1 00:00:03,160 --> 00:00:08,280 Speaker 1: Crisis in our lifetime. We cannot turn back to the 2 00:00:08,360 --> 00:00:18,000 Speaker 1: world before COVID nineteen. Our societies have suffered too much, 3 00:00:19,440 --> 00:00:26,720 Speaker 1: our populations have made too many sacrifices. Hello. I'm Stephanie Flanders, VA, 4 00:00:26,840 --> 00:00:29,520 Speaker 1: and welcome to the first of three special editions of 5 00:00:29,560 --> 00:00:33,320 Speaker 1: Stephanomics from the Bloomberg New Economy Forum in Singapore. World 6 00:00:35,600 --> 00:00:46,440 Speaker 1: the time to act is now. Should countries aim for 7 00:00:46,680 --> 00:00:49,920 Speaker 1: zero COVID or learn to live with it? Most of 8 00:00:50,000 --> 00:00:53,360 Speaker 1: Asia was firmly on one side of that debate through 9 00:00:53,400 --> 00:00:56,320 Speaker 1: the first eighteen months of the pandemic, but as variants 10 00:00:56,360 --> 00:00:58,560 Speaker 1: have spread and other parts of the world have taken 11 00:00:58,560 --> 00:01:02,520 Speaker 1: a different course of COVID endemic, many are now changing 12 00:01:02,640 --> 00:01:05,680 Speaker 1: tack and like it or not, Bloomberg has ended up 13 00:01:05,680 --> 00:01:08,760 Speaker 1: as a test case for one country's revised attitude to 14 00:01:08,800 --> 00:01:12,840 Speaker 1: the virus this week, holding the New Economy Forum in Singapore. 15 00:01:14,040 --> 00:01:16,399 Speaker 1: The World Economic Forum tried to have a meeting here 16 00:01:16,400 --> 00:01:19,319 Speaker 1: in August was forced to cancel. The same happened to 17 00:01:19,319 --> 00:01:22,480 Speaker 1: Singapore's famous Formula one race in the autumn, But the 18 00:01:22,560 --> 00:01:26,000 Speaker 1: New Economy Forum has not been canceled yet. It's happening 19 00:01:26,040 --> 00:01:29,039 Speaker 1: this week. We're here and several hundred delegates are on 20 00:01:29,080 --> 00:01:32,800 Speaker 1: their way to join. So can Singapore be an example 21 00:01:33,160 --> 00:01:36,679 Speaker 1: of a new normal for the region, and economically, what 22 00:01:36,720 --> 00:01:39,520 Speaker 1: are the stakes for all economies in learning to live 23 00:01:39,560 --> 00:01:42,280 Speaker 1: with COVID. I'm going to talk to Bloomberg Chief economist 24 00:01:42,319 --> 00:01:45,200 Speaker 1: Tom Marlig about that in a few minutes, but first, 25 00:01:45,440 --> 00:01:49,920 Speaker 1: the editorial director of Bloomberg New Economy, Andrew Brown, Andy, 26 00:01:50,520 --> 00:01:54,480 Speaker 1: you're on the ground. What's it been like in reality 27 00:01:54,600 --> 00:01:59,040 Speaker 1: organizing an in person event in a country that's also 28 00:01:59,480 --> 00:02:05,160 Speaker 1: still nervous about COVID. Well, Singapore is a laboratory of 29 00:02:05,240 --> 00:02:10,919 Speaker 1: sorts for how countries can move from zero COVID chasing 30 00:02:10,960 --> 00:02:17,720 Speaker 1: down every last infection too COVID endemic where essentially you 31 00:02:17,840 --> 00:02:23,040 Speaker 1: take the view that it's impossible to stop COVID uh 32 00:02:23,400 --> 00:02:27,360 Speaker 1: and the you know, the the the the new variants 33 00:02:27,400 --> 00:02:32,640 Speaker 1: have become so easily transmissible that your only option is 34 00:02:32,720 --> 00:02:37,080 Speaker 1: to learn to live with it. And Singapore took that decision. 