Speaker 1: Crisis in our lifetime. We cannot turn back to the
Speaker 1: world before COVID nineteen. Our societies have suffered too much,
Speaker 1: our populations have made too many sacrifices. Hello. I'm Stephanie Flanders, VA,
Speaker 1: and welcome to the first of three special editions of
Speaker 1: Stephanomics from the Bloomberg New Economy Forum in Singapore. World
Speaker 1: the time to act is now. Should countries aim for
Speaker 1: zero COVID or learn to live with it? Most of
Speaker 1: Asia was firmly on one side of that debate through
Speaker 1: the first eighteen months of the pandemic, but as variants
Speaker 1: have spread and other parts of the world have taken
Speaker 1: a different course of COVID endemic, many are now changing
Speaker 1: tack and like it or not, Bloomberg has ended up
Speaker 1: as a test case for one country's revised attitude to
Speaker 1: the virus this week, holding the New Economy Forum in Singapore.
Speaker 1: The World Economic Forum tried to have a meeting here
Speaker 1: in August was forced to cancel. The same happened to
Speaker 1: Singapore's famous Formula one race in the autumn, But the
Speaker 1: New Economy Forum has not been canceled yet. It's happening
Speaker 1: this week. We're here and several hundred delegates are on
Speaker 1: their way to join. So can Singapore be an example
Speaker 1: of a new normal for the region, and economically, what
Speaker 1: are the stakes for all economies in learning to live
Speaker 1: with COVID. I'm going to talk to Bloomberg Chief economist
Speaker 1: Tom Marlig about that in a few minutes, but first,
Speaker 1: the editorial director of Bloomberg New Economy, Andrew Brown, Andy,
Speaker 1: you're on the ground. What's it been like in reality
Speaker 1: organizing an in person event in a country that's also
Speaker 1: still nervous about COVID. Well, Singapore is a laboratory of
Speaker 1: sorts for how countries can move from zero COVID chasing
Speaker 1: down every last infection too COVID endemic where essentially you
Speaker 1: take the view that it's impossible to stop COVID uh
Speaker 1: and the you know, the the the the new variants
Speaker 1: have become so easily transmissible that your only option is
Speaker 1: to learn to live with it. And Singapore took that decision.
Speaker 1: Of course, it wasn't it wasn't entirely a leap in
Speaker 1: the dark. They decided that once they had got to
Speaker 1: a certain vaccination level that they would reopen and a
Speaker 1: lot of countries in this part of the world in
Speaker 1: East Asia or Asia Pacific looking now at Singapore's experience
Speaker 1: and learning lessons from it, including Austria, Alien New Zealand,
Speaker 1: but most importantly China, which is by far the largest
Speaker 1: zero COVID country, and they are still adamantly sticking to
Speaker 1: their course. Well we should. We'll definitely talking about China
Speaker 1: in a minute, but just on on Singapore. I mean,
Speaker 1: how we have all this, We have this in person event,
Speaker 1: but in practical terms, I'm noticing, Um, you know, I
Speaker 1: would normally just go into the Bloomberg office and see
Speaker 1: members of my team when I'm there. Now we're doing that,
Speaker 1: but it's quite carefully arranged because many people are still
Speaker 1: being told to work from home. There's still quite a
Speaker 1: lot of restrictions in terms of how many people you
Speaker 1: can have meals with. So so it's still early days,
Speaker 1: isn't it. It is, um, But you know, we've the
Speaker 1: Singapore authorities have been remarkably flexible when it comes to
Speaker 1: the Bloomberg New Economy Forum. They want to, in a sense,
Speaker 1: use us as part of this experiment to demonstrate first
Speaker 1: of all to the world that Singapore is back open
Speaker 1: for business, but I think also to a domestic population
Speaker 1: that it is possible to open and open safely. So
Speaker 1: we all came in in this vaccinated traveler lane. They've
Speaker 1: opened these lanes to a number of countries including the
Speaker 1: United States, Australia, UK. That everybody who is attending and
Speaker 1: there's several hundred of us, several hundred delegates at the
Speaker 1: New Economy Forum this year. Um, we're all coming in
Speaker 1: under a special dispensation. First of all, everybody, of course
Speaker 1: must be vaccinated and prove their vaccination, and then you
Speaker 1: have to take a PCR test. Within forty eight hours
Speaker 1: of departure. You arrive at Changi Airport, you've got another
Speaker 1: pc HART test. You go to your hotel, you quarantine
Speaker 1: for a few hours until the result of that PCR
Speaker 1: test comes in and then you um, then you're free
Speaker 1: to go. You're free to too, and it's not a bubble. Um,
Speaker 1: we're allowed to move around the city. We liked. Singaporeans
