WEBVTT - More Portfolio Pruning to Come at GE, Heymann Says 0:00:09.720 --> 0:00:12.880 Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keene with 0:00:13.560 --> 0:00:16.520 David Gura. Daily we bring you insight from the best 0:00:16.560 --> 0:00:22.279 of economics, finance, investment, and international relations. Find Bloomberg Surveillance 0:00:22.320 --> 0:00:27.000 on Apple Podcasts, SoundCloud, Bloomberg dot Com, and of course 0:00:27.320 --> 0:00:33.560 on the Bloomberg. We're going with Michael Darta. He's the 0:00:33.600 --> 0:00:35.680 chief economist and market strategies at m K m KM 0:00:35.720 --> 0:00:37.920 Partners Trains. This here in our Bloomberg eleven three studios 0:00:37.920 --> 0:00:39.280 that in New York. Great to see you, Great to 0:00:39.320 --> 0:00:42.040 be back. A last Poor York, you write, A last 0:00:42.080 --> 0:00:45.920 fiscal policy in the US looks dead? What role when 0:00:45.920 --> 0:00:48.599 we look at the record numbers that we've seen this week, 0:00:48.640 --> 0:00:50.879 Dow hit in, how much of that do you attribute 0:00:50.880 --> 0:00:53.239 to the to the prospects still that there might be 0:00:53.320 --> 0:00:55.560 somewhere in the quarters of Congress work proceeding on on 0:00:55.720 --> 0:00:58.920 new fiscal policy. Well, not much, David, And that's a 0:00:59.000 --> 0:01:02.640 very controversial, an unpopular view. But consider the fact that 0:01:02.680 --> 0:01:05.640 emerging markets are up what thirty plus percent this year. 0:01:06.240 --> 0:01:08.720 Let's take a look at the Eurozone business cycle. They 0:01:08.720 --> 0:01:11.959 have the same lift in business confidence and p m 0:01:11.959 --> 0:01:14.520 I s that we're seeing in the US. So you know, 0:01:14.560 --> 0:01:18.640 the idea that we can continue to attribute what's happening here, 0:01:18.640 --> 0:01:22.440 whether it's the market or data, to a surprise election 0:01:22.520 --> 0:01:25.039 that happened last fall, just to me seems like a 0:01:25.240 --> 0:01:29.320 real stretch. Now, maybe something minor gets done on the 0:01:29.319 --> 0:01:33.160 fiscal side, but in terms of sweeping reforms or an 0:01:33.319 --> 0:01:37.720 enormous tax cut, which isn't reform in my opinion, I 0:01:37.760 --> 0:01:40.319 think the chances of that are quite slim. So we 0:01:40.319 --> 0:01:43.040 can extrapolate that further. It's not just the prospect of 0:01:43.040 --> 0:01:45.920 an infrastructure package, for instance, it is a tax form 0:01:45.920 --> 0:01:49.120 package as well. Well. Look, look, reform, at least in 0:01:49.200 --> 0:01:53.760 my book, implies that you are streamlining and simplifying that 0:01:53.840 --> 0:01:57.680 you're essentially paying for lower rates with base broadening. So 0:01:57.760 --> 0:02:01.200 it should be revenue neutral if you're doing it right. 0:02:01.640 --> 0:02:06.360 Is the gold standard, bipartisan revenue neutral. President Reagan wouldn't 0:02:06.360 --> 0:02:10.440 accept anything less. This is not what I'm hearing coming 0:02:10.440 --> 0:02:12.840 out of Washington. I mean, they you know, they started 0:02:12.840 --> 0:02:16.680 discussing closing certain loopholes, and there was a violent reaction, 0:02:16.760 --> 0:02:19.799 and there's been a backing off. And now I'm hearing 0:02:19.880 --> 0:02:23.040 that you know, some of the Conservative members want a 0:02:23.080 --> 0:02:25.840 FED chair that runs it hot so they can expand 0:02:25.840 --> 0:02:30.640 the deficit, the same members that wanted a deflationary monetary 0:02:30.720 --> 0:02:34.200 policy under a previous president. I mean, it's just jaw 0:02:34.320 --> 0:02:37.160 dropping when you look at that that list of five names, 0:02:37.200 --> 0:02:41.360 including Cheer Yelling. The president says he's considering those five. Um, 0:02:41.400 --> 0:02:43.639 how much difference is there between them when when you 0:02:43.639 --> 0:02:45.240 look at the effect they might have on the economy, 0:02:45.280 --> 0:02:48.320 effect on on the markets. Um, how satisfied are you 0:02:48.360 --> 0:02:49.880 with the list that that you have in front of you? 0:02:49.960 --> 0:02:51.840 And and do you think that each stands to to 0:02:52.240 --> 0:02:54.320 be different a different type of candidate when it comes 0:02:54.320 --> 0:02:56.280 to the economy in the markets? Well, I think they all, 0:02:56.320 --> 0:02:59.120 you know, have their own particular set of strengths. If 0:02:59.240 --> 0:03:01.760 you know, you want to size the you know, the positive. 