Speaker 1: This is Bloomberg Date Break Weekend, our global look at
Speaker 1: the top stories in the coming week from our Daybreak
Speaker 1: anchors all around the world, and straight ahead on the program,
Speaker 1: a look at the Federal Reserves Annual meeting in Jackson Hole, Wyoming.
Speaker 1: I'm Tom Busby in New York.
Speaker 2: I'm Stephen Carolin London, where we're looking ahead to the
Speaker 2: latest house priced data in the UK as the sector
Speaker 2: breaks is for further price falls as interest rates move higher.
Speaker 3: I'm Brian Curtis in Hong Kong. We look inside the
Speaker 3: black box that is China.
Speaker 4: I'm Killie Lines in Washington, where we have our eyes
Speaker 4: on Milwaukee ahead of the first Republican presidential primary date.
Speaker 5: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
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Speaker 1: Day to You, I'm Tom Busby, and we begin today's
Speaker 1: program with what to expect at the Kansas City Fed's
Speaker 1: annual Jackson Hole Economic Policy Symposium, a three day event
Speaker 1: that officially starts this coming Thursday with a highly anticipated
Speaker 1: address from FED chair Jerome Powell. Friday morning about ten am,
Speaker 1: Wall Street Time, Bloomberg Surveillance co host Lisa Abramowitz, who
Speaker 1: will be in Jackson Hole this week, joins us now
Speaker 1: with some insight. Lisa, thank you so much for being.
Speaker 6: Here, Tom, thank you so much for having me.
Speaker 1: Well, the theme of this year's symposium is structural shifts
Speaker 1: in the global economy, but for most of us, it's
Speaker 1: all about what Jay Powell will say in those remarks
Speaker 1: and any hints he may offer about what the FED
Speaker 1: is thinking going into the September FOMC meeting now just
Speaker 1: a few weeks away. So what do you think we
Speaker 1: can expect to hear from Chairman Powell? Lisa, Well, I
Speaker 1: think the.
Speaker 6: Whole idea of structural shifts raises a question about whether j.
Speaker 6: Powell is willing to come out and say inflation is
Speaker 6: structurally going to be high in the years to come,
Speaker 6: and whether the rate that the FED sets has to
Speaker 6: also be higher in the years to come, and if
Speaker 6: he says that what that does to sort of underpin
Speaker 6: some of the moves we've seen in the bond market,
Speaker 6: in other words, bond selling off, yields going up in
Speaker 6: response to this expectation of higher rates for longer.
Speaker 1: Well, it was a year ago at Jackson Hole that
Speaker 1: Jpal warned of the pain that rising interest rates would
Speaker 1: cause the economy and consumers. Now there's been some pain
Speaker 1: benchmark lending rates at a twenty year high, but we've
Speaker 1: seen surprisingly strong job growth since then. We've seen a
Speaker 1: resilient economy, steady consistent growth, consumer spending, housing market a
Speaker 1: little uneven, but is it better than when he projected
Speaker 1: just a year ago.
Speaker 6: So when he was talking about pain, he was talking
Speaker 6: about the unemployment rate coming up. There was a belief
Speaker 6: that there was no way to get inflation lower unless
Speaker 6: you had unemployment tick up. People lose their jobs, and
Speaker 6: this was the pain that they talked about that was
Speaker 6: necessary to avoid further pain down the line in terms
Speaker 6: of higher inflation, sort of taxing the profits, taxing the
Speaker 6: incomes of the average American. We are still at about
Speaker 6: three and a half percent unemployment rate about a year later.
Speaker 6: In the employment market, that pain is not apparent. Nobody
Speaker 6: would say that this is a difficult labor market. Quite
Speaker 6: the opposite, and there are indications that while it is
Speaker 6: loosening a touch, it still is relatively easy to get
Speaker 6: a job, and wage increases are still above what they
Speaker 6: had been pre pandemic. So as we look to this speech,
Speaker 6: there is a real question about whether Jerome Powell will
Speaker 6: come out and say we were wrong, we didn't need
Speaker 6: the pain, and actually inflation is coming down just fine
Speaker 6: because post pandemic there were normalization effects that had not
Speaker 6: yet taken hold, And whether he's going to come out
Speaker 6: and say, we believe in a soft landing and we
Speaker 6: are going to be patient and hold rates where they
Speaker 6: are for longer to gauge whether or not we are.
Speaker 6: If we're wrong, we can raise rates further, but otherwise,
Speaker 6: let's lean into this. That's kind of what we've heard
Speaker 6: from other Fed officials as they've talked, let's lean in
Speaker 6: a little bit to this idea that maybe we're getting,
Speaker 6: you know, this mythical beast that is the soft landing
Speaker 6: or the no landing and inflation coming in. You know,
Speaker 6: this will be something that I hope he does address
Speaker 6: because it was a pretty dark speech last year.
Speaker 1: Yeah, the markets took a tumble, right, correct.