Speaker 1: have to download a mobile app called Trace together into
Speaker 1: our iPhones, are into our smartphones, which alerts US and
Speaker 1: the Singapore authorities to any sort of near misses that
Speaker 1: we have with people who subsequently test positive for for
Speaker 1: for COVID. So it's a controlled experiment, and and we're
Speaker 1: a part of it. The previous colleague of mine who
Speaker 1: had gone to a very even more controlled event I
Speaker 1: think a year a year or so ago in Singapore,
Speaker 1: and that the limits of that quarantine was so strict
Speaker 1: that you've got a hotel room key that only allowed
Speaker 1: one use and after that, if you if you had
Speaker 1: snuck out of your hotel room when you weren't supposed to,
Speaker 1: you would not be able to get back in. To
Speaker 1: have visions of sort of you know, in the middle
Speaker 1: of the night, people trying to have a run or
Speaker 1: something and then ending up outside in the corridor. Yeah, Well,
Speaker 1: the Singapore public has high expectations on the performance of
Speaker 1: their government, and indeed the government prides itself on its
Speaker 1: technocratic efficiency and ability. So it wasn't an easy decision
Speaker 1: of their's to step back and essentially sort of let go,
Speaker 1: But you know, they had they had no choice. The
Speaker 1: salient point about Singapore is that it is one of
Speaker 1: the world's most open economies, most globalized economy in terms
Speaker 1: of the movement of goods and services and people knowledge,
Speaker 1: and remaining in lockdown just wasn't an option that the
Speaker 1: economy was really devastated last year. UM. The air transport
Speaker 1: sector of the economy UM supports jobs and industries that
Speaker 1: account for about twelve percent of Singapore's GDP. And you
Speaker 1: know the three through and at the center of this
Speaker 1: is Channi Airport. Last year, through put in Changi was
Speaker 1: about three to four percent of what it normally is.
Speaker 1: And Singapore went into its steepest deepest recession since independence
Speaker 1: in nineteen sixty five. UM, so they had to reopen
Speaker 1: the you know what happened was as soon as they reopened,
Speaker 1: they went from you know, caseload of a few dozen
Speaker 1: a day very quickly to thousands. They almost immediately spiked
Speaker 1: at about five thousand cases a day. And now we're
Speaker 1: down to about three thousand a day. And and and
Speaker 1: we had an accompanying sort of surge in death or
Speaker 1: surge is probably the wrong word because it's still very
Speaker 1: very modest. UM. You know, don't forget that the population
Speaker 1: of Singapore is about five and a half million people,
Speaker 1: about the same size as Sydney or Melbourne, Barcelona. UM. Nevertheless, UM,
Speaker 1: you know, we're seeing last year remarkably the total number
Speaker 1: of deaths in Singapore from COVID Uh, with just a
Speaker 1: few dozen, and now we're getting ten or so a day. Um.
Speaker 1: And I think that was the first lesson that that
Speaker 1: countries like Singapore are taking from from the like Australia
Speaker 1: rather taking from the Singapore experience, which is that you
Speaker 1: really do need even though your population is highly vaccinated,
Speaker 1: you can expect a surgeon infections and deaths. And it
Speaker 1: is quite politically tricky for governments that have staked so
Speaker 1: much of their credibility on chasing down every last COVID
Speaker 1: infection zero COVID. You mentioned China, it famously is on
Speaker 1: another attack. How long do you think they can hold
Speaker 1: out with the zero COVID approach and at what cost? Well,
Speaker 1: it's an interesting question. I mean, they've decreed that they're
Speaker 1: going to be closed through the Olympics, the Winter Olympics,
Speaker 1: which will take place in in February. Um, You've got
Speaker 1: this really important Communist Party congress towards the end of
Speaker 1: the year. I think it's highly unlikely that they're going
Speaker 1: to open up and risk a surgeon infections before them,
Speaker 1: particularly since they frequently compare the way that they have
Speaker 1: had had so effectively handled the aftermath of of of
Speaker 1: you know, the up for the outbreak in Wuhan UM
Speaker 1: to the art failure and of the United States to
Speaker 1: contain the virus UM. So they staked a lot of
Speaker 1: legitimacy UM on zero COVID. So I don't see them
Speaker 1: reopening next year. UM. You know, it may may actually
Speaker 1: be that they're going to keep in place restrictions UH
Speaker 1: for many years. One of the lessons I think that
Speaker 1: they learn, or that one can learn from the Singapore
Speaker 1: experiences that the longer you leave it, the worst it becomes.
