WEBVTT - Surveillance Special: China's Economic Slowdown 0:00:00.080 --> 0:00:12.960 Yea. Welcome to the Bloomberg Surveillance Podcast. I'm Tom Keane. 0:00:13.480 --> 0:00:17.560 Daily we bring you insight from the best in economics, finance, investment, 0:00:18.000 --> 0:00:23.480 and international relations. Find Bloomberg Surveillance on Apple Podcasts, SoundCloud, 0:00:23.600 --> 0:00:34.479 Bloomberg dot Com, and of course, on the Bloomberg Without Question. 0:00:34.840 --> 0:00:37.800 The interview of the day, I will cut to the chase. 0:00:38.479 --> 0:00:42.559 There's exactly one book to read to catch up with 0:00:42.640 --> 0:00:46.080 the changes in China. It is The Third Revolution and 0:00:46.159 --> 0:00:48.839 it is by Elizabeth Economy. Of course she changed our 0:00:48.920 --> 0:00:52.400 dialogue with China where the river runs black? Uh, that 0:00:52.520 --> 0:00:54.600 was just a few years ago, Liz Economy with a 0:00:54.640 --> 0:00:59.160 Council on Foreign Relations. Professor Economy, Good morning, wonderful to 0:00:59.240 --> 0:01:02.080 have you with us. What is the Third Revolution right now? 0:01:02.160 --> 0:01:05.880 For President She? He's got some challenges. How's that Third 0:01:05.920 --> 0:01:10.160 Revolution going? So? You know, the Third Revolution for Shijin 0:01:10.240 --> 0:01:13.399 Ping was really upending, uh, the period of reform and 0:01:13.440 --> 0:01:16.080 opening up that Dung Shao Ping had ushered in some 0:01:16.200 --> 0:01:19.760 thirty years earlier, and creating a China that was far 0:01:19.880 --> 0:01:22.840 more repressive and authoritaring at home, but more ambitious and 0:01:22.920 --> 0:01:26.680 expansive abroad. Right. It was his great rejuvenation of the 0:01:26.760 --> 0:01:30.440 Chinese nation. I think what we're seeing today is that, 0:01:30.640 --> 0:01:33.800 you know, over the past six years, this model has 0:01:33.840 --> 0:01:38.920 produced its own set of fairly profound challenges for shijin Ping. Uh. 0:01:38.959 --> 0:01:42.000 You know, there's a great sense of political malaise in 0:01:42.040 --> 0:01:45.480 the country because of his grab for power. Uh, you know, 0:01:45.600 --> 0:01:48.080 his you know, elimination of the two term limit on 0:01:48.120 --> 0:01:51.280 the presidency. Uh. You know, a hundred and fifty shijin 0:01:51.320 --> 0:01:54.640 Ping you know, institutes institutes for shijin Ping. Thought. People 0:01:54.720 --> 0:01:57.240 feel as though there's been to some extent a return 0:01:57.720 --> 0:02:00.880 to that Maoist era cult of personnality, and they don't 0:02:00.920 --> 0:02:03.480 want to go back to that. Right constraining the Internet, 0:02:03.800 --> 0:02:06.560 the intrusion of the Communist Party, you know, into private 0:02:06.680 --> 0:02:10.640 enterprises and in more deeply into people's lives. So I 0:02:10.680 --> 0:02:14.240 think he's he's created his own set of problems through 0:02:14.320 --> 0:02:20.040 this third Revolution. Within his third revolution, there has to 0:02:20.080 --> 0:02:23.760 be a Communist Party on one page. Is he goes 0:02:23.800 --> 0:02:27.640 to this People's Congress, is his four or whatever the 0:02:27.680 --> 0:02:31.320 body count is Paul Borough leaders. Are they all on 0:02:31.360 --> 0:02:34.880 the same page or is there a huge descent? So 0:02:35.200 --> 0:02:39.519 this is the Commonist Party meeting the party Congress happens 0:02:39.520 --> 0:02:41.400 in the fall. This is the National People's Congress, so 0:02:41.400 --> 0:02:44.720 they're actually three thousand people feeding and aging right now 0:02:44.800 --> 0:02:47.480 for two weeks um. And I think there there are 0:02:47.520 --> 0:02:50.640 many dissenting views, uh, you know, and I think part 0:02:50.639 --> 0:02:52.840 of it has to do with the failure to move 0:02:52.919 --> 0:02:55.440 forward on structural economic reforms. So there's a lot of 0:02:55.919 --> 0:02:59.720 discontent over again chi Jin Pink's tightening up and his 0:03:00.120 --> 0:03:03.480 preferencing