1 00:00:03,120 --> 00:00:09,920 Speaker 1: Bloomberg Audio Studios, podcasts, radio news China's economy is in 2 00:00:09,960 --> 00:00:15,080 Speaker 1: a slowdown. To get a better picture of how the 3 00:00:15,120 --> 00:00:19,200 Speaker 1: slowing economy is affecting people on the ground, Bloomberg talked 4 00:00:19,239 --> 00:00:22,120 Speaker 1: to people across a range of incomes and industries. 5 00:00:22,440 --> 00:00:25,599 Speaker 2: People with their own companies, entrepreneurs, people working in the 6 00:00:25,640 --> 00:00:30,680 Speaker 2: financial sector, but also people working as window cleaners, people 7 00:00:30,760 --> 00:00:33,200 Speaker 2: supplementing their income as d D drivers. 8 00:00:33,760 --> 00:00:37,320 Speaker 1: Rebecca Chung Wilkins is Bloomberg's correspondent for the Economy and 9 00:00:37,360 --> 00:00:40,519 Speaker 1: Government team in Hong Kong. None of the people Bloomberg 10 00:00:40,560 --> 00:00:43,360 Speaker 1: spoke to wanted us to record their voices for fear 11 00:00:43,360 --> 00:00:46,960 Speaker 1: of repercussions in China, but by and large, people did 12 00:00:47,000 --> 00:00:49,720 Speaker 1: tell us that they aren't feeling as well off as 13 00:00:49,760 --> 00:00:53,480 Speaker 1: they did five years ago. One of them is mister Kwang, 14 00:00:53,720 --> 00:00:55,800 Speaker 1: who asked us to use just his last name. 15 00:00:56,200 --> 00:01:00,080 Speaker 2: He is an entrepreneur, so he's a commodity trader in 16 00:01:00,120 --> 00:01:03,080 Speaker 2: his forties, and a few years ago he started his 17 00:01:03,160 --> 00:01:05,400 Speaker 2: own company, running his own outfit. 18 00:01:05,600 --> 00:01:09,640 Speaker 1: Essentially in the pre COVID years, Huang was pretty successful 19 00:01:09,840 --> 00:01:11,160 Speaker 1: and had a cushy life. 20 00:01:11,400 --> 00:01:14,920 Speaker 2: He bought an apartment in this very trendy district of Shenjen. 21 00:01:15,240 --> 00:01:17,920 Speaker 2: He also bought himself and treated himself to a Tesla 22 00:01:18,240 --> 00:01:19,000 Speaker 2: Model X. 23 00:01:19,480 --> 00:01:22,080 Speaker 1: But things have really changed for him in the last 24 00:01:22,120 --> 00:01:26,160 Speaker 1: few years. Huang says business has never been tougher. 25 00:01:26,840 --> 00:01:31,280 Speaker 2: So his business essentially predicated on buying energy from generators 26 00:01:31,319 --> 00:01:35,040 Speaker 2: and selling this to small factories. And what he told 27 00:01:35,120 --> 00:01:38,520 Speaker 2: us is that he finds that these factories aren't wanting 28 00:01:38,560 --> 00:01:41,800 Speaker 2: to lock in chower contracts that as long as they 29 00:01:41,840 --> 00:01:45,440 Speaker 2: previously would, and it's essentially because they're just not sure 30 00:01:45,720 --> 00:01:49,480 Speaker 2: that there is going to be continued strong demand for 31 00:01:49,800 --> 00:01:50,600 Speaker 2: their products. 32 00:01:51,000 --> 00:01:53,400 Speaker 1: All that meant Huang has had to make some hard 33 00:01:53,440 --> 00:01:55,480 Speaker 1: decisions about his own business. 34 00:01:56,080 --> 00:02:00,000 Speaker 2: Ultimately, he's ended up sacking five employees in his life 35 00:02:00,160 --> 00:02:04,240 Speaker 2: firm because he has this worsening outlook over the market 36 00:02:04,480 --> 00:02:09,320 Speaker 2: for twenty twenty four and he talks about having last 37 00:02:09,440 --> 00:02:13,160 Speaker 2: year to become a sort of so called run fan nane. 38 00:02:13,919 --> 00:02:15,919 Speaker 1: Okay, wait, wait, so you have to explain what is 39 00:02:16,000 --> 00:02:16,960 Speaker 1: run funan. 40 00:02:17,120 --> 00:02:20,760 Speaker 2: So ruan fan nan is this expression that literally translates 41 00:02:20,800 --> 00:02:24,519 Speaker 2: as something like a sort of soft rice man. But 42 00:02:24,680 --> 00:02:27,680 Speaker 2: this idea of being a soft man and not being 43 00:02:27,720 --> 00:02:30,720 Speaker 2: able to provide for your family, and it's really a 44 00:02:30,800 --> 00:02:33,120 Speaker 2: joke about the fact that he had to rely on 45 00:02:33,200 --> 00:02:37,120 Speaker 2: his wife's income to take care as his family last year. 46 00:02:37,480 --> 00:02:41,040 Speaker 1: What Huang is experiencing is a new reality for many 47 00:02:41,240 --> 00:02:42,200 Speaker 1: Chinese citizens. 