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Speaker 1: Let's get to Andrew Tilton. He is with us. Andrew

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Speaker 1: is the chief Asia Pacific economist at Goldman Sachs. We're

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Speaker 1: going to be looking at markets and what I want

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Speaker 1: to start off by the situation with COVID on the mainland. Andrew,

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Speaker 1: your firm is basically saying an exit from this policy

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Speaker 1: that has been in place for well since the beginning

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Speaker 1: of the pandemic is going to be very, very messy.

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Speaker 1: How does this end up? Do you think? Well, our

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Speaker 1: base case scenarios that they try to keep a lid

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Speaker 1: on COVID during the winter and head for a more

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Speaker 1: orderly reopening in the second quarter of next year. That

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Speaker 1: would give them time for more vaccinations and more healthcare preparation.

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Speaker 1: There's a risk of a disorderly excit, but that's not

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Speaker 1: the scenario we think is most likely. The authorities do

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Speaker 1: need to make a choice soon, though, whether they're willing

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Speaker 1: to allow more cases or whether they're going to tighten

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Speaker 1: restrictions to try to keep COVID under control during the winter.

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Speaker 1: That's really the key there. Which way are they going

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Speaker 1: to go? Regardless, at one point, you would expect some

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Speaker 1: kind of of reopening, and most people pointing to the

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Speaker 1: first quarter or after the first quarter of twenty three,

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Speaker 1: what kind of growth do we then see in China's

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Speaker 1: economy when we finally do see that opening, whether or

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Speaker 1: not it's going to be disorderly or not, we can

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Speaker 1: have a burst of strong growth, as we've seen in

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Speaker 1: other economies, that can be in excess of five or

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Speaker 1: six percent for a year. Potentially it's it's temporary that

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Speaker 1: that pace of growth won't last, but we've seen many

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Speaker 1: economies where we had very strong growth, particularly in consumer

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Speaker 1: sector and in services upon reopening. So our growth forecast

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Speaker 1: for next year is four and a half percent for

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Speaker 1: the full year, but that's really a very weak first

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Speaker 1: half and a very strong second half, given that we're

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Speaker 1: expecting them to start reopening in earnest in the second quarter.

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Speaker 1: We just heard from ed in that last newscast conversation

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Speaker 1: around a wider adoption of Western m r n A vaccines,

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Speaker 1: bearing in mind that within the few last few weeks

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Speaker 1: Beijing did approve under emergency use the BioNTech vaccine for

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Speaker 1: foreign expats. Does the reopening that you think may occur

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Speaker 1: is that been built in any way on the notion

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Speaker 1: that will get new vaccines delivered to the mainland. There

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Speaker 1: are a lot of new vaccines in testing and development

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Speaker 1: and that may help on the margin, but the bigger

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Speaker 1: issue in our view is simply that there's a significant

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Speaker 1: fraction of the elderly population that is either unvaccinated or

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Speaker 1: under vaccinated that hasn't received the booster yet. The most

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Speaker 1: important thing is reaching very high levels of vaccination and

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Speaker 1: ideally with booster shots for that population. Even you know,

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Speaker 1: the kind of older generation, vaccines can still provide a

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Speaker 1: lot of protection against the hospitalization or death. So getting

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Speaker 1: unvaccinated people vaccinated is really the key. Andrew very quickly.

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Speaker 1: I mean, we're seeing a lot of weakness in the currency. Uh,

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Speaker 1: not surprisingly in about ten seconds. Do you think that

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Speaker 1: the authorities are going to be concerned about this in

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Speaker 1: the near term, Not hugely, as long as the drop

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Speaker 1: is not too precipitous. X for outlook is tough. So

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Speaker 1: a little bit of weakness in the currency, I don't

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Speaker 1: think we'll bother the authorities too much as long as

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Speaker 1: it's not a straight line. Curious to get some of

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Speaker 1: your thoughts about growth in the region in twenty three

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Speaker 1: and not surprising you are expecting it to be a

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Speaker 1: little sluggation. As we know, it all depends on China too.

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Speaker 1: But interesting you're saying, with the US China rivalry driving

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Speaker 1: both countries to invest in deep in ties. Perhaps in

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Speaker 1: the Assan region, what growth do you expect there? We

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Speaker 1: are looking for a slowdown over the next couple of quarters.

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Speaker 1: Is that boost from reopening these economies is fading now?

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Speaker 1: But we do think ass gets on, we'll see a reacceleration.

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Speaker 1: Some of the impact of monetary tightening will have worked

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Speaker 1: its way through the system. The global manufacturing cycles should

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Speaker 1: be picking up and the you know that the drag

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Speaker 1: from the slowing reopening is going to be behind us.

