WEBVTT - China Trading Curbs, Bilateral Eco Talks

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<v Speaker 1>Good morning.

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<v Speaker 2>I'm Brian Curtis and I'm Doug Prisner. Here are the

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<v Speaker 2>stories we're following today.

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<v Speaker 3>Well, a new medical emergency for the British monarchy. Let's

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<v Speaker 3>get to Dan Schwartzman in New York with more.

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<v Speaker 1>Dan Hey.

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<v Speaker 4>Brian Buckingham Palace says that King Charles is being treated

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<v Speaker 4>for an unspecified form of cancer and will be stepping

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<v Speaker 4>back from public duties. The cancer was discovered late in

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<v Speaker 4>January while the seventy five year old was in the

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<v Speaker 4>hospital being treated for an enlarged prostate. The pass only

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<v Speaker 4>has said that the cancer is not related to that

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<v Speaker 4>prostate condition. President Biden has expressed his concern and says

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<v Speaker 4>he will reach out to the king, whom he met

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<v Speaker 4>back in July. Charles has only been king since September

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<v Speaker 4>after the death of his mother, Queen Elizabeth. Northern California

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<v Speaker 4>is trying to dig out from the storms. Southern California

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<v Speaker 4>is still under emergency warnings. Bloomberg's Had Baxter reports from

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<v Speaker 4>San Francisco.

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<v Speaker 5>Four days of the atmospheric river weather conditions were the

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<v Speaker 5>worst coming over the weekend. Some Bay Area peaks got

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<v Speaker 5>one hundred mile per hour winds, not that high for

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<v Speaker 5>most of US, and the power outages were widespread. At

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<v Speaker 5>one point, as much as half of Silicon Valley customers

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<v Speaker 5>lost power at our home eighteen hours without power of

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<v Speaker 5>things of ease now hopefully, although tragically two people did

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<v Speaker 5>die from falling trees. The focus now has gone to

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<v Speaker 5>southern California, where there is flooding and power outages, as

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<v Speaker 5>well as landslides in the Hollywood Hills and Santa Monica Mountains.

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<v Speaker 5>There are still evacuation orders in place and several rescues

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<v Speaker 5>have had to happen in San Francisco. I'm at Baxter Bloomberg.

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<v Speaker 6>Radio thanks Ed.

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<v Speaker 4>Secretary of State Anthony blinkoln has kicked off his fifth

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<v Speaker 4>visit to the Middle East since Samasa's attack of Israel

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<v Speaker 4>back in October, and he started it with a meeting

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<v Speaker 4>with Saudi Arabia's Crown Prince Mohammed bin Salman. Blincoln will

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<v Speaker 4>visit Egypt cutter in Israel also on this latest trip. Meanwhile,

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<v Speaker 4>ceasefire talks continue, with the US cutter in Egypt drawing

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<v Speaker 4>up a proposal that would see a stop in hostilities

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<v Speaker 4>for several weeks, the phased release of remaining hostages Both

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<v Speaker 4>House Republican leaders and GOP presidential frontrunner Donald Trump have

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<v Speaker 4>rejected a bipartisan Senate deal to impose new border restrictions

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<v Speaker 4>while tying in billions of dollars of aid to Ukraine.

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<v Speaker 4>Speaker Mike Johnson has called the deal quote dead on

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<v Speaker 4>arrival and a wasted time. Both Senate leaders Chuck Schumer

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<v Speaker 4>and Mitch McConnell back the bill, which allows the Department

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<v Speaker 4>of Homeland Security to start turning away asylum seekers whenever

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<v Speaker 4>encounters reached four thousand daily for a week. The bill

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<v Speaker 4>would also tough in qualifications to seek asylum in the country.

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<v Speaker 4>Johnson and other Republicans are pushing for much stricter immigration

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<v Speaker 4>policies in exchange unlocked tens of billions of.

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<v Speaker 6>Dollars of aid to Ukraine.

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<v Speaker 4>The Wall Street Journal reports that Republican presidential candidate Nikki

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<v Speaker 4>Haley has requested Secret Service protection after receiving threats. Haley's

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<v Speaker 4>campaign has not detailed what threats led to the request.

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<v Speaker 4>The Secretary of Homeland Security has the authority to grant

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<v Speaker 4>a protective detail after consulting with a Congressional advisory committee.

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<v Speaker 4>Haley has previously talked about a swatting episode that occurred

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<v Speaker 4>back in December that sent law enforcement to her South

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<v Speaker 4>Carolina home.