0:03:02.720 --> 0:03:04.880 As far as I'm concerned, I have a bias here. 0:03:04.919 --> 0:03:06.680 I mean, I think Yelling is on the list, and 0:03:06.720 --> 0:03:08.799 I think she's the most qualified. I think it's hard 0:03:08.840 --> 0:03:12.160 to take a look around, uh and not you know, 0:03:12.320 --> 0:03:14.800 just assume that she's you know, the best person for 0:03:14.840 --> 0:03:18.600 the job, especially if you're interested in continuity. That said, 0:03:18.760 --> 0:03:20.920 she seems to have fallen out of favor you know, 0:03:20.960 --> 0:03:24.080 with some of the president's closest advisors. So now it 0:03:24.120 --> 0:03:27.400 looks like it's coming down to a tailor or a Powell. 0:03:27.800 --> 0:03:30.960 Powell probably would be the you know, candidate that would 0:03:30.960 --> 0:03:32.800 have the you know, the view would be the most 0:03:32.800 --> 0:03:36.200 continuity tailor. Maybe. I mean, if you if you're just 0:03:36.240 --> 0:03:38.520 looking at his rule, it's as short rates should be 0:03:38.920 --> 0:03:41.080 hundreds of basis points higher than they are now. That 0:03:41.160 --> 0:03:43.480 scares some, but anyone who comes in is going to 0:03:43.600 --> 0:03:45.920 have to govern by consensus. So I don't think with 0:03:45.960 --> 0:03:50.120 any of these particular individuals you'd have an abrupt, radical, 0:03:50.200 --> 0:03:53.080 you change in policy. That's just not how the FED operates. 0:03:53.200 --> 0:03:56.440 You mentioned. Let me take opportunity to ask about seven 0:03:56.600 --> 0:03:58.800 as well as we can, sort of looking back on 0:03:58.800 --> 0:04:01.680 on the events of the week thirty years ago, what 0:04:01.720 --> 0:04:04.520 have we learned since then? What did we not see 0:04:04.600 --> 0:04:08.920 leading into leading into a black Monday. Well, we've certainly 0:04:08.920 --> 0:04:12.800 had a few bad bear markets and significant corrections since then, 0:04:12.840 --> 0:04:17.200 But unfortunately for individual investors, it seems like they forget 0:04:17.240 --> 0:04:19.640 the lessons of the past and the sense that if 0:04:19.680 --> 0:04:22.120 you are you know, if you're not out of the market, 0:04:22.160 --> 0:04:25.159 and then a severe drop takes place or more. The 0:04:25.200 --> 0:04:27.119 best thing you can do is just grit your teeth 0:04:27.160 --> 0:04:30.640 and hang in there. And that really goes against every 0:04:30.720 --> 0:04:35.920 human psychological impulse, right, I mean, you know, psychology makes 0:04:35.960 --> 0:04:38.160 us want to buy at the top and sell everything 0:04:38.200 --> 0:04:41.120 at the bottom. And it's really difficult to lean against 0:04:41.120 --> 0:04:44.360 those impulses. But if we can be unemotional about it, 0:04:44.400 --> 0:04:47.839 look at the history, you know that's it's really you know, 0:04:47.920 --> 0:04:49.760 if you'd stayed in there, well, I mean, look how 0:04:49.800 --> 0:04:51.839 well you did even with two thousand seven and two 0:04:51.839 --> 0:04:54.800 thousand eight, right, I mean, if you weren't able to 0:04:54.800 --> 0:04:56.960 get out of the market before that, you know that 0:04:57.240 --> 0:05:01.120 huge bear trend started. If you just stuck with it, 0:05:01.240 --> 0:05:05.040 you've done extremely well. But few did you mentioned earlier 0:05:05.080 --> 0:05:08.200 Good morning every one time Keenan David girl worldwide getting 0:05:08.200 --> 0:05:11.960 ready for Yankees Astros tonight, among others, say particularly good 0:05:11.960 --> 0:05:15.320 morning on serious Sex. I'm Channel one early morning, Los Angeles, 0:05:15.920 --> 0:05:19.600 coming home from the celebrations of the Dodgers. Michael Darny, 0:05:19.680 --> 0:05:23.479 you said earlier today on this linkage of bonds to equities, 0:05:23.880 --> 0:05:30.400 when do we relink? When do we reattached to normality? Well, 0:05:30.600 --> 0:05:34.440 and so you know, you know that could happen two ways. 0:05:34.440 --> 0:05:36.839 It could happen with bond yields rising, or we could 0:05:36.880 --> 0:05:42.880 continue to enjoy equity price valuation gains. Equity price gains 0:05:42.920 --> 0:05:46.359 that push up valuations and you could relink in that fashion. 