Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world. Straight Ahead on the program, we'll
Speaker 2: look to earnings from streaming and chip giants Netflix and Intel.
Speaker 2: I'm Nathan Hager in Washington.
Speaker 3: I'm Caroline hepkehim in London, where we're looking at the
Speaker 3: annual gathering of the Powerful, the rich, and the famous.
Speaker 4: In Davos, Switzerland, I'm Doug Prisner, looking at how Beijing
Speaker 4: will report the performance of the Chinese economy.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 2: Good day to you. I'm Nathan Hager. Investors will be
Speaker 2: watching earnings from Intel and Netflix this week for signals
Speaker 2: on two very different corners of the tech landscape. Well
Speaker 2: here from Netflix first on Tuesday, man for more and
Speaker 2: what to expect from the streaming giant. I'm joined now
Speaker 2: by Bloomberg Intelligence Senior media analyst Githa Ranganathan and Geitha.
Speaker 2: I feel like there's been so much talk about Netflix's
Speaker 2: bidding war for Warner Brothers Discovery that it's been kind
Speaker 2: of easy to lose sight of the fundamental. So this
Speaker 2: will be kind of refreshing. What are you expecting.
Speaker 5: Yeah, I'm really hoping we get a rispite from this
Speaker 5: three ring circus, Nathan. I mean, it's been going on
Speaker 5: for quite a while now. I hope the focus really
Speaker 5: turns and this is a distraction, you know, from this
Speaker 5: whole drama that we've seen. But fundamentals wise, you're absolutely right.
Speaker 5: The company has never been in a stronger situation. We
Speaker 5: think they will absolutely deliver on their revenue growth expectations
Speaker 5: of about seventeen percent, strong operating margin, strong free cash flow.
Speaker 5: They're expecting about nine billion dollars for the full year.
Speaker 5: And really, I mean many many times, Nathan, the company
Speaker 5: has said that, you know, twenty twenty five as well
Speaker 5: as the fourth quarter. The slate really is absolutely a
Speaker 5: blockbuster slate. I mean, you think about it, stranger things,
Speaker 5: you know, the finale, you had so many other titles.
Speaker 5: I mean, whether you're thinking about Knives Out or Emily
Speaker 5: in Paris or you know, My Secret Santa or Frankenstein,
Speaker 5: nobody wants this. I mean, the list just goes on
Speaker 5: and on. But I think more importantly, Nathan, I mean,
Speaker 5: it was really their sports strategy. So if you look
Speaker 5: at the Lions Vikings game on Christmas date, that was
Speaker 5: the most streamed NFL game in US history, So really
Speaker 5: a huge achievement and kind of really speaks to you know,
Speaker 5: what Netflix has been able to achieve. So I think
Speaker 5: there's obviously going to be a lot of attention on
Speaker 5: all of those metrics, how that kind of plays out
Speaker 5: into advertising, which is a big focus for them. But
Speaker 5: I think still, you know, this overhang from the Warner
Speaker 5: drama is not going away anytime soon.
Speaker 2: In full disclosure, I too watch Stranger Things five and
Speaker 2: the Knives Out sequel. But when you think about that
Speaker 2: content slate and what I would have to think is
Speaker 2: a strategy for even more content to come into this year,
Speaker 2: doesn't it raise the question about what the strategy is
Speaker 2: for Netflix to buy Warner Brothers Discovery. Does it need
Speaker 2: that Warner Brothers ip.
Speaker 5: So that has really been the head scratcher, right, People
Speaker 5: really kind of wondering is Netflix just playing the long
Speaker 5: game here? Do they just want to beef up their
Speaker 5: content portfolio, make more of an defensive play for Warner,
Speaker 5: keep it out of everybody else's hands, or are they
Speaker 5: really seeing some kind of slow down in their own
Speaker 5: core engagement? And I mean, this is what has kind
Speaker 5: of fueled so much of concern here, because you know,
Speaker 5: people really wondering why they're going after the Warner portfolio.
Speaker 5: Is it because we're seeing, you know, some kind of
Speaker 5: a slow down and engagement metrics. I don't necessarily think
Speaker 5: that will be the case. But regardless of how this
Speaker 5: whole drama plays out, we know that fundamentals will continue
Speaker 5: to be very strong. They have, you know, their own
Speaker 5: original titles, even without Warner, have really performed very very well.
Speaker 5: We've seen over the past, you know, so many years.
Speaker 5: But I do think that Netflix is prepping for the future, Nathan,
Speaker 5: as we kind of look at AI and how AI
Speaker 5: can democratize content, I think it really becomes key for
Speaker 5: many of these big streamers to have access to more
Speaker 5: top tier franchises and properties, and really Warner brings them
Speaker 5: a huge treasure trobe of titles that they can mine
Speaker 5: very nicely into the future.
Speaker 2: We'll talk a little bit more about what's driving your
Speaker 2: view that Netflix still has that engagement compared to some
Speaker 2: of its competitors as well. What are some of the
Speaker 2: metrics you're looking at now that they don't break out,
Speaker 2: you know, subscriber accounts anymore.