48 00:02:42,639 --> 00:02:45,880 Speaker 2: Mister Huang also tells us that he's far from alone 49 00:02:46,000 --> 00:02:49,280 Speaker 2: in this situation. He talks about how a lot of 50 00:02:49,280 --> 00:02:52,040 Speaker 2: the private business owners that he knows are trapped in 51 00:02:52,120 --> 00:02:54,440 Speaker 2: this debt cycle, so they're borrowing new loans to pay 52 00:02:54,440 --> 00:02:58,280 Speaker 2: old ones, and even those who were, for example, considering 53 00:02:58,360 --> 00:03:01,800 Speaker 2: having more kids have had to cancel those plans because 54 00:03:01,800 --> 00:03:04,960 Speaker 2: they can't afford to grow their family right now. 55 00:03:05,880 --> 00:03:09,359 Speaker 1: Rebecca says, the negative sentiments the downturn is stirring up 56 00:03:09,520 --> 00:03:12,560 Speaker 1: could be a real problem for the ruling Communist Party, 57 00:03:13,240 --> 00:03:16,080 Speaker 1: and that's because for decades the party has held power 58 00:03:16,240 --> 00:03:18,480 Speaker 1: through a kind of bargain with the Chinese people. 59 00:03:18,760 --> 00:03:20,680 Speaker 2: So one way to think about this bargain or this 60 00:03:20,760 --> 00:03:24,079 Speaker 2: relationship is as a kind of social contract. Essentially, people 61 00:03:24,240 --> 00:03:27,400 Speaker 2: accept fewer freedoms in exchange for a promise of a 62 00:03:27,400 --> 00:03:30,600 Speaker 2: better life. So Chinese people don't necessarily have an active 63 00:03:30,760 --> 00:03:33,560 Speaker 2: say in how they're being governed. They don't get to 64 00:03:33,639 --> 00:03:37,240 Speaker 2: vote in elections, but what they do get for the 65 00:03:37,320 --> 00:03:41,960 Speaker 2: last several decades is a rapid increase in their prosperity. Now, 66 00:03:42,000 --> 00:03:44,600 Speaker 2: some political scientists debate whether you can really call this 67 00:03:44,640 --> 00:03:48,160 Speaker 2: a social contract because ordinary Chinese people don't have a 68 00:03:48,240 --> 00:03:51,680 Speaker 2: say in that exchange. But there is still this broader question, 69 00:03:52,080 --> 00:03:55,160 Speaker 2: which is what happens when that promise of prosperity, when 70 00:03:55,200 --> 00:03:59,120 Speaker 2: that bargain starts to falter. And now we see that 71 00:04:00,080 --> 00:04:03,640 Speaker 2: it isn't necessarily breaking down entirely, but we are starting 72 00:04:03,680 --> 00:04:10,640 Speaker 2: to see these signs that the bargain is beginning to fray. 73 00:04:12,360 --> 00:04:16,240 Speaker 1: Welcome to The Big Take Asia from Bloomberg News. I'm wanh. 74 00:04:16,760 --> 00:04:19,160 Speaker 1: Every week we take you inside some of the world's 75 00:04:19,200 --> 00:04:23,240 Speaker 1: biggest and most powerful economies and the markets, tycoons, and 76 00:04:23,400 --> 00:04:28,360 Speaker 1: businesses that drive this ever shifting region. Today on the show, 77 00:04:28,760 --> 00:04:33,120 Speaker 1: China's economic miracle is ending. So how does President shi 78 00:04:33,200 --> 00:04:36,080 Speaker 1: Jinping keep up the bargain that the communist parties had 79 00:04:36,120 --> 00:04:43,520 Speaker 1: with its people for decades? So there are a number 80 00:04:43,520 --> 00:04:46,600 Speaker 1: of reasons why people in China aren't feeling great about 81 00:04:46,640 --> 00:04:50,080 Speaker 1: the economy right now. The most looming setback is the 82 00:04:50,120 --> 00:04:51,039 Speaker 1: property sector. 