0:05:46.440 --> 0:05:48.760 Different models will have, you know, tell you that there's 0:05:48.760 --> 0:05:51.640 a different disparity. But one thing we don't have today 0:05:51.680 --> 0:05:56.080 that we had, you know, was a big divergence in 0:05:56.279 --> 0:05:59.920 favor of bonds. Right, the stock market was very expensive 0:06:00.000 --> 0:06:03.520 relative to the bond market, and we had a big 0:06:03.800 --> 0:06:06.920 increase in long rates that you're with the stock market 0:06:07.040 --> 0:06:09.360 rising up until you know, we were in the late summer, 0:06:09.400 --> 0:06:12.599 I think we peaked. So three basis points surge in 0:06:12.680 --> 0:06:16.039 long rates. If something like that today would clearly cause 0:06:16.080 --> 0:06:19.320 a big stock market upheaval. So if that's your forecast, 0:06:19.360 --> 0:06:22.800 and certainly you'd be negative on equities. But we tell clients, look, 0:06:22.800 --> 0:06:25.640 the Fed is raising short rates and reducing the balance sheet. 0:06:25.680 --> 0:06:28.080 All the things that were supposed to spike long rates 0:06:28.080 --> 0:06:31.560 haven't done it. So you know, maybe it's the new normal, 0:06:31.640 --> 0:06:34.320 Maybe it's debt and demographics, whatever you want to call it. 0:06:34.640 --> 0:06:36.919 The Fed being able, you know, being willing to undershoot 0:06:36.920 --> 0:06:41.080 the inflation target, consistently. You know whatever, these you know, 0:06:41.240 --> 0:06:44.800 these forces are long. Rates don't look like they're headed 0:06:44.880 --> 0:06:49.080 up dramatically anytime soon, so we'll have to leave it there. 0:06:49.080 --> 0:06:51.359 Michael darda just terrific news flow this morning. Thank you 0:06:51.440 --> 0:06:53.360 so much for coming in my pleasure. Can you try 0:06:53.360 --> 0:06:56.520 to come in on a quieter fight. I'm glad it's 0:06:56.680 --> 0:06:58.599 it's great. I'd love to talk to you the day 0:06:58.640 --> 0:07:01.440 we hear about a fed sherman. Be happy to come 0:07:01.480 --> 0:07:04.479 back then, you know, pick up the MKM phone he 0:07:04.560 --> 0:07:07.279 has in his car. He's got a red phone on 0:07:07.320 --> 0:07:11.920 the dashboard which is the the surveillance issue surveillance issue phone. 0:07:12.520 --> 0:07:27.640 Michael Darter, thank you so much to that. Further Ado, 0:07:27.800 --> 0:07:30.480 Nicholas Hayman joins us on our phone lines. Mr Hayman, 0:07:32.040 --> 0:07:34.280 I'm among the mix of people we talked to on 0:07:34.360 --> 0:07:37.920 general Electric has been more constructive. Uh, and we're thrilled 0:07:37.960 --> 0:07:39.720 that he can join us this morning. Nick, I want 0:07:39.720 --> 0:07:43.280 to cut to the chase which is in ge power. 0:07:44.040 --> 0:07:46.400 Not so much as there a sense of fraud, but 0:07:46.600 --> 0:07:50.280 was there a sense of deception of how business would 0:07:50.280 --> 0:07:55.480 slow Well, certainly that was one of the biggest holes 0:07:55.520 --> 0:07:58.200 in the quarter. Oil and gas was also pretty challenged, 0:07:58.560 --> 0:08:02.720 but they took some raw right ounds in power um 0:08:02.880 --> 0:08:06.520 had conversion and I will have to see here, you know, 0:08:06.560 --> 0:08:09.720 I think that that uh UM, the business you know, 0:08:10.080 --> 0:08:13.000 is facing a challenge where it you know, shifts from 0:08:13.240 --> 0:08:18.080 developed countries too more, you know, emerging and non developed countries. 0:08:18.400 --> 0:08:20.640 Gas servants are still going to be a functional part 0:08:20.720 --> 0:08:23.920 of the power solution on the planet. And GE's got 0:08:23.920 --> 0:08:25.880 the best product in the market. But as we just 0:08:25.920 --> 0:08:29.440 saw yesterday, Semans is closing eleven out of twenty three plans. 