35 00:02:38,520 --> 00:02:40,960 Speaker 1: Of course, it wasn't it wasn't entirely a leap in 36 00:02:41,000 --> 00:02:43,560 Speaker 1: the dark. They decided that once they had got to 37 00:02:43,560 --> 00:02:48,280 Speaker 1: a certain vaccination level that they would reopen and a 38 00:02:48,320 --> 00:02:50,760 Speaker 1: lot of countries in this part of the world in 39 00:02:50,840 --> 00:02:55,919 Speaker 1: East Asia or Asia Pacific looking now at Singapore's experience 40 00:02:56,200 --> 00:03:01,519 Speaker 1: and learning lessons from it, including Austria, Alien New Zealand, 41 00:03:02,280 --> 00:03:06,399 Speaker 1: but most importantly China, which is by far the largest 42 00:03:07,120 --> 00:03:11,720 Speaker 1: zero COVID country, and they are still adamantly sticking to 43 00:03:11,800 --> 00:03:15,240 Speaker 1: their course. Well we should. We'll definitely talking about China 44 00:03:15,280 --> 00:03:17,680 Speaker 1: in a minute, but just on on Singapore. I mean, 45 00:03:17,720 --> 00:03:19,800 Speaker 1: how we have all this, We have this in person event, 46 00:03:20,120 --> 00:03:23,400 Speaker 1: but in practical terms, I'm noticing, Um, you know, I 47 00:03:23,400 --> 00:03:26,560 Speaker 1: would normally just go into the Bloomberg office and see 48 00:03:26,680 --> 00:03:29,480 Speaker 1: members of my team when I'm there. Now we're doing that, 49 00:03:29,560 --> 00:03:33,399 Speaker 1: but it's quite carefully arranged because many people are still 50 00:03:33,440 --> 00:03:35,680 Speaker 1: being told to work from home. There's still quite a 51 00:03:35,680 --> 00:03:38,440 Speaker 1: lot of restrictions in terms of how many people you 52 00:03:38,480 --> 00:03:42,560 Speaker 1: can have meals with. So so it's still early days, 53 00:03:42,600 --> 00:03:47,080 Speaker 1: isn't it. It is, um, But you know, we've the 54 00:03:47,200 --> 00:03:52,200 Speaker 1: Singapore authorities have been remarkably flexible when it comes to 55 00:03:52,240 --> 00:03:55,560 Speaker 1: the Bloomberg New Economy Forum. They want to, in a sense, 56 00:03:55,760 --> 00:03:59,760 Speaker 1: use us as part of this experiment to demonstrate first 57 00:03:59,760 --> 00:04:02,840 Speaker 1: of all to the world that Singapore is back open 58 00:04:02,920 --> 00:04:07,280 Speaker 1: for business, but I think also to a domestic population 59 00:04:07,920 --> 00:04:13,280 Speaker 1: that it is possible to open and open safely. So 60 00:04:13,480 --> 00:04:16,920 Speaker 1: we all came in in this vaccinated traveler lane. They've 61 00:04:16,920 --> 00:04:19,839 Speaker 1: opened these lanes to a number of countries including the 62 00:04:19,920 --> 00:04:25,560 Speaker 1: United States, Australia, UK. That everybody who is attending and 63 00:04:25,560 --> 00:04:28,080 Speaker 1: there's several hundred of us, several hundred delegates at the 64 00:04:28,080 --> 00:04:31,520 Speaker 1: New Economy Forum this year. Um, we're all coming in 65 00:04:31,640 --> 00:04:36,280 Speaker 1: under a special dispensation. First of all, everybody, of course 66 00:04:36,560 --> 00:04:40,520 Speaker 1: must be vaccinated and prove their vaccination, and then you 67 00:04:40,560 --> 00:04:44,080 Speaker 1: have to take a PCR test. Within forty eight hours 68 00:04:44,160 --> 00:04:49,040 Speaker 1: of departure. You arrive at Changi Airport, you've got another 69 00:04:49,120 --> 00:04:52,840 Speaker 1: pc HART test. You go to your hotel, you quarantine 70 00:04:52,880 --> 00:04:55,560 Speaker 1: for a few hours until the result of that PCR 71 00:04:55,640 --> 00:04:59,720 Speaker 1: test comes in and then you um, then you're free 72 00:04:59,720 --> 00:05:02,760 Speaker 1: to go. You're free to too, and it's not a bubble. Um, 73 00:05:03,040 --> 00:05:06,440 Speaker 1: we're allowed to move around the city. We liked. Singaporeans 74 00:05:06,480 --> 00:05:10,919 Speaker 1: have to download a mobile app called Trace together into 75 00:05:10,960 --> 00:05:15,880 Speaker 1: our iPhones, are into our smartphones, which alerts US and 76 00:05:16,040 --> 00:05:19,760 Speaker 1: the Singapore authorities to any sort of near misses that 77 00:05:19,839 --> 00:05:25,120 Speaker 1: we have with people who subsequently test positive for for 78 00:05:25,120 --> 00:05:28,800 Speaker 1: for COVID. So it's a controlled experiment, and and we're 79 00:05:28,839 --> 00:05:32,080 Speaker 1: a part of it. The previous colleague of mine who 80 00:05:32,080 --> 00:05:34,480 Speaker 1: had gone to a very even more controlled event I 81 00:05:34,560 --> 00:05:36,799 Speaker 1: think a year a year or so ago in Singapore, 82 00:05:36,880 --> 00:05:39,640 Speaker 1: and that the limits of that quarantine was so strict 83 00:05:39,680 --> 00:05:42,480 Speaker 1: that you've got a hotel room key that only allowed 84 00:05:42,480 --> 00:05:44,400 Speaker 1: one use and after that, if you if you had 85 00:05:44,400 --> 00:05:46,640 Speaker 1: snuck out of your hotel room when you weren't supposed to, 86 00:05:46,680 --> 00:05:48,599 Speaker 1: you would not be able to get back in. To 87 00:05:48,680 --> 00:05:50,120 Speaker 1: have visions of sort of you know, in the middle 88 00:05:50,120 --> 00:05:51,560 Speaker 1: of the night, people trying to have a run or 89 00:05:51,600 --> 00:05:54,160 Speaker 1: something and then ending up outside in the corridor. Yeah, Well, 90 00:05:54,560 --> 00:05:59,320 Speaker 1: the Singapore public has high expectations on the performance of 91 00:05:59,440 --> 00:06:04,120 Speaker 1: their government, and indeed the government prides itself on its 92 00:06:04,200 --> 00:06:09,360 Speaker 1: technocratic efficiency and ability. So it wasn't an easy decision 93 00:06:09,640 --> 00:06:13,479 Speaker 1: of their's to step back and essentially sort of let go, 94 00:06:14,440 --> 00:06:17,360 Speaker 1: But you know, they had they had no choice. The 95 00:06:17,960 --> 00:06:22,000 Speaker 1: salient point about Singapore is that it is one of 96 00:06:22,000 --> 00:06:26,760 Speaker 1: the world's most open economies, most globalized economy in terms 97 00:06:26,760 --> 00:06:32,039 Speaker 1: of the movement of goods and services and people knowledge, 98 00:06:32,520 --> 00:06:37,479 Speaker 1: and remaining in lockdown just wasn't an option that the 99 00:06:37,560 --> 00:06:44,640 Speaker 1: economy was really devastated last year. UM. The air transport 100 00:06:44,920 --> 00:06:49,800 Speaker 1: sector of the economy UM supports jobs and industries that 101 00:06:49,839 --> 00:06:55,479 Speaker 1: account for about twelve percent of Singapore's GDP. And you 102 00:06:55,520 --> 00:06:57,560 Speaker 1: know the three through and at the center of this 103 00:06:57,720 --> 00:07:00,760 Speaker 1: is Channi Airport. Last year, through put in Changi was 104 00:07:00,800 --> 00:07:03,400 Speaker 1: about three to four percent of what it normally is. 105 00:07:04,240 --> 00:07:08,880 Speaker 1: And Singapore went into its