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Speaker 1: So we're looking at reasonably healthy growth as particularly as

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Speaker 1: we get in the back half of the year. You know,

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Speaker 1: particularly in Indonesia, Philippines, Vietnam likely to show pretty high

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Speaker 1: rates of So what happens when you take a look

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Speaker 1: at North Asia, I'm thinking of Japan, South Korea, what

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Speaker 1: do you see? Well, in the North Asia region, we've

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Speaker 1: seen a bigger impact from the global trade and manufacturing slowdown,

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Speaker 1: and these are quite export oriented economies, particularly it comes

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Speaker 1: to Korea, Taiwan, a significant slowdown recently related to the

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Speaker 1: tech cycle, a deceleration in in semiconductor and contact goods

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Speaker 1: output as we get into next year and we work

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Speaker 1: off excess inventories in some manufacturing sectors, and as the

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Speaker 1: monetary titan reaches a peak, which we think will probably occur,

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Speaker 1: you know in most economies in early we should start

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Speaker 1: to see factory activity begin picking up again as as well,

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Speaker 1: but overall growth likely to be quite sluggish in the

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Speaker 1: next couple of quarters, particularly in the northern part of

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Speaker 1: the region, and particularly in China, given that we expect

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Speaker 1: authorities to keep COVID restrictions pretty tight in the meantime,

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Speaker 1: and that has caused a lot of companies to really

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Speaker 1: assist whether or not they want to be manufacturing in

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Speaker 1: China if they're facing a lot of those headwinds. Who

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Speaker 1: kind of gets the benefit of that? Is it? Is

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Speaker 1: it the likes you mentioned Asian countries of Vietnam and

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Speaker 1: and India too. Yes, Ausia on in India should be

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Speaker 1: big beneficiaries of what some people call the China plus

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Speaker 1: one strategy. To the extent that multinational firms want to

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Speaker 1: have alternative sources of supply, they would probably be looking

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Speaker 1: for lower cost markets in the region, but which also

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Speaker 1: have significant domestic markets of their own, and so a

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Speaker 1: number of oddsi on economies that you mentioned as well

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Speaker 1: as India could fit the bill there, and we would

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Speaker 1: expect those economies to receive a bigger fraction of investment

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Speaker 1: going forward. You also have pretty young, growing populations in

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Speaker 1: a number of these economies, particularly India, Vietnam, in Aonesia, Philippines,

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Speaker 1: each with a hundred million plus citizens, and in a

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Speaker 1: relatively young population that's likely to be growing pretty meaningly

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Speaker 1: for a decade or more. Still, so we conducted or

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Speaker 1: i should say the m Live team on the Bloomberg terminal,

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Speaker 1: they conducted a survey indicating that stag inflation is the

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Speaker 1: key risk for the global economy in would you agree

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Speaker 1: with that Over the next couple of quarters, we do

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Speaker 1: see slowing growth and still rising inflation, but inflation is

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Speaker 1: already peaked in a few places, particularly in parts of

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Speaker 1: Latin America, and we think it will peak in much

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Speaker 1: of the world over the next quarter or two. So

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Speaker 1: we actually think by the time you get into mid

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Speaker 1: the growth inflation mix will be improving. Growth should be

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Speaker 1: picking up a little and inflation should be coming down.

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Speaker 1: For now, that mix has been tough. It's been getting worse,

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Speaker 1: and that's been part of the reason why markets have

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Speaker 1: been taking it so tough. But I think as we

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Speaker 1: get into growth starting to bottom out, inflation coming off

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Speaker 1: a peak, that will be a better backdrop for asset markets,

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Speaker 1: particularly towards the back end of the year, and just

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Speaker 1: very quickly any kind of I guess real recessionary fears.

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Speaker 1: I mean you had the Abbi and Zed warning of

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Speaker 1: that itself last week. Certainly, with the levels that monetary

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Speaker 1: tightening is getting to, recession risks are elevated. We think

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Speaker 1: about a one third chance of recession in the US

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Speaker 1: over the coming year, and in Asia we're running well

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Speaker 1: below normal rates of growth in China and a few

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Speaker 1: other economies, so recession risks are elevated. The peak recession

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Speaker 1: risk probably in the next few quarters, and will clearly

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Speaker 1: be potential spillover effects from the U S or Europe

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Speaker 1: if we have a particularly deep procession there. Alright, Andrew,

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Speaker 1: we thank you for your time. Andrew tilt In, chief

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Speaker 1: Asia Pacific Economist at Goldman Sex