0:08:29.560 --> 0:08:33.120 What's your timeline for the magic of a new CEO. 0:08:33.480 --> 0:08:35.560 Is this going to be a hockey stick or a 0:08:35.640 --> 0:08:37.719 v I should say, where we go down and come 0:08:37.840 --> 0:08:42.199 right back? Or is this going to be quarters of agony? Well, 0:08:42.320 --> 0:08:44.120 I you know, right now, I would have thought time 0:08:44.160 --> 0:08:46.760 that the market might have been thinking that dollar fifteen 0:08:46.800 --> 0:08:48.720 or dollar twenty was where we were headed this year. 0:08:48.760 --> 0:08:51.800 Obviously they suggested a dollar five to a dollar ten, 0:08:52.480 --> 0:08:56.840 so that would indicate uh still much larger structuring actions 0:08:56.880 --> 0:09:00.160 are to come in the fourth quarter, and presume only 0:09:00.400 --> 0:09:02.800 that will begin to set the path for next year 0:09:03.320 --> 0:09:07.600 on a stronger footing. So instead of this year being 0:09:07.760 --> 0:09:11.280 you know part way down in eighteen at the bottom. 0:09:11.280 --> 0:09:14.400 We'll have to see, but my sense is obviously, uh 0:09:14.520 --> 0:09:17.120 at one, five, one ten, we're at the bottom this year. 0:09:17.200 --> 0:09:19.360 The question is where do you go back to next year? 0:09:19.600 --> 0:09:22.000 David Nick? How large does it does Jeff himiltloom in 0:09:22.000 --> 0:09:24.320 this in this quarterly report? Do you see evidence of 0:09:24.360 --> 0:09:26.840 his tenure yet? And and how quickly do you think 0:09:26.880 --> 0:09:31.280 of the new CEO? John Flannery is proceeding with the transformation. Oh, 0:09:31.360 --> 0:09:34.000 he's proceeding at light speed. You know, there's no question 0:09:34.040 --> 0:09:36.400 about it. You know that he's changing the board, he's 0:09:36.480 --> 0:09:39.520 changing the senior management, he's changing the culture, he's changing 0:09:39.520 --> 0:09:42.240 the cost structure radically. And I think we're going to 0:09:42.320 --> 0:09:45.640 see a lot more of pruning of the portfolio. Not 0:09:45.760 --> 0:09:48.079 big things, but you know, Perwiphul, things that don't earn 0:09:48.080 --> 0:09:51.040 their costic capital. Help an amateur like me. I print 0:09:51.040 --> 0:09:53.920 out this press release it's very easy to read with 0:09:53.960 --> 0:09:56.000 a lot of big font and blue text, and then 0:09:56.240 --> 0:09:59.040 attached to it, I've got I've got recast a G 0:09:59.200 --> 0:10:02.520 Industrials Finance tools and then as originally reported, G Industrial Financials. 0:10:02.600 --> 0:10:06.480 Help me understand the difference between those two spreadsheets. Um, 0:10:06.520 --> 0:10:10.920 there have been four different sets of earnings from them 0:10:11.080 --> 0:10:14.439 over the last several years, and this has been one 0:10:14.480 --> 0:10:17.480 of the issues that um, you know, the company has 0:10:17.480 --> 0:10:20.680 taken a slant on earnings to exclude pension expands, to 0:10:20.800 --> 0:10:25.760 exclude contract assets, which in essence are deferred revenues that 0:10:25.800 --> 0:10:30.160 are realized upfront. And um, you know, I think that 0:10:30.679 --> 0:10:33.240 uh as John goes forward, we're going to move back 0:10:33.280 --> 0:10:35.959 a lot closer to a gap number you know that's 0:10:35.960 --> 0:10:39.760 adjusted for games and or you know, one time costs 0:10:39.840 --> 0:10:43.880 or restructuring items. Do you load the boat this morning? 0:10:44.040 --> 0:10:47.600 I mean, if you love, are gonna love it here? Yeah? 0:10:47.559 --> 0:10:50.439 I didn't that. This is I don't believe a broken company. 0:10:50.559 --> 0:10:52.800 Remember that doesn't look like one of my screen nick, 0:10:52.880 --> 0:10:55.080 It doesn't. This is the heart of the matter, folks. 