Speaker 6: It was sending a very clear message. The Fed came
Speaker 6: through on what they were saying. They raised rates at
Speaker 6: the fastest pace in modern economic history. So at what
Speaker 6: point do they have to revamp their idea of what
Speaker 6: restrictive means of how high rates have to go to
Speaker 6: bring inflation back down to two percent? Or are they
Speaker 6: going to say we don't need to get it down
Speaker 6: to two percent so quickly, which is so some of
Speaker 6: them are hinting, And you know, if that's the case,
Speaker 6: we can be patient and we can watch and we
Speaker 6: can maybe avoid that.
Speaker 1: Well, then that year, CPI went from about nine percent
Speaker 1: in July of twenty twenty two to last month's reading
Speaker 1: of three point two percent. So whatever they're doing seems
Speaker 1: to be working.
Speaker 6: Some people would argue that the decline in inflation, which
Speaker 6: just means prices are rising at a slower clip, is
Speaker 6: just simply because year over year comparison numbers are too
Speaker 6: difficult to really achieve that sort of equal nine percent level,
Speaker 6: right that. In other words, inflation rose at a tremendous
Speaker 6: pace mid year last year, very difficult year over year
Speaker 6: to supersede that as such a great clip. Some people
Speaker 6: are saying that that is fading and that you're going
Speaker 6: to see a reacceleration in inflation NEIL data among those
Speaker 6: other people saying that this isn't it even Fed policied
Speaker 6: have taking effect. This is just simply a normalization a
Speaker 6: lot of questions that they, you know, would be interesting
Speaker 6: for them to weigh in on.
Speaker 1: Now, the FED meets again in September, and before then
Speaker 1: we're going to get some big data point. We have
Speaker 1: jobs data, housing data. So what will you be looking for?
Speaker 6: So you're asking, probably I don't want to say the
Speaker 6: wrong person, but I will give you the traditional answer,
Speaker 6: and then I will give you my answer. The traditional
Speaker 6: answer is CPI is really important to see how much
Speaker 6: inflation's coming in, and of course the job's number is
Speaker 6: also really important to get a sense of just how
Speaker 6: much the economy is cooling or how much the labor
Speaker 6: market is showing signs of loosening. I would argue part
Speaker 6: of the problem with this whole concept of data dependency
Speaker 6: is that which data are you looking at and what
Speaker 6: narrative are you trying to paint. Are you looking at
Speaker 6: leading in economic indicators? Are you looking at data over
Speaker 6: a couple of months, how many months? What's enough to
Speaker 6: give you conviction that you've actually killed the inflation beast right?
Speaker 6: And the reason why I ask this is because this
Speaker 6: is supposedly a newly data dependent fed. What do they
Speaker 6: do if inflation gets back down to three percent on
Speaker 6: a rolling three month basis? Do they say victory? Do
Speaker 6: they say we have enough data to have conviction that's
Speaker 6: going down to two percent? Or do they say, wait
Speaker 6: a second, we're also looking at the data that's over
Speaker 6: there with what cars cost and oh yeah, over here
Speaker 6: with how people are feeling in the University of Michigan
Speaker 6: Consumer Sentiment Survey. It is a moving target to get
Speaker 6: a sense of what the economic model is at a
Speaker 6: time of incredible change, and that I think is what
Speaker 6: people are trying to understand. What data are they looking at,
Speaker 6: what's their framework for making these assessments at a time
Speaker 6: where that itself is of great debate.
Speaker 1: Now some of that data, particularly housing, which we all
Speaker 1: look at closely. It's tough affordability at a forty year low,
Speaker 1: because interest rates are at a twenty two year high
Speaker 1: and the price is just unbelievable. That's got to impact everything.
Speaker 6: Yes, and it's surprising that, given affordability is so low,
Speaker 6: housing prices having come down more. And this goes to
Speaker 6: the heart of the conundrum for the Federal Reserve. Three
Speaker 6: years ago, if you would have pulled anybody off the
Speaker 6: street and said, hey, the Fed's going to go from
Speaker 6: zero percent to five percent in terms of the overnight rate,
Speaker 6: mortgage rates are going to be north of seven percent.
Speaker 6: Where do you think housing prices are going to be?
Speaker 6: Everyone would say, oh, my goodness, they would absolutely tank.
Speaker 6: There's no way they can continue to chug hargher. And
Speaker 6: yet here we are. And part of it is that
Speaker 6: because of the higher rates, people aren't selling and there's
Speaker 6: no supply. I mean, this is one of the most
Speaker 6: counterintuitive economies in the way that it is sort of
Speaker 6: developed that a lot of people have seen, and it
Speaker 6: keeps up ending economist projections. So housing will be interesting.
Speaker 6: The tea leaves that it's sending, though again as much
Speaker 6: mystery as they are anything else, because of the ways
Speaker 6: people adapt to higher rates and finding workarounds.
Speaker 1: So tell me why we wait to see which J.
Speaker 1: Powell We're going to get a Dubvish or hawkish. What's
Speaker 1: it like at Jackson Hole. What's it like being there?
