huge ball
Speaker 1: in next that we have just got about thirty seconds.
Speaker 1: We've talked with you about this before. Any progress that
Speaker 1: we're making on this, Are you seeing it? Not? Honestly,
Speaker 1: not yet not it's not showing up in the data yet.
Speaker 1: But I know, I know that many nursing leaders and
Speaker 1: HR leaders and nursing education leaders are actively working on it.
Speaker 1: They have to be stressed out because if you think
Speaker 1: about an aging population, we're all going to just need
Speaker 1: more of certainly healthcare services overall, but definitely nursing in particular. Eman,
Speaker 1: good to check in with you again. Doctor iman Abu's age.
Speaker 1: She's co founder and chief executive officer at Incredible Health
Speaker 1: JOININGSVA Zoom from Austin, Texas. Yeah, I mean, I think
Speaker 1: about it, right. We just know that an aging population
Speaker 1: is just going to need a lot of healthcare going
Speaker 1: foe and you do wonder whether the doctors will be there,
Speaker 1: the nurses will be there, absolutely, but then hearing about
Speaker 1: the wage gains signing bonuses, will that be enough to
Speaker 1: continue to get workers in that field as long as
Speaker 1: the pool of workers right there? All right, you're listening
Speaker 1: and watching Bloomberg Business Week. This is Bloomberg Radio. You're
Speaker 1: listening to the Bloomberg Business Week podcast. Catch us live
Speaker 1: weekday afternoons from three to six Eastern on Bloomberg Radio,
Speaker 1: the Bloomberg Business app, and YouTube. You can also listen
Speaker 1: live on Amazon Alexa from our flagship New York station
Speaker 1: Just Say Alexa playing Bloomberg eleven thirty. Okay, I'm just
Speaker 1: gonna say it. This is one of my favorite stories
Speaker 1: of the day. It's one that will be in the
Speaker 1: new issue of Bloomberg BusinessWeek on newstands later on this week,
Speaker 1: already online at Bloomberg dot com Sash Business Week, and
Speaker 1: it's of course on the Bloomberg terminal. It's about how
Speaker 1: China has become the lender of last resort for developing countries.
Speaker 1: Why you should care because it has lots of implications
Speaker 1: geopolitically and more. With more, let's head to Washington, DC.
Speaker 1: That's where we find Sean don And is Bloomberg News
Speaker 1: senior economics writer. He is on zoom and then in
Speaker 1: our Bloomberg a director broker studio, we have Bloomberg Business
Speaker 1: wee get or Joel Webber. Joel. I feel like China's
Speaker 1: involvement around the globe, especially in the developing world, has
Speaker 1: grown a lot. We know a lot of it by
Speaker 1: way of its Belt and Road initiative. This story by
Speaker 1: Sean now takes it up a notch. Yeah, and it
Speaker 1: actually looks at sort of the soft power and you're
Speaker 1: right about this epic project building spree that China has
Speaker 1: been been on. This is a little different and it
Speaker 1: actually shows that basically China has been in a quiet
Speaker 1: little fight with IMF and and the amount of money
Speaker 1: here is really the crazy part. So, Sean, what how
Speaker 1: did you find this story and what stands out to
Speaker 1: about these numbers. Yeah, look, this is really the results
Speaker 1: of some really great work by some economists at an
Speaker 1: outfit called AID Data, which is at William and Mary
Speaker 1: in Virginia, the World Bank, the Keel Institute in Germany,
Speaker 1: and Carmen Reinhardt up at Harvard, who is one of
Speaker 1: the world's leading experts on the kind of history and
Speaker 1: politics of debt and their impact on crises. They did
Speaker 1: this amazing work where they dived into really central bank
Speaker 1: records and other records around the world and identified this
Speaker 1: two hundred and forty billion dollars that had been loaned
Speaker 1: out by China over the last twenty years to twenty
Speaker 1: two countries. And these are twenty two countries in the
Speaker 1: developing world. And this is a different kind of lending
Speaker 1: from China in that what we've grown used to is
Speaker 1: China financing big infrastructure projects like ports in the developing world.
Speaker 1: This is actually what we would call rescue lending. These
Speaker 1: are bailouts to countries that have gotten into trouble, to
Speaker 1: their central banks to try and help them ride out crises.