0:10:55.080 --> 0:10:58.679 I'm looking at the financials on my screen, orders, backlog, 0:10:58.800 --> 0:11:02.000 the sum total. It's pretty darn good. The nick. Why 0:11:02.080 --> 0:11:04.920 is it start getting beaten up? Well, it's getting beaten 0:11:04.960 --> 0:11:07.800 up because people obviously, you know, I don't have much 0:11:07.920 --> 0:11:11.760 of a forward visibility right now, not only about the earnings, 0:11:11.760 --> 0:11:14.120 but people, you know, the questions are around the dividend 0:11:14.600 --> 0:11:16.760 and um, you know, is the dividend that right now 0:11:16.800 --> 0:11:21.360 the markets discounting something in the neighborhood of reduction in 0:11:21.400 --> 0:11:24.120 that dividend. And the question is, you know, is that 0:11:24.200 --> 0:11:27.360 a good decision to make um? You know, given the 0:11:27.360 --> 0:11:30.160 company has certainly got playing of liquidity, the debt trades 0:11:30.240 --> 0:11:33.559 all above par um. They're ahead of plan on cost 0:11:33.600 --> 0:11:35.559 out at one point two billion. We thought they might 0:11:35.559 --> 0:11:37.840 get to one four. They promised in April to do 0:11:37.880 --> 0:11:41.640 a billion. So there, you know, things are are, you know, 0:11:41.679 --> 0:11:44.199 and they've they've brought out, you know, you know, all 0:11:44.240 --> 0:11:46.200 brand new products in the last two or three years 0:11:46.240 --> 0:11:48.240 across all their businesses that are state of the heart. 0:11:48.280 --> 0:11:51.560 I believe it's November. What's Nick Hayman's number one question 0:11:51.600 --> 0:11:55.240 November at the analyst meeting where you animals go up 0:11:55.280 --> 0:11:59.120 against these guys and you really get nasty. What's the nasty? 0:11:59.400 --> 0:12:03.080 What is the what is tom what's the pathway forward 0:12:03.320 --> 0:12:07.680 for you know, revitalizing the cash flow from operating activities? 0:12:07.720 --> 0:12:12.120 We need fifteen to sixteen to sustain the current level 0:12:12.280 --> 0:12:15.920 of eight billion in dividends and a normalized level of 0:12:16.280 --> 0:12:18.439 you know, capital spending it two and a half to 0:12:18.520 --> 0:12:20.880 three billion, and you know, if you can get to 0:12:20.960 --> 0:12:23.480 fifteen or sixteen next year, which obviously this year they 0:12:23.520 --> 0:12:27.960 now project seven instead of twelve to fourteen. And you 0:12:28.000 --> 0:12:29.760 know we thought maybe it'd be eleven with a lot 0:12:29.800 --> 0:12:32.600 more restructuring. Well there's more restructuring and write downs to come. 0:12:33.600 --> 0:12:36.080 Thank you for the very greatly appreciated and it came 0:12:36.080 --> 0:12:38.640 into the heart of this most historic day with general 0:12:39.200 --> 0:12:43.320 elector just an ugly statement in the stock down. Stay 0:12:43.360 --> 0:13:00.280 with us, this is Bloomberg, David, why do you bring 0:13:00.320 --> 0:13:03.160 in our steam guest? We got Jeff Sprague coming up 0:13:03.200 --> 0:13:05.600 on g I should say, after Nick came and thrilled. 0:13:05.640 --> 0:13:07.560 This is what we do on surveillance. Give you a 0:13:07.640 --> 0:13:10.480 set of opinions on general Electric and we'll do that 0:13:10.480 --> 0:13:13.080 with Mr Sprague in a bit, David, why don't you 0:13:13.080 --> 0:13:16.320 bring in our steam guests? The former basketball player who 0:13:16.640 --> 0:13:19.040 shot hoops with the President Obama one of many items 0:13:19.040 --> 0:13:21.680 on the CV. That's a Bob Hornet's vice Chaircassinger associates 0:13:21.679 --> 0:13:24.199 from we're Under Secretary State for Economic Growth, Energy and 0:13:24.240 --> 0:13:25.760 the Environment here with us, As Tom says in our 0:13:25.760 --> 0:13:28.520 Bloombick eleven three oh studios. You missed it earlier in 0:13:28.559 --> 0:13:31.720 the week Tom was practicing the president. She clap on 0:13:31.800 --> 0:13:35.240 air the constant clap that we are during the address 0:13:35.280 --> 0:13:38.040 that he gave to the People's Congress. There's this one 0:13:38.600 --> 0:13:41.280 helping us. Well, that's one tradition in China that the 0:13:41.360 --> 0:13:44.280 audience claps for you, and you clap for the audience 0:13:44.400 --> 0:13:48.520 you go. So it's part of the way Chinese culture works. There. 