Speaker 6: Well, truth be told, we're up at four am local
Speaker 6: time or three am local times, so it's usually pretty
Speaker 6: dark and cold, and it's very cold, you know, up
Speaker 6: in the mountains, but it's gorgeous as the sun comes
Speaker 6: up over all of the mountains. And then there are
Speaker 6: those on the fed and the academics who join, who
Speaker 6: go hiking and canoeing and fishing, and they are those
Speaker 6: who stay in the lodge and have discussions. It's really
Speaker 6: neat to have so many thinkers together trying to hash
Speaker 6: things out to understand.
Speaker 7: Where we are.
Speaker 6: And it's a retreat in the traditional American kind of sense.
Speaker 1: Do you think that kind of atmosphere loosens these people
Speaker 1: up the way we normally see them as so stern,
Speaker 1: so buttoned up. Is it a little different in Wyoming?
Speaker 1: Yes and no.
Speaker 6: They are stayed because they have a tall task, they
Speaker 6: have a difficult one, and they have a big job
Speaker 6: to do. And I feel that, you know, I feel
Speaker 6: that energy from them.
Speaker 8: You know.
Speaker 6: Sure, people a little bit looser, sure, but it isn't
Speaker 6: party mode. It's not as though people you know, do
Speaker 6: junkets where they're throwing axes and getting hammered. It's like,
Speaker 6: you know, definitely a feeling of gravitas for the moment.
Speaker 6: And I think that that's, you know, that's what the
Speaker 6: atmosphere feels like. And to be fair, I mean we
Speaker 6: are fairly isolated, about forty five minutes away from the
Speaker 6: actual town of Jackson Hole, and you're surrounded by little
Speaker 6: cabins or nothing and mountains. So it's not exactly a
Speaker 6: party atmosphere conducive to you know, you know, some kind
Speaker 6: of you know, incredible partying. This is you know, the
Speaker 6: levity that people have going for a hike or you know,
Speaker 6: going fishing. It's more of that nature.
Speaker 1: Thank you, Lisa. Bloomberg Surveillance co host Lisa Abramowitz will
Speaker 1: have live special coverage from Jackson Hole of all the
Speaker 1: key events. Plus we'll bring all the news being made
Speaker 1: on the sidelines to you as well right here on
Speaker 1: Bloomberg Radio. Coming up on Bloomberg day Break Weekend is
Speaker 1: the real estate market in the UK in trouble. I'm
Speaker 1: Tom Busby and this is Bloomberg. This is Bloomberg day
Speaker 1: Break Weekend, our global look ahead at the top stories
Speaker 1: for investors in the coming week. I'm Tom Busby in
Speaker 1: New York. Up later in our program, Troubles mount for
Speaker 1: the Chinese economy as the slow down deepens. We'll bring
Speaker 1: you details, but first Britain's real estate market will be
Speaker 1: in focused in the coming days. Home prices under pressure
Speaker 1: from higher rates, and Bloomberg Economics is forecasting further declines
Speaker 1: as the effects of the most recent hikes feed slowly
Speaker 1: into the market. Any hopes of a pause from the
Speaker 1: Bank of England have been dashed by recent hotter inflation
Speaker 1: and wage growth data. For more, Let's head to London
Speaker 1: and bring in Bloomberg Daybreak Europe Banker Stephen Carroll Tom like.
Speaker 2: The weather, house prices are a topic of national conversation
Speaker 2: in Britain. After more than a decade of steady growth,
Speaker 2: prices are starting to come down, falling around five percent
Speaker 2: from their peak last August. Bloomberg reckons they have another
Speaker 2: five percent or so to fall, and we'll get fresh
Speaker 2: data from the property website right Move in the coming days.
Speaker 2: The Bank of England's fourteen consecutive interest rate hikes are
Speaker 2: still feeding into the market because of the way that
Speaker 2: UK mortgage rates are usually fixed for just two to
Speaker 2: five years. The recent stronger than expected wage growth and
Speaker 2: inflation data means markets now expect BOE rates to peak
Speaker 2: around six percent, So there's still plenty of pain ahead
Speaker 2: for the housing market. We've been discussing this with Damian Shephard,
Speaker 2: our residential real estate reporter, and John Steppek, who writes
Speaker 2: Bloomberg's Money Distilled newsletter.
Speaker 9: Well, the market expectation though is that rates will peak
Speaker 9: are in about six percent in March. And obviously, I
Speaker 9: mean market expectations have changed an awful lot that she
Speaker 9: hadn't bounced up and down. The more important, I'll say,
Speaker 9: the BOEV is an important fact on mortgages, but it's
Speaker 9: not the kind of most important, and it's not, you know,
Speaker 9: the key. A lot of it depends on how keen
Speaker 9: by are to lend as well. So on the one hand,
Speaker 9: rates have gone up a lot. On the other hand,
Speaker 9: banks are quite keen they right loans because they're not
Speaker 9: doing a lot of business to the business they can do.
Speaker 9: You know, they want to do it, but you know,
Speaker 9: at the end of the day, the kind of base
Speaker 9: rate is the base rate. So you're talking about interest
Speaker 9: rates have gone from about say two percent in the
Speaker 9: mortgage about you know, eighteen months ago and now you're
Speaker 9: going to be paying what a five and a half percent?