Speaker 1: And that takes China into a whole different area of
Speaker 1: lending and, as you say, starts to establish it in
Speaker 1: its central bank as a lender of last resort in
Speaker 1: the global economy and the potential rival to institutions that
Speaker 1: have been around for since the end of World War two,
Speaker 1: really like the International Monetary Fund and that have become
Speaker 1: the normal way that we respond to crises. So you
Speaker 1: write that exact comparisons are difficult, but China's one hundred
Speaker 1: and eighty five billions surpassed one hundred and forty four
Speaker 1: billion dispersed by the IMF over this same period. What
Speaker 1: period are we talking in? Why is it so difficult
Speaker 1: to compare? Yeah, So, look, the IMF gives out concessional
Speaker 1: emergency loans with a lot of conditions attached, requiring reforms.
Speaker 1: The type of lending that we're talking about in this period,
Speaker 1: which is between two thy sixteen and twenty twenty one,
Speaker 1: which catches the lead up too in the first couple
Speaker 1: of years pandemic and some of the economic turmoil that
Speaker 1: we've seen since then. The type of lending you get
Speaker 1: from the People's Bank of China comes via these swaps
Speaker 1: to central bank reserves and it sometimes comes from state
Speaker 1: owned banks with higher interest rates and different ten years.
Speaker 1: The kind of terms of lending are difficult to compare,
Speaker 1: and that's what we're talking about there. But the total
Speaker 1: sum that we're talking about there, and this is the
Speaker 1: amount that's drawn down on credit lines rather than the
Speaker 1: amount that's committed by either China or the IMF, means
Speaker 1: that the one hundred and eighty five billion dollars that
Speaker 1: China sent out over that period these just these twenty
Speaker 1: two countries, remember, is comparable to the one hundred and
Speaker 1: forty four billion dollars that the IMF sent out dispersed
Speaker 1: to member countries that we're dealing with various economic crises
Speaker 1: in the same period. Okay, Sean, So what kind of
Speaker 1: countries are we talking about here and what do we
Speaker 1: know about why they've needed it? And turned to China. Yeah,
Speaker 1: so look, we're talking about countries like Pakistan, We're talking
Speaker 1: about countries like Argentina, Sri Lanka. We're talking largely about
Speaker 1: the poorer countries in the world and countries that have
Speaker 1: run into debt problems over the years. Some critics would
Speaker 1: charge that a lot of those debt problems have come
Speaker 1: as a result of Chinese lending. In fact, that's what
Speaker 1: the Biden administration and previous administrations would claim. This kind
Speaker 1: of this this incredible flow of funds that's come out
Speaker 1: through the Belton Road Initiative into the developing world to
Speaker 1: help build infrastructures, sometimes at terms that were, in hindsight,
Speaker 1: maybe too generous or irresponsible. This is and these are
Speaker 1: debts that have built up and as we hit the pandemic,
Speaker 1: As we hit the term, a lot of countries ran
Speaker 1: into trouble and they want to bolster their foreign exchange reserves.
Speaker 1: They need to bolster their government budgets to try and
Speaker 1: ride the stuff in the past. These are things that
Speaker 1: they would go to the IMF for or other land.
Speaker 1: How much of it, too, is about the Chinese currency,
Speaker 1: because we know that the Chinese would love for the
Speaker 1: Chinese currency to be the world reserve currency and not
Speaker 1: the US dollar, and they've tried to kind of put
Speaker 1: it out there. This is all about influence, right and
Speaker 1: currency is out there are are about influence as well.