steepest deepest recession since independence 106 00:07:08,960 --> 00:07:14,400 Speaker 1: in nineteen sixty five. UM, so they had to reopen 107 00:07:15,240 --> 00:07:19,800 Speaker 1: the you know what happened was as soon as they reopened, 108 00:07:19,800 --> 00:07:24,120 Speaker 1: they went from you know, caseload of a few dozen 109 00:07:24,240 --> 00:07:29,960 Speaker 1: a day very quickly to thousands. They almost immediately spiked 110 00:07:29,960 --> 00:07:33,280 Speaker 1: at about five thousand cases a day. And now we're 111 00:07:33,280 --> 00:07:37,480 Speaker 1: down to about three thousand a day. And and and 112 00:07:37,480 --> 00:07:40,760 Speaker 1: we had an accompanying sort of surge in death or 113 00:07:40,880 --> 00:07:43,680 Speaker 1: surge is probably the wrong word because it's still very 114 00:07:43,800 --> 00:07:46,640 Speaker 1: very modest. UM. You know, don't forget that the population 115 00:07:46,680 --> 00:07:48,640 Speaker 1: of Singapore is about five and a half million people, 116 00:07:48,640 --> 00:07:53,280 Speaker 1: about the same size as Sydney or Melbourne, Barcelona. UM. Nevertheless, UM, 117 00:07:53,320 --> 00:07:57,320 Speaker 1: you know, we're seeing last year remarkably the total number 118 00:07:57,320 --> 00:08:00,800 Speaker 1: of deaths in Singapore from COVID Uh, with just a 119 00:08:00,800 --> 00:08:06,040 Speaker 1: few dozen, and now we're getting ten or so a day. Um. 120 00:08:06,120 --> 00:08:08,840 Speaker 1: And I think that was the first lesson that that 121 00:08:08,960 --> 00:08:12,920 Speaker 1: countries like Singapore are taking from from the like Australia 122 00:08:13,000 --> 00:08:15,680 Speaker 1: rather taking from the Singapore experience, which is that you 123 00:08:15,800 --> 00:08:20,600 Speaker 1: really do need even though your population is highly vaccinated, 124 00:08:20,680 --> 00:08:25,560 Speaker 1: you can expect a surgeon infections and deaths. And it 125 00:08:25,680 --> 00:08:28,720 Speaker 1: is quite politically tricky for governments that have staked so 126 00:08:28,800 --> 00:08:34,080 Speaker 1: much of their credibility on chasing down every last COVID 127 00:08:34,360 --> 00:08:49,480 Speaker 1: infection zero COVID. You mentioned China, it famously is on 128 00:08:49,520 --> 00:08:52,199 Speaker 1: another attack. How long do you think they can hold 129 00:08:52,200 --> 00:08:57,079 Speaker 1: out with the zero COVID approach and at what cost? Well, 130 00:08:57,080 --> 00:09:00,720 Speaker 1: it's an interesting question. I mean, they've decreed that they're 131 00:09:00,760 --> 00:09:06,120 Speaker 1: going to be closed through the Olympics, the Winter Olympics, 132 00:09:06,160 --> 00:09:10,160 Speaker 1: which will take place in in February. Um, You've got 133 00:09:10,200 --> 00:09:15,440 Speaker 1: this really important Communist Party congress towards the end of 134 00:09:15,480 --> 00:09:18,920 Speaker 1: the year. I think it's highly unlikely that they're going 135 00:09:19,000 --> 00:09:23,560 Speaker 1: to open up and risk a surgeon infections before them, 136 00:09:23,640 --> 00:09:28,360 Speaker 1: particularly since they frequently compare the way that they have 137 00:09:28,520 --> 00:09:32,559 Speaker 1: had had so effectively handled the aftermath of of of 138 00:09:33,040 --> 00:09:36,600 Speaker 1: you know, the up for the outbreak in Wuhan UM 139 00:09:36,880 --> 00:09:41,160 Speaker 1: to the art failure