Speaker 1: And one reason that they had this explosion of infections
Speaker 1: despite having widespread vaccination UM is because there was no
Speaker 1: natural immunity in the population. I mean simply last year,
Speaker 1: nobody got infected UM. And that even even a small
Speaker 1: even though of all those cases are mild or asymptomatic,
Speaker 1: a small, tiny number of cases UM that do become
Speaker 1: serious can very quickly overwhelm the healthcare system. Don't get
Speaker 1: Singapore's healthcare system and hospital system is among the best
Speaker 1: in the world, and China's healthcare system, particularly in rural areas,
Speaker 1: is rudimentary. And so it's going to become increasingly difficult
Speaker 1: for China to to reopen. Bearing in mind all also
Speaker 1: that they're not using mRNA vaccines in China. They're still
Speaker 1: using the old fashioned vaccines made by you know, injecting
Speaker 1: people with the inactive or all very diluted forms of
Speaker 1: the virus, and these vaccines aren't as good. We're going
Speaker 1: to talk about the economic cost of that in a
Speaker 1: second with with Tom. But I'm just as you know,
Speaker 1: you lived in China for many years, You're a distinguished
Speaker 1: observer and analyst of China. I'm just wondering what you
Speaker 1: think about the the kind of intellectual and cultural cost
Speaker 1: of China remaining excluded. I've been struck recently in sessions
Speaker 1: where I'm talking to China experts academics sitting in the
Speaker 1: US who are just increasingly concerned that about the lack
Speaker 1: of information flow and how our understanding of what's happening
Speaker 1: in China will diminish over time. This just this basic
Speaker 1: inability for people to go there UM and exchange ideas
Speaker 1: and thoughts. Are you what do you think about that?
Speaker 1: I think it is concerning when you look at these
Speaker 1: pictures of these barrack like buildings that they're constructing in
Speaker 1: Guangzhou and other coastal cities. UM capable of housing five
Speaker 1: thousand travelers, and it's pretty clear that they're hunkered down
Speaker 1: for the long term. And I think the lack of
Speaker 1: interaction between China and the world risks UM China looking inward,
Speaker 1: turning inward, UM she Jimping. The country's leader, of course,
Speaker 1: hasn't traveled since the beginning of the pandemic. Um he
Speaker 1: didn't show up. But the G twenty he didn't show
Speaker 1: up a cop And as you say, all of the
Speaker 1: normal interactions between China and the world, whether that's academics,
Speaker 1: whether that's journalists, um, whether that's government officials, have all
Speaker 1: dried up. And I think under those circumstances, Um, it's
Speaker 1: much easier um for China to end up with a
Speaker 1: caricature view on what's happening in the world. It's much
Speaker 1: easier for the world to demonize China. I just think
Speaker 1: given all the tensions that are now bubbling in the
Speaker 1: relationship tension, geopolitical tensions, tensions over Taiwan, human rights, and
Speaker 1: shin Ja, this is a time when China needs to
Speaker 1: be engaging much more vigorously with the rest of the world.
Speaker 1: And in the absence I think of of these context
Speaker 1: I think danger as bad things can happen. I saw
Speaker 1: we had a story the other day that the President,
Speaker 1: Joe Biden, is not happy with the level of intelligence
Speaker 1: that he's getting from from China. So it's not doesn't
Speaker 1: bode well. Andrew Brown, thank you very much. Great to
Speaker 1: be with you. Definitely, thank you. M So. As previously advertised,
Speaker 1: I wanted to have a quick chat with Chief Economist
Speaker 1: Tom Orlig about the state of the Chinese economy because
Speaker 1: it's obviously a big part of these conversations around the
Speaker 1: COVID zero strategy, but we're also seeing China slowdown quite radically,
Speaker 1: including in some of the latest data. So so, Tom,
Speaker 1: how severe is this slowdown? It's pretty bad, Stephanie. You've
Speaker 1: got three factors hitting at the same time. First, you've
Speaker 1: got COVID zero. Just a few cases are sufficient for
Speaker 1: China to lockdown entire towns in entire provinces, and that
Speaker 1: hits growth. Second, you've got energy shortages, not unique to China,
Speaker 1: but certainly hitting hard given the energy intensity of China's
Speaker 1: industrial sector. And lastly, perhaps most troubling for the China
Speaker 1: bears is what's going on in the real estate sector. Ever,
Speaker 1: Grand emblematic of a sector which is over built over
Speaker 1: leaver Ridge and now running into trouble paying its bills.