Speaker 1: This is about a great geopolitical battle. A lot of
Speaker 1: these swap lines that were set up by the PBOC
Speaker 1: over the last twenty years were set up with the
Speaker 1: idea of financing trade and getting the world to use
Speaker 1: the Chinese currency, the rand named a lot more. But
Speaker 1: in what we've seen in this case, and what they
Speaker 1: really document in the study, is that these swap lines
Speaker 1: that were set up for that purpose in fact ended
Speaker 1: up being used for kind of emergency rescues and in
Speaker 1: some cases, you know, ended up as as dollar funds
Speaker 1: going into the foreign reserves are being transferred into dollars
Speaker 1: and kind of you know, bolstering the dollar system in
Speaker 1: a way and in a funny way. But the whole,
Speaker 1: the whole game here is really you know, when we
Speaker 1: talk about the US and China and growing rivalries and
Speaker 1: in this Cold War, we often focus on the trade
Speaker 1: wars or the battles over technology and things like semiconductors. Well,
Speaker 1: this is a whole other side that we really need
Speaker 1: to start paying it to more attention to. And that's
Speaker 1: debt and what is happening in the world where a
Speaker 1: lot of poor countries are getting into increasing problems and
Speaker 1: they need rescues. And here's China riding to the rescue
Speaker 1: alongside the International Monetary Fund and some of those US
Speaker 1: led or US backed institutions that have been the tradition,
Speaker 1: the traditional responders and sean when you're talking about these
Speaker 1: swap lines. Obviously, when we think about the Federal Reserve,
Speaker 1: it's so crucial when they have this to obviously prevent
Speaker 1: liquidity problems, and they've done some measures in the last
Speaker 1: few weeks with other central banks to expand the frequency
Speaker 1: of that. But when we're talking about China's currency swap
Speaker 1: agreements kind of set this up, and how exactly could
Speaker 1: all of this play out, and what's different about this
Speaker 1: compared with when you're looking at these other global central banks, right, So,
Speaker 1: I mean, the FED swap lines are with fairly they've
Speaker 1: become this crisis responsible since the two thousand and seven
Speaker 1: eight global financial crisis, but there was a pretty limited
Speaker 1: set of central banks. These are largely rich world central banks,
Speaker 1: the European Central Bank, the Bank of England and the
Speaker 1: Bank of Japan and so on, and they're really about,
Speaker 1: you know, getting emergency liquidity into the dollar system. They're
Speaker 1: always be incredibly transparent. You can go out to the
Speaker 1: New York Federal Reserves website and you can look at
Speaker 1: individual transactions and who has drawn down and the tenor
Speaker 1: of those transactions, the interest rate that's that's being paid.
Speaker 1: The Chinese here are doing something different. They're using these
Speaker 1: swap lines as more traditional or different kind of rescue loans.
Speaker 1: And look, their defenders say, and they're doing something that's
Speaker 1: needed in the world, and that they're helping out these
Speaker 1: central banks in developing countries. These are banks that central
Speaker 1: banks that don't have access to the FED swap lines,
Speaker 1: and they're helping them at times when they really need
Speaker 1: to help. Hey, Sean, is this, though, in essence, perhaps
Speaker 1: really a Chinese bank bailout? Well, that's the suspicion of
Speaker 1: the authors, and Carmen reinharden I had this fascinating interview
Speaker 1: and when she says, look, I think part of this
Speaker 1: is the PBOC bailing out Chinese banks that got into
Speaker 1: trouble as a result of Shijianpings Belt and Road initiative
Speaker 1: that ended up with these bad loans and developing countries.
Speaker 1: And if you look, there's a correlation between where these
Speaker 1: these swap lines are being drawn down and the bad
Speaker 1: debts that are out there for China um or the
Speaker 1: high levels of indebtedness to China. But she also says
Speaker 1: she can't prove that. Then again she also says it
Speaker 1: doesn't matter because money is fungible, and if you get
Speaker 1: money in central bank reserves that frees up money elsewhere
Speaker 1: on government balance sheets. It can help. Uh, you know,
Speaker 1: governments use her bolster budgets and uh. And the overall
Speaker 1: economic position in a country to the US, I amf
Speaker 1: looking at this. Suddenly there number two or distant more
Speaker 1: distant than that. How do how does this play out? John?
Speaker 1: I think from we got to watch. Uh, it's hard
Speaker 1: to watch because it's opaque. This is you know, again,
Speaker 1: the genius of this study is that they've they've told
Speaker 1: us about this, they've documented these something. These are not
Speaker 1: things that we can look at easily on the PBOC website. Um.
