1 00:00:02,920 --> 00:00:08,320 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:10,560 --> 00:00:13,000 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:13,039 --> 00:00:14,960 Speaker 2: the top stories in the coming week from our day 4 00:00:15,000 --> 00:00:17,119 Speaker 2: Break anchors all around the world, and straight ahead on 5 00:00:17,160 --> 00:00:19,840 Speaker 2: the program, a look at key inflation data in the 6 00:00:19,920 --> 00:00:23,600 Speaker 2: US and earnings from media and entertainment giant Walt Disney. 7 00:00:23,880 --> 00:00:25,440 Speaker 2: I'm Tom Busby in New York. 8 00:00:25,640 --> 00:00:28,400 Speaker 1: I'm callin hetger Hair in London, where we're thinking about 9 00:00:28,440 --> 00:00:32,120 Speaker 1: the Chancellor's Mansion House speech as she tries to moove 10 00:00:32,120 --> 00:00:32,560 Speaker 1: a city. 11 00:00:32,920 --> 00:00:35,800 Speaker 3: I'm Doug Krisner looking at bay Chain's reaction to the 12 00:00:35,800 --> 00:00:38,720 Speaker 3: reelection of Donald Trump. Will also take a look at 13 00:00:38,760 --> 00:00:41,160 Speaker 3: what to expect in the week ahead from ten Cent 14 00:00:41,280 --> 00:00:42,680 Speaker 3: as it reports earnings. 15 00:00:43,880 --> 00:00:47,360 Speaker 4: That's all e struly head on Bloomberg Daybreak Weekend on 16 00:00:47,520 --> 00:00:52,000 Speaker 4: Bloomberg eleven Trio, New York, Bloomberg ninety nine to one, Washington, DC, 17 00:00:52,440 --> 00:00:57,320 Speaker 4: Bloomberg ninety two nine Boston, DAB Digital Radio, London, Sirius 18 00:00:57,480 --> 00:01:00,840 Speaker 4: XM one twenty one, and around the world Bloomberg Radio 19 00:01:00,920 --> 00:01:03,160 Speaker 4: dot Com and the Bloomberg Business app. 20 00:01:08,200 --> 00:01:08,760 Speaker 5: Good day to you. 21 00:01:08,840 --> 00:01:11,120 Speaker 2: I'm Tom Busby, and we begin today's program with some 22 00:01:11,240 --> 00:01:14,560 Speaker 2: key inflation data in the US. The Consumer Price Index 23 00:01:14,600 --> 00:01:18,280 Speaker 2: the CPI out on Wednesday eight thirty am Wall Street Time, 24 00:01:18,760 --> 00:01:21,760 Speaker 2: with the Federal Reserve lowering its benchmark lending rate two 25 00:01:21,800 --> 00:01:24,319 Speaker 2: meetings in a row, what could this mean for Fed 26 00:01:24,440 --> 00:01:27,800 Speaker 2: policy moving forward? For more, we're joined by Michael McKee, 27 00:01:27,800 --> 00:01:32,319 Speaker 2: Bloomberg International Economics and Policy correspondent. Michael Well, let's start 28 00:01:32,319 --> 00:01:35,200 Speaker 2: with where inflation is right now. It's come a long way. 29 00:01:35,880 --> 00:01:37,760 Speaker 6: It's come a long way, but it seems to have 30 00:01:37,800 --> 00:01:40,959 Speaker 6: stalled out a little bit progress. We have not seen 31 00:01:41,120 --> 00:01:46,839 Speaker 6: major movements in the indexes in recent months. Now, the CPI, 32 00:01:47,000 --> 00:01:50,920 Speaker 6: which comes up this week is expected to show basically 33 00:01:51,080 --> 00:01:53,800 Speaker 6: no change on a month over month basis, but that 34 00:01:53,800 --> 00:01:57,040 Speaker 6: would mean, because of what we call base effects, that 35 00:01:57,360 --> 00:02:00,280 Speaker 6: the year over year headline CPI actually goes up up. 36 00:02:00,640 --> 00:02:03,080 Speaker 6: The forecast is for two point six percent from two 37 00:02:03,120 --> 00:02:07,400 Speaker 6: point four percent in September, and the core will stay 38 00:02:07,520 --> 00:02:11,359 Speaker 6: unchanged at three point three percent, which is not going 39 00:02:11,400 --> 00:02:15,360 Speaker 6: to make for a great headline for people. But and 40 00:02:15,480 --> 00:02:16,720 Speaker 6: Jay Powell talked about. 41 00:02:16,520 --> 00:02:19,000 Speaker 5: That that we have. 42 00:02:19,320 --> 00:02:22,120 Speaker 6: Not seen a lot of progress, but he said it 43 00:02:22,200 --> 00:02:24,799 Speaker 6: wasn't a bad situation because it's still pretty low. 44 00:02:25,200 --> 00:02:28,480 Speaker 2: So the latest personal consumption expenditure though look like a 45 00:02:28,680 --> 00:02:30,359 Speaker 2: two point one percent year over year. 46 00:02:30,800 --> 00:02:34,720 Speaker 6: Yeah, And the problem for the FED is people tend 47 00:02:34,720 --> 00:02:35,840 Speaker 6: to focus on the CPI. 48 00:02:36,000 --> 00:02:38,000 Speaker 5: The average American focuses on the CPI. 49 00:02:38,080 --> 00:02:40,200 Speaker 6: It's the one that gets the headlines on the front 50 00:02:40,240 --> 00:02:42,560 Speaker 6: page of the paper when it comes out. The PCE 51 00:02:42,880 --> 00:02:47,919 Speaker 6: numbers are something that economics nerds and FED and Wall 52 00:02:47,960 --> 00:02:52,840 Speaker 6: Street people follow it. It's constructed differently, and the FED 53 00:02:52,919 --> 00:02:56,680 Speaker 6: feels that it is a more accurate measure of what's 54 00:02:56,720 --> 00:03:00,600 Speaker 6: actually happening happening with inflation, particularly since doesn't put as 55 00:03:00,680 --> 00:03:02,040 Speaker 6: much weight on home. 56 00:03:01,919 --> 00:03:03,280 Speaker 5: Prices as the CPI. 57 00:03:03,360 --> 00:03:07,560 Speaker 6: But the CPI is what they have to deal with psychologically. 58 00:03:08,120 --> 00:03:10,239 Speaker 2: So what are the big drivers then for this? I mean, 59 00:03:10,600 --> 00:03:13,200 Speaker 2: we've all felt a low gas prices, that's great. You 60 00:03:13,280 --> 00:03:16,480 Speaker 2: brought up housing prices which go nowhere, but up it seems. 61 00:03:16,919 --> 00:03:19,440 Speaker 2: I mean, what are the drivers for the inflation that 62 00:03:19,480 --> 00:03:21,600 Speaker 2: we're seeing now? The two point one percent in the PCE, 63 00:03:22,120 --> 00:03:24,280 Speaker 2: maybe a three point three percent in the CPI. 64 00:03:24,560 --> 00:03:27,080 Speaker 6: Well, we still have housing as a problem. It's not 65 00:03:27,120 --> 00:03:29,960 Speaker 6: coming down as fast as the FED thought. Chairman Powell 66 00:03:30,040 --> 00:03:33,480 Speaker 6: last week pointed out that when you look at new 67 00:03:33,600 --> 00:03:37,000 Speaker 6: costs for rents, which is what the housing costs numbers 68 00:03:37,040 --> 00:03:40,160 Speaker 6: are based on. They have gone down or they have 69 00:03:40,280 --> 00:03:43,440 Speaker 6: stopped rising, and that should be reflected in the numbers, 70 00:03:43,560 --> 00:03:47,560 Speaker 6: and it's not yet. There are other things that are 71 00:03:47,840 --> 00:03:53,160 Speaker 6: sort of quirky and change with the timing of the year. 72 00:03:53,800 --> 00:03:58,440 Speaker 6: One of them is airfares, another is hotel prices. And 73 00:03:58,480 --> 00:04:01,520 Speaker 6: you know we've talked about used and new cars quite 74 00:04:01,520 --> 00:04:06,440 Speaker 6: a bit. Those all go into the question about what 75 00:04:06,520 --> 00:04:10,960 Speaker 6: is going to happen with inflation, and they're all sort 76 00:04:10,960 --> 00:04:14,600 Speaker 6: of separate, different reasons why they're going up. For example, 77 00:04:14,640 --> 00:04:19,080 Speaker 6: we are expecting maybe used car prices to rise in 78 00:04:19,120 --> 00:04:21,200 Speaker 6: October because a lot of people who were in the 79 00:04:21,279 --> 00:04:24,960 Speaker 6: hurricane damaged areas, they still had to get to work 80 00:04:25,000 --> 00:04:26,719 Speaker 6: and their cars were destroyed, the. 81 00:04:27,320 --> 00:04:29,080 Speaker 5: New cars, and the first thing they do is they. 82 00:04:28,960 --> 00:04:32,599 Speaker 6: Go get the cheapest car they can get, and so 83 00:04:32,960 --> 00:04:36,200 Speaker 6: we should expect to see some rise in used car 84 00:04:36,279 --> 00:04:38,640 Speaker 6: prices and the next month maybe the new car prices 85 00:04:38,680 --> 00:04:39,040 Speaker 6: go up. 86 00:04:39,520 --> 00:04:42,000 Speaker 2: And another thing we've seen in some of these job 87 00:04:42,080 --> 00:04:46,359 Speaker 2: numbers higher wages is that impacting inflation as well. The 88 00:04:46,360 --> 00:04:50,000 Speaker 2: more people have, the more they can raise the price tags, 89 00:04:50,040 --> 00:04:50,680 Speaker 2: the more. 90 00:04:51,240 --> 00:04:54,839 Speaker 6: It's an interesting question. So far that doesn't seem to 91 00:04:54,920 --> 00:04:58,000 Speaker 6: have been happening. It may have been in the last 92 00:04:58,040 --> 00:05:01,440 Speaker 6: couple of years, given that we saw a big wage 93 00:05:01,480 --> 00:05:05,679 Speaker 6: increases as there was a shortage of workers, and whether 94 00:05:05,760 --> 00:05:09,760 Speaker 6: that fed into inflation expectations doesn't really look like it did. 95 00:05:10,279 --> 00:05:15,000 Speaker 6: But we had just last week got a revision to 96 00:05:15,640 --> 00:05:18,960 Speaker 6: unit labor costs that showed a big rise in compensation 97 00:05:19,160 --> 00:05:21,919 Speaker 6: for employees, much bigger over the last couple of years 98 00:05:21,960 --> 00:05:24,600 Speaker 6: than had been recorded. The fact that it was a 99 00:05:24,680 --> 00:05:26,760 Speaker 6: revised number doesn't mean all of a sudden we're going 100 00:05:26,800 --> 00:05:30,160 Speaker 6: to see inflation expectations rise, but it does suggest that 101 00:05:30,200 --> 00:05:34,679 Speaker 6: people have more money, and so as long as demand 102 00:05:34,800 --> 00:05:36,560 Speaker 6: is high, then it becomes. 