of state owned enterprises over private enterprise. So a 0:03:03.480 --> 0:03:06.360 lot of descent around that. There's concern around Chijun King's 0:03:06.360 --> 0:03:10.000 anti corruption campaign, right, the lack of transparency in that 0:03:10.080 --> 0:03:12.840 and uh, you know, lack of rule of law. They 0:03:12.840 --> 0:03:17.280 had six over six hundred thousand officials were punished last 0:03:17.360 --> 0:03:20.280 year for corruption. That the hundred thousand more than the 0:03:20.360 --> 0:03:25.320 year before. Uh, there are many areas of unhappiness. But 0:03:25.400 --> 0:03:27.680 does he go into this thing? Does he go into 0:03:27.720 --> 0:03:30.760 this three thousand member congress for everybody collapse at the 0:03:30.800 --> 0:03:37.160 same time. I know you monitor the clapping volume, But 0:03:37.160 --> 0:03:40.600 but beneath that is four D two hundred and six 0:03:40.640 --> 0:03:43.320 members of the Polar Bear and all the other subsets 0:03:43.360 --> 0:03:46.600 that there are, are they in support of their president. 0:03:47.440 --> 0:03:51.000 I think we've we've seen you know, over the last summer. UM, 0:03:51.040 --> 0:03:55.160 there was a lot of discussion about descent within the 0:03:55.200 --> 0:03:57.880 Standing Committee of the Politburo. Right, as you said, this 0:03:57.960 --> 0:04:01.200 sort of the top, very top, uh, you know, seven 0:04:01.200 --> 0:04:05.360 person group, UM, that that Jinping was being sort of 0:04:05.400 --> 0:04:09.480 accused of overreach, that he had created all these problems 0:04:09.680 --> 0:04:12.160 with the United States, you know, facing this trade war, 0:04:12.720 --> 0:04:14.760 that there were problems you know through the Belt and 0:04:14.880 --> 0:04:17.680 Road project a lot of countries. Now are you know 0:04:18.400 --> 0:04:22.200 staying or even canceling projects the big infrastructure projects that 0:04:22.240 --> 0:04:25.560 they had agreed to with China. Um. Obviously the Chinese 0:04:25.560 --> 0:04:28.400 economy was slowing and they didn't seem to have a 0:04:28.480 --> 0:04:32.160 game plan. He wasn't listening to the reform economists. Uh, 0:04:32.200 --> 0:04:34.720 and you know he kept wanting to double down on 0:04:34.760 --> 0:04:38.839 state control. So I think all throughout the system, Uh, 0:04:38.920 --> 0:04:42.680 there is sent and so so so what is the 0:04:42.760 --> 0:04:47.520 experience you've seen in their history of what's next? What's 0:04:47.560 --> 0:04:53.320 the process forward for a totalitarian regime given this descent? 0:04:54.560 --> 0:04:57.560 So I think, um, if the economy continues to slow 0:04:57.680 --> 0:04:59.799 right now, what we're seeing is you know, some small 0:04:59.800 --> 0:05:03.680 move months towards economic reform. I think she Jumping was 0:05:03.760 --> 0:05:06.400 kind of pushed into a corner UH and forced to 0:05:06.440 --> 0:05:08.880 make a statement a few months back about the need 0:05:09.000 --> 0:05:11.200 to enhance the role of the market, which is not 0:05:11.360 --> 0:05:14.360 his inclination. UM. So we have to see whether or 0:05:14.440 --> 0:05:17.599 not they're actually some of these reform initiatives move forward. 0:05:18.040 --> 0:05:21.560 If they do, if the economy begins to kick back in, 0:05:21.960 --> 0:05:24.240 then I think economic growth kicks back, and I think 0:05:24.360 --> 0:05:28.120 She jinping is okay. If it doesn't, UM, I don't 0:05:28.160 --> 0:05:30.320 expect that they would remove she Jumping, but I think 0:05:30.320 --> 0:05:32.919 you could see what happened to Mause Doong after the 0:05:32.960 --> 0:05:35.680 great leap forward in the early nineteen sixties, which is 0:05:35.839 --> 0:05:38.880 he was moved to the second line, right because and 0:05:39.600 --> 0:05:43.360 that says is she no longer first? If you if 0:05:43.400 --> 0:05:48.440 you equal doctor economy, have you identified the next Chowing Lay? 0:05:48.480 --> 0:05:51.080 I mean, it's great to talk about Mao and and she, 