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<v Speaker 6>The former governor, though was not home at the time.

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<v Speaker 4>Global News twenty four hours a day and whenever you

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<v Speaker 4>want it with Bloomberg News.

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<v Speaker 6>Now. I'm Dan Schwartzman, and this is Bloomberg Brian.

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<v Speaker 3>Dan, thanks very much. Six minutes past the hour. It's

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<v Speaker 3>time now for the top business stories of the hour.

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<v Speaker 3>China is said to be tightening trading restrictions on domestic

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<v Speaker 3>institutional investors and some offshore units. Bloomberg Yvon Mann has

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<v Speaker 3>more on this story from Hong Kong.

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<v Speaker 7>We hear Chinese officials have imposed caps on some brokerages

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<v Speaker 7>cross border total return swaps with clients. This is a

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<v Speaker 7>channel that can be used by Chinese investors to short

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<v Speaker 7>Hong Kong stocks. At the same time, Chinese brokers who

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<v Speaker 7>use a channel to buy mainland shares for their offshore

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<v Speaker 7>units were told not to reduce their positions. Also, we

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<v Speaker 7>hear some hedge funds have been banned from placing cell

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<v Speaker 7>orders completely, and still others have been barred from cutting

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<v Speaker 7>stock positions in leverage funds. Economists say this could provide

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<v Speaker 7>some short term relief, but may be counter productive as

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<v Speaker 7>investors worry about their ability to exit the market in

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<v Speaker 7>Hong Kong. I'm von Mann Bloomberg Radio.

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<v Speaker 2>Well here in the States, we mentioned a moment ago

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<v Speaker 2>how strong the economic news of the day was US

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<v Speaker 2>services expanding by the most in four months during the

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<v Speaker 2>month of January. Now that follows last Friday's surprisingly strong

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<v Speaker 2>jobs report. Both of these data points kind of spoil

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<v Speaker 2>the notion of a federate cut in March. We heard

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<v Speaker 2>today from the head of the Chicago FED, Austin Goulesby.

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<v Speaker 2>He was saying, it's important to consider all aspects of

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<v Speaker 2>the data.

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<v Speaker 8>We just got to be mindful in seeing these big

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<v Speaker 8>strong jobs numbers and big GDP numbers that they do

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<v Speaker 8>not have to mean overheating in the traditional sense, if

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<v Speaker 8>the supply side is moving around.

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<v Speaker 2>That is Austin gouls me the head of the Chicago FED.

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<v Speaker 2>He went on to say that he will not commit

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<v Speaker 2>to any specific decision on rate policy before the Fed's

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<v Speaker 2>March meeting.

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<v Speaker 3>Bright Well, US and Chinese officials are set to meet

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<v Speaker 3>in Beijing for another round of talks on economic issues.

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<v Speaker 1>That's coming up this week.

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<v Speaker 3>We hear a five person delegation from the US Treasury,

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<v Speaker 3>we'll meet with Chinese counterparts. The discussions mark another round

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<v Speaker 3>of the Economic Working Group that was established last year.

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<v Speaker 3>The talks will cover topics including the macroeconomic outlook the

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<v Speaker 3>two countries, investment screening regimes, and coordination on debt and

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<v Speaker 3>climate change. Let's get to our guest now in the

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<v Speaker 3>studios with US Live. It's Eric jew a Bloombery economists

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<v Speaker 3>covering China and Hong Kong. Eric, thanks very much for

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<v Speaker 3>sneaking into our studios here with us this morning. So look,

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<v Speaker 3>I mean, we all know that the stock market is

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<v Speaker 3>not the best barometer for judging what's happening with the

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<v Speaker 3>Chinese economy, but it is still a useful indicator. Small

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<v Speaker 3>cap stocks hit very hard. The CSI one thousand index

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<v Speaker 3>is down twenty seven percent for the year. Now that's

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<v Speaker 3>an extraordinary number. The benchmark is only down three percent,

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<v Speaker 3>and we all know that the benchmark.

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<v Speaker 1>Itself has been down.

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<v Speaker 3>But we're thinking that perhaps if you don't have support

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<v Speaker 3>from the so called national team, then you hit even harder,

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<v Speaker 3>like we see with that.

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<v Speaker 1>Twenty seven percent figure. And what does that tell us

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<v Speaker 1>about the economy?