103 00:05:36,279 --> 00:05:39,559 Speaker 5: A question of supply keeping up or prices will rise. 104 00:05:39,760 --> 00:05:42,360 Speaker 2: Yeah. Yeah, Let's go back to what the Fed did 105 00:05:42,400 --> 00:05:46,400 Speaker 2: this past week, and you know, this quarter point twenty 106 00:05:46,400 --> 00:05:49,280 Speaker 2: five basis point cut. And more importantly, I want to 107 00:05:49,320 --> 00:05:51,640 Speaker 2: talk about Chairman Powell and what he said in his 108 00:05:51,680 --> 00:05:56,679 Speaker 2: press conference talking about the new administration coming in, talking 109 00:05:56,760 --> 00:06:00,400 Speaker 2: about all the factors and data points that led to 110 00:06:00,440 --> 00:06:01,800 Speaker 2: his decision this past week. 111 00:06:02,279 --> 00:06:07,880 Speaker 6: Basically because the economy continues to be relatively strong, but 112 00:06:08,480 --> 00:06:15,320 Speaker 6: slow down in inflation and missed the confusing jobs reports 113 00:06:15,360 --> 00:06:18,680 Speaker 6: from September and October, where September was really really strong 114 00:06:18,680 --> 00:06:22,440 Speaker 6: in October was really really weak, which they figure probably 115 00:06:22,520 --> 00:06:26,560 Speaker 6: as hurricane related, but at this point they don't know, 116 00:06:26,920 --> 00:06:29,080 Speaker 6: so they just went ahead with kind of the plan. 117 00:06:29,160 --> 00:06:32,239 Speaker 6: They had to reduce rates by twenty five basis points 118 00:06:32,279 --> 00:06:36,560 Speaker 6: because they said, no matter what you think of all 119 00:06:36,600 --> 00:06:42,280 Speaker 6: these possible explanations for stuff, that inflation was under control 120 00:06:42,360 --> 00:06:44,359 Speaker 6: and that interest rates are still restrictive. 121 00:06:44,400 --> 00:06:46,320 Speaker 5: That's their story. 122 00:06:46,240 --> 00:06:49,559 Speaker 2: And they're sticking to it. A lot to look forward 123 00:06:49,600 --> 00:06:53,000 Speaker 2: to our thanks to Michael McKee, Bloomberg International Economics and 124 00:06:53,080 --> 00:06:56,719 Speaker 2: Policy correspondent. We moved next to corporate earnings from the 125 00:06:56,720 --> 00:07:00,640 Speaker 2: world's biggest entertainment company, Walt Disney, reporting fourth order results 126 00:07:00,640 --> 00:07:03,200 Speaker 2: on Thursday, on the heels of finally turning a profit 127 00:07:03,240 --> 00:07:05,920 Speaker 2: and its streaming video unit in the previous quarter, and 128 00:07:06,120 --> 00:07:10,680 Speaker 2: after announcing another timeline to replace its CEO. For more 129 00:07:10,800 --> 00:07:13,200 Speaker 2: on what to look for, we're joined by Getha raghanoffin 130 00:07:13,560 --> 00:07:18,200 Speaker 2: Bloomberg Intelligence analyst on US media. Well that is a 131 00:07:18,240 --> 00:07:21,800 Speaker 2: Biggie Disney appointing a new chairman last month. James P. 132 00:07:22,000 --> 00:07:25,360 Speaker 2: Gorman of Wall Street banking giant Morgan Stanley, and announced 133 00:07:25,720 --> 00:07:29,840 Speaker 2: another time frame to replace Bob Eiger in early twenty 134 00:07:29,920 --> 00:07:33,080 Speaker 2: twenty six. What does this mean for Disney, Gita. 135 00:07:33,160 --> 00:07:35,720 Speaker 7: Thank you so much, Tom So. Obviously, succession has been 136 00:07:35,760 --> 00:07:39,600 Speaker 7: one of the biggest issues for Disney in recent times, 137 00:07:39,640 --> 00:07:42,160 Speaker 7: and you know, the lack of a proper strategy has 138 00:07:42,280 --> 00:07:47,320 Speaker 7: really kind of troubled investors and kind of industry watchers alike. 139 00:07:48,200 --> 00:07:50,080 Speaker 7: So it's really good that they're coming up with this plan. 140 00:07:50,120 --> 00:07:54,520 Speaker 7: They're obviously taking succession extremely seriously. They have a person 141 00:07:54,560 --> 00:07:58,400 Speaker 7: there who's kind of overseen, you know, his own succession 142 00:07:58,440 --> 00:08:01,400 Speaker 7: at at Morgan Stanley really really smoothly, so he's obviously 143 00:08:01,480 --> 00:08:06,000 Speaker 7: very familiar with the process. That said, Tom, the appointment 144 00:08:06,000 --> 00:08:08,720 Speaker 7: of a new CEO has actually been pushed a little bit. 145 00:08:08,800 --> 00:08:11,560 Speaker 7: So we were expecting an announcement sometime next year, in 146 00:08:11,600 --> 00:08:14,600 Speaker 7: twenty twenty five. It looks like that's going to be 147 00:08:14,680 --> 00:08:17,440 Speaker 7: pushed at least you know, six months, or maybe even 148 00:08:17,520 --> 00:08:20,960 Speaker 7: more to sometime in twenty twenty six. And it obviously 149 00:08:20,960 --> 00:08:23,560 Speaker 7: tells us how critical of an issue this is and 150 00:08:23,600 --> 00:08:26,360 Speaker 7: also how complicated it is. And that's just because of 151 00:08:26,400 --> 00:08:29,080 Speaker 7: the nature of Disney's business. I mean, they have so many, 152 00:08:29,320 --> 00:08:33,280 Speaker 7: very many disparate businesses. Whether it's theme parks or studios, 153 00:08:33,400 --> 00:08:36,720 Speaker 7: or the television networks or ESPN, they all require kind 154 00:08:36,720 --> 00:08:39,560 Speaker 7: of different expertise and a different skill set, and so 155 00:08:39,559 --> 00:08:41,600 Speaker 7: it's going to be hard to kind of it's obviously 156 00:08:41,720 --> 00:08:42,760 Speaker 7: very big shoes to fill. 157 00:08:42,960 --> 00:08:43,160 Speaker 5: Well. 158 00:08:43,280 --> 00:08:45,840 Speaker 2: Also, the last one did not work out so well 159 00:08:45,840 --> 00:08:46,679 Speaker 2: with Bob Chappick. 160 00:08:46,880 --> 00:08:49,360 Speaker 7: Yes, and again this is where, you know, we come 161 00:08:49,400 --> 00:08:51,000 Speaker 7: back to this age old question. I mean, do you 162 00:08:51,120 --> 00:08:55,040 Speaker 7: have somebody who is really good in terms of relationships 163 00:08:55,040 --> 00:08:57,640 Speaker 7: with you know, the creatives, with Hollywood executives, or do 164 00:08:57,720 --> 00:09:01,160 Speaker 7: you have a more hands on person who has tremendous 165 00:09:01,200 --> 00:09:04,360 Speaker 7: experience with the parks. And so even as they kind 166 00:09:04,360 --> 00:09:08,320 Speaker 7: of go about trying to determine who their new CEO 167 00:09:08,400 --> 00:09:10,319 Speaker 7: will be, I think that kind of really will give 168 00:09:10,400 --> 00:09:13,160 Speaker 7: us a glimpse into what their future strategy is going 169 00:09:13,200 --> 00:09:15,320 Speaker 7: to be. Is it going to be more a theme 170 00:09:15,480 --> 00:09:18,200 Speaker 7: park kind of focused company. We do have to remember 171 00:09:18,200 --> 00:09:19,880 Speaker 7: that this is the bread and butter of the company, 172 00:09:19,920 --> 00:09:24,480 Speaker 7: brings in almost sixty five percent of profits, so definitely 173 00:09:24,640 --> 00:09:27,160 Speaker 7: very very critical to both the top and the bottom line. 174 00:09:27,240 --> 00:09:30,480 Speaker 7: But at the same time, you know, Hollywood relationship with 175 00:09:30,679 --> 00:09:33,720 Speaker 7: you know, Hollywood talent with creatives is also important because 176 00:09:33,800 --> 00:09:36,640 Speaker 7: it's the movies and it's it's the studio content that 177 00:09:36,760 --> 00:09:40,120 Speaker 7: ultimately is the flywheel and is so important for kind 178 00:09:40,160 --> 00:09:42,960 Speaker 7: of feeding all of the other businesses, including the theme 179 00:09:43,000 --> 00:09:43,640 Speaker 7: park business. 