0:05:51.360 --> 0:05:55.160 but who comes in to save the day. Well, Unfortunately, 0:05:56.680 --> 0:05:59.960 the sort of the three I think within the stand 0:06:00.000 --> 0:06:03.560 the committee are not particularly strong. There's yeah, Lee Ka 0:06:03.680 --> 0:06:07.479 Chong and Wang Yang and Han Jong. They're sort of 0:06:07.480 --> 0:06:11.000 the three that you know could potentially UH do something, 0:06:11.040 --> 0:06:13.960 but this would be more of a consensus decision. That 0:06:14.120 --> 0:06:17.200 we're going back to the dungest model of collective and 0:06:17.200 --> 0:06:20.760 consensus based decision making. It's not necessarily interesting one leader 0:06:20.800 --> 0:06:23.320 moves into replace she in the way that she has 0:06:23.320 --> 0:06:25.880 grabbed onto the power, but that that they go back 0:06:25.920 --> 0:06:29.400 to the sense that no one person stands above the rest. 0:06:29.600 --> 0:06:32.040 If you're just joining us CV star fellow the Council 0:06:32.080 --> 0:06:35.440 on Foreign Relations, Elizabeth Economy, I can't say enough about 0:06:35.440 --> 0:06:38.239 her effort the Third Revolution. I read it cover to cover. 0:06:38.760 --> 0:06:41.400 You should too. One of the great theories that we 0:06:41.440 --> 0:06:44.800 saw from the River runs black and onward. Uh, Liz 0:06:44.880 --> 0:06:47.640 Economy is a power of the cities. What is the 0:06:47.720 --> 0:06:51.760 relationship of President she and Beijing to the people that 0:06:51.880 --> 0:06:56.440 actually run Shanghai, run Hong Kong, Rung sheng Do and 0:06:56.480 --> 0:06:59.719 the others. So one of the really interesting things that's 0:06:59.720 --> 0:07:02.159 happened and over the past year year and a half 0:07:02.279 --> 0:07:05.400 is that we've seen repeated calls by Shijin Ping, by 0:07:05.440 --> 0:07:10.920 Lei Ka Chung for local officials to implement Beijing's policies. Uh. 0:07:10.920 --> 0:07:14.600 There seems to be an incredible reluctance on the part 0:07:14.640 --> 0:07:17.680 of local officials to do what Beijing says. I think 0:07:17.720 --> 0:07:20.800 it's in part. It's because the mandates come down. There 0:07:20.800 --> 0:07:24.320 are so many different mandates and sometimes they conflict. Right. 0:07:24.360 --> 0:07:28.080 So first you have a mandate, you know, to stop lending. Right. 0:07:28.240 --> 0:07:30.720 Then you have a mandate no, actually start lending again. 0:07:31.000 --> 0:07:34.160 You have a mandate to protect the environment. Now, just 0:07:34.320 --> 0:07:37.000 in the past two months they said, actually, our targets 0:07:37.040 --> 0:07:38.880 are too ambitious. We're going to take a step back 0:07:38.960 --> 0:07:41.840 and protecting the environment. And of course the anti corruption 0:07:41.880 --> 0:07:45.400 campaign which has caused many local officials really not to 0:07:45.480 --> 0:07:48.160 want to take risks. They don't want to be noticed 0:07:48.200 --> 0:07:51.400 by Beijing. Uh. And and then somehow, you know, draw 0:07:51.440 --> 0:07:53.920 attention to them and perhaps come under some kind of 0:07:54.400 --> 0:07:58.480 corruption claim. So I think right now the situation for 0:07:58.560 --> 0:08:01.320 Beijing is very don Uh. They have a lot of 0:08:01.320 --> 0:08:04.080 resistance at the local level to vamp off the not 0:08:04.240 --> 0:08:08.120 so new normal Chapter four of the Third Revolution. Right now, 0:08:08.160 --> 0:08:10.840 what's the not so new normal for President Trump? What's 0:08:10.880 --> 0:08:14.160 the to do list for America? Is they address these 0:08:14.240 --> 0:08:20.000 uncertainties in China. I think this administration um is leaving 0:08:20.000 --> 0:08:23.200 no stone unturned. It's pretty extraordinary. I have to say. 0:08:23.520 --> 0:08:26.800 It's across the full range of issues, whether we're talking 0:08:26.800 --> 0:08:30.160 the security front or the trade front or even the 0:08:30.160 --> 0:08:33.600 political front right Chinese influence operations. What's going on in 