and of the United States to 140 00:09:41,600 --> 00:09:44,760 Speaker 1: contain the virus UM. So they staked a lot of 141 00:09:44,840 --> 00:09:49,359 Speaker 1: legitimacy UM on zero COVID. So I don't see them 142 00:09:49,559 --> 00:09:54,439 Speaker 1: reopening next year. UM. You know, it may may actually 143 00:09:54,440 --> 00:09:57,920 Speaker 1: be that they're going to keep in place restrictions UH 144 00:09:58,320 --> 00:10:01,360 Speaker 1: for many years. One of the lessons I think that 145 00:10:01,520 --> 00:10:04,000 Speaker 1: they learn, or that one can learn from the Singapore 146 00:10:04,000 --> 00:10:06,960 Speaker 1: experiences that the longer you leave it, the worst it becomes. 147 00:10:07,600 --> 00:10:12,120 Speaker 1: And one reason that they had this explosion of infections 148 00:10:12,160 --> 00:10:16,480 Speaker 1: despite having widespread vaccination UM is because there was no 149 00:10:16,640 --> 00:10:21,520 Speaker 1: natural immunity in the population. I mean simply last year, 150 00:10:21,600 --> 00:10:26,760 Speaker 1: nobody got infected UM. And that even even a small 151 00:10:26,880 --> 00:10:31,319 Speaker 1: even though of all those cases are mild or asymptomatic, 152 00:10:31,960 --> 00:10:37,000 Speaker 1: a small, tiny number of cases UM that do become 153 00:10:37,120 --> 00:10:41,440 Speaker 1: serious can very quickly overwhelm the healthcare system. Don't get 154 00:10:41,440 --> 00:10:44,439 Speaker 1: Singapore's healthcare system and hospital system is among the best 155 00:10:44,480 --> 00:10:49,840 Speaker 1: in the world, and China's healthcare system, particularly in rural areas, 156 00:10:50,240 --> 00:10:57,240 Speaker 1: is rudimentary. And so it's going to become increasingly difficult 157 00:10:57,280 --> 00:11:00,240 Speaker 1: for China to to reopen. Bearing in mind all also 158 00:11:00,480 --> 00:11:04,880 Speaker 1: that they're not using mRNA vaccines in China. They're still 159 00:11:05,000 --> 00:11:09,920 Speaker 1: using the old fashioned vaccines made by you know, injecting 160 00:11:09,920 --> 00:11:13,760 Speaker 1: people with the inactive or all very diluted forms of 161 00:11:13,800 --> 00:11:18,760 Speaker 1: the virus, and these vaccines aren't as good. We're going 162 00:11:18,800 --> 00:11:20,680 Speaker 1: to talk about the economic cost of that in a 163 00:11:20,720 --> 00:11:23,480 Speaker 1: second with with Tom. But I'm just as you know, 164 00:11:23,600 --> 00:11:26,720 Speaker 1: you lived in China for many years, You're a distinguished 165 00:11:26,760 --> 00:11:32,000 Speaker 1: observer and analyst of China. I'm just wondering what you 166 00:11:32,040 --> 00:11:36,720 Speaker 1: think about the the kind of intellectual and cultural cost 167 00:11:37,080 --> 00:11:40,920 Speaker 1: of China remaining excluded. I've been struck recently in sessions 168 00:11:40,920 --> 00:11:47,280 Speaker 1: where I'm talking to China experts academics sitting in the 169 00:11:47,440 --> 00:11:52,800 Speaker 1: US who are just increasingly concerned that about the lack 170 00:11:52,840 --> 00:11:56,720 Speaker 1: of information flow and how our understanding of what's happening 171 00:11:56,720 --> 00:12:01,480 Speaker 1: in China will diminish over time. This just this basic 172 00:12:01,840 --> 00:12:06,800 Speaker 1: inability for people to go there UM and exchange ideas 173 00:12:06,880 --> 00:12:09,040 Speaker 1: and thoughts. Are you what do you