180 00:09:43,920 --> 00:09:47,280 Speaker 2: Oh yeah, and they have actually some of those other businesses, 181 00:09:47,320 --> 00:09:50,440 Speaker 2: not the theme parks, which is almost an autopilot. They've 182 00:09:50,440 --> 00:09:52,680 Speaker 2: had some of the biggest blockbusters of this year, and 183 00:09:52,720 --> 00:09:55,920 Speaker 2: the movie theaters, the streaming unit, as I said earlier, 184 00:09:56,160 --> 00:10:00,000 Speaker 2: finally turning a profit, the Disney plus Hulu, ESPN plus. 185 00:10:00,480 --> 00:10:03,200 Speaker 2: I mean, it looks like all of the investing they've 186 00:10:03,240 --> 00:10:05,880 Speaker 2: done in the directing consumer the streaming operations has really 187 00:10:05,920 --> 00:10:06,400 Speaker 2: paid off. 188 00:10:06,600 --> 00:10:09,880 Speaker 7: Yeah, it absolutely has. And you spoke about the studio, 189 00:10:09,920 --> 00:10:13,720 Speaker 7: which is really important because they had definitely a whole 190 00:10:13,800 --> 00:10:17,480 Speaker 7: string of missus, you know, at the studio division, but 191 00:10:17,559 --> 00:10:21,840 Speaker 7: that obviously changed this year with the outperformance both of 192 00:10:21,920 --> 00:10:25,720 Speaker 7: Inside Out Too as well as you know, Deadpool and Wolverine, 193 00:10:25,720 --> 00:10:29,320 Speaker 7: which are some of the biggest releases for this year. Definitely, 194 00:10:29,920 --> 00:10:32,080 Speaker 7: and as we look forward as well, you know, it 195 00:10:32,120 --> 00:10:34,640 Speaker 7: looks like they're finally kind of turned the corner. On 196 00:10:35,400 --> 00:10:38,079 Speaker 7: you know, the content pipeline, and so as we look 197 00:10:38,120 --> 00:10:40,440 Speaker 7: forward to both twenty twenty five and twenty twenty six, 198 00:10:41,080 --> 00:10:44,160 Speaker 7: that's late is definitely strengthening. So there's definitely a lot 199 00:10:44,160 --> 00:10:47,040 Speaker 7: of positive momentum on in the studio side of things. 200 00:10:47,520 --> 00:10:50,120 Speaker 7: But then as we kind of think about streaming, yes, 201 00:10:50,200 --> 00:10:53,640 Speaker 7: that's where all of the profitability delta is kind of 202 00:10:53,679 --> 00:10:55,960 Speaker 7: really going to come over the next few years. 203 00:10:56,160 --> 00:10:59,760 Speaker 2: And also just to mention Moanatu and Move Fast of 204 00:10:59,760 --> 00:11:02,959 Speaker 2: the King both out in the next couple of weeks really, 205 00:11:03,000 --> 00:11:04,640 Speaker 2: so that could also add to. 206 00:11:04,640 --> 00:11:08,520 Speaker 7: Things absolutely absolutely that just goes to speak to you know, 207 00:11:08,559 --> 00:11:13,160 Speaker 7: their content slate strengthening tremendously. This is the whole studio 208 00:11:13,200 --> 00:11:16,600 Speaker 7: turnaround that we're seeing in progress. Ultimately, remember Tom, all 209 00:11:16,640 --> 00:11:19,240 Speaker 7: of those movies are going to come to the Disney 210 00:11:19,240 --> 00:11:22,560 Speaker 7: Plus streaming platform, so again it's going to have you know, 211 00:11:22,600 --> 00:11:26,040 Speaker 7: that nice tailwind effects in terms of boosting subscriber numbers. 212 00:11:26,240 --> 00:11:28,160 Speaker 2: Now, I want to bring up something at the parks, 213 00:11:28,400 --> 00:11:31,559 Speaker 2: as you said, sixty five percent of its profits. It 214 00:11:31,720 --> 00:11:34,000 Speaker 2: seems to always be a winner for them, but they 215 00:11:34,000 --> 00:11:37,000 Speaker 2: did something a little controversial in the last couple of months. 216 00:11:37,000 --> 00:11:40,559 Speaker 2: That is the Lightning Lane premiere pass a nearly five 217 00:11:40,679 --> 00:11:45,439 Speaker 2: hundred dollars extra fee to skip lines. Was this a miscalculation? 218 00:11:45,920 --> 00:11:48,760 Speaker 2: Was it wrong to do this? And how is it 219 00:11:48,800 --> 00:11:49,760 Speaker 2: fared for the company. 220 00:11:49,920 --> 00:11:51,880 Speaker 7: I don't think it was wrong. I mean, one of 221 00:11:51,880 --> 00:11:54,720 Speaker 7: the things that we've seen overall is that theme park 222 00:11:54,760 --> 00:11:59,439 Speaker 7: demand has moderated. And as theme park demand is moderating, 223 00:11:59,520 --> 00:12:02,480 Speaker 7: we also know that visibility is kind of limited on 224 00:12:02,559 --> 00:12:05,600 Speaker 7: when trends will improve. So obviously they do, you know, 225 00:12:05,679 --> 00:12:08,240 Speaker 7: if this is always going to be a volume and 226 00:12:08,280 --> 00:12:11,400 Speaker 7: a pricing game, So as they kind of see volume 227 00:12:11,480 --> 00:12:14,120 Speaker 7: going down, they obviously have to come up with more 228 00:12:14,120 --> 00:12:17,880 Speaker 7: innovative ways of kind of you know, raising prices and 229 00:12:18,840 --> 00:12:23,200 Speaker 7: boosting and preserving their top line. That of course said, 230 00:12:23,320 --> 00:12:24,960 Speaker 7: I mean, they also have to be careful not to 231 00:12:25,040 --> 00:12:28,200 Speaker 7: overplay their hand, and so it is a very careful 232 00:12:28,240 --> 00:12:31,360 Speaker 7: balancing act. I do agree, But you know, I think 233 00:12:30,600 --> 00:12:36,120 Speaker 7: the Lightning Lane price increase obviously came after a lot 234 00:12:36,160 --> 00:12:38,960 Speaker 7: of deliberation and a lot of careful thought. I mean, 235 00:12:39,000 --> 00:12:42,520 Speaker 7: they obviously have tremendous demand at a lot of these attractions, 236 00:12:42,559 --> 00:12:44,520 Speaker 7: and I think that is kind of what prompted it. 237 00:12:44,720 --> 00:12:47,520 Speaker 7: So I don't think it's a miscalculation. But again we'll 238 00:12:47,520 --> 00:12:49,280 Speaker 7: have to wait and watch. We have to wait for 239 00:12:49,320 --> 00:12:52,280 Speaker 7: their earnings call to see exactly how it's played out 240 00:12:52,280 --> 00:12:52,600 Speaker 7: so far. 241 00:12:52,840 --> 00:12:55,520 Speaker 2: All right, and those Disney Q four earnings out this 242 00:12:55,640 --> 00:12:59,200 Speaker 2: Thursday are thanks to Geet the Raganathan Bloomberg Intelligence analysts 243 00:12:59,360 --> 00:13:02,400 Speaker 2: on us ME and coming up on Bloomberg day Break weekend, 244 00:13:02,400 --> 00:13:05,200 Speaker 2: we'll discuss whether the UK Chancellor can bring growth back 245 00:13:05,360 --> 00:13:08,120 Speaker 2: to the City of London. I'm Tom Busby and this 246 00:13:08,400 --> 00:13:21,960 Speaker 2: is Bloomberg. This is Bloomberg day Break weekend, our global 247 00:13:21,960 --> 00:13:23,960 Speaker 2: look ahead at the top stories for investors in the 248 00:13:23,960 --> 00:13:27,200 Speaker 2: coming week. I'm Tom Busby in New York. Up later 249 00:13:27,240 --> 00:13:30,520 Speaker 2: in the program, Beijing confronts the threat of punishing US 250 00:13:30,640 --> 00:13:34,720 Speaker 2: tariffs on its exports. But first, fresh from her autumn budget, 251 00:13:34,800 --> 00:13:38,440 Speaker 2: UK Chancellor Rachel Reeves delivers her biggest City of London 252 00:13:38,520 --> 00:13:41,720 Speaker 2: speech to date this week. Her plan for growth relies 253 00:13:41,720 --> 00:13:44,800 Speaker 2: heavily on the business sector, but will she impress them 254 00:13:44,880 --> 00:13:47,200 Speaker 2: for more. Let's go to London and bring in Bloomberg 255 00:13:47,240 --> 00:13:50,080 Speaker 2: day Break Europe anchor Caroline Hepgar Tom. 256 00:13:50,160 --> 00:13:53,720 Speaker 1: It takes place in the historic surroundings of the Lord 257 00:13:53,840 --> 00:13:57,880 Speaker 1: Mayor's official residence the Mansion House. Speech is billed as 258 00:13:57,880 --> 00:14:01,560 Speaker 1: an opportunity for chancellors to make their case to the 259 00:14:01,600 --> 00:14:05,880 Speaker 1: famously independent city of London, governed by its own laws 260 00:14:05,920 --> 00:14:09,000 Speaker 1: and even featuring a separate police force. The City of 261 00:14:09,040 --> 00:14:13,400 Speaker 1: London has always valued independence, but as home to many 262 00:14:13,480 --> 00:14:16,920 Speaker 1: of the country's financial services giants, it's a region that 263 00:14:17,000 --> 00:14:20,320 Speaker 1: Rachel Reeves will want to bring on board with her agenda. 264 00:14:20,480 --> 00:14:23,320 Speaker 1: She's expected to outline her vision for the Square Mile, 265 00:14:23,440 --> 00:14:26,920 Speaker 1: detailing how the Treasury will support the country's world leading 266 00:14:26,960 --> 00:14:31,840 Speaker 1: financial services sector to grow, innovate and finance growth around 267 00:14:31,880 --> 00:14:36,040 Speaker 1: the country. That's according to a Treasury statement. But will 268 00:14:36,080 --> 00:14:40,920 Speaker 1: Reeves's fiscal policy hold back those business ambitions. I've been 269 00:14:40,920 --> 00:14:44,320 Speaker 1: speaking to Richard Wilson, who's the CEO of the UK's 270 00:14:44,320 --> 00:14:49,520 Speaker 1: biggest flat fee investment platform, Interactive Investor. He says that 271 00:14:49,600 --> 00:14:54,160 Speaker 1: some of the measures introduced in Reeves's recent budget present 272 00:14:54,280 --> 00:14:56,160 Speaker 1: a real challenge for corporates. 273 00:14:56,840 --> 00:15:01,040 Speaker 8: Well, the majority of the changes were very well telegraphed. 