Speaker 5: Yeah, absolutely, so. You know, they do disclose a periodically,
Speaker 5: you know, a report called what we watched, and they
Speaker 5: released this every six months, and we do get some
Speaker 5: insight into really one of the biggest titles on Netflix,
Speaker 5: how many minutes are spent watching those titles, And on
Speaker 5: average you'll see that a Netflix member spends about two
Speaker 5: to two and a half hours per day engaging with
Speaker 5: their content, which is really a staggering number. And then
Speaker 5: if you just kind of put that in the context
Speaker 5: of all of the streaming players, they're way ahead of
Speaker 5: most of their rivals, but they constantly bring up this
Speaker 5: comparison with YouTube, whom they actually trail, and so their
Speaker 5: whole argument has been, you know, we really need to
Speaker 5: catch up to YouTube, and that threat only gets bigger,
Speaker 5: I think with you know, the advent of AI and
Speaker 5: people like wanting to create more content, more user generated
Speaker 5: content with all of these AI tools like Sora, and
Speaker 5: so while Netflix really is in a strong and you know,
Speaker 5: an enviable position, they always kind of have to watch
Speaker 5: over their shoulder.
Speaker 2: I would say, so given that position, should subscribers be
Speaker 2: on the lookout for things like higher rates? We keep
Speaker 2: seeing those creep up here and there as well.
Speaker 5: Yes, they definitely have pricing power. We've kind of seen
Speaker 5: a steady cadence of price increases every twelve to eighteen months.
Speaker 5: So I absolutely think that a price increase is you know,
Speaker 5: on the books sometime in twenty twenty six, and that's
Speaker 5: just kind of become the name of the game here
Speaker 5: in streaming. We've seen all of these streaming services, I mean,
Speaker 5: whether it's Netflix, Disney Plus, HBO Max, all of them,
Speaker 5: you know, really kind of using that pricing lever as
Speaker 5: you know, the subscriber number does it become is not
Speaker 5: important anymore and it's really more our pooh and pricing
Speaker 5: power and revenue growth. So all of the streamers are
Speaker 5: kind of flexing their muscle when it comes to pricing.
Speaker 2: All right, Well, we're going to be focused on the
Speaker 2: fundamentals in just the next few days when Netflix opens
Speaker 2: those fourth quarter books. Thank you for this, Keith the
Speaker 2: Great having you on with us. That's Keith the wrong nothing,
Speaker 2: senior US media analysts for Bloomberg Intelligence. Now let's turn
Speaker 2: to Intel, the biggest maker of personal computer processors, opens
Speaker 2: its fourth quarterbooks on Thursday. Is the turnaround intact? Let's
Speaker 2: bring in Bloomberg Technology reporter Ian King for insights on that.
Speaker 4: Ian.
Speaker 2: We know the US government is working on building a
Speaker 2: ten percent stake in Intel, so it's sure to be
Speaker 2: watching these earnings. What should we expect from the chip maker?
Speaker 6: Yeah, I mean this company has very much had a
Speaker 6: transitional point last year. You mentioned obviously the government investment
Speaker 6: was also an investment by Nvidia and also an investment
Speaker 6: by SoftBank. What those did was really shore up the
Speaker 6: balance sheet. So on that side of the house, kind
Speaker 6: of task completed. Things are better than they were. There's
Speaker 6: no kind of existential risk, at least in people's minds
Speaker 6: for the time being. But what we're really looking at
Speaker 6: now is the operational side. You're a chip company. You
Speaker 6: have to sell more chips. You have to sell more chips,
Speaker 6: cost more money and get more profit.
Speaker 2: Now to that point. Where do things stand for Intel
Speaker 2: right now? Getting that operational side in a turnaround in
Speaker 2: the short term, Yeah, I mean we're.
Speaker 6: In the very early stages of that. At the beginning
Speaker 6: of this year, Intel was at the CES conference in
Speaker 6: Las Vegas and they unveiled a new range of chips
Speaker 6: based on a new production technology, and what they said was, look,
Speaker 6: this gets us back in the game. This makes us
Speaker 6: competitive again, and this is very much, you know, the
Speaker 6: proof point that our technology is irrelevant in this industry. Again,
Speaker 6: obviously we're only a couple of weeks away from that,
Speaker 6: so you know, too early to see whether they're selling
Speaker 6: like hotcakes or whether you know, that's hype from the company.
Speaker 6: But obviously the company's forecast this quarter will be really
Speaker 6: important as a guide to their confidence in that.
Speaker 2: Talk a little bit more about what the CEO had
Speaker 2: to say about those new chips and how they stack
Speaker 2: up to some of the competition around, you know, names
Speaker 2: that we're familiar with, like Nvidia, like AMD.
Speaker 6: Yeah, I mean we're talking about PC processes at this point.
Speaker 6: So that's a high volume market for Intel. So that's
Speaker 6: important in terms of cash flows, that's important in terms
Speaker 6: of filling those factories, but it's not the sort of
Speaker 6: down of profitability, you know that the core profitability that'll
Speaker 6: come later when we see what it's doing in serverships.