83 00:04:51,560 --> 00:04:53,880 Speaker 2: So the bulk of household wealth in China is actually 84 00:04:53,920 --> 00:04:57,479 Speaker 2: held in real estate. About seventy percent of family assets 85 00:04:57,520 --> 00:05:00,400 Speaker 2: are tied up in property, and for more than decade 86 00:05:00,400 --> 00:05:04,160 Speaker 2: there was too much property speculation, too much building, and 87 00:05:04,240 --> 00:05:08,719 Speaker 2: too much debt. And the consequence ultimately of this whole 88 00:05:08,800 --> 00:05:11,920 Speaker 2: housing boom was that China was left with a huge 89 00:05:11,960 --> 00:05:15,760 Speaker 2: amount of overcapacity in the real estate sector. Bluebug Economics 90 00:05:15,839 --> 00:05:18,839 Speaker 2: estimates that at the start of the twenty twenties, China 91 00:05:18,920 --> 00:05:21,560 Speaker 2: was building about thirty percent more property than it actually 92 00:05:21,640 --> 00:05:22,600 Speaker 2: needed each year. 93 00:05:23,120 --> 00:05:25,520 Speaker 1: At the end of twenty twenty one, one of China's 94 00:05:25,520 --> 00:05:30,600 Speaker 1: biggest developers, ever Grant, defaulted on its bonds. Basically, they 95 00:05:30,600 --> 00:05:34,200 Speaker 1: were unable to pay their debt to investors. Their default 96 00:05:34,400 --> 00:05:37,279 Speaker 1: was followed by more than three dozen firms that also 97 00:05:37,320 --> 00:05:41,200 Speaker 1: struggled to manage their debt loads. Rebecca says the collapse 98 00:05:41,240 --> 00:05:44,919 Speaker 1: in the property market has people feeling pessimistic about making 99 00:05:44,960 --> 00:05:46,560 Speaker 1: other kinds of investments. 100 00:05:46,800 --> 00:05:49,080 Speaker 2: So Chinese people have gone from thinking I've got this 101 00:05:49,200 --> 00:05:53,039 Speaker 2: asset which is hugely valuable and accruing more value each 102 00:05:53,120 --> 00:05:56,520 Speaker 2: year I'm rich to now thinking I've got this asset 103 00:05:56,600 --> 00:05:59,480 Speaker 2: which I thought was really valuable, but maybe it isn't, 104 00:05:59,560 --> 00:06:02,120 Speaker 2: and I just don't feel quite as rich as I 105 00:06:02,120 --> 00:06:03,760 Speaker 2: did a few years ago. 106 00:06:05,080 --> 00:06:08,520 Speaker 1: Another reason why some Chinese people aren't feeling quite as 107 00:06:08,680 --> 00:06:12,240 Speaker 1: rich as wage cuts. The Common Prosperity Agenda, one of 108 00:06:12,240 --> 00:06:19,360 Speaker 1: Schijenping's signature policies, brought crackdowns on multiple industries, technology, property, education, 109 00:06:19,520 --> 00:06:22,839 Speaker 1: and even gaming, and that of course led to massive 110 00:06:23,000 --> 00:06:31,000 Speaker 1: job and wage cuts. It aimed to close the wealth 111 00:06:31,000 --> 00:06:34,360 Speaker 1: gap and lift the country's poorest. Here's what Bloomberg's chief 112 00:06:34,360 --> 00:06:37,039 Speaker 1: economist Tom Orlick has to say on the policy. 113 00:06:37,360 --> 00:06:41,200 Speaker 3: What's the motivation for the Common Prosperity Agenda. Well, I 114 00:06:41,200 --> 00:06:45,840 Speaker 3: think it's partly that China had a big problem with inequality. 115 00:06:46,200 --> 00:06:49,480 Speaker 3: The rich were getting really, really rich, but a bunch 116 00:06:49,520 --> 00:06:52,919 Speaker 3: of people were being left behind. So Common Prosperity is 117 00:06:52,960 --> 00:06:57,200 Speaker 3: partly about addressing that problem. It's also about how to 118 00:06:57,320 --> 00:07:00,840 Speaker 3: deal with a slower growing economy. When the economy is 119 00:07:00,880 --> 00:07:05,599 Speaker 3: growing eight, nine, ten percent, everyone's getting richer, everyone's feeling happy, 120 00:07:05,839 --> 00:07:10,440 Speaker 3: everyone's supportive of Communist Party rule. When the economy is 121 00:07:10,520 --> 00:07:13,560 Speaker 3: just growing four or five percent, well, you need to 122 00:07:13,560 --> 00:07:16,040 Speaker 3: pay a bit more attention to how that four or 123 00:07:16,040 --> 00:07:19,360 Speaker 3: five percent is getting shared out to make sure everyone's 124 00:07:19,400 --> 00:07:22,920 Speaker 3: getting a little bit of the pie now. 125 00:07:22,960 --> 00:07:26,040 Speaker 1: To be clear, the official data show average incomes are 126 00:07:26,080 --> 00:07:31,320 Speaker 1: still rising, more slowly, but still rising, but other indicators 127 00:07:31,360 --> 00:07:33,520 Speaker 1: suggest that things might be less positive. 