274 00:15:01,520 --> 00:15:08,400 Speaker 8: You've got a spend, tax and borrow agenda with numbers 275 00:15:08,440 --> 00:15:12,480 Speaker 8: that are very high, and the ifs came out and 276 00:15:12,520 --> 00:15:15,600 Speaker 8: the OBI can confoundly that that leads to lower growth 277 00:15:15,640 --> 00:15:19,320 Speaker 8: going forward, a higher debt servicing burden, and of course 278 00:15:19,320 --> 00:15:22,600 Speaker 8: the guilt markets have been a little bit ambiguous about 279 00:15:22,720 --> 00:15:24,560 Speaker 8: their view of that because the yields have gone up 280 00:15:24,600 --> 00:15:28,720 Speaker 8: in two and ten years basically makes the UK a 281 00:15:28,800 --> 00:15:31,680 Speaker 8: less attractive market to invest invested others because you've got 282 00:15:31,680 --> 00:15:35,400 Speaker 8: a higher tax burden. And the irritation I think for 283 00:15:35,520 --> 00:15:38,760 Speaker 8: many of us is that, whilst there's clearly as a 284 00:15:38,800 --> 00:15:43,920 Speaker 8: fiscal tightrope to walk going after some what would be 285 00:15:44,000 --> 00:15:50,160 Speaker 8: symbolic or illogical taxes like itt reliefs on agriculture and 286 00:15:50,280 --> 00:15:54,200 Speaker 8: business property do undermine entrepreneurship in the country. We've got 287 00:15:54,520 --> 00:15:57,080 Speaker 8: millions of people where the bedrock of our future is 288 00:15:57,080 --> 00:16:01,480 Speaker 8: on entrepreneurship, which comes from family businesses. That's not a 289 00:16:01,560 --> 00:16:04,200 Speaker 8: sensible way to build growth of that. It flies in 290 00:16:04,240 --> 00:16:05,640 Speaker 8: the face of your growth agenda. 291 00:16:05,760 --> 00:16:08,240 Speaker 9: So to be clear, you think this budget was anti growth? 292 00:16:08,480 --> 00:16:09,680 Speaker 8: Yes, no question. 293 00:16:10,200 --> 00:16:12,040 Speaker 9: As a business just as a CEO, what are you 294 00:16:12,040 --> 00:16:14,760 Speaker 9: doing with that increase in national insurance going to be 295 00:16:15,400 --> 00:16:17,240 Speaker 9: Does that mean lower wages for your team? Are you 296 00:16:17,240 --> 00:16:18,720 Speaker 9: going to pass it up through in terms of high 297 00:16:18,760 --> 00:16:20,360 Speaker 9: cost for your customers? How are you going to manage that. 298 00:16:20,600 --> 00:16:24,800 Speaker 8: I mean, we're in a very competitive environment and the 299 00:16:24,880 --> 00:16:28,200 Speaker 8: option we're we're competing with all the near brokers, the 300 00:16:28,320 --> 00:16:33,160 Speaker 8: US houses, the UK clearing bags, the European houses, everybody, 301 00:16:33,200 --> 00:16:37,560 Speaker 8: the inpension companies. Our option to move price is zero. 302 00:16:38,160 --> 00:16:43,520 Speaker 8: So then you're dealing with efficiency and or wages or 303 00:16:43,600 --> 00:16:46,560 Speaker 8: reduced profitability. I think Rachel Reeves and one of our 304 00:16:46,560 --> 00:16:49,160 Speaker 8: interviews said, you know, custom companies will be become more 305 00:16:49,160 --> 00:16:51,920 Speaker 8: efficient as if we're not trying to do that every 306 00:16:52,000 --> 00:16:54,680 Speaker 8: day already. So the reality is it will either be 307 00:16:54,720 --> 00:16:57,840 Speaker 8: lower profits and therefore kind of lower return and lower 308 00:16:57,880 --> 00:17:01,360 Speaker 8: ability to reinvesting technology, or you look at your wage 309 00:17:01,360 --> 00:17:03,000 Speaker 8: bill thinking how the hell do I solve that? 310 00:17:03,280 --> 00:17:06,439 Speaker 1: Okay, So in terms of what comes next from Labor 311 00:17:07,119 --> 00:17:10,560 Speaker 1: mansion House, there has been a push to try to 312 00:17:11,119 --> 00:17:14,440 Speaker 1: and in fact a whole group of insurers and pension 313 00:17:14,840 --> 00:17:18,360 Speaker 1: companies agreed to try to put more money into UK 314 00:17:18,440 --> 00:17:22,840 Speaker 1: listed stocks that wasn't mandatory. Does it become mandatory under labor? 315 00:17:22,960 --> 00:17:26,440 Speaker 1: Do they target something, Do they make it more compulsory 316 00:17:26,440 --> 00:17:29,920 Speaker 1: for people to invest in UK listed or unlisted assets? 317 00:17:30,040 --> 00:17:30,240 Speaker 5: Yeah? 318 00:17:30,320 --> 00:17:32,600 Speaker 8: I think well that there are two. There's a problem 319 00:17:32,640 --> 00:17:35,520 Speaker 8: that the UK has which is compared to some other 320 00:17:35,560 --> 00:17:39,360 Speaker 8: countries in Canada and Australia and a reference quite a lot. 321 00:17:39,560 --> 00:17:43,440 Speaker 8: We have a fragmented pension stock so the actual size 322 00:17:43,440 --> 00:17:48,120 Speaker 8: of the pool that you're allocating is not as large 323 00:17:48,119 --> 00:17:50,080 Speaker 8: as it should be. So there's a task there which 324 00:17:50,119 --> 00:17:54,679 Speaker 8: is to consolidate pension assets with a big opportunity across 325 00:17:54,720 --> 00:17:59,000 Speaker 8: local councils and the public sectors. Has been well documented. 326 00:17:59,720 --> 00:18:03,880 Speaker 8: The fear that we should have is forcing an allocation 327 00:18:04,320 --> 00:18:09,000 Speaker 8: of risk which is disproportionate. That would conflict with your 328 00:18:09,080 --> 00:18:12,000 Speaker 8: kind of risk management and the members of your long 329 00:18:12,080 --> 00:18:14,760 Speaker 8: term pension holders. So that's not a sensible thing to do. 330 00:18:14,880 --> 00:18:16,560 Speaker 1: But label will say how do you get a growth 331 00:18:16,560 --> 00:18:19,440 Speaker 1: and how and people have been complaining about the fact 332 00:18:19,480 --> 00:18:22,360 Speaker 1: that the UK market is undervalued and that we've seen 333 00:18:22,359 --> 00:18:25,040 Speaker 1: a massive decline in investment in UK consul. 334 00:18:24,920 --> 00:18:26,560 Speaker 8: So there are two things there for me. One is 335 00:18:26,600 --> 00:18:28,840 Speaker 8: you've got to create the scaler pension assets so that 336 00:18:28,920 --> 00:18:31,480 Speaker 8: you can make an allocation which is proportionate of a 337 00:18:31,560 --> 00:18:34,720 Speaker 8: much bigger base. And secondly, we have been bleeding out 338 00:18:34,840 --> 00:18:37,320 Speaker 8: the UK stock market with stamp duty for the last 339 00:18:37,359 --> 00:18:40,159 Speaker 8: twenty years. The British government has sorted either I'm not 340 00:18:40,200 --> 00:18:42,119 Speaker 8: sure it's too late. It may be too late to 341 00:18:42,160 --> 00:18:44,919 Speaker 8: save it. We are taxing the thing out of existence. 342 00:18:45,119 --> 00:18:48,879 Speaker 1: Richard Wilson, there CEO of Interactive Investors, speaking to me 343 00:18:49,080 --> 00:18:53,360 Speaker 1: and to Bloomberg's Tom McKenzie, officials say that the imagine 344 00:18:53,440 --> 00:18:56,720 Speaker 1: how speech will drive up investment and showcase what the 345 00:18:56,800 --> 00:18:59,760 Speaker 1: UK has to offer. They'll have their work cut out 346 00:18:59,760 --> 00:19:03,000 Speaker 1: for though, if recent forecast from the Office for Budget 347 00:19:03,000 --> 00:19:07,160 Speaker 1: Responsibility or anything to go by now. According to their predictions, 348 00:19:07,200 --> 00:19:11,280 Speaker 1: the pace of UK economic growth will peak next year 349 00:19:11,320 --> 00:19:14,520 Speaker 1: at two percent before falling back to around one and 350 00:19:14,520 --> 00:19:18,280 Speaker 1: a half percent later in this parliament, and that after 351 00:19:18,760 --> 00:19:22,880 Speaker 1: the budget announcement, so can Rachel Reeves's plans to supercharge 352 00:19:23,200 --> 00:19:27,160 Speaker 1: the city and the UK change that trajectory. Is something 353 00:19:27,200 --> 00:19:31,400 Speaker 1: I've been talking about with Bloomberg City editor Catherine Griffiths. 354 00:19:31,119 --> 00:19:35,120 Speaker 10: Over the years the Mansion House speech. Sometimes it kind 355 00:19:35,119 --> 00:19:38,959 Speaker 10: of passes without much notice, and other years it can 356 00:19:39,000 --> 00:19:43,399 Speaker 10: be really key. This year, certainly, probably from both sides, 357 00:19:43,440 --> 00:19:46,840 Speaker 10: the government side and the kind of audience side, it's 358 00:19:46,880 --> 00:19:50,320 Speaker 10: going to be really key. This year's Mansion House Speech 359 00:19:50,440 --> 00:19:52,960 Speaker 10: was due to happen in the summer and it's been 360 00:19:53,000 --> 00:19:56,560 Speaker 10: pushed back until next week because of the election, So 361 00:19:56,600 --> 00:19:58,639 Speaker 10: there's that sense of sort of time as well, this 362 00:19:58,720 --> 00:20:03,120 Speaker 10: sort of highly anticipated event. And then actually the Treasury 363 00:20:03,119 --> 00:20:07,159 Speaker 10: in ratl Reefs have themselves been sort of amping it 364 00:20:07,240 --> 00:20:09,080 Speaker 10: up a bit, making it clear to people in the 365 00:20:09,080 --> 00:20:11,480 Speaker 10: city that this is going to be a big event 366 00:20:11,560 --> 00:20:15,600 Speaker 10: where rail reeves the Chancellor will lay out lots of 367 00:20:15,640 --> 00:20:19,720 Speaker 10: sort of detail and conviction about how this government is 368 00:20:19,760 --> 00:20:20,760 Speaker 10: going to deliver growth. 