Speaker 6: What the company has said is, look, hey, this new
Speaker 6: range really kind of repairs the issues of the last
Speaker 6: couple of ranges of chips that we've had out there.
Speaker 6: You know, it's the most power efficient and they're good
Speaker 6: at performance as well, so that that really helps position
Speaker 6: as well against our competitors. And you know, they're talking
Speaker 6: about their confidence again, and that's really been the first
Speaker 6: time in a long time that we've seen Intel really
Speaker 6: kind of beat their fist against their chest and say, hey,
Speaker 6: look at our chips.
Speaker 2: Do those chips the cost of putting them together? Does
Speaker 2: that pose a potential risk for Intel go going forward?
Speaker 6: Well, the risk is how many they can sell. They've
Speaker 6: already built, you know, a brand new factory Fab fifty
Speaker 6: two in Arizona. They're trying to convert some of their
Speaker 6: other production lines over to this new production technique. That
Speaker 6: shift and that cost makes sense if you sell a
Speaker 6: lot of these things. If you don't, then that's where
Speaker 6: the problem is.
Speaker 2: There's got to be a lot of focus as well,
Speaker 2: like you mentioned about the foundry plans for Intel. Given
Speaker 2: the US governments focus on boosting that business with its stake,
Speaker 2: what kind of color could we expect around you know,
Speaker 2: Intel's factory plans, you know, boosting manufacturing in the United States.
Speaker 6: If you if you own Intel stock, and as taxpayers
Speaker 6: in the US we do. All you care about is
Speaker 6: Intel going out on stage somewhere or in some forum
Speaker 6: and saying, hey, this is a big customer we have
Speaker 6: other than ourselves. You know, in video is going to
Speaker 6: use our plans. Amb is going to use our plans.
Speaker 6: That has not happened yet, and you know, the prospects
Speaker 6: for that at the moment are kind of murky. We
Speaker 6: don't know. It's difficult for Intel to sort of do
Speaker 6: that because you don't want to be talking about what
Speaker 6: your customers are up to. But frankly, the eighteen A node,
Speaker 6: the one that these new chips are built on, that
Speaker 6: node has not delivered on the promises of external customers
Speaker 6: that we got from previous management. And it might be
Speaker 6: that the next node is so called fourteen A, which
Speaker 6: is going to come in the next couple of years,
Speaker 6: that might be the one where we start to see
Speaker 6: external customers, so probably a longer term story.
Speaker 2: There are you seeing just reading the tea leaves of
Speaker 2: much interest at least in the short term from potential
Speaker 2: customers for Intel in some of these chips and the
Speaker 2: foundery business.
Speaker 6: If you're one of those companies I just mentioned, you're
Speaker 6: going to look at Intel. Of course you are. We're
Speaker 6: in a world where we should have capacity, where TSMC
Speaker 6: is basically filling all of the others it possibly can,
Speaker 6: and is likely getting more than it can fill. So
Speaker 6: of course you're going to look at Intel, but you're
Speaker 6: also going to look at Samsung. Samsung is arguably a
Speaker 6: more established kind of second source to TSMC in the
Speaker 6: so called boundary world. So yeah, everybody's gonna look. But
Speaker 6: Intel has to prove that this technology it has is
Speaker 6: a good enough to compete with TSMC and be offers
Speaker 6: an advantage because it costs money to switch over as well.
Speaker 2: Appreciate this. Ian, thanks for coming on with us ahead
Speaker 2: of Intel's earnings. That's Ian King, technology reporter for Bloomberg News,
Speaker 2: and coming up on Bloomberg Daybreak weekend, we'll look ahead
Speaker 2: to the annual gathering of the rich, famous and powerful
Speaker 2: in Davos I'm Nathan Hager, and this is Bloomberg. This
Speaker 2: is Bloomberg Daybreak, Weekend, our global book ahead, the top
Speaker 2: stories for investors in the coming week. I'm Nathan Hager
Speaker 2: in Washington. Up Later in the program will turn to
Speaker 2: China and look at whether economic expansion there met the
Speaker 2: government's target. But first, the international business'll eite to send
Speaker 2: on Switzerland next week for the World Economic Forum in Davos.
Speaker 2: The annual gathering is traditionally about multilateral goals promoting peace, prosperity,
Speaker 2: and social progress, but this year has begun with fundamental
Speaker 2: questions about international law, America's role in the global order,
Speaker 2: and if global business is on the same page on
Speaker 2: issues like diversity, climate change, and politics. For more, let's
Speaker 2: head to London and check in with Bloomberg Daybreak. You're
Speaker 2: a banker, Caroline Hepger Nathan.
Speaker 3: The organization that Ron's Davos has set its theme for
Speaker 3: this year as a spirit of dialogue, with world leaders
Speaker 3: including US President Donald Trump set to attend. Who're quite
Speaker 3: curious to know what conversations they will be having. It's
Speaker 3: Trump's first in person appearance at Davos in six years.