128 00:07:34,120 --> 00:07:38,800 Speaker 3: We look at business surveys. They show factories and offices 129 00:07:39,400 --> 00:07:43,960 Speaker 3: thinking more about shedding workers than adding workers. We look 130 00:07:44,000 --> 00:07:47,240 Speaker 3: at a survey from the Central Bank, which suggests that 131 00:07:47,320 --> 00:07:51,400 Speaker 3: households are getting more and more pessimistic about their future earnings. 132 00:07:51,880 --> 00:07:55,760 Speaker 3: So we don't have perfect clarity on what's happening in 133 00:07:55,840 --> 00:07:59,080 Speaker 3: China's labor market or what's happening with China's wages, but 134 00:07:59,160 --> 00:08:03,400 Speaker 3: the data we do have suggests a minimum wage grate 135 00:08:03,560 --> 00:08:07,400 Speaker 3: is slowing, and perhaps there are some more serious problems there. 136 00:08:08,360 --> 00:08:12,040 Speaker 1: All that leads to a shrinking of household spending. People 137 00:08:12,080 --> 00:08:15,080 Speaker 1: aren't buying new houses or having kids. 138 00:08:15,520 --> 00:08:18,360 Speaker 2: So, just like mister Huang mentioned when he talked to us, 139 00:08:18,480 --> 00:08:22,000 Speaker 2: some of his friends no longer want to have children, 140 00:08:22,080 --> 00:08:25,360 Speaker 2: or they're delaying plans to have children because they just 141 00:08:25,400 --> 00:08:28,160 Speaker 2: don't feel like they can afford to. And this is 142 00:08:28,200 --> 00:08:31,520 Speaker 2: a bigger problem that people don't necessarily want to have 143 00:08:31,600 --> 00:08:34,520 Speaker 2: babies if they're worried about being able to afford a 144 00:08:34,559 --> 00:08:37,800 Speaker 2: bigger apartment to house another child. As well as account 145 00:08:37,800 --> 00:08:42,200 Speaker 2: for all the extra cost things like education, medical care. Essentially, 146 00:08:42,240 --> 00:08:44,840 Speaker 2: it's this concern that they're worried about whether or not 147 00:08:44,880 --> 00:08:47,400 Speaker 2: they have enough money and just how much is going 148 00:08:47,559 --> 00:08:49,199 Speaker 2: to cost to have a bigger family. 149 00:08:49,559 --> 00:08:52,040 Speaker 1: So, Rebecca, at the beginning of the show, we mentioned 150 00:08:52,080 --> 00:08:54,880 Speaker 1: the bargain between China's rule and Communist Party and the 151 00:08:55,000 --> 00:08:58,040 Speaker 1: Chinese people. Right, you give his control, we make you 152 00:08:58,080 --> 00:09:02,360 Speaker 1: prosperous now, and his current leadership is facing an ongoing 153 00:09:02,480 --> 00:09:06,079 Speaker 1: real estate crisis. You've got slowing growth and income and 154 00:09:06,160 --> 00:09:09,839 Speaker 1: a low fertility rate, among other things. On top of that, 155 00:09:10,160 --> 00:09:13,080 Speaker 1: many Chinese may not be as hopeful about their futures 156 00:09:13,120 --> 00:09:17,000 Speaker 1: right now. Is China's social contract being renegotiated here? 157 00:09:17,240 --> 00:09:20,959 Speaker 2: So the way we frame this question in our story 158 00:09:21,080 --> 00:09:23,400 Speaker 2: is in terms of Ronald Reagan's famous question to US 159 00:09:23,480 --> 00:09:25,800 Speaker 2: voters back in nineteen eighty, which is, are you better 160 00:09:25,880 --> 00:09:28,880 Speaker 2: off than you were four years ago? And of course, 161 00:09:29,160 --> 00:09:32,280 Speaker 2: back in nineteen eighty, for many American voters, the resounding 162 00:09:32,280 --> 00:09:34,840 Speaker 2: answer to that question was no, I'm worse off, which 163 00:09:34,880 --> 00:09:38,040 Speaker 2: is why Jimmy Carter lost the election and Ronald Reagan 164 00:09:38,440 --> 00:09:41,520 Speaker 2: entered the White House. Now, China doesn't have elections, but 165 00:09:41,559 --> 00:09:44,960 Speaker 2: it does have politics, and one of the reasons why 166 00:09:45,240 --> 00:09:48,720 Speaker 2: politics in China has been so stable is because the 167 00:09:48,800 --> 00:09:52,400 Speaker 2: Chinese Communist Party for much of the past for decades, 168 00:09:52,440 --> 00:09:56,599 Speaker 2: have been able to deliver this really stellar increase in prosperity. 