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<v Speaker 9>Yeah, I think I think you're partly right that saw

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<v Speaker 9>market not the you know, the best parameter you know

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<v Speaker 9>to to to see what's going on in China. But

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<v Speaker 9>I think at least it's a good parameter of what's

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<v Speaker 9>a sentiment, especially I'm shore China. I think there used

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<v Speaker 9>to be a joke saying the only two things which

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<v Speaker 9>is still telling the truths in China is stom market

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<v Speaker 9>and the football China soccer team. So yeah, so you see,

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<v Speaker 9>so yeah, I mean it's it's a it's kind of

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<v Speaker 9>a real time you know, monitor of the sentiment in China,

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<v Speaker 9>and I think that the tumble is very much telling

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<v Speaker 9>the truth that actually invest at least the investor investors

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<v Speaker 9>are increasing being disappointed on how the government irresponding to

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<v Speaker 9>the economy, to the you know confidence and yeah, the

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<v Speaker 9>national team is probably giving some hands, but we don't

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<v Speaker 9>see that's a long term solution. It's probably helping to

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<v Speaker 9>you know, stabilize a bit in short term, but they're

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<v Speaker 9>not going to last long, right. We have seen last

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<v Speaker 9>week so after Premier League Chance said something about stabili

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<v Speaker 9>in the market, we see a few days of stabilization,

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<v Speaker 9>but too quickly, you know, renew the tumble again. So

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<v Speaker 9>I think they such measures the national team, it's not

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<v Speaker 9>really addressing the fundamental underlying issue why it's calling in

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<v Speaker 9>the low sentiment in China, and unless a government they're

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<v Speaker 9>really you know, doing something to addressing those issues, I

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<v Speaker 9>don't think we're going to see a sustainable rebound in

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<v Speaker 9>the stock market.

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<v Speaker 2>It's very interesting you make that point. I was looking

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<v Speaker 2>at a piece citing Goldman Sachs data. Actually the firm

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<v Speaker 2>estimates the amount of stock buying that we have seen

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<v Speaker 2>on the part of the national team at about seventy

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<v Speaker 2>billion YU one. That would work out to be maybe

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<v Speaker 2>just under ten billion US over the last month. But

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<v Speaker 2>Goldman is going on to say that we're only about

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<v Speaker 2>a third of the way there, that you need a

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<v Speaker 2>total of about two hundred billion you want in buying

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<v Speaker 2>just to stabilize the market. I mean, and I'm wondering

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<v Speaker 2>about the message that that type of aggressive buying would send.

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<v Speaker 9>Yeah, as I said, I don't think that's a long

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<v Speaker 9>term solution. Right. You can buy by today, you can

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<v Speaker 9>buy a tomorrow, you can buy next week, but you

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<v Speaker 9>cannot buy forever.

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<v Speaker 6>Right.

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<v Speaker 3>So yeah, let me counter that though with you know,

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<v Speaker 3>your own team at Bloomberg Economics says that economic activity

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<v Speaker 3>is actually accelerating a little bit in January. It's a

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<v Speaker 3>rebound in production and construction. And you're citing high frequency

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<v Speaker 3>indicator indexes and that it's not quite at the pre

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<v Speaker 3>pandemic levels, but it is rising. And you say that

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<v Speaker 3>the Bloomberg now cast points to GDP expanding five point

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<v Speaker 3>five percent year on year annualized in the first quarter.

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<v Speaker 1>Now that's up from five point two percent growth.

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<v Speaker 3>But is it just too short a time for that

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<v Speaker 3>to actually filter through the sentiment?

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<v Speaker 9>Yeah, and also bear in mind, so we need to

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<v Speaker 9>read this data with question because it could be that

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<v Speaker 9>you know, factory that just Russian before trying to new

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<v Speaker 9>your holiday in early February, so they just guessing is

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<v Speaker 9>done before the holiday. So we do expect you you're

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<v Speaker 9>going to see more weakness in February, and that's natural

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<v Speaker 9>because a long disruptions from the holidays. So I think

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<v Speaker 9>a better gauge is that we have to combine the

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<v Speaker 9>first two months. You know, probably we get more hard

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<v Speaker 9>data in much that will give us a better picture.

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<v Speaker 9>But for now, yeah, some pick up in general, but

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<v Speaker 9>I think it's too early to be careful.

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<v Speaker 2>We had a guest on the program yesterday saying, when

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<v Speaker 2>I asked a question about trying to turn around sentiment,

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<v Speaker 2>the answer was very blunt. I mean, deregulate the economy.