Speaker 3: Last year in a virtual address, the US president criticized
Speaker 3: the Paris Climate Accord and promised to unlock the liquid
Speaker 3: gold of fossil fuels. As well as his geopolitical interventions
Speaker 3: in the Middle East, Venezuela, and Greenland, Trump has also
Speaker 3: shown his administration is prompt to impose its demands on
Speaker 3: global businesses, from reassuring to pricing executive pay and shareholder
Speaker 3: dividends across a wide array of sectors. What message will
Speaker 3: he world leaders and the leading light of global business
Speaker 3: be bringing to this international forum. Joining me now is
Speaker 3: our editor at large, Francine Laqua, who will be leading
Speaker 3: Bloomberg's coverage at Davos as every year. Francine, of course,
Speaker 3: what do you think are the big questions that you're
Speaker 3: going to be asking this year at Davos? Not asking
Speaker 3: you to reveal your trade secrets, but give us an insight.
Speaker 7: I mean, there's this idea girling that twenty twenty five
Speaker 7: was really the year where Prisoner Trump shaped his agenda
Speaker 7: about how he sees the world economic times trade, and
Speaker 7: I think we're trying to find out whether twenty twenty
Speaker 7: six is maybe the year where countries or companies push back. Now,
Speaker 7: we definitely started you know, the first couple of weeks
Speaker 7: of this year with a terrific news flow, much much
Speaker 7: newsflow that we weren't expecting. And look, it's going to be,
Speaker 7: you know, part of the Donald Trump Show. He shows
Speaker 7: up in Davols. It's the third time that he arrives.
Speaker 7: We believe that he'll be there towards the middle of
Speaker 7: the week. In his first appearance in twenty eighteen, I
Speaker 7: remember it like it was yesterday. He delivered a surprisingly
Speaker 7: opened armed message declaring that America First does not mean
Speaker 7: America alone. Then he was pretty defiant in twenty twenty
Speaker 7: as his impeachment trial was getting underway in Washington. And
Speaker 7: then last year, this was like two days after he
Speaker 7: got inaugurated. After shortly after being reelected, he delivered a
Speaker 7: speech at the Annual Meeting via video, and there he
Speaker 7: focused on oil prices, interest rates, in European regulations. So
Speaker 7: a lot of the questions will really be trying to
Speaker 7: figure out how to deal with the President of the US,
Speaker 7: how to deal with the administray if there's tariffs and trade.
Speaker 7: And then there's more like the softball questions, you know
Speaker 7: about the spurt of dialogue, how can we invest in people.
Speaker 7: Some of the conferences were probably or some of the
Speaker 7: panels were probably distilled just to make sure that they
Speaker 7: would appeal to the Trump administration. But you have great speakers,
Speaker 7: you have Jamie Diamond, you have all of Wall Street
Speaker 7: showing up. But it's a little bit of a mix
Speaker 7: and match. I mean, you want to know what you
Speaker 7: know President Trump does and what AI becomes in terms
Speaker 7: of valuation and impact on the economy.
Speaker 3: Interesting. So then who are you hoping most to speak to,
Speaker 3: to hear from, because it really is is everyone. It's
Speaker 3: those global world leaders, business leaders who are going to
Speaker 3: be there.
Speaker 7: So I think this year is a little bit different
Speaker 7: again because it'll be really interesting to hear a reaction,
Speaker 7: right to see if there's anyone that speaks up against
Speaker 7: some of the things that the Trump administration are putting
Speaker 7: in place. We'll have good conversations on inflation. And I
Speaker 7: keep on getting reminded that why inflation hasn't really taken
Speaker 7: off is because when President Trump, on Liberation Day last
Speaker 7: year put these tariffs, the rest of the world stayed quiet.
Speaker 7: This year could be different. I don't know whether Davos
Speaker 7: is the right time. We also really want to know
Speaker 7: what is and will be in President Trump's speech. Does
Speaker 7: he go after Europe? We know that he's been talking
Speaker 7: about financials and the fact that, for example, he wants
Speaker 7: to go after some of the private equity because domestically
Speaker 7: has this huge, huge concern about affordability. So does that
Speaker 7: spill over into the messaging for the rest of the world.
Speaker 7: I mean, I can rememberly maybe two three big policy
Speaker 7: speeches this year when you know, it wasn't even the president,
Speaker 7: it was the Vice president's and people around him came
Speaker 7: to Europe. Frankly, it was shocking, right we had JD.
Speaker 7: Vans and the people in the room were wondering whether
Speaker 7: it was still an ally or not, whether the US
Speaker 7: was And so I'm looking for tone. And then on
Speaker 7: the back of that, you know what some of the
Speaker 7: big Titans think that means for their business and world economy.
Speaker 3: WEF which is the organization obviously behind Devils in their
Speaker 3: mission statement, had to thumb through the book to find it.