169 00:09:57,000 --> 00:09:59,520 Speaker 2: So if you ask Chinese people, are you better off 170 00:09:59,559 --> 00:10:01,320 Speaker 2: than new we are five years ago, which is the 171 00:10:01,400 --> 00:10:05,320 Speaker 2: length of China's presidential term, at almost any point over 172 00:10:05,360 --> 00:10:08,400 Speaker 2: the past forty years, the answer would most likely have 173 00:10:08,440 --> 00:10:11,440 Speaker 2: been yes, I'm much better off than I was. But 174 00:10:11,520 --> 00:10:15,560 Speaker 2: under Jinping the answer is quite a bit more complicated. 175 00:10:15,800 --> 00:10:20,320 Speaker 2: So while average households are still seeing their incomes rising, 176 00:10:20,679 --> 00:10:23,640 Speaker 2: they are rising at a much slower pace than they were, 177 00:10:24,240 --> 00:10:27,320 Speaker 2: and anyone who put their nest egg in say Chinese 178 00:10:27,400 --> 00:10:32,120 Speaker 2: real estate or equities, will have taken a pretty significant hit. 179 00:10:33,160 --> 00:10:37,480 Speaker 2: So Chinese households aren't necessarily feeling richer than they did, 180 00:10:37,800 --> 00:10:40,720 Speaker 2: and in fact, many of them might be feeling poorer. 181 00:10:43,520 --> 00:10:46,760 Speaker 1: There was one moment where that prosperity evaporated at the 182 00:10:46,840 --> 00:10:50,439 Speaker 1: end of the nineteen eighties, where inflation and unemployment shut up. 183 00:10:51,280 --> 00:10:53,440 Speaker 1: That was when we saw a genuine challenge to the 184 00:10:53,480 --> 00:10:57,199 Speaker 1: authority of the Communist Party. That culminated in the bloody 185 00:10:57,240 --> 00:11:02,760 Speaker 1: crackdown at Tieneman Square. So, Rebecca, where are we now? 186 00:11:03,360 --> 00:11:06,440 Speaker 2: Well, we're certainly not in anything like as dire a 187 00:11:06,520 --> 00:11:10,000 Speaker 2: situation as the end of the nineteen eighties. Back then 188 00:11:10,080 --> 00:11:13,840 Speaker 2: we saw real incomes we actually falling, for example. But 189 00:11:13,960 --> 00:11:17,400 Speaker 2: even so we are seeing this shift from a long 190 00:11:17,559 --> 00:11:21,480 Speaker 2: period of rapid rises in prosperity to a much more 191 00:11:21,520 --> 00:11:27,880 Speaker 2: complicated situation where incomes are growing more slowly, wealth is falling. 192 00:11:28,240 --> 00:11:30,880 Speaker 2: And all of that does mean there is a change 193 00:11:31,200 --> 00:11:35,320 Speaker 2: in the social contract or a change in the relationship 194 00:11:35,360 --> 00:11:38,560 Speaker 2: between the Chinese Communist Party and the Chinese people. 195 00:11:40,720 --> 00:11:44,680 Speaker 1: After the break, how President Sheijinping is managing the fraying 196 00:11:44,960 --> 00:11:57,040 Speaker 1: of the social contract. The sound you're hearing is from 197 00:11:57,040 --> 00:12:00,480 Speaker 1: the white Paper movement in twenty twenty two. That's when 198 00:12:00,480 --> 00:12:04,040 Speaker 1: protesters held up blank sheets of paper to oppose COVID 199 00:12:04,080 --> 00:12:07,840 Speaker 1: controls in Shanghai, and it eventually brought a rapid end 200 00:12:07,920 --> 00:12:12,040 Speaker 1: to the lockdown that lasted two months. Since then, there 201 00:12:12,040 --> 00:12:15,560 Speaker 1: has been striking developments in demonstrations in China over the 202 00:12:15,600 --> 00:12:16,120 Speaker 1: past year. 203 00:12:16,679 --> 00:12:20,800 Speaker 2: Freedom Houses China Descent Monitor, for example, calculated that about 204 00:12:20,880 --> 00:12:24,200 Speaker 2: eighty percent of all the