Speaker 9: I think the two year average fix is about five
Speaker 9: point eight at the moment, so it's gone up an
Speaker 9: awful lot and the things I don't think that we've
Speaker 9: seen that feed through all the way to prices yet.
Speaker 10: I want to ask your advice from whether you're looking
Speaker 10: at two year ago for five year But we'll leave
Speaker 10: that for maybe the end of the conversation. Let's bringing
Speaker 10: Dimian at this point. Dimian when it comes to volumes,
Speaker 10: because there's been some element resilience in terms of the
Speaker 10: housing market. What's what's happening with with volumes given this
Speaker 10: higher rates environment.
Speaker 8: Yes, I think you know the doomsday predictions of big
Speaker 8: house price falls. I think it's playing out relatively slowly.
Speaker 8: But in transactions, you're seeing them a lot lower than
Speaker 8: they were this time last year. One of John's recent
Speaker 8: newsletters pointed me to the Ricks survey where you see
Speaker 8: the view of estate agents and surveyors and they're pretty
Speaker 8: down beat.
Speaker 10: It's pretty brutal.
Speaker 8: For real, it's pretty brutal, and that normally points to
Speaker 8: dip in transactions because they're not getting their commission. So
Speaker 8: I think transactions are down. And what's interesting is that's
Speaker 8: even happening at the top end of the market. In
Speaker 8: Prime London, we're down about twenty five percent transaction wise
Speaker 8: in July compared to the same month a year ago.
Speaker 8: And when you see that sort of distress happening at
Speaker 8: the top end of the market, it makes you think,
Speaker 8: what's happening a bit lower down?
Speaker 2: Bloomberg Economics expect it a peach to traft move of
Speaker 2: ten percent in house prices. I mean, how far does
Speaker 2: it look like we're into that and should people be
Speaker 2: holding on for this help that prices are going to
Speaker 2: drop much further?
Speaker 9: Well, I mean, okay, more so far we're doing four
Speaker 9: percent a contination weed from August twenty twenty to. The
Speaker 9: first thing I would say there is look, if you're
Speaker 9: buying a house, forget about trying to time the market,
Speaker 9: because it really is a waste of your energy. There
Speaker 9: are so many other factors that matter for buying a house,
Speaker 9: and it's mostly your personal circumstances. And if you're an
Speaker 9: investor that's a slightly different issue. But you know you
Speaker 9: need somewhere to live, and if you've decided this is
Speaker 9: right for you. The thing you focus on is making
Speaker 9: sure you've got somewhere that a you can afford if
Speaker 9: things go a bit pair shaped with the interest rates,
Speaker 9: and be that you are happy to live in for
Speaker 9: a prolonged period of time in case, you know, something
Speaker 9: happens and you end up stuck there.
Speaker 3: You know.
Speaker 9: So that's that's basically what you should be thinking about,
Speaker 9: rather than worrying about whether prices are going to go
Speaker 9: down by another five percent from here or not. That said,
Speaker 9: you know, I struggle to see how prices won't fall
Speaker 9: further because you know, obviously there is that massive issue,
Speaker 9: which is the interest rates have gone up so much
Speaker 9: that people can no longer borrow I mean, and then
Speaker 9: and interest rates go up, buyers cannot borrow as much money,
Speaker 9: and therefore they cannot afford the prices that sellers wanted
Speaker 9: a year ago or six months ago. So the sellers
Speaker 9: have to give way or they have to sit in
Speaker 9: their houses, which is, as Damien said, one reason why
Speaker 9: transactions have kind of fallen off at Cliff because you know,
Speaker 9: does a stalemate going on. But the longer that continues,
Speaker 9: the longer that you know, the more I think that
Speaker 9: would have to resolve in favor of the buyers rather
Speaker 9: than the sellers, because you know, if you want to
Speaker 9: move then at some point you're going to have to
Speaker 9: accept that. Well, people just don't have to buy in
Speaker 9: put it anymore.
Speaker 10: What is happening diamon on the mortgage market then just
Speaker 10: splash that out for us, we saw a lot of
Speaker 10: big banks pulling deals recently that that grabbed a lot
Speaker 10: of headlines because rates were just going up, markets were
Speaker 10: repricing on higher rates from the boa is. That started
Speaker 10: to settle a little bit. What are you looking at
Speaker 10: in terms of kind of two year, five year I
Speaker 10: mean John touched on this, but but unpacking a little
Speaker 10: bit more for us.
Speaker 8: Yeah, So we've seen some headlines in the last couple
Speaker 8: of weeks of lenders sort of slowly putting rates down again.