think about that? 174 00:12:09,160 --> 00:12:12,800 Speaker 1: I think it is concerning when you look at these 175 00:12:12,840 --> 00:12:19,560 Speaker 1: pictures of these barrack like buildings that they're constructing in 176 00:12:19,679 --> 00:12:25,920 Speaker 1: Guangzhou and other coastal cities. UM capable of housing five 177 00:12:26,000 --> 00:12:32,000 Speaker 1: thousand travelers, and it's pretty clear that they're hunkered down 178 00:12:32,360 --> 00:12:36,520 Speaker 1: for the long term. And I think the lack of 179 00:12:36,760 --> 00:12:42,960 Speaker 1: interaction between China and the world risks UM China looking inward, 180 00:12:43,080 --> 00:12:48,040 Speaker 1: turning inward, UM she Jimping. The country's leader, of course, 181 00:12:48,480 --> 00:12:52,680 Speaker 1: hasn't traveled since the beginning of the pandemic. Um he 182 00:12:52,800 --> 00:12:56,319 Speaker 1: didn't show up. But the G twenty he didn't show 183 00:12:56,440 --> 00:13:01,000 Speaker 1: up a cop And as you say, all of the 184 00:13:01,120 --> 00:13:07,479 Speaker 1: normal interactions between China and the world, whether that's academics, 185 00:13:07,480 --> 00:13:13,320 Speaker 1: whether that's journalists, um, whether that's government officials, have all 186 00:13:13,400 --> 00:13:17,840 Speaker 1: dried up. And I think under those circumstances, Um, it's 187 00:13:17,960 --> 00:13:22,439 Speaker 1: much easier um for China to end up with a 188 00:13:22,559 --> 00:13:27,000 Speaker 1: caricature view on what's happening in the world. It's much 189 00:13:27,080 --> 00:13:31,840 Speaker 1: easier for the world to demonize China. I just think 190 00:13:31,880 --> 00:13:34,640 Speaker 1: given all the tensions that are now bubbling in the 191 00:13:34,679 --> 00:13:39,880 Speaker 1: relationship tension, geopolitical tensions, tensions over Taiwan, human rights, and 192 00:13:39,960 --> 00:13:43,320 Speaker 1: shin Ja, this is a time when China needs to 193 00:13:43,400 --> 00:13:48,120 Speaker 1: be engaging much more vigorously with the rest of the world. 194 00:13:48,800 --> 00:13:52,640 Speaker 1: And in the absence I think of of these context 195 00:13:53,240 --> 00:13:56,760 Speaker 1: I think danger as bad things can happen. I saw 196 00:13:56,760 --> 00:13:58,920 Speaker 1: we had a story the other day that the President, 197 00:13:59,000 --> 00:14:02,000 Speaker 1: Joe Biden, is not happy with the level of intelligence 198 00:14:02,040 --> 00:14:06,000 Speaker 1: that he's getting from from China. So it's not doesn't 199 00:14:06,000 --> 00:14:09,319 Speaker 1: bode well. Andrew Brown, thank you very much. Great to 200 00:14:09,360 --> 00:14:20,720 Speaker 1: be with you. Definitely, thank you. M So. As previously advertised, 201 00:14:20,840 --> 00:14:23,280 Speaker 1: I wanted to have a quick chat with Chief Economist 202 00:14:23,400 --> 00:14:26,840 Speaker 1: Tom Orlig about the state of the Chinese economy because 203 00:14:27,360 --> 00:14:31,120 Speaker 1: it's obviously a big part of these conversations around the 204 00:14:31,880 --> 00:14:36,440 Speaker 1: COVID zero strategy, but we're also seeing China slowdown quite radically, 205 00:14:36,440 --> 00:14:39,320 Speaker 1: including in some of the latest data. So so, Tom, 206 00:14:39,360 --> 00:14:43,880 Speaker 1: how severe is this slowdown? It's pretty bad, Stephanie. You've 207 00:14:43,880 --> 00:14:47,440 Speaker 1: got three factors hitting at