369 00:20:21,560 --> 00:20:24,840 Speaker 1: Yes, and that has been her promise, kissed Arma's promise, 370 00:20:24,920 --> 00:20:27,040 Speaker 1: but there were doubts after the budget. What do you 371 00:20:27,080 --> 00:20:30,119 Speaker 1: think she's going to try to communicate then about the 372 00:20:30,160 --> 00:20:31,120 Speaker 1: growth ambitions. 373 00:20:31,840 --> 00:20:34,760 Speaker 10: So it seems like we're going to get quite a 374 00:20:34,800 --> 00:20:40,080 Speaker 10: lot on this government's plans for pensions reforms. Of course, 375 00:20:40,200 --> 00:20:43,000 Speaker 10: this is not a new topic. The previous government also 376 00:20:43,240 --> 00:20:47,160 Speaker 10: was trying to push through with reforms to the pension system. 377 00:20:47,640 --> 00:20:50,520 Speaker 10: There's you know, billions and billions and billions of pounds 378 00:20:50,560 --> 00:20:54,240 Speaker 10: in pension pots in the UK. This point that yes, 379 00:20:54,320 --> 00:20:57,960 Speaker 10: we want overseas investors coming into the UK, but actually 380 00:20:58,119 --> 00:21:00,800 Speaker 10: in the UK itself there's a lot of sitting in 381 00:21:01,160 --> 00:21:04,399 Speaker 10: savings funds and how we try to deploy that money 382 00:21:04,440 --> 00:21:07,119 Speaker 10: in a way that's both good for the owners of 383 00:21:07,119 --> 00:21:09,560 Speaker 10: the money, the people who will be pensioners in the future, 384 00:21:09,600 --> 00:21:13,600 Speaker 10: to get higher levels of return so they have better retirements, 385 00:21:13,840 --> 00:21:16,480 Speaker 10: but also of course how that money can be used 386 00:21:16,520 --> 00:21:19,359 Speaker 10: in a more productive way in the British economy. So 387 00:21:19,400 --> 00:21:24,560 Speaker 10: that's the point about pension pots owning British shares, owning 388 00:21:24,560 --> 00:21:28,560 Speaker 10: British assets that are privately held. So there's all of that, 389 00:21:29,240 --> 00:21:33,840 Speaker 10: and then we may also get some reforms about how 390 00:21:33,840 --> 00:21:38,399 Speaker 10: the government the government's relationship with the financial regulators. Again 391 00:21:38,800 --> 00:21:41,159 Speaker 10: a topic that has been going for a very long time, 392 00:21:41,520 --> 00:21:45,760 Speaker 10: but there's a wide consensus that there needs to be 393 00:21:45,880 --> 00:21:48,800 Speaker 10: some sort of change to ensure that the regulators have 394 00:21:48,840 --> 00:21:52,120 Speaker 10: a clearer mandate to pursue growth and competitiveness. 395 00:21:52,720 --> 00:21:55,719 Speaker 1: Having said that, what do you think is going to 396 00:21:55,760 --> 00:21:59,399 Speaker 1: be the feedback from that business audience? Days ago I 397 00:21:59,440 --> 00:22:02,600 Speaker 1: was speaking to the CEO of Interactive Investor, Richard Wilson. 398 00:22:02,600 --> 00:22:05,720 Speaker 1: They've got something like four hundred thousand customers here in 399 00:22:05,760 --> 00:22:08,760 Speaker 1: the UK, and I asked him about that pension reform question. 400 00:22:08,880 --> 00:22:12,600 Speaker 1: For example, trying to encourage businesses to funnel their investor 401 00:22:12,680 --> 00:22:16,879 Speaker 1: money into either listed or unlisted UK assets. He was 402 00:22:16,880 --> 00:22:21,520 Speaker 1: talking about the UK stock market being untradeable. So there 403 00:22:21,560 --> 00:22:23,800 Speaker 1: are great difficulties and there's been a lot of kind 404 00:22:23,800 --> 00:22:26,800 Speaker 1: of pushback against the budget. What is the audience in 405 00:22:26,800 --> 00:22:28,080 Speaker 1: the city going to be thinking. 406 00:22:27,880 --> 00:22:31,120 Speaker 10: About, Yeah, I think it will be a mixed reaction 407 00:22:31,359 --> 00:22:34,040 Speaker 10: and it is actually quite a key moment for the 408 00:22:34,119 --> 00:22:38,399 Speaker 10: Chancellor to sort of really try to set her agenda 409 00:22:38,600 --> 00:22:42,320 Speaker 10: and kind of push forward her credentials with the city, 410 00:22:42,480 --> 00:22:44,399 Speaker 10: because yes, I think there are people out there in 411 00:22:44,400 --> 00:22:48,560 Speaker 10: the city who do believe that the London stock market, 412 00:22:49,320 --> 00:22:52,040 Speaker 10: while it has many advantages in the UK, has many 413 00:22:52,080 --> 00:22:55,320 Speaker 10: advantages as a place to invest and do business. That 414 00:22:55,560 --> 00:22:59,359 Speaker 10: sort of maybe the long term trend really is towards 415 00:22:59,680 --> 00:23:03,000 Speaker 10: as of capital, where essentially the US really is the 416 00:23:03,040 --> 00:23:05,560 Speaker 10: biggest pool of capital and we're sort of fighting against 417 00:23:05,600 --> 00:23:08,960 Speaker 10: that tide in a way, and that perhaps London and 418 00:23:09,000 --> 00:23:12,720 Speaker 10: the UK should think about other ways to remain relevant. 419 00:23:12,760 --> 00:23:15,080 Speaker 10: So when you think of it in those terms, trying 420 00:23:15,160 --> 00:23:19,440 Speaker 10: to sort of force pension money into some might say 421 00:23:19,520 --> 00:23:21,720 Speaker 10: essentially a sort of a dying stock market isn't the 422 00:23:21,760 --> 00:23:22,359 Speaker 10: best idea. 423 00:23:23,280 --> 00:23:27,560 Speaker 1: How important a factor is it that the budget also 424 00:23:27,560 --> 00:23:31,720 Speaker 1: saw an increase in national insurance employer contributions, which is 425 00:23:31,880 --> 00:23:33,520 Speaker 1: an additional tax on business. 426 00:23:34,160 --> 00:23:36,879 Speaker 10: Yeah, I mean business doesn't like it for sure. It 427 00:23:36,880 --> 00:23:40,160 Speaker 10: has been well. One thing that the Treasury and retro 428 00:23:40,200 --> 00:23:43,000 Speaker 10: Reefs team certainly did was telegraph a lot of the 429 00:23:43,040 --> 00:23:44,960 Speaker 10: measures in the budget. So I think people have had 430 00:23:45,200 --> 00:23:47,240 Speaker 10: time to get their heads around that and they don't 431 00:23:47,320 --> 00:23:51,000 Speaker 10: like it. But ultimately, as ret Reefs I suppose said herself, 432 00:23:51,240 --> 00:23:53,919 Speaker 10: some people needed to bear the burden this time, and 433 00:23:53,960 --> 00:23:57,560 Speaker 10: she put it on the wealthy and business. I suppose 434 00:23:57,760 --> 00:24:00,240 Speaker 10: there will be business people out there who understand and 435 00:24:00,680 --> 00:24:03,240 Speaker 10: I think that that's what had to happen in this budget. 436 00:24:03,240 --> 00:24:07,800 Speaker 10: But they're looking for conviction and ideas for how the 437 00:24:07,800 --> 00:24:09,160 Speaker 10: whole economy can grow. 438 00:24:10,200 --> 00:24:14,120 Speaker 1: Is there a positive case? There are concerns about economic growth? 439 00:24:14,200 --> 00:24:17,000 Speaker 1: The OBR talked about how the budget would increase economic 440 00:24:17,040 --> 00:24:19,640 Speaker 1: growth a little bit but only in the short term 441 00:24:20,000 --> 00:24:22,320 Speaker 1: or more focus on the short term. Is there a 442 00:24:22,359 --> 00:24:25,159 Speaker 1: more positive case that we can make Well. 443 00:24:25,040 --> 00:24:27,680 Speaker 10: I guess there's that sense of the clock ticking, isn't 444 00:24:27,680 --> 00:24:30,639 Speaker 10: there because she needs to kind of get ahead of 445 00:24:30,640 --> 00:24:34,560 Speaker 10: that OBR forecast. So the measures in this budget will 446 00:24:34,600 --> 00:24:37,040 Speaker 10: do exactly as you've said, according to the OBR. So 447 00:24:37,160 --> 00:24:39,639 Speaker 10: what she's got to try to do is while these 448 00:24:39,680 --> 00:24:43,119 Speaker 10: measures bite and she collects her tax revenue that she 449 00:24:43,240 --> 00:24:45,560 Speaker 10: certainly needs, she then needs to be able to sort 450 00:24:45,560 --> 00:24:49,120 Speaker 10: of quickly show that the economy is growing and hope 451 00:24:49,160 --> 00:24:51,120 Speaker 10: that the OBR will change its forecast. 