Speaker 8: And when I say Dan, we're still essentially touching fifteen
Speaker 8: year highs when it comes to the two year and
Speaker 8: five year fixed. Now there's tens of thousands of remortgages
Speaker 8: waiting to happen in September. Now those people have been
Speaker 8: able to secure those new deals for the last six months,
Speaker 8: but it sort of spells a period of pain coming
Speaker 8: up at the end of the year when people are
Speaker 8: coming off those fixed deals which would have been locked
Speaker 8: in at much lower rates, and are now sort of
Speaker 8: looking at mortgage rates of up to almost six percent
Speaker 8: in terms of the average. So there's going to be
Speaker 8: a lot of pain to happen towards the end of
Speaker 8: this year. And despite the fact that lenders are slowly
Speaker 8: cutting rates, we're still so much higher than we saw
Speaker 8: during that era of cheap money. So there's a lot
Speaker 8: of pain to come for these remortgages.
Speaker 2: And the bitter let mortgages are a particular pinch point
Speaker 2: that we've seen, and that's come out in some of
Speaker 2: the recent data as well of how many landlords are
Speaker 2: being forced to sell up because they can't afford the
Speaker 2: increase in interest rates as well. What's the impact on
Speaker 2: the rental markets.
Speaker 8: Well, I mean, renters are at the sharp end of
Speaker 8: the problems in the property market at the moment. There's
Speaker 8: a lot of pressure on landlord finances. A lot of
Speaker 8: them are on interest only mortgages, or the majority are,
Speaker 8: which means that every time there's a BOE hike, they're
Speaker 8: going to feel the pain more than those sort of
Speaker 8: standard mortgage holders who are on fixed deals and the
Speaker 8: only option really is to hike renters monthly bills or
Speaker 8: sell up. We've seen an uptick in landlords selling their
Speaker 8: properties over the last six months, and that's quite probably
Speaker 8: in response to these high mortgage rates and the fact
Speaker 8: that you know, they see those BOE hikes quite intensely
Speaker 8: when they happen. But for renters, you know, they're seeing
Speaker 8: their monthly bills go up a lot. And these are
Speaker 8: the people that want to get on the housing ladder.
Speaker 8: I'm a rent myself and due for a rent hike
Speaker 8: at the end of this month. So when you start
Speaker 8: to consider how much that takes the opportunity of getting
Speaker 8: onto the housing ladder away from you, it's a pretty
Speaker 8: stark reality for those renters. Yeah.
Speaker 10: Indeed, John on by to let is buy to let
Speaker 10: still a good investment?
Speaker 9: No, I mean, if you're thinking this that no, No,
Speaker 9: I mean, I imagine what's happening and this is purely conjectured,
Speaker 9: but imagine what's happening with these buy to let landlords
Speaker 9: who have been forced to sail up, as the one
Speaker 9: of the problems is that they'll not then sail into
Speaker 9: FoST tame buyers. They had actually twice sealing other cash rich,
Speaker 9: more professional landlords.
Speaker 2: That was Bloomberg's John Steppeck, author of the Money Distilled newsletter,
Speaker 2: and Damian Shepard are residential real estate reporter. The one
Speaker 2: sector of the market we didn't get a chance to
Speaker 2: discuss with them was luxury homes. Damien has been reporting
Speaker 2: about the discounts that sellers are having to offer on
Speaker 2: houses worth millions of pounds as they try to attract buyers.
Speaker 2: So perhaps an opportunity in London's market for those with
Speaker 2: a few million to spare. I'm Stephen Carroll in London.
Speaker 2: You can catch us every weekday morning here for Bloomberg
Speaker 2: Daybreak Europe, beginning at six am in London and at
Speaker 2: one am on Wall Street.
Speaker 1: Tom. Thank you, Stephen, and coming up on Bloomberg day
Speaker 1: Break weekend to look at what's happening in China's economy.
Speaker 1: I'm Tom Busby and this is.
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Speaker 1: I'm Tom Busby in New York with your global look
Speaker 1: ahead at the top stories for investors in the coming week.
Speaker 1: Troubles mount for the Chinese economy as the slowdown deepens
Speaker 1: and a crisis bruise in the shadow banking industry. How
Speaker 1: will the government navigate through this post COVID trough well
Speaker 1: For more, let's head to Bloomberg Daybreak Asia's host Brian Curtis.
Speaker 3: Tom, we look forward to China's loan prime rates out
Speaker 3: on Monday in the coming week. After cuts in the MLF,
Speaker 3: we can expect to see an adjustment there, probably in
Speaker 3: the five year LPR for sure, which is a proxy
Speaker 3: for mortgages. By many accounts, China's housing slump is worse
Speaker 3: than the official data would suggest. New home prices have
Speaker 3: slipped only two point four percent over the past year
Speaker 3: or so, but the feedback that we're getting from estate
Speaker 3: agents and data providers paint a darker picture, and so
Speaker 3: a lot of focus is on what we might see
Speaker 3: in terms of stimulus for the broader economy. Joining us
Speaker 3: now for some discussion about this is Jenny Marsh, Bloomberg's
Speaker 3: team leader for China Economy and Government. Jenny, So, we're
Speaker 3: talking about some pretty extreme pessimism all of a sudden
Speaker 3: here in the Chinese economy.
Speaker 1: Is it warranted?