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<v Speaker 6>Is there?

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<v Speaker 2>Do you think on the part of government officials an

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<v Speaker 2>experiment happening, a thought experiment on ways to to change

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<v Speaker 2>regulation as a way of fundamentally shifting sentiment.

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<v Speaker 9>Well, I think that's the expectation by the markets or

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<v Speaker 9>by some investors, But we are not sure if that's

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<v Speaker 9>what the government is thinking, because the government is thinking

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<v Speaker 9>you if you recall President She last week talk about

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<v Speaker 9>the high quality growth and stuff, So what's in his definition?

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<v Speaker 9>What's the high quality growth? Probably he's more focusing on

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<v Speaker 9>national security or you know, toughening some regulation even in

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<v Speaker 9>those financial sectors, trying to make it more equal among society.

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<v Speaker 9>So I think our excitation is probably different from what

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<v Speaker 9>she or what's the top officials a vision for China.

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<v Speaker 9>So that's that's the key. I think the key uncertain

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<v Speaker 9>right now at the moment.

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<v Speaker 1>Is President She channeling his inner mouth?

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<v Speaker 9>I don't know, but obviously he has a big ambition

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<v Speaker 9>right trying to be if not the most.

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<v Speaker 3>I mean I asked that, because it's it's really the

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<v Speaker 3>essence of that is is ideological trumping practical.

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<v Speaker 9>Yeah, yeah, I think it's You're true, it's he's more

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<v Speaker 9>you're not talking about ideolgical. But for many in Chinese

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<v Speaker 9>I think they're increasingly frustrated because it's for ordinary people.

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<v Speaker 9>For some people, it's just looks like you're calling black

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<v Speaker 9>white right, and you're not really telling the truth. Let's

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<v Speaker 9>just be honest what's going on in the country. Let's

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<v Speaker 9>everybody from top government to the bottom, everybody just being honest.

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<v Speaker 9>What's the problem we're facing now, So you don't have

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<v Speaker 9>to we don't buy ideology of those stuff. It's it's

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<v Speaker 9>just calling black white right when we don't know.

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<v Speaker 2>So, Eric, you referenced the Lunar New Year holiday. Do

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<v Speaker 2>you have expectations about how well the Chinese consumers will

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<v Speaker 2>hold up during this period? I mean, are there pretty

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<v Speaker 2>high expectations that there's going to be a fair amount

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<v Speaker 2>of spending.

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<v Speaker 3>I think the issue on that too, if I can

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<v Speaker 3>just put something on the back of Doug's question, is

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<v Speaker 3>that you know, normally you see a little bit of

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<v Speaker 3>a slowdown during the Chinese New Year because the factory.

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<v Speaker 1>Shut down, people go home.

0:12:00.400 --> 0:12:04.240
<v Speaker 3>But I understand that Chinese leaders that they recently the

0:12:04.280 --> 0:12:09.040
<v Speaker 3>Ministry of Industry and Information Technology gathered provincial leaders and

0:12:09.080 --> 0:12:11.640
<v Speaker 3>so let's not shut down as many factories. Let's let's

0:12:11.679 --> 0:12:14.480
<v Speaker 3>get the factories running because we need this for the country.

0:12:15.360 --> 0:12:17.280
<v Speaker 1>Is this a sort of new line.

0:12:17.320 --> 0:12:20.760
<v Speaker 9>But it's hard to run those factory in China. New holiday, right,

0:12:21.200 --> 0:12:23.640
<v Speaker 9>and I think, I guess this year we're going to

0:12:23.679 --> 0:12:27.280
<v Speaker 9>see a very substantial travel across the country because it's

0:12:28.040 --> 0:12:31.360
<v Speaker 9>it's probably the first year, you know, people can totally

0:12:31.520 --> 0:12:34.680
<v Speaker 9>freely travel, you know, during a Chraining new period. Last

0:12:34.760 --> 0:12:37.680
<v Speaker 9>year it's open, reopened, but still many people got sick

0:12:37.760 --> 0:12:40.280
<v Speaker 9>because of the COVID. So I think this year we're

0:12:40.280 --> 0:12:43.960
<v Speaker 9>going to see a big traveling across country. But on

0:12:44.000 --> 0:12:48.000
<v Speaker 9>the consumption side, we don't expect a very strong number

0:12:48.080 --> 0:12:51.040
<v Speaker 9>this year, so as we have seen in past holidays. Yeah,

0:12:51.080 --> 0:12:54.440
<v Speaker 9>people are traveling, but they're not really spending so much money,

0:12:54.559 --> 0:12:57.959
<v Speaker 9>right so because the income got hit, their jobs got hit,

0:12:58.160 --> 0:13:02.480
<v Speaker 9>so everybody just you know, uh, just keeping the minimum spending.