Speaker 3: Improving the state of the world that is part of
Speaker 3: their mission statement, the emphasis being on dialogue, on collaboration,
Speaker 3: on cooperation, and as you've very much alluded to, President
Speaker 3: Trump being there in many ways the kind of aggressive
Speaker 3: expansionist America first policies of really a kind of direct
Speaker 3: in direct conflict with that aim, So it could get uncomfortable.
Speaker 7: It probably will get uncomfortable at times unless everybody plays
Speaker 7: ball and you know, tries to say that they get along.
Speaker 7: The WEFT mission statement is always a little bit complicated
Speaker 7: because they try and invite bigs head of state that
Speaker 7: can be controversial. You know, there was a Chinese president
Speaker 7: a couple of years ago. We've had other presidents that
Speaker 7: were they had to make sure that they felt welcome
Speaker 7: most the same time not being seen as a pushover.
Speaker 7: But I think what the World Economic Forum is is
Speaker 7: a great platform right for again companies or heads of
Speaker 7: state to try and push their message. So we're expecting,
Speaker 7: for example, the UK Prime Minister with the Chancellor to
Speaker 7: try and push the UK in saying look, you know
Speaker 7: this is what we're planning on growth, maybe to put
Speaker 7: the direction in a better footing for the UK after
Speaker 7: some of the mishaps that we saw in the budget
Speaker 7: and non doms. So it is a platform where you
Speaker 7: speak to worldwide investors where it gets picked up. But
Speaker 7: a lot of the business goes outside of the World
Speaker 7: Economics Forum. Remit right, it's not in the Congress Center.
Speaker 7: So I guess what we'll see in the Congress Center
Speaker 7: apart from these big policies, speatures maybe a little bit softer,
Speaker 7: and then we're also expecting deals outside. It's quite a circus, yes,
Speaker 7: with a lot of snow this.
Speaker 3: Year, and of course with bag Devil's House, you know,
Speaker 3: with lots of lots of speakers who actually come and
Speaker 3: talk to you and all of our other reporters there.
Speaker 3: Stock markets also are at a high, so I mean
Speaker 3: it comes at a very interesting moment. Are your pit
Speaker 3: stalks of ton incredibly well? Lots of focus on defense
Speaker 3: stocks as well. Geopolitical risks are very high, stock markets
Speaker 3: are very high. So it's kind of quite an interesting moment,
Speaker 3: isn't it.
Speaker 7: Yeah, I'm excited about Bloomberg House because we have a
Speaker 7: lot of the AI tech giants, and so if you
Speaker 7: look at AI, I think there are three main questions
Speaker 7: which we'll try to address. Is first, you know, if
Speaker 7: you look at AGI artificial general intelligence, how far away
Speaker 7: are we from it? How do you actually define it?
Speaker 7: Because it changes depending on who you are. There's of
Speaker 7: course the question about valuations. So if you're a Google
Speaker 7: or an open AI will speak to actually a Daria
Speaker 7: Muday of open AI. I mean, the valuations of these
Speaker 7: companies that the IPO are, They're just massive, and so
Speaker 7: there's a real question on this is all expectations, but
Speaker 7: when do they actually start making money? When do they
Speaker 7: start showing in revenue? And then the other question, which
Speaker 7: I think really filters through the economy, which we haven't
Speaker 7: spent that much time on, is we're hearing the labor
Speaker 7: markets are fine, but I hear more and more chief
Speaker 7: executives saying, look, I'm going to hire a little bit
Speaker 7: less because I have to spend on AI, and AI
Speaker 7: gives me the promise of productivity. So actually trying to
Speaker 7: understand what this means, you know, in six months, ten months,
Speaker 7: but even then two three years for our economies and
Speaker 7: job displacements is something that we would like to put
Speaker 7: the focus on.
Speaker 3: Yeah, interesting, isn't it is that big debate about globalization
Speaker 3: is this and change the end of globalizations as trade
Speaker 3: to trade flows continue versus as you say that maybe
Speaker 3: domestic productivity push and gain from AI. I mean in
Speaker 3: the past, again you slightly alluded to it, but climate
Speaker 3: change and green finance have featured very heavily at divos.
Speaker 3: Do you think that still holds.
Speaker 7: I can't see anything green on their green financing. There's
Speaker 7: a little bit on renewable energy, which is under the
Speaker 7: umbrella of the energy complex. I think there are still
Speaker 7: quite a lot of panels outside to the World Economic Forum.
Speaker 3: Now.
Speaker 7: There are, of course rumors that this is because the
Speaker 7: Trump administration said, look, we don't want anything really woke
Speaker 7: on the agenda if we show up again. If you
Speaker 7: look at an energy panel, it's difficult to do an
Speaker 7: energy panel without touching on renewables and green and how
Speaker 7: you finance that. But it's really not as prominent as
Speaker 7: it used to be. I think a lot of those
Speaker 7: conversations will still be happening, but maybe outside again, there
Speaker 7: are a lot of houses. There's also a USA House.
Speaker 7: There's a lot of houses just outside the Congress Center
Speaker 7: which people are taking over, and that comes up more
Speaker 7: outside the Congress Center than inside where it's managed by
Speaker 7: the World Economic Forum.