Speaker 1: Put all those pieces together, the economy came screeching to
Speaker 1: a halt in the third quarter and the fourth quarter
Speaker 1: hasn't started much better. You mentioned real estate. The really
Speaker 1: striking thing was they said earlier in the year, we're
Speaker 1: not going to use real estate to stimulate the economy
Speaker 1: like we have in the past. By all accounts, the
Speaker 1: leadership thinks the real estate sector has become too large
Speaker 1: or too too important to growth. So how bad would
Speaker 1: it have to get for them to blink on that.
Speaker 1: So China's real estate sector is really big. There was
Speaker 1: a recent estimate by Ken Rogoff, the kind of the
Speaker 1: giant of thinking about debt risks in the global economy,
Speaker 1: and he thinks that real estate is more than of
Speaker 1: China's GDP. So it's really big, and it's really over leaverage.
Speaker 1: There's a lot of debt there, and it's really overbuilt.
Speaker 1: I'm sure many stephonomics listeners have heard about the ghost
Speaker 1: towns of empty property which we see around China, and
Speaker 1: China's government has decided, well, this is not sustainable. So
Speaker 1: they're taking ever Grand, one of the biggest developers in
Speaker 1: the country, to the brink of bankruptcy, and they're doing
Speaker 1: this to teach a lesson to the sector, to teach
Speaker 1: the sector that they can't continue with this unsustainable debt
Speaker 1: fueled over building approach. All of that is good news.
Speaker 1: It should put the real estate sector on a more
Speaker 1: sustainable footing going forwards. It should start driving PITTAL towards
Speaker 1: more productive uses like industrial robotics or services um. But
Speaker 1: in the short term, finding a replacement for that of GDP,
Speaker 1: which currently comes from property that's tough to do. And
Speaker 1: what it means is that China almost inevitably faces a
Speaker 1: drag from real estate in the year ahead. I mean,
Speaker 1: how scared should we be by these latest numbers When
Speaker 1: you talk about the economy screeching to a halt? I mean,
Speaker 1: are you tearing up your forecast for next year? So
Speaker 1: China has really slowed a lot in the last few months.
Speaker 1: If you look at the third quarter, the official data
Speaker 1: is telling us that growth was just no point two
Speaker 1: on a sequential basis. If you annualize that, it's just
Speaker 1: a nor point eight percent growth rate. China was growing
Speaker 1: slower than the United States. China was growing much slower
Speaker 1: than the five six seven percent pace we were accustomed
Speaker 1: to before the COVID crisis. Now China has policy space
Speaker 1: to stimulate. They could do more on the fiscal side
Speaker 1: with more spending. They could do more on the monetary side,
Speaker 1: cutting interest rates or allowing banks to lend a bit more.
Speaker 1: The question is where is their tolerance whereas their pain threshold?
Speaker 1: Right now, pre COVID it was pretty clear they're not
Speaker 1: going to let growth drop below six The big question
Speaker 1: is whereas the new line. It's probably not six percent,
Speaker 1: but is it five? Is it four percent? Could we
Speaker 1: be looking at a Chinese economy growing at three These
Speaker 1: are big consequential questions for China, they're big consequential questions
Speaker 1: for the world, and right now we just don't know
Speaker 1: the answer. It's one of the things I know that
Speaker 1: we're going to be discussing over the next few days
Speaker 1: with Chinese thinkers and Chinese officials at the New Economy Forum.
Speaker 1: Thanks very much, Tomic, it's great to be here. That's
Speaker 1: it for this special edition of Stephanomics, which was produced
Speaker 1: by Magnets Hendrickson, with special thanks to Andrew Brown and
Speaker 1: Tom Pollock. Mike Sasso is the executive producer of Stephanomics,
Speaker 1: and the head of Bloomberg Podcast is Francesco Levy.