Speaker 7: You know, I think the pessimism is warranted. There are
Speaker 7: some sort of big problems facing the Chinese economy, but
Speaker 7: I think it's really important to remember the economy still
Speaker 7: is on track to grow by five percent this year,
Speaker 7: and I think you know, there was a State Council
Speaker 7: meeting this week. It was sort of a snap plenary,
Speaker 7: which is sort of surprising and does show some concern,
Speaker 7: but you know, Lee Chang's stressed at that meeting. You know,
Speaker 7: the economy is in good shape to actually meet its
Speaker 7: growth target this year. So while certainly, you know, growth
Speaker 7: is slowing and the raw problems facing the economy, it's
Speaker 7: not in bad shape.
Speaker 3: We've talked a lot about how international investors and perhaps
Speaker 3: even domestic investors are calling for more stimulus, but we
Speaker 3: did see in the South China Morning Post and they're
Speaker 3: running a piece highlighting a speech that Hijin Ping gave
Speaker 3: back way back in September asking for cadres to be patient,
Speaker 3: to understand that China just can't simply follow the beaten path,
Speaker 3: and he's really pushing for patients because that's what's needed
Speaker 3: for common prosperity to deliver its you know, its fruits.
Speaker 3: And with that type of thinking, investors may be waiting
Speaker 3: for a while here.
Speaker 7: Yeah, I mean absolutely. I mean, you know, I think
Speaker 7: China does have the resources to sort of to simulate
Speaker 7: the economy if it wants to. But you know, she's
Speaker 7: Dremping for years now, has been trying to instill this
Speaker 7: idea of high quality growth, which is sort of shifting
Speaker 7: away from the properties and economic driver, lowering debt and
Speaker 7: boosting high tech industries. So I think, you know, for she,
Speaker 7: I think in a way, he's sort of prepared to
Speaker 7: see the economy run a bit cooler if it means
Speaker 7: that actually it sort of gets into better shape. And
Speaker 7: I think actually people now are sort of accepting that
Speaker 7: five percent growth target was a serious goal rather than
Speaker 7: just some kind of flaw to be exceeded.
Speaker 3: We had just in the past few days, some Bloomberg
Speaker 3: data revealing that some sixty percent of outstanding Chinese offshore
Speaker 3: estate bonds are labeled as distressed. So we need to
Speaker 3: focus a little bit more on the property market here.
Speaker 3: Sometimes when you get prices only moving down a small amount,
Speaker 3: it doesn't tell the real story. The big drop off
Speaker 3: in transactions sometimes can tell a bigger story. How deep
Speaker 3: is the crisis in the property market?
Speaker 7: You know, I think the thing with the property market
Speaker 7: is the debt sort of facing the developers is the
Speaker 7: big thing now that you know, China has to really
Speaker 7: deal with. There are so many people who have sort
Speaker 7: of put their life savings into homes which developers haven't
Speaker 7: yet built, and now with sort of the debt problem ballooning,
Speaker 7: you know, how these developers are going to sort of
Speaker 7: find the financing to make good on these properties is
Speaker 7: a real risk. And I think that's the thing that
Speaker 7: the government is worried about. And I think, you know,
Speaker 7: there are many ways in which they're prepared to see
Speaker 7: things sort of go a bit cooler, but you know,
Speaker 7: this is something that can sort of spill over into
Speaker 7: social instability. And also then you know how this sort
Speaker 7: of ripple effect through the economy, which is kind of
Speaker 7: what we're seeing this week, you know, with the shadow
Speaker 7: banking crisis now, where these trust funds have sort of
Speaker 7: invested in the property market and this sort of ripples
Speaker 7: over and then impacts some people's wealth. So I think
Speaker 7: it is a big concern.
Speaker 3: Yeah. One wonder is whether or not we see more
Speaker 3: people out in the streets like we did see in
Speaker 3: the past week in Beijing, whether or not that forces
Speaker 3: the hand of policymakers. It's the type of thing that
Speaker 3: was rumored back when zero COVID was.
Speaker 7: Changed and exactly and I think, you know, for she,
Speaker 7: despite the fact he does come from this elite, sort
Speaker 7: of princely background, he sees himself as sort of a
Speaker 7: champion of the people. And I think this COVID protests
Speaker 7: were so shocking because he realized that the average person
Speaker 7: A was angry and B had been hardest hit by
Speaker 7: his policies, and I think that is worrying for him.
Speaker 7: And you know, the one thing that I think the
Speaker 7: Chinese public is willing to protest about is their wealth.
Speaker 7: You know, if you make Chinese people poorer, they will
Speaker 7: come out into the streets. And I think those protests
Speaker 7: have seen as being somewhat legitimate as well. So is
Speaker 7: the kind of thing the government would respond to for sure.
Speaker 3: So confidence is needed not only for the business sector,
Speaker 3: but for the consumer sector. And then we have a
Speaker 3: story like we ran just at the latter part of
Speaker 3: this past week, where officials have asked investment funds to
Speaker 3: avoid being net sellers of equities, in other words, to
Speaker 3: make sure that they're buying a little more than their selling.