0:13:02.559 --> 0:13:05.480
<v Speaker 9>But of course they want some home gathering, so want

0:13:05.480 --> 0:13:07.880
<v Speaker 9>to see their parents for for so many years, So

0:13:08.040 --> 0:13:10.320
<v Speaker 9>I think we're going to see lots of travel, so

0:13:10.520 --> 0:13:14.000
<v Speaker 9>probably they'll travel related to some tourism related business. Are

0:13:14.040 --> 0:13:17.040
<v Speaker 9>going to see some booster during the holiday. But I

0:13:17.080 --> 0:13:21.440
<v Speaker 9>think overall consumption good consumption, probably won't be so strong.

0:13:21.600 --> 0:13:24.440
<v Speaker 2>We talk a lot about kind of deflationary forces that

0:13:24.480 --> 0:13:26.800
<v Speaker 2>work in the economy. So at the retail level, I mean,

0:13:26.840 --> 0:13:29.319
<v Speaker 2>are people going to be dealing with much lower prices

0:13:29.440 --> 0:13:30.240
<v Speaker 2>as they consume?

0:13:31.920 --> 0:13:36.040
<v Speaker 9>I think I read something. You know, even the pop

0:13:36.080 --> 0:13:40.120
<v Speaker 9>prices haven't increased a lot this year around before the

0:13:40.200 --> 0:13:44.040
<v Speaker 9>China New Year, So that's another, you know, bad sign,

0:13:44.080 --> 0:13:48.040
<v Speaker 9>not a good sign of the deflation part. I think, yeah,

0:13:48.120 --> 0:13:51.240
<v Speaker 9>but it's it's it's it's just demand not there. It's

0:13:51.280 --> 0:13:54.480
<v Speaker 9>it's cheap. But even it's cheap, probably people don't have

0:13:54.520 --> 0:13:57.400
<v Speaker 9>that so much money to spend like before. I think

0:13:57.520 --> 0:13:58.200
<v Speaker 9>that's thesue.

0:13:58.360 --> 0:14:01.080
<v Speaker 3>Let's go back to the slightly more or optimistic read

0:14:01.200 --> 0:14:03.600
<v Speaker 3>that I mentioned from Bloomberg Economics. You say we'll have

0:14:03.640 --> 0:14:05.600
<v Speaker 3>to get really two full months in to be able

0:14:05.640 --> 0:14:08.600
<v Speaker 3>to gauge that. But let's say that things are actually

0:14:08.840 --> 0:14:13.800
<v Speaker 3>improving a little bit through here. What would be feeding that?

0:14:14.040 --> 0:14:17.920
<v Speaker 3>You know, what's driving the pickup? We mentioned production and construction,

0:14:18.080 --> 0:14:19.920
<v Speaker 3>but can that continue.

0:14:22.040 --> 0:14:23.720
<v Speaker 6>It's more the strengths.

0:14:23.760 --> 0:14:25.920
<v Speaker 9>I think in the past a couple of months we

0:14:25.960 --> 0:14:29.800
<v Speaker 9>have seen quite strong reading on the construction PMI, so

0:14:29.920 --> 0:14:34.360
<v Speaker 9>that's probably suggesting some physical stimulus was feeding into you know,

0:14:34.440 --> 0:14:38.760
<v Speaker 9>some construction part, but it's mostly still infrastructure investment. That's

0:14:38.760 --> 0:14:41.520
<v Speaker 9>a traditional way the government're trying to boost an ecoloony.

0:14:41.960 --> 0:14:45.280
<v Speaker 9>Of course the efficiency is probably decreasing, but it's still,

0:14:45.440 --> 0:14:49.560
<v Speaker 9>you know, I can have some impact on the economy,

0:14:49.640 --> 0:14:51.840
<v Speaker 9>at least I think in the first quarter, because they

0:14:52.280 --> 0:14:55.120
<v Speaker 9>they frontload some fiscal stimular in the end of last year.

0:14:57.520 --> 0:15:00.280
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