protests that they documented for 205 00:12:24,240 --> 00:12:27,560 Speaker 2: twenty twenty three were related to the economy. We're seeing 206 00:12:27,600 --> 00:12:30,920 Speaker 2: an increasing number of protests related to the economic strains 207 00:12:30,960 --> 00:12:35,040 Speaker 2: that people are feeling these days, including failed real estate projects, 208 00:12:35,280 --> 00:12:39,280 Speaker 2: but that isn't bubbling up into widespread protests that present 209 00:12:39,400 --> 00:12:44,360 Speaker 2: any kind of existential challenge to the Party. What's really 210 00:12:44,480 --> 00:12:49,160 Speaker 2: rare to see coordinated widespread protests in China because of 211 00:12:49,200 --> 00:12:53,000 Speaker 2: the sort of tightly controlled nature of society, which is 212 00:12:53,120 --> 00:12:58,520 Speaker 2: heavily surveiled. So typically protests in China's quite small scale, 213 00:12:58,679 --> 00:13:03,640 Speaker 2: is quite sporadic, spontaneous in nature, and it very rarely 214 00:13:03,960 --> 00:13:09,480 Speaker 2: targets the central government or President Shei Jinping himself directly 215 00:13:09,880 --> 00:13:14,400 Speaker 2: with criticism. If we do see criticism of authorities, it's 216 00:13:14,520 --> 00:13:18,480 Speaker 2: more often directed, for example, to local governments or local 217 00:13:18,520 --> 00:13:22,360 Speaker 2: authorities who they may feel have not sufficiently protected them 218 00:13:22,640 --> 00:13:24,000 Speaker 2: against certain risks. 219 00:13:25,200 --> 00:13:28,360 Speaker 1: But Tom says it's important to keep the recent slowdown 220 00:13:28,520 --> 00:13:32,880 Speaker 1: in context. The average Chinese household is still much better 221 00:13:32,960 --> 00:13:35,800 Speaker 1: off than they were, say, forty years ago, and that 222 00:13:36,000 --> 00:13:39,760 Speaker 1: buys the Party a certain amount of goodwill from the people. Plus, 223 00:13:40,040 --> 00:13:42,360 Speaker 1: things are bad, but they aren't that bad. 224 00:13:42,760 --> 00:13:48,640 Speaker 3: We don't have mass unemployment we don't have average incomes falling. 225 00:13:49,360 --> 00:13:53,079 Speaker 3: We don't have a financial crisis. So we're talking about 226 00:13:53,480 --> 00:13:57,320 Speaker 3: a slowdown for many, a stagnation for some, but we're 227 00:13:57,320 --> 00:13:59,160 Speaker 3: not talking about an economic crisis. 228 00:13:59,600 --> 00:14:03,600 Speaker 1: Meanwhile, the Pilot Bureau, China's highest policy making body, is 229 00:14:03,640 --> 00:14:06,680 Speaker 1: signaling that it will take action to help support the economy. 230 00:14:07,000 --> 00:14:10,440 Speaker 3: So in economics, as in fairy tales, the magic number 231 00:14:10,640 --> 00:14:14,880 Speaker 3: is very often three, and I see three planks to 232 00:14:14,920 --> 00:14:18,800 Speaker 3: the Chinese Communist Party's strategy to deal with this new 233 00:14:18,920 --> 00:14:24,440 Speaker 3: problem of slower income growth and falling wealth. The first 234 00:14:24,480 --> 00:14:28,320 Speaker 3: strategy is to stimulate. We're not seeing the big bazooka 235 00:14:28,400 --> 00:14:32,960 Speaker 3: stimulus that we've seen in past Chinese downturns, but Beijing 236 00:14:33,200 --> 00:14:36,200 Speaker 3: has definitely got out a bunch of water pistols, and 237 00:14:36,240 --> 00:14:39,480 Speaker 3: it's trying to doubt the flames in the property sector 238 00:14:39,880 --> 00:14:43,200 Speaker 3: and ensure that incomes and wealth don't fall too far. 239 00:14:44,160 --> 00:14:47,480 Speaker 3: The second part of the strategy is something that political 240 00:14:47,520 --> 00:14:55,120 Speaker 3: scientists call preventative repression. That's the technological panopticon, which gives 241 00:14:55,200 --> 00:14:59,680 Speaker 3: China's one point four billion citizens the strong sense that 242 00:14:59,720 --> 00:15:05,080 Speaker 3: weather they're online or walking on the street, somebody's watching them. 243 00:15:05,360 --> 