the same time. First, you've 208 00:14:47,480 --> 00:14:51,200 Speaker 1: got COVID zero. Just a few cases are sufficient for 209 00:14:51,320 --> 00:14:55,840 Speaker 1: China to lockdown entire towns in entire provinces, and that 210 00:14:55,960 --> 00:15:01,520 Speaker 1: hits growth. Second, you've got energy shortages, not unique to China, 211 00:15:01,880 --> 00:15:06,280 Speaker 1: but certainly hitting hard given the energy intensity of China's 212 00:15:06,280 --> 00:15:11,160 Speaker 1: industrial sector. And lastly, perhaps most troubling for the China 213 00:15:11,280 --> 00:15:15,360 Speaker 1: bears is what's going on in the real estate sector. Ever, 214 00:15:15,440 --> 00:15:20,040 Speaker 1: Grand emblematic of a sector which is over built over 215 00:15:20,120 --> 00:15:23,920 Speaker 1: leaver Ridge and now running into trouble paying its bills. 216 00:15:24,360 --> 00:15:27,960 Speaker 1: Put all those pieces together, the economy came screeching to 217 00:15:28,080 --> 00:15:31,880 Speaker 1: a halt in the third quarter and the fourth quarter 218 00:15:32,200 --> 00:15:37,120 Speaker 1: hasn't started much better. You mentioned real estate. The really 219 00:15:37,160 --> 00:15:40,800 Speaker 1: striking thing was they said earlier in the year, we're 220 00:15:40,840 --> 00:15:45,160 Speaker 1: not going to use real estate to stimulate the economy 221 00:15:45,200 --> 00:15:47,440 Speaker 1: like we have in the past. By all accounts, the 222 00:15:47,520 --> 00:15:50,600 Speaker 1: leadership thinks the real estate sector has become too large 223 00:15:50,680 --> 00:15:54,200 Speaker 1: or too too important to growth. So how bad would 224 00:15:54,200 --> 00:15:56,400 Speaker 1: it have to get for them to blink on that. 225 00:15:56,960 --> 00:16:00,440 Speaker 1: So China's real estate sector is really big. There was 226 00:16:00,480 --> 00:16:03,880 Speaker 1: a recent estimate by Ken Rogoff, the kind of the 227 00:16:04,040 --> 00:16:07,960 Speaker 1: giant of thinking about debt risks in the global economy, 228 00:16:08,320 --> 00:16:12,000 Speaker 1: and he thinks that real estate is more than of 229 00:16:12,080 --> 00:16:17,080 Speaker 1: China's GDP. So it's really big, and it's really over leaverage. 230 00:16:17,120 --> 00:16:20,200 Speaker 1: There's a lot of debt there, and it's really overbuilt. 231 00:16:20,800 --> 00:16:23,880 Speaker 1: I'm sure many stephonomics listeners have heard about the ghost 232 00:16:23,920 --> 00:16:28,000 Speaker 1: towns of empty property which we see around China, and 233 00:16:28,640 --> 00:16:33,360 Speaker 1: China's government has decided, well, this is not sustainable. So 234 00:16:33,400 --> 00:16:36,080 Speaker 1: they're taking ever Grand, one of the biggest developers in 235 00:16:36,080 --> 00:16:39,480 Speaker 1: the country, to the brink of bankruptcy, and they're doing 236 00:16:39,520 --> 00:16:42,520 Speaker 1: this to teach a lesson to the sector, to teach 237 00:16:42,560 --> 00:16:47,160 Speaker 1: the sector that they can't continue with this unsustainable debt 238 00:16:47,280 --> 00:16:52,680 Speaker 1: fueled over building approach. All of that is good news. 239 00:16:53,560 --> 00:16:55,520 Speaker 1: It should put the real estate sector on a more 240 00:16:55,520 --> 00:17:00,720 Speaker 1: sustainable footing going forwards. It should start driving PITTAL towards 241 00:17:00,720 --> 00:17:08,119 Speaker 1: more productive uses like