0:13:48.520 --> 0:13:51.520 We got a very nice thing. But they're good at it. 0:13:51.600 --> 0:13:52.960 They're very good at and they have a lot of 0:13:53.000 --> 0:13:57.120 time to do it. Three hours to start. It's just 0:13:57.200 --> 0:14:01.240 what's called the work program or the work report, and 0:14:01.360 --> 0:14:05.000 it's traditionally very long. It's who start, who do we blame? Now? 0:14:06.120 --> 0:14:08.480 It goes way back. I mean, the work report is 0:14:09.600 --> 0:14:14.439 provided by the current UM Party secretary, who is now 0:14:14.440 --> 0:14:18.880 shipging ping about the last five years under his tootledge, 0:14:18.960 --> 0:14:22.800 under his domain, and then about the next five years. 0:14:22.840 --> 0:14:25.720 So it's really a long report. And it's good actually 0:14:25.720 --> 0:14:28.760 that it's long, because it really represents a consensus of 0:14:28.960 --> 0:14:33.320 freaking in the party. I actually, come on, President Trump 0:14:33.440 --> 0:14:35.720 is looking at that, going, David, He's going, I could 0:14:35.760 --> 0:14:38.480 do that, he could do that. But the fact is 0:14:38.520 --> 0:14:40.760 it's filled with a lot of interesting stuff. That there's 0:14:40.800 --> 0:14:43.520 a lot of general language in it, but almost every 0:14:43.560 --> 0:14:47.760 time this report comes out, very specific things occur afterwards, 0:14:47.800 --> 0:14:51.120 even though the language itself seems very general. For instance, 0:14:51.520 --> 0:14:55.760 just an interesting number. President John Zaman mentioned the market 0:14:55.800 --> 0:14:59.680 fifty four times when he gave his report. Party Congress 0:15:00.640 --> 0:15:04.040 President she mentioned it eighteen times. So it shows you, 0:15:04.520 --> 0:15:06.360 when you look at it and you do your sort 0:15:06.360 --> 0:15:09.920 of analysis, where the emphasis is and how it's changed. 0:15:10.080 --> 0:15:13.480 Those things they don't seem to be useful, but in 0:15:13.520 --> 0:15:16.600 effect they do reflect a consensus on the party. Harman's 0:15:16.680 --> 0:15:18.960 just looking at the way the white smoke blows when 0:15:18.960 --> 0:15:26.160 they when he also has uh, there is such a 0:15:26.160 --> 0:15:29.080 heavy brid of expectations leading to this event. What do 0:15:29.160 --> 0:15:30.800 we learn from this? The speech itself, it had a 0:15:30.880 --> 0:15:33.800 long time horizon. He's looking at many decades out. What 0:15:33.800 --> 0:15:36.240 what does China look like in his vision here twenty 0:15:36.320 --> 0:15:38.760 three years out. He sees this as a new era 0:15:38.880 --> 0:15:43.360 in China, where China has gone through some economic difficulties 0:15:43.920 --> 0:15:47.920 and is now particularly as a result of how well 0:15:47.960 --> 0:15:51.320 it survived the financial crisis of two thousand and eight 0:15:51.800 --> 0:15:53.920 and the difficulties and had a couple of years ago, 0:15:54.520 --> 0:15:57.800 feels a lot more self confidence about its economy. It's 0:15:57.800 --> 0:16:00.280 growing at six point seven six point eight per cent, 0:16:00.880 --> 0:16:03.760 so the economy is moving ahead. He's positive about that. 0:16:04.080 --> 0:16:07.960 He's also very assertive about China's role in the world. 0:16:08.480 --> 0:16:10.520 That China wants to be at he put as he 0:16:10.560 --> 0:16:13.440 put its center stage, and that is it wants to 0:16:13.480 --> 0:16:15.880 play a greater role globally. It certainly wants to play 0:16:15.920 --> 0:16:19.280 a greater role in the region. The US has obliged 0:16:19.400 --> 0:16:23.560 him by pulling out of t p P, giving the 0:16:23.680 --> 0:16:28.040 Chinese trade negotiations that are going on the RCP more 0:16:28.080 --> 0:16:32.480 opportunity to reflect China's point of view. One Belt, one 0:16:32.560 --> 0:16:34.920 Road is going to link China to the rest of 0:16:34.920 --> 0:16:37.400 Asia and Europe and other parts of the world. They 0:16:37.440 --> 0:16:40.960 have a new base in Djibouti. They're playing a stronger 0:16:41.040 --> 0:16:44.720 role in Southeast in South China. See. So he sees 0:16:44.720 --> 0:16:48.760 a more confident China economically at home, a more confident