Speaker 3: What does that do for confidence when stories like that emanate,
Speaker 3: I think.
Speaker 7: It's not a good look. You know, if the government
Speaker 7: has to intervene in this kind of way, then the
Speaker 7: market's not running as it should be, you know. And
Speaker 7: this is a problem that the government has at the moment.
Speaker 7: It sort of has these mixed signals. And the one
Speaker 7: hand they're saying, you know, the growth target is fine
Speaker 7: and sort of the Communist Party's newspaper earlier this week
Speaker 7: had an editorial saying, you know, no growth would be
Speaker 7: a problem. But on the other hand, they don't want
Speaker 7: the confidence to deteriorate in a way that it becomes
Speaker 7: a self fulfilling loop, you know, and then things do
Speaker 7: go into sort of crisis mode. I think there were
Speaker 7: some banks earlier this week that downgraded their economic growth
Speaker 7: forecast to below five percent. And I think if it
Speaker 7: does start to look like the government's going to miss
Speaker 7: the five percent target, that's also something that could really
Speaker 7: motivate the government to take sort of bolder steps.
Speaker 3: And we talked also at times over the past week
Speaker 3: about Chinese officials deciding not to publish the unemployment numbers
Speaker 3: for youth, and as you pointed out in an interview
Speaker 3: that we did on Bloomberg day Break Asia, those numbers
Speaker 3: from sixteen to twenty four maybe a little misleading because
Speaker 3: of the difficulty in sort of tracking young people. But
Speaker 3: it's another example of how policy sometimes will get adjusted
Speaker 3: just to have the appearance of things not being as
Speaker 3: bad as perhaps they look.
Speaker 7: Oh yeah, exactly, I mean, you know exactly. It could
Speaker 7: be that China has legitimate reasons for wanting to change
Speaker 7: just methodology in capturing this data, because you know, should
Speaker 7: it be capturing sixteen year old in youth unemployment data
Speaker 7: if realistically their students you know, still living at home,
Speaker 7: et cetera. But the way they did it, you know,
Speaker 7: pausing that data in a month whereas expected to soar,
Speaker 7: creates a bad impression particularly when it comes as they've
Speaker 7: been restricting growing amounts of data. They used to release
Speaker 7: numbers show the amount of land developers bought and the
Speaker 7: price they paid. That's been missing for much part of
Speaker 7: this year. You know, there's countless examples of this where
Speaker 7: trying to sort of when things get a bit too
Speaker 7: awkward and prickly, they just sort of stop releasing that data.
Speaker 7: And you know that creates this sort of feasonter fears
Speaker 7: that China is becoming more of a black box somewhere,
Speaker 7: which is volatile, hard to invest in.
Speaker 3: Yeah, and it does raise questions about the overall data.
Speaker 3: I've been here for more than thirty years, and you
Speaker 3: know we always had these questions about data. But for
Speaker 3: the most part we say, well, the data is the data,
Speaker 3: and this is what we live with. But now it's
Speaker 3: very much in focus again. But I think we should
Speaker 3: probably spend a little bit of time on some of
Speaker 3: the positives in the Chinese economy, because, to be fair,
Speaker 3: even as you suggested earlier, if we were getting up
Speaker 3: around five percent growth, some things are working. So let's
Speaker 3: take a minute here to look at some parts of
Speaker 3: the Chinese economy that do seem to be producing yeah.
Speaker 7: I mean, and also often when we talk about the data,
Speaker 7: it's sort of like the data is weakening, the growth
Speaker 7: is slowing. You know, we're not saying that there is
Speaker 7: actually in decline. So you know, obviously CPI did go
Speaker 7: intocline recently, but there are sort of other right spots
Speaker 7: for the economy, so I think it is important to
Speaker 7: sort of to focus on those.
Speaker 3: Two interesting perspective. Jenny, thanks so much for joining us.
Speaker 3: Jenny Marsh Bloomberg Team leader for China's Economy and Government.
Speaker 3: I'm Brian Curtis along with Doug Chrisner. You can catch
Speaker 3: us every weekday here for Bloomberg day Break Asia, beginning
Speaker 3: at six am in Hong Kong and six pm on
Speaker 3: Wall Street.
Speaker 1: Tom, thank you, Brian, and coming up here on Bloomberg
Speaker 1: day Break weekend to look at we head to the
Speaker 1: first twenty twenty four Republican primary debate, which happens on Wednesday.
Speaker 1: I'm Tom Busby, and this is Bloomberg. This is Bloomberg
Speaker 1: day Break Weekend, our global look ahead at the top
Speaker 1: stories for investors in the coming week. I'm Tom Busby
Speaker 1: in New York. Wednesday marks the first debate of the
Speaker 1: twenty twenty four presidential season, and it's a focus on
Speaker 1: the Republican field. For a preview, let's head to our
Speaker 1: Bloomberg ninety nine to one newsroom in Washington and Bloomberg
Speaker 1: Sound On co host Kaylee.