00:15:07,880 Speaker 3: And the third part of the strategy is what Shei 244 00:15:07,960 --> 00:15:12,440 Speaker 3: Jinpin calls common prosperity. It's the idea that the pie 245 00:15:12,560 --> 00:15:15,160 Speaker 3: is going to grow more slowly, but it's going to 246 00:15:15,160 --> 00:15:18,320 Speaker 3: be shared out in a more equitable way. It's kind 247 00:15:18,360 --> 00:15:22,440 Speaker 3: of a grab bag of different policies, finds for the 248 00:15:22,520 --> 00:15:28,000 Speaker 3: tech monopolies, instructions to the gig economy, companies to pay 249 00:15:28,080 --> 00:15:32,320 Speaker 3: their workers at least a living wage. The crackdown on 250 00:15:32,320 --> 00:15:35,960 Speaker 3: the real estate sector, which is causing enormous pain for 251 00:15:36,080 --> 00:15:40,400 Speaker 3: Chinese economy writ large, but is also bringing down house 252 00:15:40,440 --> 00:15:43,840 Speaker 3: prices and making them more affordable to first time buyers. 253 00:15:44,160 --> 00:15:47,120 Speaker 1: And Rebecca says it's important to remember that the Chinese 254 00:15:47,160 --> 00:15:51,160 Speaker 1: economy has multiple engines for growth. It's not just about 255 00:15:51,160 --> 00:15:54,600 Speaker 1: real estate. She says. The government is eyeing new growth drivers. 256 00:15:55,080 --> 00:15:58,560 Speaker 2: One way to think about the Chinese economy is like 257 00:15:58,720 --> 00:16:02,720 Speaker 2: an aeroplane that has two or four engines, so different 258 00:16:02,760 --> 00:16:05,920 Speaker 2: engines and different things that are driving it. Now. Property 259 00:16:06,080 --> 00:16:09,040 Speaker 2: is one of those engines, but there are other things too. 260 00:16:09,040 --> 00:16:12,000 Speaker 2: There are things like exports that rely on global demand. 261 00:16:12,400 --> 00:16:15,960 Speaker 2: And what we're kind of currently underway is a plan 262 00:16:16,160 --> 00:16:19,200 Speaker 2: by seats in Pying and Buy Beijing to change what 263 00:16:19,360 --> 00:16:23,160 Speaker 2: engines are driving that plane and what is essentially keeping 264 00:16:23,160 --> 00:16:26,880 Speaker 2: that plane up in the air. And as that happens, naturally, 265 00:16:26,920 --> 00:16:30,360 Speaker 2: of course you get quite a bit of disruption. And 266 00:16:30,400 --> 00:16:32,640 Speaker 2: if you're on the plane you look at that property 267 00:16:32,680 --> 00:16:34,920 Speaker 2: engine and it looks like it's on fire. Of course, 268 00:16:34,920 --> 00:16:37,440 Speaker 2: people start to panic, You start to really worry. 269 00:16:37,720 --> 00:16:39,880 Speaker 1: Yeah, And of course it's not going to be helpful 270 00:16:39,920 --> 00:16:41,240 Speaker 1: to tell people not to panic. 271 00:16:41,760 --> 00:16:44,360 Speaker 2: Absolutely, it doesn't help to see one of those engines 272 00:16:44,400 --> 00:16:47,240 Speaker 2: caught on fire. And it's very hard then to try 273 00:16:47,360 --> 00:16:52,960 Speaker 2: and restore confidence. Ultimately, the goal is to get consumers 274 00:16:53,080 --> 00:16:54,800 Speaker 2: back on the streets and spending. 275 00:16:54,880 --> 00:16:55,480 Speaker 1: It's hard to. 276 00:16:55,480 --> 00:16:58,640 Speaker 2: Do that if you see property in the state that 277 00:16:58,680 --> 00:17:00,680 Speaker 2: it is. It's hard to be convince that you should 278 00:17:00,680 --> 00:17:02,960 Speaker 2: go out and invest in a business. But that's not 279 00:17:03,120 --> 00:17:06,640 Speaker 2: to say that, of course, the economy is anywhere close 280 00:17:06,680 --> 00:17:09,240 Speaker 2: to the precipice of collapse, because you definitely still have 281 00:17:09,400 --> 00:17:12,119 Speaker 2: these other engines of growth, and in the meantime, Beijing is, 282 00:17:12,119 --> 00:17:15,639 Speaker 2: of course China institute these other mechanisms. So look at, 283 00:17:15,680 --> 00:17:20,640 Speaker 2: for example, the three new drivers, things like solar panels, evs, batteries, 284 00:17:21,040 --> 00:17:23,480 Speaker 2: where the hope is that they will start to make 285 00:17:23,600 --> 00:17:25,880 Speaker 2: up some of the losses that you're seeing in other 286 00:17:25,920 --> 00:17:26,879 Speaker 2: parts of the economy. 