Speaker 3: N I'm not going to ask you how many years
Speaker 3: you've covered devils. I know it's a long time, but
Speaker 3: it's very important because it anchors a lot of our thinking,
Speaker 3: doesn't it Because it comes right at the start of
Speaker 3: the year. But I do want to ask you what
Speaker 3: I think listeners will be interested in, which is, how
Speaker 3: do you have the stamina to go from conversations to
Speaker 3: conversations conversation with all of these people on very different topics.
Speaker 3: How do you think and plan about your engagement when
Speaker 3: you're there? What do you think about getting out of
Speaker 3: Stavos as if event as a journalist.
Speaker 7: First of all, that the networking is actually tiring, but
Speaker 7: I think you have to enjoy it otherwise you don't
Speaker 7: show up at a night cab at eleven pm, especially
Speaker 7: if you're on air at five am, but it's worth it.
Speaker 7: There are a lot of people that are going to
Speaker 7: Davis for the first time, and so some of them
Speaker 7: are reached out. And I always said, look, just prepared
Speaker 7: to leave early in the morning. So for us it's
Speaker 7: five am, but it could be six or seven if
Speaker 7: you're a chief executive, and just plan your day like
Speaker 7: you're not going back to the hotel. So I actually
Speaker 7: have a little bag and I have like various slate
Speaker 7: layers if I'm outside for three hours, or a different
Speaker 7: pair of shoes if I'm moderating. And it's so you know,
Speaker 7: prepare logistically and then just read read reads that you're
Speaker 7: prepared for anything and listen out because sometimes there'll be big,
Speaker 7: big people that we're not expecting that show up.
Speaker 3: Okay, Fan, we'll watch you with the Wheely back around Davos.
Speaker 3: I'm preparing for those big conversations. Thank you for talking
Speaker 3: to us about it. We really appreciate it. Well. You've
Speaker 3: been hearing from Bloomberg's fancce Ine Laqua. Of course, ahead
Speaker 3: of the World Economic Forums annual meeting in Davos, we
Speaker 3: will have full coverage as that takes place on the
Speaker 3: nineteenth to the twenty sixth of January. I'm Caroline Hebge
Speaker 3: here in London. You can catch us every weekday morning
Speaker 3: for Blueberg Daybreak you at beginning at six am in London.
Speaker 3: That's one am on Wall Street.
Speaker 2: Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend,
Speaker 2: we'll look at how Beijing will report the performance of
Speaker 2: the Chinese economy. I'm Nathan Hager, and this is Bloomberg.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look ahead, the
Speaker 2: top stories for investors in the coming week. I'm Nathan
Speaker 2: Hager and Washington. Let's turn to the growth story in
Speaker 2: China and whether economic expansion met the government's target. Bloomberg's
Speaker 2: Doug Krisnerius, host of the Daybreak Asia podcast Nathan.
Speaker 4: In the coming week, we'll get readings on Chinese economic
Speaker 4: growth for both the fourth quarter and the full year. Now,
Speaker 4: we already know the government has set a growth target
Speaker 4: for twenty twenty five of five percent, and there are
Speaker 4: few reasons to suspect this will not be met, especially
Speaker 4: when you look at the collapse of fixed asset investment
Speaker 4: over the second half of twenty twenty five. Now, the
Speaker 4: growth target will be a main focal point in March,
Speaker 4: when top Chinese leaders gather for their annual parliamentary session
Speaker 4: and unveil the next five year plan and set a
Speaker 4: new growth target. They will likely emphasize the durability of
Speaker 4: China's export economy in the face of a teraro for
Speaker 4: with the United States. For a closer look, I'm joined
Speaker 4: by Bloomberg's Alan Wong. Alan is Bloomberg ecogov editor for China.
Speaker 4: Alan joins from our studios in Hong Kong. Thank you
Speaker 4: so much for being here. I have to begin by
Speaker 4: asking for your take on what we will learn from
Speaker 4: these GDP figures in the coming week.
Speaker 8: China set out to achieve around five percent growth target
Speaker 8: for twenty twenty five, and it's looking very likely that
Speaker 8: it's going to hit that, but that's the consensus anyway,
Speaker 8: and there's actually no surprises that even in the last
Speaker 8: quarter that China was well on track to hit that goal.
Speaker 8: So a lot of economists and investors they have moved
Speaker 8: on to the next question and to look at what
Speaker 8: the Chinese economy is going to look like in the
Speaker 8: coming year, because a lot of the factors that helped
Speaker 8: China last year may not be around anymore and have
Speaker 8: changed in material ways. So one thing that I'd be
Speaker 8: looking at is what Trey looks like with China in
Speaker 8: a coming year. And obviously there's a lot of external
Speaker 8: factors affecting what on not China China's factories could sell
Speaker 8: abroad and how much they can do that.
Speaker 4: Alan, I'm curious to get your take on how high
Speaker 4: tech industries in China have been contributing to the overall
Speaker 4: growth story, and I'm thinking of electric vehicles in particular.