industrial robotics or services um. But 242 00:17:08,200 --> 00:17:12,679 Speaker 1: in the short term, finding a replacement for that of GDP, 243 00:17:12,800 --> 00:17:16,480 Speaker 1: which currently comes from property that's tough to do. And 244 00:17:16,560 --> 00:17:19,560 Speaker 1: what it means is that China almost inevitably faces a 245 00:17:19,680 --> 00:17:22,480 Speaker 1: drag from real estate in the year ahead. I mean, 246 00:17:22,520 --> 00:17:26,400 Speaker 1: how scared should we be by these latest numbers When 247 00:17:26,400 --> 00:17:28,639 Speaker 1: you talk about the economy screeching to a halt? I mean, 248 00:17:28,880 --> 00:17:33,040 Speaker 1: are you tearing up your forecast for next year? So 249 00:17:33,119 --> 00:17:36,159 Speaker 1: China has really slowed a lot in the last few months. 250 00:17:36,520 --> 00:17:39,280 Speaker 1: If you look at the third quarter, the official data 251 00:17:39,440 --> 00:17:42,280 Speaker 1: is telling us that growth was just no point two 252 00:17:42,840 --> 00:17:45,960 Speaker 1: on a sequential basis. If you annualize that, it's just 253 00:17:46,040 --> 00:17:49,320 Speaker 1: a nor point eight percent growth rate. China was growing 254 00:17:49,400 --> 00:17:53,320 Speaker 1: slower than the United States. China was growing much slower 255 00:17:53,520 --> 00:17:56,679 Speaker 1: than the five six seven percent pace we were accustomed 256 00:17:56,680 --> 00:18:01,280 Speaker 1: to before the COVID crisis. Now China has policy space 257 00:18:01,520 --> 00:18:04,280 Speaker 1: to stimulate. They could do more on the fiscal side 258 00:18:04,600 --> 00:18:07,280 Speaker 1: with more spending. They could do more on the monetary side, 259 00:18:07,600 --> 00:18:11,320 Speaker 1: cutting interest rates or allowing banks to lend a bit more. 260 00:18:12,280 --> 00:18:16,080 Speaker 1: The question is where is their tolerance whereas their pain threshold? 261 00:18:16,200 --> 00:18:19,159 Speaker 1: Right now, pre COVID it was pretty clear they're not 262 00:18:19,200 --> 00:18:22,879 Speaker 1: going to let growth drop below six The big question 263 00:18:24,440 --> 00:18:27,520 Speaker 1: is whereas the new line. It's probably not six percent, 264 00:18:27,920 --> 00:18:31,080 Speaker 1: but is it five? Is it four percent? Could we 265 00:18:31,200 --> 00:18:34,760 Speaker 1: be looking at a Chinese economy growing at three These 266 00:18:34,760 --> 00:18:38,840 Speaker 1: are big consequential questions for China, they're big consequential questions 267 00:18:38,840 --> 00:18:41,000 Speaker 1: for the world, and right now we just don't know 268 00:18:41,040 --> 00:18:43,240 Speaker 1: the answer. It's one of the things I know that 269 00:18:43,240 --> 00:18:45,200 Speaker 1: we're going to be discussing over the next few days 270 00:18:45,680 --> 00:18:50,280 Speaker 1: with Chinese thinkers and Chinese officials at the New Economy Forum. 271 00:18:50,359 --> 00:18:59,320 Speaker 1: Thanks very much, Tomic, it's great to be here. That's 272 00:18:59,359 --> 00:19:02,480 Speaker 1: it for this special edition of Stephanomics, which was produced 273 00:19:02,480 --> 00:19:05,840 Speaker 1: by Magnets Hendrickson, with special thanks to Andrew Brown and 274 00:19:05,920 --> 00:19:09,800 Speaker 1: Tom Pollock. Mike Sasso is the executive producer of Stephanomics, 275 00:19:10,280 --> 00:19:13,040 Speaker 1: and the head of Bloomberg Podcast is Francesco Levy.