Speaker 1: And so we really needed to watch and see where
Speaker 1: where China established itself in the world and where it
Speaker 1: sends this money, whether it is just to bail out
Speaker 1: Chinese banks, in which case that's going to be something
Speaker 1: that wraps up in just a couple of years, or
Speaker 1: whether they're establishing themselves as a longer term beneficent power
Speaker 1: that comes in to help rescue the world's poorer countries
Speaker 1: and does so for generations to come. Well, it is
Speaker 1: kind of interesting and I just think it just shows
Speaker 1: you how China is just playing on a very very
Speaker 1: different level here Sean. You know, in terms of these markets,
Speaker 1: many of them that they're playing into in the emerging world,
Speaker 1: I mean, they have things that China wants to tap into,
Speaker 1: whether it's raw materials, raw minerals, if you will. And
Speaker 1: I just feel like the relationship becomes much more intertwined. Absolutely. Look,
Speaker 1: as we said earlier, this is all about influence in geopolitics,
Speaker 1: and we're going to be watching this for many years
Speaker 1: to come. We talked about how this could potentially help
Speaker 1: out these poorer economies, but what would be the consequences
Speaker 1: for the global economy with this? Give it the nature
Speaker 1: of it. Yeah, look, it's there is You know, Carmen
Speaker 1: Reinhardt is among the skeptics when when she talks about
Speaker 1: helping out these poorer economies. You're providing money. But in
Speaker 1: some ways, one of the things we've seen with China
Speaker 1: is that they've been reluctant to restructure aircats on debts
Speaker 1: to really ease the debt burden on a lot of
Speaker 1: poor countries. And we could get into a cycle where
Speaker 1: some of these countries just get stuck in debt traps,
Speaker 1: and that the Chinese while they're they're funneling this money,
Speaker 1: they're they're keeping things ticking along. These these countries maybe
Speaker 1: paying the bills day in and day out, but they
Speaker 1: may not be getting out from under these debt piles,
Speaker 1: which drags on their economies, which has social consequences for
Speaker 1: their people, and they have consequences for people in the
Speaker 1: rich world as well as we see you know, we've
Speaker 1: we've seen this at our southern border here in the
Speaker 1: United States, people from troubled economies in Central America coming
Speaker 1: north and you could pay out of Africa and other
Speaker 1: parts of you know, you mentioned economic problems. You mentioned
Speaker 1: Sri Lanka there, and that also exact exact example of that,
Speaker 1: where you have a stable country, stable economy, and all
Speaker 1: of a sudden it finds itself with you know, just
Speaker 1: astronomical amounts of debt that's also linked to China. Um
Speaker 1: When you think through some of those other names that
Speaker 1: we've rattled through here, genre there any other ones that
Speaker 1: jump out to you that we'll be talking about who
Speaker 1: are linked in the same research. Look, when it comes
Speaker 1: to debt problems that are very live and the people
Speaker 1: are looking at right now. It's Sri Lanka, it's Zambia
Speaker 1: and Africa. It's Ghana, where debt restructuring talks were just
Speaker 1: getting started. And then there's the one that gives a
Speaker 1: lot of people. That is Pakistan, which obviously is a
Speaker 1: nuclear power, and it also has some incredible debt problems
Speaker 1: and some big Chinese debt problems that it needs to
Speaker 1: sort out in the years to come. Hence what we
Speaker 1: said at the beginning, some you know, potentially this all
Speaker 1: has implications when it comes to geopolitics. Sean, great story
Speaker 1: and I'm must read. Sean Donnan is senior economics writer
Speaker 1: at Bloomberg News via zoom from Washington, d see our
Speaker 1: thanks to him as well as Jill Webber, editor of
Speaker 1: Bloomberg Business Week. He's in our studio this story. By
Speaker 1: the way, it's going to be the upcoming new issue
Speaker 1: of Bloomberg Business Week. It'll be out on newstands on Thursday.
Speaker 1: Already on the Bloomberg terminal, but you can also find
Speaker 1: it at Bloomberg dot com slash business Week. Really really
Speaker 1: important and certainly sign of our times, definitely, and especially
Speaker 1: when we're talking about these currency swap agreements, specifically with
Speaker 1: China and how that differs when you're thinking about these
Speaker 1: other central banks globally. It's really fascinating to see potentially
Speaker 1: how this plays out, as well as when we talked
Speaker 1: about these poorer economies that potentially need this help, and
Speaker 1: then also the potential consequences there. I love how it's
Speaker 1: kind of like a sly way to get everybody to
Speaker 1: use the Chinese currency. Rachelburn just you know, hey, look
Speaker 1: at this. Look at this. We have a we have
Speaker 1: an app for that too. How did that happen? You're
Speaker 1: listening to the Bloomberg Business Week podcast. Catch us live
Speaker 1: weekday afternoons from three to six Eastern Listen on Bloomberg
Speaker 1: dot com, the iHeart Radio app, and the Bloomberg Business app,
Speaker 1: or watch us live on YouTube. I'm rum journal. But
Speaker 1: you let me drive? Oh no, no, no, no, who's
Speaker 1: going home? Honey? Please? I'll do the riding gravels. I
Speaker 1: want to drive. It's good question. This is the drive
Speaker 1: to the clothes than well, jog down on Bloomberg Radio.