China, 0:16:48.880 --> 0:16:52.120 broad and more assertive China, and China is going to 0:16:52.200 --> 0:16:55.680 play a greater role. And this is the hijin Ping era. 0:16:56.200 --> 0:17:02.840 Mao started the new China after the revolution, Don got 0:17:02.920 --> 0:17:06.399 the reforms underway. Shijin Ping will lead China and to 0:17:06.520 --> 0:17:11.280 a new are of greater economic prosperity and greater certain 0:17:11.320 --> 0:17:13.480 rests abroad. It's a new era in his view, and 0:17:13.600 --> 0:17:17.159 China will be center stage at the world meetings of 0:17:17.240 --> 0:17:20.359 various swords like the G twenty and elsewhere, and that 0:17:20.480 --> 0:17:23.640 will give China greater prestige, which Chinese want. There there's 0:17:23.640 --> 0:17:26.359 a strong feeling of nationalism and that we have a 0:17:26.440 --> 0:17:28.840 role in the world to play now as we did 0:17:28.880 --> 0:17:31.240 a couple of hundred years ago. Here's dumb question. Tom's 0:17:31.280 --> 0:17:32.600 gonna allow me a couple of them here on this 0:17:32.720 --> 0:17:35.600 this Friday. What's the role of the party in China today? 0:17:35.600 --> 0:17:37.960 How much has that changed over these generations. Role of 0:17:37.960 --> 0:17:41.680 the party is stronger today under shi jin Ping uh 0:17:41.720 --> 0:17:44.560 in part because Shi Jinping is a strong leader. He's 0:17:44.560 --> 0:17:46.679 the leader of the party. He believes in the party. 0:17:47.280 --> 0:17:49.399 The other is that they have established in order to 0:17:49.480 --> 0:17:53.160 get things done, what they call these small leading groups. 0:17:54.240 --> 0:17:58.200 The leading groups are led by Shi Jinping, he's the chair, 0:17:58.320 --> 0:18:01.960 and they bring in party leaders and other government leaders. 0:18:02.160 --> 0:18:05.399 But the point to make about this is their groups 0:18:05.520 --> 0:18:09.119 under the government, under the leadership of the Prime Minister, 0:18:09.200 --> 0:18:12.640 and then they're smaller groups that are led by the 0:18:12.640 --> 0:18:15.240 head of the party Si Jinping, also of course out 0:18:15.240 --> 0:18:18.480 of the government, but also involve members of the Standing 0:18:18.520 --> 0:18:20.879 Committee of the polit Bureau and other senior leaders. We 0:18:20.880 --> 0:18:23.240 haven't found out how that's going to change, who's going 0:18:23.280 --> 0:18:25.440 to see that. We haven't found out what the Standing 0:18:25.440 --> 0:18:28.520 Committee is going to look like, but they'll be probably 0:18:28.680 --> 0:18:30.919 as the world last time, seven, although it could be 0:18:30.960 --> 0:18:34.359 reduced to five. One of the key questions is Wang 0:18:34.359 --> 0:18:36.960 shi Shan, who is now the leader of the Anti 0:18:37.040 --> 0:18:40.359 Corruption Group but also very knowledge about the economy. I 0:18:40.400 --> 0:18:43.200 work with him a lot because he was the economic 0:18:43.240 --> 0:18:46.160 guy at the strategic any kind of dialogue with the US, 0:18:46.240 --> 0:18:49.400 so I've gotten to know him quite well. It may 0:18:49.400 --> 0:18:52.880 well be that he retains his role in the Standing Committee. 0:18:52.920 --> 0:18:57.040 Wang Yang who is the current economic guy, the Vice 0:18:57.080 --> 0:19:02.440 Minister for Economics, as a candidate for the job of 0:19:02.560 --> 0:19:05.560 a member of the Standing Committee, another guy I've worked with. 0:19:05.640 --> 0:19:09.280 So I'm actually fairly comfortable that at least I've had 0:19:09.359 --> 0:19:11.639 a chance to meet and work with some of these people, 0:19:11.680 --> 0:19:15.520 and they're basically knowledgeable about the global economy. They want 0:19:15.640 --> 0:19:17.880 China to play a greater role in the global economy. 