287 00:17:29,119 --> 00:17:32,480 Speaker 1: And to better understand Reagan's question, are you better off 288 00:17:33,000 --> 00:17:36,159 Speaker 1: in the China context, Bloomberg looked at two data sets, 289 00:17:36,320 --> 00:17:40,320 Speaker 1: one on economic growth and another on political freedom. Bloomberg's 290 00:17:40,320 --> 00:17:44,960 Speaker 1: analysis suggests China has come full circle in those two respects. 291 00:17:45,359 --> 00:17:49,160 Speaker 2: So we looked at IMF data on China's GDP growth, 292 00:17:49,680 --> 00:17:52,840 Speaker 2: and we looked at a political science data set on 293 00:17:53,000 --> 00:17:56,359 Speaker 2: freedom in China that includes things like freedom of the press, 294 00:17:56,440 --> 00:18:00,479 Speaker 2: freedom for academics, and freedom to express your opinion public, 295 00:18:00,520 --> 00:18:03,680 Speaker 2: for example. And these two data sets, when you bring 296 00:18:03,760 --> 00:18:07,399 Speaker 2: them together and look at how growth and freedom have 297 00:18:07,520 --> 00:18:11,400 Speaker 2: evolved in China over the last forty years, they tell 298 00:18:11,440 --> 00:18:14,680 Speaker 2: a really striking story. So back at the start of 299 00:18:14,720 --> 00:18:18,360 Speaker 2: the reform era, or even before the reform era began, 300 00:18:19,000 --> 00:18:22,119 Speaker 2: we see that growth was really weak and freedom was 301 00:18:22,160 --> 00:18:26,040 Speaker 2: really constrained. And then if we go through and look 302 00:18:26,400 --> 00:18:33,000 Speaker 2: later during China's leadership under Dengxilping, freedom's expanded and growth accelerated. 303 00:18:33,440 --> 00:18:37,840 Speaker 2: Under Jang Zamin, freedoms remained in place and growth remained strong. 304 00:18:38,200 --> 00:18:41,680 Speaker 2: And then finally under Hujin Tao, you saw the beginnings 305 00:18:41,720 --> 00:18:45,320 Speaker 2: of a slowdown in growth, the beginnings of an erosion 306 00:18:45,760 --> 00:18:50,399 Speaker 2: of social freedoms. Finally, under Shejinping, the erosion of growth 307 00:18:50,440 --> 00:18:53,960 Speaker 2: and the narrowing of social freedoms has continued to the 308 00:18:54,000 --> 00:18:57,720 Speaker 2: point where China has almost come full circle, with growth 309 00:18:57,920 --> 00:19:02,119 Speaker 2: slower and freedoms more strained. Though it is important to 310 00:19:02,240 --> 00:19:06,439 Speaker 2: bear in mind, of course, living standards under President cy 311 00:19:06,520 --> 00:19:10,640 Speaker 2: j In Ping versus under mauzadong a much much higher. 312 00:19:14,320 --> 00:19:16,840 Speaker 1: Thanks for listening to The Big Take Asia podcast from 313 00:19:16,840 --> 00:19:20,760 Speaker 1: Bloomberg News. I'm wan ha. This episode was produced by 314 00:19:20,800 --> 00:19:24,679 Speaker 1: Young Young, Naomi Um, Jessica Beck, and David Fox. It 315 00:19:24,720 --> 00:19:28,280 Speaker 1: was mixed by Blake Maples and fact checked by Adriana Tapia. 316 00:19:29,240 --> 00:19:31,959 Speaker 1: It was edited by Caitlin Kenney, Daniel ten Kate, and 317 00:19:32,000 --> 00:19:35,960 Speaker 1: Ben Holland. There was additional assistants from Emily Cadman, Alan 318 00:19:36,080 --> 00:19:40,480 Speaker 1: Juan Chen Hua When Eric Jue, Jennifer Welch, and Nick 319 00:19:40,520 --> 00:19:44,240 Speaker 1: Hallmark Name with Shaven and Kim Gettlelson are our senior producers. 320 00:19:44,560 --> 00:19:48,080 Speaker 1: Nicole Beemster Bower is our executive producer. Sage Bauman is 321 00:19:48,080 --> 00:19:51,400 Speaker 1: Bloomberg's head of Podcasts. Please follow and review The Big 322 00:19:51,440 --> 00:19:54,280 Speaker 1: Take Asia Wherever you listen to podcasts, it helps new 323 00:19:54,320 --> 00:20:00,680 Speaker 1: listeners find the show.