452 00:24:51,119 --> 00:24:54,640 Speaker 1: Accordingly, we're thinking about the fallout of the Trump election 453 00:24:54,920 --> 00:24:59,720 Speaker 1: victory twenty percent Tara potentially on the UK. Rachel Reeves 454 00:25:00,000 --> 00:25:04,879 Speaker 1: modeled her economic policy during the election campaign, so some 455 00:25:04,960 --> 00:25:08,480 Speaker 1: time ago on the Biden administration's by the nomics, she 456 00:25:08,600 --> 00:25:12,400 Speaker 1: called her plan secure a nomics. I noticed that term 457 00:25:12,400 --> 00:25:15,600 Speaker 1: has perhaps faded a little bit. How does the UK 458 00:25:16,600 --> 00:25:19,959 Speaker 1: deal with now a Trump White House and possibility of 459 00:25:19,960 --> 00:25:20,760 Speaker 1: towers and so on. 460 00:25:21,040 --> 00:25:23,879 Speaker 10: I think the UK, and you know, many other big 461 00:25:23,960 --> 00:25:27,719 Speaker 10: countries that have extensive dealings with the US, will obviously 462 00:25:27,760 --> 00:25:30,280 Speaker 10: be worried about that. But we are a huge services 463 00:25:30,280 --> 00:25:33,760 Speaker 10: economy and we have many many links in terms of 464 00:25:33,760 --> 00:25:36,760 Speaker 10: financial services between the two countries, and I suppose the 465 00:25:36,840 --> 00:25:40,520 Speaker 10: UK also hopes that after Brexit that we may have 466 00:25:40,600 --> 00:25:43,240 Speaker 10: a certain amount of freedom to tread our own path 467 00:25:43,320 --> 00:25:43,960 Speaker 10: with the US. 468 00:25:44,280 --> 00:25:47,240 Speaker 1: My thanks Sibili and Begg's City editor Cafine Griffith. So 469 00:25:47,480 --> 00:25:52,320 Speaker 1: does Labors smoke salmon offensive continue and will the City 470 00:25:52,359 --> 00:25:55,879 Speaker 1: of London's leaders be receptive to the message from the 471 00:25:55,960 --> 00:25:59,399 Speaker 1: new government. We will have full coverage of the Chancellor's 472 00:25:59,400 --> 00:26:02,239 Speaker 1: mansion house beach here on Bloomberg. I'm Caroline Hepge here 473 00:26:02,240 --> 00:26:04,280 Speaker 1: in London. You can catch us every weekday morning for 474 00:26:04,280 --> 00:26:07,840 Speaker 1: Bloomberg Daybreak Europe, beginning at six am in London one 475 00:26:07,920 --> 00:26:08,840 Speaker 1: am on Wall Street. 476 00:26:09,080 --> 00:26:12,200 Speaker 2: Tom, Thank you, Caroline, And coming up on Bloomberg day 477 00:26:12,200 --> 00:26:14,760 Speaker 2: Break Weekend, we'll examine the effects of Donald Trump's election 478 00:26:15,160 --> 00:26:19,440 Speaker 2: on US China relations. I'm Tom Busby, and this is Bloomberg. 479 00:26:30,040 --> 00:26:32,639 Speaker 2: This is Bloomberg day Break Weekend, our global look ahead 480 00:26:32,680 --> 00:26:34,800 Speaker 2: at the top stories for investors in the coming week. 481 00:26:35,040 --> 00:26:37,760 Speaker 2: I'm Tom Busby in New York. The timing of Donald 482 00:26:37,760 --> 00:26:41,040 Speaker 2: Trump's reelection comes at an interesting time for China. Beijing 483 00:26:41,480 --> 00:26:44,680 Speaker 2: has been working to revitalize its economy and now the 484 00:26:44,720 --> 00:26:47,600 Speaker 2: thread of US tariff's looms large. We'll get a better 485 00:26:47,600 --> 00:26:50,159 Speaker 2: read this week on how well the Chinese economy is 486 00:26:50,160 --> 00:26:54,200 Speaker 2: holding up. Bloomberg's Doug Krisner, host of the Daybreak Asia podcast, 487 00:26:54,240 --> 00:26:55,720 Speaker 2: is here with a closer look. 488 00:26:56,040 --> 00:26:56,320 Speaker 11: Tom. 489 00:26:56,400 --> 00:26:59,119 Speaker 3: We're looking at the monthly activity data for China in 490 00:26:59,160 --> 00:27:02,360 Speaker 3: the week ahead will be key, particularly when you look 491 00:27:02,359 --> 00:27:06,480 Speaker 3: at the numbers on retail sales and industrial production. However, 492 00:27:06,520 --> 00:27:08,959 Speaker 3: we want to begin with a Chinese reaction to Donald 493 00:27:08,960 --> 00:27:11,600 Speaker 3: Trump's return to the White House. We know that a 494 00:27:11,640 --> 00:27:15,040 Speaker 3: major part of Trump's economic policy is tariff's. He is 495 00:27:15,080 --> 00:27:18,320 Speaker 3: planning to place tariffs on all US imports that would 496 00:27:18,359 --> 00:27:21,800 Speaker 3: include charges of between ten percent to twenty percent on 497 00:27:21,840 --> 00:27:26,440 Speaker 3: all imported goods, and where Chinese products are concerned, tariff's 498 00:27:26,440 --> 00:27:29,320 Speaker 3: of as much as sixty percent. For a closer look, 499 00:27:29,359 --> 00:27:32,879 Speaker 3: I'm joined by John lu Bloomberg News, executive editor for 500 00:27:32,960 --> 00:27:35,920 Speaker 3: Greater China. John, it's always a pleasure. Thanks for making 501 00:27:35,920 --> 00:27:38,119 Speaker 3: time to chat with us. Can we begin with Donald 502 00:27:38,160 --> 00:27:42,040 Speaker 3: Trump's impending return as US president. I'm curious about the 503 00:27:42,080 --> 00:27:43,639 Speaker 3: reaction in the Chinese capital. 504 00:27:43,920 --> 00:27:47,639 Speaker 11: I think there's actually a bit of awe at the 505 00:27:47,720 --> 00:27:50,840 Speaker 11: moment that Donald Trump was able to pull off the 506 00:27:50,880 --> 00:27:52,920 Speaker 11: sort of victory that it seems like he was able 507 00:27:52,920 --> 00:27:56,520 Speaker 11: to pull off potentially a trifecta, taking both the Senate 508 00:27:56,600 --> 00:27:59,719 Speaker 11: and the House along with the White House. And the 509 00:27:59,720 --> 00:28:01,720 Speaker 11: thing that I'm hearing from lots of people here in 510 00:28:01,760 --> 00:28:04,800 Speaker 11: Beijing is wow, where you know, it's really amazing he 511 00:28:04,840 --> 00:28:07,200 Speaker 11: was able to do that. I don't think people have 512 00:28:07,320 --> 00:28:11,680 Speaker 11: gotten yet to the point of thinking very deeply about 513 00:28:11,840 --> 00:28:12,440 Speaker 11: what next. 514 00:28:12,800 --> 00:28:14,919 Speaker 3: John, you know better than I the challenges that are 515 00:28:14,960 --> 00:28:18,240 Speaker 3: facing the Chinese economy at the moment. The export side 516 00:28:18,600 --> 00:28:21,720 Speaker 3: seems to have been holding up reasonably well. It's the 517 00:28:21,800 --> 00:28:25,960 Speaker 3: domestic economy that's really been struggling. So too have imports 518 00:28:26,000 --> 00:28:29,000 Speaker 3: to China to some extent. In your view, how well 519 00:28:29,080 --> 00:28:32,480 Speaker 3: is China prepared to respond to the potential trade war 520 00:28:32,600 --> 00:28:35,200 Speaker 3: with the US or a different style of trade war, 521 00:28:35,280 --> 00:28:36,160 Speaker 3: let's put it that way. 522 00:28:36,560 --> 00:28:40,120 Speaker 11: I think China is better prepared in the sense that 523 00:28:40,200 --> 00:28:44,600 Speaker 11: we've seen this show before, Like we've lived through four 524 00:28:44,720 --> 00:28:47,760 Speaker 11: years of a Donald Trump administration and we've gone through 525 00:28:47,760 --> 00:28:50,280 Speaker 11: a trade war, and so in that respect, I think 526 00:28:50,360 --> 00:28:53,080 Speaker 11: China is much more prepared in terms of how to 527 00:28:53,160 --> 00:28:58,080 Speaker 11: negotiate what the main points of contention potentially probably will be. 528 00:28:58,520 --> 00:29:02,160 Speaker 11: In terms of how well they could take on a 529 00:29:02,200 --> 00:29:05,520 Speaker 11: sixty percent tariffs all around, I think the answer to 530 00:29:05,560 --> 00:29:08,000 Speaker 11: that is not very well. There have been some estimates 531 00:29:08,200 --> 00:29:12,280 Speaker 11: by ubs, for instance, that calculate if Donald Trump did, 532 00:29:12,320 --> 00:29:15,080 Speaker 11: in fact put sixty percent tariffs on all Chinese exports 533 00:29:15,120 --> 00:29:18,200 Speaker 11: to the US. That would essentially cut two point five 534 00:29:18,240 --> 00:29:20,280 Speaker 11: percentage points from China's GDP. 535 00:29:20,520 --> 00:29:22,040 Speaker 5: That means China would be. 536 00:29:21,920 --> 00:29:24,040 Speaker 11: Growing half as fast as it has been in the 537 00:29:24,080 --> 00:29:25,719 Speaker 11: last couple of years as a result. 538 00:29:25,800 --> 00:29:28,280 Speaker 3: Given how the Chinese economy is struggling at the moment, 539 00:29:28,400 --> 00:29:33,000 Speaker 3: is there a particular vulnerability where the US could potentially 540 00:29:33,040 --> 00:29:37,560 Speaker 3: take advantage of this weaker state and try to capitalize 541 00:29:37,600 --> 00:29:41,240 Speaker 3: that If these tariffs are really a form of the 542 00:29:41,360 --> 00:29:44,840 Speaker 3: first part of a negotiation, does the US necessarily have 543 00:29:45,080 --> 00:29:46,360 Speaker 3: a bit of the upper hand here? 544 00:29:46,800 --> 00:29:49,760 Speaker 11: I think definitely the United States has in upper hand 545 00:29:49,760 --> 00:29:53,920 Speaker 11: when it comes to these negotiations. China depends on being 546 00:29:53,960 --> 00:29:58,920 Speaker 11: able to have access to foreign markets to create jobs, 547 00:29:59,000 --> 00:30:02,760 Speaker 11: to create demand for its manufactured goods. The Chinese government 548 00:30:02,760 --> 00:30:05,160 Speaker 11: has been trying to wean itself off of that dependency, 549 00:30:05,200 --> 00:30:06,840 Speaker 11: but it's going to take time and it's not going 550 00:30:06,880 --> 00:30:09,160 Speaker 11: to happen very quickly, and so in the short term, 551 00:30:09,600 --> 00:30:11,360 Speaker 11: I think there are a lot of cards in Donald 552 00:30:11,400 --> 00:30:15,000 Speaker 11: Trump's and the United States hand in terms of how 553 00:30:15,080 --> 00:30:17,800 Speaker 11: those negotiations go. I have heard quite a number of 554 00:30:17,920 --> 00:30:20,040 Speaker 11: Chinese officials sort of re up the idea or bring 555 00:30:20,120 --> 00:30:22,560 Speaker 11: up the sense that Donald Trump has actually set himself 556 00:30:22,600 --> 00:30:25,320 Speaker 11: that this is maybe a negotiating tactic, So they're kind 557 00:30:25,320 --> 00:30:29,120 Speaker 11: of approaching as in a hopeful way, maybe he will 558 00:30:29,160 --> 00:30:31,640 Speaker 11: not actually on day one impose those terrors. 