0:19:18.200 --> 0:19:21.879 They're used to working with Americans and foreigners. These are 0:19:22.000 --> 0:19:27.600 very sophisticated people, um who are going to be at 0:19:27.640 --> 0:19:31.040 least candidates for this What are they going to say 0:19:31.040 --> 0:19:32.800 to their counterparts from the U S when they get 0:19:32.840 --> 0:19:34.360 there in a couple of weeks time. When you talked 0:19:34.359 --> 0:19:37.439 about the Strategic Economic DIALOGE, they were these formalized meetings 0:19:37.480 --> 0:19:40.920 over the years under these past administrations. That's changing someone 0:19:40.960 --> 0:19:43.840 under this administration. How robust is that relationship now? How 0:19:43.920 --> 0:19:45.639 essential is this first meeting going to be For a 0:19:45.680 --> 0:19:47.520 lot of them, it will be very important because of 0:19:47.560 --> 0:19:50.800 course President Trump is going there in November. But I 0:19:50.880 --> 0:19:54.240 think what China is saying, what President she is saying, 0:19:54.280 --> 0:19:57.240 is we're going to assert our interests. We're not going 0:19:57.280 --> 0:20:01.360 to be pushed around. He didn't mention in any detailed 0:20:01.400 --> 0:20:04.720 relations with the United States, but it's clear that he 0:20:04.840 --> 0:20:07.640 understands he has to work with the United States. He 0:20:07.960 --> 0:20:10.119 it's not that he wants a confrontation with US, he 0:20:10.160 --> 0:20:12.800 does not, but he wants to assert Chinese use and 0:20:12.800 --> 0:20:16.520 he's saying, our economic model actually is working. So if 0:20:16.560 --> 0:20:18.520 your country is around the world thinking about what your 0:20:18.560 --> 0:20:20.760 econ model ought to be, take a look at how 0:20:20.800 --> 0:20:22.680 well we've done, but I'm gonna get this question and 0:20:22.720 --> 0:20:24.600 then we'll come back with you and continuous Is there 0:20:24.720 --> 0:20:29.359 just a brilliant discussion in ken Burns Vietnam video the 0:20:29.480 --> 0:20:33.359 ten episodes, our relationship with China is one of the 0:20:33.440 --> 0:20:38.680 constant changing events throughout Do you see continuity here? Are 0:20:38.720 --> 0:20:42.640 we just going to continue to change and evolve our 0:20:42.680 --> 0:20:45.960 relationship with China? I think it will change and evolve. 0:20:46.080 --> 0:20:49.240 In part, they'll be continuity because there's a lot of 0:20:49.280 --> 0:20:52.720 business relationships and financial relationships we work with him, many 0:20:52.720 --> 0:20:55.720 of which he established, And that was really one of 0:20:55.760 --> 0:20:58.440 my roles. I thought that the history of the next 0:20:58.440 --> 0:21:01.080 ten twenty years would be written in part by how 0:21:01.160 --> 0:21:04.199 effectively we work with China, not that we're always going 0:21:04.240 --> 0:21:07.560 to agree that we would embed our relationship. Is that 0:21:07.680 --> 0:21:09.159 going to change? I mean, are you going to be 0:21:09.240 --> 0:21:12.959 in a ken Burton's video? I think. I think that 0:21:13.000 --> 0:21:16.600 the Chinese are gonna want enter in a position to 0:21:16.680 --> 0:21:21.520 assert their interests to a much greater degree in global institutions, 0:21:21.520 --> 0:21:24.040 certainly in regional institutions, and they were in the past. 0:21:24.560 --> 0:21:26.560 We don't seem to have a strategy. We don't have 0:21:26.600 --> 0:21:29.200 a TV precisely where I seem to have a don't 0:21:30.000 --> 0:21:33.840 with them, and unless we did commercial, I got to 0:21:33.840 --> 0:21:41.360 go to commercial spot, commercial ambassador. Right, We're gonna come 0:21:41.359 --> 0:21:48.080 back and continue this important discussion, was Elliott Kissinger associate. 0:21:48.359 --> 0:21:50.320 David's better at this than I am. I' gonna let 0:21:50.359 --> 0:21:52.720 him pick it up. But I got one issue, you say, 0:21:52.800 --> 0:21:56.200 a key guy, because we're all Hong Kong and the Brain, 0:21:56.640 --> 0:21:59.360 Shanghai and the Brain. Some of us have been to Beijing. 0:22:00.000 --> 0:22:02.600 There's a whole another China out there, and one of 0:22:02.640 --> 0:22:04.840 them is is it Chung Ching is at the right 0:22:04.880 --> 0:22:08.720 production which is in southwest China South and it's where 0:22:08.760 --> 0:22:11.480 Shang Kai shek was in World War Two. It's one 0:22:11.520 --> 0:22:16.600 of the four big cities that are governed by a 0:22:16.640 --> 0:22:19.720