Speaker 1: All right, everybody, let's get to it. You've got about
Speaker 1: eighteen minutes left today's trading session, getting ready to wrap
Speaker 1: up the trading day. Thank you lower that, Thank you
Speaker 1: very much. All Right, equities bouncing around. We're definitely off
Speaker 1: our best levels of the session, a little bit lower
Speaker 1: on each of those major equity averages, as you just
Speaker 1: heard from Charlie Tech the most down on a percentage
Speaker 1: basis among those big three indexes. As for the two
Speaker 1: year note, we're looking at it at four point zero three.
Speaker 1: Sustain above that four percent marker, right at it. Let's
Speaker 1: get to it. We want to talk a little bit
Speaker 1: about the fixed income world. Brian Allen is director of
Speaker 1: fixed income at the institutional investment manager cs McKey Asset Management.
Speaker 1: They've got over seven point nine billion dollars in assets
Speaker 1: as of the end of last year, based in Pittsburgh,
Speaker 1: and he joins us via zoom from Jacksonville, Florida. Hey, Brian,
Speaker 1: good to have you here with us, right person to
Speaker 1: have Considering what's been going on in the financial markets,
Speaker 1: what do you make of the environment and your expectations
Speaker 1: for the fixed income world over the next six to
Speaker 1: twelve months. Do you have clarity, first of all, or
Speaker 1: transparency in terms of what comes next? Frankly, no real clarity.
Speaker 1: It was certainly the events of the last few weeks
Speaker 1: pointed out that we've come a long way with respect
Speaker 1: the FED funds and general market interest rates frankly a
Speaker 1: little too high. The concern was always the Fed would
Speaker 1: raise rates until something broke, and it seems we've reached
Speaker 1: that threshold. We had quickest moved down in rates over
Speaker 1: a short term time frame that we've seen in at
Speaker 1: least since nineteen eighty seven. So I think going forward
Speaker 1: we may see one more rate high from the Fed,
Speaker 1: and I don't expect to see the three or four
Speaker 1: rate cuts the markets discounting, but I think it's safe
Speaker 1: to say that the Fed will be done after another
Speaker 1: rate high pick and we'll wait to see what the
Speaker 1: ripple effects of the banking Not crisis, but concerns we
Speaker 1: have right now how they play out. Not a crisis, Yeah,
Speaker 1: okay TBD Brian. With all of this uncertainty that's swirling around,
Speaker 1: how are you advis clients to position in this type
Speaker 1: of environment. For our clients in particular, we are very
Speaker 1: much quality and liquidity focus that certainly will serve them well.
Speaker 1: Now we have concerns about the rising odds of a
Speaker 1: ridge session and what that may do to credit, not
Speaker 1: only to the consumer, the borrowers. But the performance of
Speaker 1: corporate credit for our investments. One thing one I guess
Speaker 1: blessing in disguise from the spike and volatility we've seen
Speaker 1: as a deep discount and very attractive spread levels on
Speaker 1: agency issues that frankly now are yielding comparable to investment
Speaker 1: great treasuries without the same economic cyclicality exposure that our
Speaker 1: corporate credit has the same type of risk. There well,
Speaker 1: you certainly have exposure to volatility, and a little more
Speaker 1: so than you find in corporate credit when you're just
Speaker 1: focused on market volatility. We've seen such a spight, though
Speaker 1: we've now gone back. We've exceeded the levels seen during
Speaker 1: the first quarter of twenty and twenty with COVID, and
Speaker 1: we were on par with the worst levels. The highest
Speaker 1: levels in volatility is seen in two thousand and eight,
Speaker 1: So that really has chief in those securities and made
Speaker 1: them very attractive. And the one thing you can bet
Speaker 1: the beds obviously desire is to bring inflation under control,
Speaker 1: but to certainly do their part to establish liquidity in
Speaker 1: the markets and market function, and therefore we think it's
Speaker 1: a safe bet that market volatility won't stay at these
Speaker 1: unusually elevated levels for too long. Hey what about real estate?
Speaker 1: And I bring it up something just crossed on Twitter.