Speaker 4: It's hard to believe that it's been two decades now
Speaker 4: since policymakers in Beijing decided to overtake Western carmakers by
Speaker 4: betting on evs, and now it's clear that China is
Speaker 4: the undisputed world leader. There's also this story on artificial intelligence,
Speaker 4: and I'm thinking of last year's so called deep seek moment.
Speaker 4: So when you consider EVS and AI, are these industries
Speaker 4: having a significant impact when it comes to growth?
Speaker 8: I think the EV sectors certainly contributed to China's economic
Speaker 8: growth materially AI. I think we're not quite seeing that
Speaker 8: just yet, but just and also it's much harder to
Speaker 8: measure than the value of goods flowing out of China's border.
Speaker 8: So if you just take a moment look at the
Speaker 8: EV exports, and just one of the posted children of
Speaker 8: China's industrial might is that EV growth. EV sales growth
Speaker 8: has been in a double digits for many many months
Speaker 8: in a row, and that really helped China export to markets,
Speaker 8: especially outside the US, because in the US, Chinese imports
Speaker 8: of EV's face a lot very high terriffs as basically prohibitive,
Speaker 8: But elsewhere China has been doing much better. But it's
Speaker 8: quite interesting that too, if you compare the production of
Speaker 8: EV's with traditional gasoline vehicles. One thing that people might
Speaker 8: overlook is that actually China's still producing mostly conventional vehicles,
Speaker 8: and that is part of China's economic story, is that
Speaker 8: the bright cand of bright spots outshine the decline in
Speaker 8: traditional industries. And I think in EV is one such
Speaker 8: example where the growth is not really offsetting the slum
Speaker 8: in the rest of the industry. And if you look
Speaker 8: at a broad economy, that might be happening at a
Speaker 8: bar scale as well.
Speaker 4: Maybe we can talk just a bit about the big
Speaker 4: news from the last week. China's trade surplus set a
Speaker 4: record last year of one point two trillion dollars. We've
Speaker 4: talked a lot about evidence that Chinese goods had been
Speaker 4: flooding markets around the world last year. So I'm wondering
Speaker 4: about the degree to which the Chinese export economy fits
Speaker 4: into the story on the trade surplus.
Speaker 8: EV exports are just part of that picture. China's explus
Speaker 8: have been strong outside the US. We're talking about selling
Speaker 8: to the African continent, to Southeast Asia, to the EU,
Speaker 8: and it's a wide variety of products and the growth
Speaker 8: has been stunning. And then one reason is that a
Speaker 8: lot of the meant for the US have been routed
Speaker 8: through those third markets. Either it's by China exporting input
Speaker 8: materials to factories in those places where they assembled and
Speaker 8: then shipped onward to the US, or through some tray
Speaker 8: rerouting that may or may not be above board that
Speaker 8: to meet the final demand in the US. But overall
Speaker 8: that the big the overarching story is that China managed
Speaker 8: to survive Trump's tariff assaults and came out with the
Speaker 8: biggest tray surplus ever one point two trillion dollars.
Speaker 4: So when we talk about China, there is no escaping
Speaker 4: the story on deflation.
Speaker 1: Now.
Speaker 4: To be fair, the latest reading on consumer prices did
Speaker 4: show a pickup in December, but that was mainly due
Speaker 4: to higher food costs. The problem is with wholesale inflation.
Speaker 4: Producer prices in the month of December were down by
Speaker 4: one point nine percent that's an annualized rate, and this
Speaker 4: made for the thirty ninth straight month of weakness in PPI.
Speaker 4: So the question becomes, will twenty twenty six be the
Speaker 4: year when we're going to see some type of reflation
Speaker 4: in China? Do you think that's possible?
Speaker 8: Economists do expect reflation this year, but then there's no
Speaker 8: consensus on just how much prices will jump, and this
Speaker 8: is something that's on Chinese official's mind because they want
Speaker 8: to fight what they call involution. They want to fight
Speaker 8: the endless prize wars that are dragging prices down and
Speaker 8: really squeezing companies profit margins. Even the ev sector of
Speaker 8: such a shining example of China's industrial success, is suffering
Speaker 8: from over competition. And then the carmakers, they're not really
Speaker 8: making that much profit from selling a lot more cars,
Speaker 8: so that has many implications for the economy. If companies
Speaker 8: aren't making enough profits, then that means that there's limited
Speaker 8: room for them to raise wage is which is very
Speaker 8: important for domestic consumption. Right this is the part of
Speaker 8: the stories that we haven't talked about yet. When the
Speaker 8: export to the rest of the world have been so
Speaker 8: strong domestically, and perhaps because domestically consumption has been so
Speaker 8: weak that exporters have nowhere to turn to except outward,
Speaker 8: and that is creating also of the problems right with
Speaker 8: even if explicitly EU jumped, we're seeing pushback from EU
Speaker 8: officials to those what they call state subsidized exports, and
Speaker 8: that's destroying competition locally, and they don't like it. That's
Speaker 8: why they also put up their trade barriers. And now
Speaker 8: the politics is coming in and then you know, there's
Speaker 8: a negotiation between all different parties and we're still waiting
Speaker 8: to see just what kind of deal that they could
Speaker 8: they could reach to end this standoff.