559 00:30:32,000 --> 00:30:34,440 Speaker 3: The Biden administration, i think it's fair to say, really 560 00:30:34,440 --> 00:30:37,760 Speaker 3: built on the tough on China strategy that was undertaken 561 00:30:37,800 --> 00:30:41,280 Speaker 3: by the first Trump administration, and what the Biden administration 562 00:30:41,400 --> 00:30:43,840 Speaker 3: did in kind of building on that was I'm thinking, 563 00:30:43,920 --> 00:30:48,680 Speaker 3: in particular the export controls on certain advanced high technology, 564 00:30:48,760 --> 00:30:52,200 Speaker 3: especially the semiconductors. So if you move away from the 565 00:30:52,360 --> 00:30:56,040 Speaker 3: issue of tariffs, the question becomes his Beijing prepared for 566 00:30:56,200 --> 00:31:01,080 Speaker 3: additional US restrictions on sales to China. Remember during the 567 00:31:01,120 --> 00:31:04,840 Speaker 3: first Trump administration, Huawei got caught up in that, didn't it. 568 00:31:04,840 --> 00:31:08,000 Speaker 11: It did. The big difference I would say between the 569 00:31:08,000 --> 00:31:10,680 Speaker 11: way that the Biden administration and the first Trump administration 570 00:31:10,840 --> 00:31:14,719 Speaker 11: prosecuted these curves on technology was the Biden administration has 571 00:31:14,760 --> 00:31:17,360 Speaker 11: been much more successful, i think in getting the American 572 00:31:17,480 --> 00:31:21,920 Speaker 11: allies to go along with their policies, and it's I 573 00:31:21,960 --> 00:31:24,959 Speaker 11: think much more in question how effective a Trump administration 574 00:31:25,000 --> 00:31:27,320 Speaker 11: would be in doing that. At the same time, I 575 00:31:27,360 --> 00:31:32,240 Speaker 11: think the Chinese are very concerned about losing even more 576 00:31:32,240 --> 00:31:36,200 Speaker 11: access to American technology of Western technology in general. There 577 00:31:36,280 --> 00:31:38,760 Speaker 11: is a ton of money being spent in China to 578 00:31:38,880 --> 00:31:42,800 Speaker 11: try and create domestic technologies to replace those things. Again, 579 00:31:42,840 --> 00:31:44,840 Speaker 11: that takes time. It's not going to happen in the 580 00:31:44,880 --> 00:31:47,240 Speaker 11: next week or year or a couple of years. 581 00:31:47,320 --> 00:31:50,440 Speaker 3: So let's imagine for a moment that Trump's thread of 582 00:31:50,440 --> 00:31:53,000 Speaker 3: these tariffs at sixty percent is really the first part 583 00:31:53,040 --> 00:31:56,760 Speaker 3: of the negotiating strategy. If he follows through, let's say 584 00:31:56,800 --> 00:31:59,600 Speaker 3: the negotiations were to fall off the rails at some 585 00:31:59,680 --> 00:32:04,520 Speaker 3: point those tariffs are really imposed. Are Chinese authorities willing 586 00:32:04,600 --> 00:32:07,440 Speaker 3: to do much more to help the economy, do you think? 587 00:32:07,480 --> 00:32:09,640 Speaker 3: And the timing is kind of interesting because we just 588 00:32:09,720 --> 00:32:13,280 Speaker 3: had the meeting of the Standing Committee and indications that 589 00:32:13,320 --> 00:32:15,600 Speaker 3: we may be getting a little bit more fiscal support 590 00:32:15,600 --> 00:32:18,200 Speaker 3: for the Chinese economy, So put that in context for me, 591 00:32:18,520 --> 00:32:19,000 Speaker 3: I think. 592 00:32:18,840 --> 00:32:22,520 Speaker 11: The timing of that meeting of the National People's Congress 593 00:32:22,600 --> 00:32:26,320 Speaker 11: Standing Committee that you just mentioned is very interesting. It 594 00:32:26,520 --> 00:32:30,200 Speaker 11: usually happens at the end of October. This meeting, they 595 00:32:30,240 --> 00:32:35,200 Speaker 11: pushed it back until November fourth through eighth, so it 596 00:32:35,320 --> 00:32:38,200 Speaker 11: ends after the election, and so a lot of people 597 00:32:38,240 --> 00:32:41,280 Speaker 11: have wondered if that timing wasn't changed so that that 598 00:32:41,400 --> 00:32:46,800 Speaker 11: Chinese officials could calibrate their response to reflect the new 599 00:32:46,840 --> 00:32:49,760 Speaker 11: administration potentially in Washington. And so the idea would be, 600 00:32:49,960 --> 00:32:53,440 Speaker 11: with Trump coming in, potentially China would do more in 601 00:32:53,520 --> 00:32:57,360 Speaker 11: terms of stimulus to try and get domestic consumption up 602 00:32:57,680 --> 00:33:01,560 Speaker 11: to make up for this additional tariffs cutting off demand 603 00:33:01,560 --> 00:33:02,480 Speaker 11: from the United States. 604 00:33:02,800 --> 00:33:04,840 Speaker 3: So before I let you go, I have to ask 605 00:33:04,960 --> 00:33:06,680 Speaker 3: about the data that we're going to get in the 606 00:33:06,680 --> 00:33:11,280 Speaker 3: coming week, the monthly activity data. Two key points industrial production, 607 00:33:11,440 --> 00:33:12,240 Speaker 3: retail sales. 608 00:33:12,280 --> 00:33:13,160 Speaker 5: We talk a lot. 609 00:33:13,000 --> 00:33:16,320 Speaker 3: About this when we try to get a clear window 610 00:33:16,400 --> 00:33:18,760 Speaker 3: into what's happening in the Chinese economy. Do you have 611 00:33:18,800 --> 00:33:20,840 Speaker 3: a sense of what these figures are going to show us? 612 00:33:21,120 --> 00:33:24,480 Speaker 11: So I think there's a bit of optimism about retail sales. 613 00:33:24,520 --> 00:33:29,040 Speaker 11: We had services PMI that showed activity in the services 614 00:33:29,080 --> 00:33:32,000 Speaker 11: industry was growing more quickly than had been expected, and 615 00:33:32,080 --> 00:33:36,680 Speaker 11: some economists have said that that suggests potentially the consumer 616 00:33:36,880 --> 00:33:40,240 Speaker 11: is recovering. We've we've obviously had a bunch of stimulus 617 00:33:40,240 --> 00:33:44,200 Speaker 11: introduced already even before the National People's National People's Congress 618 00:33:44,560 --> 00:33:47,200 Speaker 11: and so we could see that pick up more than expected. 619 00:33:47,360 --> 00:33:49,040 Speaker 11: We also had some good data at the beginning of 620 00:33:49,080 --> 00:33:52,920 Speaker 11: the of the month that showed in October, China's largest 621 00:33:52,960 --> 00:33:55,880 Speaker 11: developers actually saw an increase in sales in October from 622 00:33:55,880 --> 00:33:58,080 Speaker 11: a year early. That's the first time that's increased in 623 00:33:58,120 --> 00:34:00,880 Speaker 11: a year, and so it seems like we might be 624 00:34:00,960 --> 00:34:03,800 Speaker 11: hitting a turning point, and that's why the numbers this month. 625 00:34:03,680 --> 00:34:04,360 Speaker 5: Are so important. 626 00:34:04,440 --> 00:34:06,360 Speaker 3: John will leave it there always a pleasure. Thanks so 627 00:34:06,440 --> 00:34:09,319 Speaker 3: much for spending time with us. John lu There, Bloomberg News, 628 00:34:09,400 --> 00:34:12,719 Speaker 3: Executive editor for Greater China, joining us from our studios 629 00:34:12,760 --> 00:34:16,440 Speaker 3: in Beijing. Let's turn to the Chinese internet giant Tencent. 630 00:34:16,520 --> 00:34:18,960 Speaker 3: In the coming week, the company will be reporting earnings. 631 00:34:19,040 --> 00:34:21,000 Speaker 3: I want to take a closer look. Now we'll bring 632 00:34:21,040 --> 00:34:25,239 Speaker 3: in Robert Lee, Bloomberg, Senior tech analyst for Bloomberg Intelligence. 