Speaker 1: This is from the Real Deal, which follows the real
Speaker 1: estate sector, but they talk specifically about dead on Blackstone
Speaker 1: buildings forty seven percent more than the portfolio's worth. This
Speaker 1: is coming from Moodies. The rating agency downgrades the debt,
Speaker 1: setting eleven properties quote declining performance. And they're just talking
Speaker 1: about a couple of months after Blackstone secured a two
Speaker 1: hundred and seventy million dollars loan secured by eleven Manhattan
Speaker 1: multi family buildings went to special servicing. So Moody's downgraded
Speaker 1: the CMBs debt, citing cash flow that wouldn't cover the
Speaker 1: debt service. How are you looking at real estate specifically,
Speaker 1: which we all keep wondering post pandemic, certainly here in
Speaker 1: the United States, a lot of people are still working
Speaker 1: from home. I look at a major city like New
Speaker 1: York and there are still a lot of empty buildings.
Speaker 1: How are you looking at commercial real estate specifically? A
Speaker 1: very small portion of the universal the securities that we
Speaker 1: look at and in years past, certainly post two thousand
Speaker 1: and eight, we're very heavily invested in the evaluations were
Speaker 1: rock bottom at that point in time. I do have
Speaker 1: concern now about the elevated prices. One of the benefits
Speaker 1: are now risks that came from unusually historically low interest
Speaker 1: rates for so long. And the real concern, frankly, is
Speaker 1: not only but downrays that have occurred to funds like
Speaker 1: black Rock, but the refire risk when these bonds come,
Speaker 1: when loans come due, whether they can underwrite them at
Speaker 1: anywhere near the same value they have before. Certainly the
Speaker 1: terms won't be as attractive, and we certainly know the
Speaker 1: interest rate levels are much higher than they have been
Speaker 1: the last three or four years. So it's a challenge.
Speaker 1: In the office space historically was one that you could
Speaker 1: bet on. Frank they had concerns about twenty twenty. It
Speaker 1: was really a hotel space, then a man travel and
Speaker 1: leisure related but now long term effects. Certainly one of
Speaker 1: the largest subcomponents of the commercial real estate market is
Speaker 1: office space, and it's I think you'd be very selective
Speaker 1: and look more towards suburban and sunbelt properties then in
Speaker 1: downtown New York Chicago, some of the old Brian can
Speaker 1: I just ask you, is it a manageable problem in
Speaker 1: your view or maybe not, but I think it'll take
Speaker 1: equity infusion. Certainly. I think the properties continue to come
Speaker 1: back over time. I think places like New York do
Speaker 1: have a sort of migration problem, if you will, certainly
Speaker 1: seen a number of Wall Street firms and locates on
Speaker 1: the back office in Florida and Texas. And then of
Speaker 1: the years have gone by the last two years joined
Speaker 1: by more of the sales side trading side moving out
Speaker 1: of New York, either again for tax reasons, why the reasons, certainly,
Speaker 1: and evaluations in New York and in Chicago, I think
Speaker 1: will continue to be pressured. And there's only I think
Speaker 1: only so much conversion they con from office space into
Speaker 1: residential and the sort of teenat in Pittsburgh. But at
Speaker 1: some point they saturated the market with respect to new
Speaker 1: residential modifications to old office space. Brian, we only have
Speaker 1: about a minute left, but I want to ask you
Speaker 1: do you think the FED should raizor rates, pause or
Speaker 1: cut rates at its next meeting in May about fifty fifty.
Speaker 1: I frankly think they want to send a message of
Speaker 1: inflation really is their first concern. They have to be
Speaker 1: in the offs are aware of what's going on. In
Speaker 1: the banking world. I do think that ultimately, whether they
Speaker 1: do or don't, the message will be relatively clear that
Speaker 1: they're done or at least on pause after the May meeting.
Speaker 1: And again, I do think that the financial conditions industries
Speaker 1: they pay attention to, they've seen now. Credit card balances
Speaker 1: have gone up, loan delinquencies have certainly be under rise,
Speaker 1: debt to income ratios on mortgages. There is definite signs
Speaker 1: of the consumer is tapped out and have really worked
Speaker 1: through the majority of not all, of the excess income. Yeah,
Speaker 1: well feels like a sober or sober in tone. Brian,
Speaker 1: great to check in week you. Brian Allen, the director
Speaker 1: of fixed Income at Csukey Asset Management based in Pittsburgh,
Speaker 1: were joining SPASO from Jacksonville, Florida. These is the Bloomberg
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