Speaker 4: So from what I understand, and you can confirm this
Speaker 4: or deny it if you'd like. The property market, the
Speaker 4: weakness that we have seen in the housing sector in
Speaker 4: China continue used to cast a Paul weak confidence is
Speaker 4: something that we talk a lot about, more so on
Speaker 4: the side of the consumer perhaps than the business community.
Speaker 4: Where does this leave the Central Bank when it comes
Speaker 4: to adjusting policy in the new year. Do you think.
Speaker 8: The reason that the Central Bank hasn't done more easing
Speaker 8: last year than many economists expected was probably due to
Speaker 8: just how well the economy fared under tariff pressure. They
Speaker 8: just saw no urgent need to release more easing and
Speaker 8: to support the economy. And the outlook for this year
Speaker 8: is somewhat similar. It's reactive, like based on how the
Speaker 8: economy is doing against the external pressures. If it's doing well,
Speaker 8: then then once again PBOC may have less reason to
Speaker 8: support the economy to the amount of cash that banks
Speaker 8: must keep in reserve and release more money to the
Speaker 8: economy for lending. That is to say that we I
Speaker 8: think most economists don't expect massive stimulus to come. And
Speaker 8: you mentioned the property market. It sounds like beating a
Speaker 8: dead horse now, but we haven't seen the bottom yet
Speaker 8: in the property market, and it's a matter of whether
Speaker 8: the government sees is as necessary to restore confidence in
Speaker 8: a property market to in order to increase people's mood
Speaker 8: to consume like that is a like. The government has
Speaker 8: said that they want prices to stop falling, but so
Speaker 8: far the measures that they have rolled out so far
Speaker 8: have been incremental and haven't had a major impact on
Speaker 8: getting prices up.
Speaker 4: And higher equity prices really haven't solved that problem. It
Speaker 4: would appear at any rate. So Chinese presidenci we know,
Speaker 4: has recently welcomed a host of leaders maybe can say
Speaker 4: that they are looking to mend fences. And I'm thinking
Speaker 4: of South Korea as Leeb Jamjung along with Canadian Prime
Speaker 4: Minister Mark Carney and Britain's Cure Starmer. How do you
Speaker 4: think she is orchestrating this. We talked a moment ago
Speaker 4: about the fact that China maybe as a result of
Speaker 4: the tariff policy from the US has been working for
Speaker 4: a while now become less dependent on the United States.
Speaker 4: Is there a success now in trying to negotiate greater
Speaker 4: access to markets outside of China other than the United States.
Speaker 8: I think the fact that these leaders are visiting China
Speaker 8: over such a short period of time, and for many
Speaker 8: of those leaders is their first visits in many years,
Speaker 8: shows that there's some modest success on China's part in
Speaker 8: trying to get the West to re engage with it.
Speaker 8: But there are lots of nuances here because while those
Speaker 8: countries want to re engage China, manage their ties with
Speaker 8: China economically, in terms of national security, there's still very
Speaker 8: much part of the Western Bloc. There's still very much
Speaker 8: in bed with the US. There is not It's very
Speaker 8: hard to imagine a world where because of economic interest,
Speaker 8: these countries would choose China over the US. So what
Speaker 8: we're seeing is mostly these countries trying to manage their
Speaker 8: ties with China, try to get as good an economic
Speaker 8: deal with China as possible, and also because of worries
Speaker 8: that China's exports are hurting their local competition, So there's
Speaker 8: a lot of incentive for them to talk to China
Speaker 8: to begin with. And also what the elephant in the
Speaker 8: room is that China showed that it has massive leverage
Speaker 8: over rare earth materials that a lot of countries rely
Speaker 8: on to make stuff to in the high tech sector.
Speaker 8: So if China threatened, I mean successfully used rare earths
Speaker 8: to to get concessions from the Trump administration doing the
Speaker 8: train negotiation, and they have used the same dominance as
Speaker 8: a form of punishment on Japan. So it's also in
Speaker 8: those countries trying to engage with China's interest to make
Speaker 8: sure that they can manage to maintain that access to
Speaker 8: the eras.
Speaker 4: Alan will leave it there. Thank you so very much,
Speaker 4: Bloomberg's Alan Wong Alan is Bloomberg's ecogov editor for China.
Speaker 4: Joining today from our studios in Hong Kong, and I'm
Speaker 4: Doug Krisner. You can catch us weekdays for the Daybreak
Speaker 4: Asia podcast. It's available wherever you get your podcast Nathan.
Speaker 2: Thanks Doug.
Speaker 5: Man.
Speaker 2: That does it for this edition of Bloomberg day Break Weekend.
Speaker 2: Join us again Tuesday morning at five am Wall Street
Speaker 2: Time for the latest non markets overseas and the news
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