0:08:33.640 --> 0:08:36.440 Xinjiang in terms of the repression of the you know, 0:08:36.520 --> 0:08:41.600 weaker Muslim population there. The administration is is firing on 0:08:41.679 --> 0:08:45.640 all pistons. Um. We have to see what the end 0:08:45.640 --> 0:08:48.440 result is, Um, but I would say that they really 0:08:48.480 --> 0:08:51.960 are trying to hold the Chinese feet to the fire, 0:08:52.080 --> 0:08:55.040 so to speak, Um, and and get some movement and 0:08:55.559 --> 0:08:59.480 in a way that I think reflects American interests, Um, 0:08:59.679 --> 0:09:01.760 you know, more directly. It was my book of the 0:09:01.800 --> 0:09:05.360 summer last year, the Third Revolution, Elizabeth Economy. My book 0:09:05.360 --> 0:09:08.200 of the summer this year's Ragarajan's Knew the Third Pillar, 0:09:08.240 --> 0:09:10.720 which I know Lizz will recover to cover as I 0:09:10.760 --> 0:09:14.920 will too. But do yourself a favor redo the Third Revolution. 0:09:15.000 --> 0:09:19.400 One year on, it is still an exceptional impression dissertation 0:09:19.640 --> 0:09:22.319 on the new China. And of course with these new 0:09:22.320 --> 0:09:26.440 announcements you heard, they're the urgency from Dr Economy, Liz Economy, 0:09:26.800 --> 0:09:29.840 thank you so much. With the Council on Foreign Relations, 0:09:44.720 --> 0:09:47.600 we begin then with that soft story China low ring 0:09:47.640 --> 0:09:51.120 its goal for economic growth and announcing a major tax 0:09:51.160 --> 0:09:54.959 cuntess policy maker's seat to pull off a gradual deceleration 0:09:55.080 --> 0:09:58.520 with a grappling of a trade story and I debt 0:09:58.720 --> 0:10:01.280 legacy as well. I want to bring in Bloomberg's David 0:10:01.360 --> 0:10:04.160 inglets for more. He joins US Life from Beijing. So David, 0:10:04.160 --> 0:10:07.680 they replaced the target with a growth range. Walk me 0:10:07.720 --> 0:10:10.520 through it right, six or six and a half percent 0:10:10.840 --> 0:10:13.640 the growth last year overall with six point six percent. 0:10:14.000 --> 0:10:17.400 The first top line is there is an acknowledgement among 0:10:17.440 --> 0:10:20.720 the top leadership that growth will slow this year. Investors 0:10:20.720 --> 0:10:23.360 who are fearing that growth mind slit below six percent. 0:10:23.760 --> 0:10:27.120 This obviously adds a little bit maybe a floor to growth. 0:10:27.200 --> 0:10:29.480 More importantly, though, it's the type of growth that they 0:10:29.480 --> 0:10:31.440 want to pursue. When you look at the tax cuts 0:10:31.440 --> 0:10:35.000 that they mentioned, three hundred billion US all as it's 0:10:35.000 --> 0:10:38.560 worth of UH tax cuts and social security fees. And 0:10:38.679 --> 0:10:42.439 essentially what they're doing is there's there's been some challenges 0:10:42.559 --> 0:10:45.079 really in terms of lending money to the private sector. 0:10:45.200 --> 0:10:46.840 So in a lot of ways, what they're doing is 0:10:47.040 --> 0:10:49.079 they're leaving more money on the table in the pockets 0:10:49.080 --> 0:10:51.640 of the private sector, in people and hopefully turn around 0:10:51.640 --> 0:10:54.480 the consumption story that was quite horrible last year. Just 0:10:54.520 --> 0:10:56.800 the range also just tell you how uncertain things are 0:10:57.080 --> 0:11:00.320 for the future of the Chinese economy. It certainly does, 0:11:00.640 --> 0:11:03.160 I think when you try and quantify what six to 0:11:03.240 --> 0:11:05.440 six and a half percent is in the difference there, 0:11:05.440 --> 0:11:09.480 it's the thirteen trillion dollar economy, so that's anywhere from 0:11:08.880 --> 0:11:12.240 a rough estimate, that's about ninety billion too, maybe three 0:11:12.880 --> 0:11:15.480 dollars worth of thought put that may or may not 0:11:15.679 --> 0:11:17.800 be there. So essentially what they're trying to do, and 0:11:17.840 --> 0:11:19.839 really when it comes to the party, I had to 0:11:19.880 --> 0:11:22.360 look at the reports forty page of spont size twelve. 