Speaker 4: Lines tom Next week is going to be a big
Speaker 4: one in the world of politics for many reasons. President
Speaker 4: Biden visiting Maui on Monday, the first Republican primary debate
Speaker 4: on Wednesday, and then a Friday deadline for former President
Speaker 4: Trump and the eighteen other co defendants charged in the
Speaker 4: Georgia twenty twenty election case to voluntarily surrender in Fulton
Speaker 4: count But really it's the debate that's the big one
Speaker 4: we've all been waiting for, so we'll focus on that.
Speaker 4: Bloomberg Washington Senior editor Wendy Benjaminson is here with me
Speaker 4: for more. So, Wendy, the biggest question is going to
Speaker 4: surround former President Trump and will he or won't he
Speaker 4: actually show up.
Speaker 11: That's exactly right, and it's killy. It's something that Donald
Speaker 11: Trump has just perfected in his time in political life.
Speaker 11: Is no matter what else is going on, this tragic fire,
Speaker 11: his own criminal endeamonds, we are all wondering on pins
Speaker 11: and needles. Is he going to show up for the
Speaker 11: debate or isn't he? And it will? I mean, it's
Speaker 11: important whether or not you like Donald Trump. It's important
Speaker 11: because the whole debate shape is different and for the
Speaker 11: candidates involved, all of their prep will be different. You know,
Speaker 11: candidates really spend a lot of time preparing for the debate.
Speaker 11: They do role playing and all of that. And if
Speaker 11: Trump is there, it's one debate. If Trump is not there,
Speaker 11: it's a totally different debate.
Speaker 4: Well, and if he's not who then is the punching bag?
Speaker 11: That honor goes to Ron DeSantis, the governor of Florida,
Speaker 11: who is second in the polls, even though he is
Speaker 11: thirty points below Donald Trump at this point, but he's
Speaker 11: in that number two spot with Vivid Ramaswami and surprisingly
Speaker 11: in some places Tim Scott nipping at his heels.
Speaker 4: Well, and we learned this past week that those close
Speaker 4: to Rondasantis are actually advising him during the debate to
Speaker 4: defend Trump and go after Ramaswami, who you were just
Speaker 4: talking about, defending the person you are running against, defending
Speaker 4: the front runner. How does that make sense, Wendy Well, I.
Speaker 11: Struggle with this I've been struggling with this one too,
Speaker 11: because it just doesn't make any sense in a normal world.
Speaker 11: But what this DeSantis super pack or a firm associated
Speaker 11: with DeSantis, is super pac put online so that it
Speaker 11: could legally communicate with Ron DeSantis debate advice that said, yes,
Speaker 11: you should defend Donald Trump, but in kind of a backhanded,
Speaker 11: bless your heart kind of way. What they're saying is, well,
Speaker 11: he's under four indictments. The poor man, he just is
Speaker 11: so distracted he couldn't possibly focus on the country's needs.
Speaker 11: He must take time to focus on himself.
Speaker 1: You know.
Speaker 11: Hearts and minds go hearts and prayers go to the
Speaker 11: former president. So I guess that's kind of a left
Speaker 11: handed way of defending him.
Speaker 4: So with Trump as the front runner and all of
Speaker 4: these candidates pretty much linguishing behind him, many of the
Speaker 4: people who are going to be up on that stage
Speaker 4: are still down in the single digits? Are there any
Speaker 4: of them where if they can't, you know, make something
Speaker 4: big happen at this debate, it's kind of game over.
Speaker 11: It could be game over for some of these guys.
Speaker 11: There is a guys, I say, Nikki Haley, the former
Speaker 11: governor of South Carolina is still in it, she says,
Speaker 11: to win it. So we will see. But and her
Speaker 11: performance is very important in this debate. But there's another
Speaker 11: debate in September, I believe, toward the end of September,
Speaker 11: and there will be even tougher requirements to get on
Speaker 11: that stage. So unless you have one of those viral
Speaker 11: moments what the Desantus memo called the what was it
Speaker 11: the falling off the cliff ada was the orchestra pit
Speaker 11: moment where a candidate who talks about foreign policy for
Speaker 11: three or four minutes will not be remembered as much
Speaker 11: as the guy who falls into the orchestra pit.
Speaker 4: All right, this is going to be a very interesting one.
Speaker 4: Bloomberg Washington Senior Editor Wendy Benjaminson, thank you so much.
Speaker 4: And Tom all eyes are going to be on Milwaukee.
Speaker 1: Thank you.
Speaker 5: Kaylee.
Speaker 1: That was Bloomberg Sound On co host Kaylee Lines, reporting
Speaker 1: from our Bloomberg ninety nine one newsroom in Washington, and
Speaker 1: you can hear sound on weekdays one to three pm
Speaker 1: on Bloomberg Radio. And that does it for this edition
Speaker 1: of Bloomberg Daybreak Weekend. Join us again Monday morning, five
Speaker 1: am Wall Street Time for the latest on markets overseas,
Speaker 1: and the news you need to start your day. I'm
Speaker 1: Tom Buzzby. Stay with us. Top stories and global business
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