633 00:34:25,239 --> 00:34:27,839 Speaker 3: He joins us from our studios in Hong Kong. Thanks 634 00:34:27,880 --> 00:34:29,799 Speaker 3: for making time to chat with us, Robert. This is 635 00:34:29,840 --> 00:34:33,279 Speaker 3: a very interesting company. It's involved in so many different things, 636 00:34:33,280 --> 00:34:37,880 Speaker 3: whether it's social media, music, it's e commerce, there's mobile gaming, 637 00:34:38,000 --> 00:34:42,399 Speaker 3: payment systems, and some artificial intelligence happening in the background. Where, 638 00:34:42,560 --> 00:34:46,160 Speaker 3: especially where Cloud computing is concerned. So as you look 639 00:34:46,200 --> 00:34:48,919 Speaker 3: out to the earnings that we're expecting in the coming week, 640 00:34:48,920 --> 00:34:50,040 Speaker 3: what are you most focused on? 641 00:34:50,200 --> 00:34:54,520 Speaker 12: That's absolutely right Tencent and it's we chat, or as 642 00:34:54,560 --> 00:34:57,759 Speaker 12: it's referred to locally, wasting platform is a ubiquitous part 643 00:34:57,840 --> 00:35:01,040 Speaker 12: of Chinese life. The platform, for those who are unfamiliar 644 00:35:01,080 --> 00:35:05,400 Speaker 12: with it, is really a combination of the metas Facebook app. 645 00:35:05,480 --> 00:35:08,640 Speaker 12: You know, there's an element of PayPal. It's all singing, 646 00:35:08,680 --> 00:35:12,960 Speaker 12: all dancing, really, so it's an essential part of living 647 00:35:13,040 --> 00:35:14,399 Speaker 12: in China. 648 00:35:14,440 --> 00:35:15,879 Speaker 5: I think the major. 649 00:35:15,640 --> 00:35:18,360 Speaker 12: Driver of ten cents earnings this year has been the 650 00:35:18,400 --> 00:35:21,480 Speaker 12: strength that they've seen on the gaming side, particularly driven 651 00:35:21,520 --> 00:35:24,960 Speaker 12: by one particular title called DNF So that was a 652 00:35:25,000 --> 00:35:29,000 Speaker 12: licensing title from a company called Nexon, but it's been 653 00:35:29,040 --> 00:35:30,839 Speaker 12: a major smash hit for them, and as they say, 654 00:35:30,880 --> 00:35:33,200 Speaker 12: within the video game business, you're only as good as 655 00:35:33,200 --> 00:35:36,080 Speaker 12: your last hit, So that has been a major drive 656 00:35:36,200 --> 00:35:38,640 Speaker 12: driver of their earnings. From sort of Q one Q two. 657 00:35:39,080 --> 00:35:42,560 Speaker 12: We'll see ongoing strength into the third quarter, but I 658 00:35:42,600 --> 00:35:45,840 Speaker 12: think that is well known and is already factored in 659 00:35:45,920 --> 00:35:46,560 Speaker 12: by the market. 660 00:35:46,760 --> 00:35:49,000 Speaker 3: In the States, we've been talking a lot about artificial 661 00:35:49,040 --> 00:35:53,719 Speaker 3: intelligence different startups now that are capturing amazing valuations. And 662 00:35:53,760 --> 00:35:57,640 Speaker 3: then companies like open ai that already have relationships with 663 00:35:57,719 --> 00:36:00,960 Speaker 3: a company like Microsoft. Where is ten Cent in the 664 00:36:00,960 --> 00:36:03,360 Speaker 3: world of artificial intelligence right now in China? 665 00:36:03,880 --> 00:36:04,200 Speaker 5: Okay? 666 00:36:04,239 --> 00:36:07,279 Speaker 12: I would say ten Cent early, Barber and then their 667 00:36:07,360 --> 00:36:10,839 Speaker 12: peers Byte, Dance and Huawei. The four of them are 668 00:36:11,160 --> 00:36:15,360 Speaker 12: best place to win out and emerge as the leaders 669 00:36:15,360 --> 00:36:18,640 Speaker 12: in China's AI sector. But we're at an early stage 670 00:36:18,640 --> 00:36:22,880 Speaker 12: of development at the moment, their operations in aggregate and 671 00:36:22,920 --> 00:36:26,680 Speaker 12: loss making, and the level of monetization or revenue generation 672 00:36:26,800 --> 00:36:29,719 Speaker 12: on the software side, because these companies are all software firms, 673 00:36:29,760 --> 00:36:32,480 Speaker 12: so we're not talking about the equivalents of the in videos. 674 00:36:33,040 --> 00:36:35,799 Speaker 12: The monetization is at a very low level. So ten 675 00:36:35,880 --> 00:36:39,120 Speaker 12: Cent has got a very broad based platform, so scope 676 00:36:39,160 --> 00:36:43,840 Speaker 12: to generate internal synergies by applying AI to generate cost savings, 677 00:36:43,800 --> 00:36:46,279 Speaker 12: et cetera is definitely very high. So that should help 678 00:36:46,560 --> 00:36:50,640 Speaker 12: defend their margin and underpin their margin going forward. But 679 00:36:50,719 --> 00:36:53,440 Speaker 12: as I said, the issue with the China market in 680 00:36:53,480 --> 00:36:55,920 Speaker 12: a you know, with a population of one point four billion, 681 00:36:56,160 --> 00:36:59,399 Speaker 12: it's a hyper competitive market. There are a very large 682 00:36:59,480 --> 00:37:02,360 Speaker 12: number of players out there. It's very fragmented market. 683 00:37:02,520 --> 00:37:05,160 Speaker 3: When you consider artificial intelligence. I know, there are these 684 00:37:05,239 --> 00:37:09,160 Speaker 3: export controls that the Bidy administration has placed on advanced 685 00:37:09,160 --> 00:37:12,359 Speaker 3: semiconductor technology, with the idea of keeping some of these 686 00:37:12,840 --> 00:37:16,480 Speaker 3: super advanced chips away from China. Now, a lot of 687 00:37:16,480 --> 00:37:19,520 Speaker 3: the thinking had been that maybe China would be compelled 688 00:37:19,560 --> 00:37:23,120 Speaker 3: to try to find military type applications for those chips, 689 00:37:23,480 --> 00:37:25,400 Speaker 3: but they seemed to be so much a part of 690 00:37:25,440 --> 00:37:28,640 Speaker 3: the AI story. I'm wondering whether or not these Chinese companies, 691 00:37:29,000 --> 00:37:31,839 Speaker 3: like again ten Cent, Ali, Baba Baid, when it comes 692 00:37:31,840 --> 00:37:35,080 Speaker 3: to AI, they're really at a disadvantage because of these 693 00:37:35,120 --> 00:37:36,160 Speaker 3: export controls. 694 00:37:36,400 --> 00:37:38,879 Speaker 12: That was exactly my view sort of earlier in the year, 695 00:37:39,000 --> 00:37:40,520 Speaker 12: the end of last year. I mean, it was an 696 00:37:40,560 --> 00:37:44,600 Speaker 12: obvious risk to these firms. However, they seem to have 697 00:37:44,600 --> 00:37:47,560 Speaker 12: worked their way around it, so they mitigated the problem 698 00:37:47,800 --> 00:37:51,160 Speaker 12: in a couple of ways. First thing is, I mean, 699 00:37:51,520 --> 00:37:54,640 Speaker 12: whilst the export controls were put in place by the 700 00:37:54,719 --> 00:37:57,480 Speaker 12: US for the reasons you've mentioned, they were well flagged 701 00:37:57,480 --> 00:37:59,719 Speaker 12: in advance, so that gave an opportunity for these big 702 00:37:59,760 --> 00:38:03,799 Speaker 12: time platforms to actually accumulate inventory before the controls came 703 00:38:03,840 --> 00:38:06,840 Speaker 12: in place. And also, you know, whilst you know the 704 00:38:07,160 --> 00:38:09,680 Speaker 12: relationship between China, the US and a lot of Western 705 00:38:09,680 --> 00:38:13,120 Speaker 12: Europe is strained to some degree. At the moment, you know, 706 00:38:13,200 --> 00:38:14,920 Speaker 12: China is still on good terms with a lot of 707 00:38:14,920 --> 00:38:18,399 Speaker 12: other countries around the world, particularly in the Gulf region, etc. 708 00:38:19,000 --> 00:38:21,720 Speaker 12: So I think that, you know, there is anecdotal evidence 709 00:38:21,760 --> 00:38:23,879 Speaker 12: that China has had some help from its friends, shall 710 00:38:23,880 --> 00:38:28,120 Speaker 12: we say, in you know, in importing some of these 711 00:38:28,160 --> 00:38:31,360 Speaker 12: restricted products. But then the third thing that the Chinese 712 00:38:31,360 --> 00:38:36,200 Speaker 12: companies have done is they have again the challenge that 713 00:38:36,200 --> 00:38:39,680 Speaker 12: they face to spurred innovation, and China does have very 714 00:38:39,680 --> 00:38:43,920 Speaker 12: strong inherent strengths in software development. So what they have 715 00:38:44,040 --> 00:38:48,960 Speaker 12: done is developed a newer generation of more focused, smaller 716 00:38:49,000 --> 00:38:53,080 Speaker 12: models which are more adept at working on the lower 717 00:38:53,160 --> 00:38:56,840 Speaker 12: power accelerator chips coming from the likes of Huawei, so 718 00:38:56,920 --> 00:38:58,320 Speaker 12: domestically developed chips. 719 00:38:58,440 --> 00:39:01,120 Speaker 3: Robert, thanks so much for helping us preview this week's 720 00:39:01,160 --> 00:39:04,640 Speaker 3: earnings from ten Cent. He's Robert Lee, senior tech analyst 721 00:39:04,680 --> 00:39:07,759 Speaker 3: for Bloomberg Intelligence, and I'm Doug Chrisner. You can join 722 00:39:07,840 --> 00:39:11,560 Speaker 3: us weekdays here for the Bloomberg Daybreak Asia podcast, available 723 00:39:11,560 --> 00:39:14,200 Speaker 3: wherever you get your podcast Tom. 724 00:39:14,239 --> 00:39:16,480 Speaker 2: Thanks Doug, and that does it for this edition of 725 00:39:16,480 --> 00:39:19,239 Speaker 2: Bloomberg day Break weekend. Join us again Monday morning at 726 00:39:19,239 --> 00:39:21,480 Speaker 2: five am Wall Street Time for the latest on markets 727 00:39:21,480 --> 00:39:23,960 Speaker 2: overseas and the news you need to start your day. 728 00:39:24,440 --> 00:39:27,360 Speaker 2: I'm Tom Busby. Stay with us. Top stories and global 729 00:39:27,360 --> 00:39:29,400 Speaker 2: business headlines are coming up right now.