0:11:22.960 --> 0:11:25.640 It's a work report. It's the first time they mentioned 0:11:25.640 --> 0:11:29.319 explicitly that everything they're growing at the growth problem right 0:11:29.320 --> 0:11:32.560 now is really meant to protect jobs and employment. And 0:11:32.559 --> 0:11:35.120 when it comes to the party, it's really all about 0:11:35.440 --> 0:11:38.320 social stability. Well, there is a Communist Party and then 0:11:38.360 --> 0:11:41.840 there's a National People's Congress. By my count, it's two thousand, 0:11:41.960 --> 0:11:45.920 nine hundred warm bodies in the room clapping on Q great. 0:11:46.400 --> 0:11:52.160 What percentage of those people support president? That's the big question. Um. 0:11:52.320 --> 0:11:54.440 In fact, a lot of the things that we heard 0:11:54.440 --> 0:11:56.640 today from the work report, and a lot of the 0:11:56.640 --> 0:12:00.560 things that essentially you'll hear the next ten days or so. Uh, 0:12:00.600 --> 0:12:04.760 tomorrow Wednesday is in time. You'll have the Economic Planner 0:12:04.800 --> 0:12:06.840 coming up with their own press conference. You're the Commerce 0:12:06.840 --> 0:12:08.920 Ministry that day after that the PBO. See what has 0:12:09.000 --> 0:12:11.840 all these ministries? A lot of the things that you'll hear, 0:12:12.760 --> 0:12:15.760 we're decided back in October during the plenum. It is 0:12:15.800 --> 0:12:18.320 the Communist Party, of course, and what they say essentially 0:12:18.440 --> 0:12:21.400 is likely what will what what? What will likely happen. 0:12:22.000 --> 0:12:24.720 The other piece really to that story as well, is 0:12:24.840 --> 0:12:28.520 really then moving the economy from one that is centrally planned, 0:12:28.559 --> 0:12:31.720 state owned into one of course where you have more 0:12:31.760 --> 0:12:34.000 private enterprise. And the tricky part, and the reason I 0:12:34.040 --> 0:12:36.640 bring that up is when they talk about, oh, we 0:12:36.679 --> 0:12:40.640 need to get capital through to the private enterprises, Well, 0:12:40.640 --> 0:12:42.480 guess what a lot of the people that we talked 0:12:42.480 --> 0:12:44.640 to say, you look at the structure of the Chinese 0:12:44.640 --> 0:12:49.240 banking system, it's not really designed yet the service the 0:12:49.280 --> 0:12:51.960 private sectors. So really that's one area to watch and 0:12:52.040 --> 0:12:55.720 how they actually manage to to to to to gradually 0:12:56.280 --> 0:13:00.000 moderate the economy to where they wanted to be. Blimberg's 0:13:00.040 --> 0:13:02.360 DVID English joining US Life from Beijing as we get 0:13:02.360 --> 0:13:18.520 a new growth range from the Chinese government. Let's talk 0:13:18.559 --> 0:13:22.040 to someone from Britain who only thinks in centigrade. Actually 0:13:22.080 --> 0:13:25.000 she went to the University of Maine, where it's colder 0:13:25.000 --> 0:13:27.160 than cold a good part of the year. Good morning, 0:13:27.240 --> 0:13:31.199 up in or no listening, Mary and Schneider Petsinger joins 0:13:31.280 --> 0:13:32.760 us right now, and this is to get briefed on 0:13:32.920 --> 0:13:36.360 China is economy to join us later on, Marianne, what 0:13:36.480 --> 0:13:40.880 what struck me about the Chinese announcement was the all 0:13:41.000 --> 0:13:43.920 in sense of it. Is it a point of crisis 0:13:44.600 --> 0:13:47.800 for the leadership of the Communist Party or is this 0:13:48.040 --> 0:13:52.640 an evolutionary path that they're on to some new policy. 0:13:54.200 --> 0:13:57.720 I think we're certainly seeing an evolutionary phase for a 0:13:57.800 --> 0:14:00.679 lot will go, will happen, and certainly also with vacations 0:14:01.240 --> 0:14:04.080 for what it means for the US economy. Um. Also, 0:14:04.400 --> 0:14:07.920 you know, on the US China front, there are sources 0:14:08.000 --> 0:14:11.640 that say we're close to a potential trade deal, that 0:14:11.720 --> 0:14:15.600 we're in the final stages. But again, you know, even 0:14:15.640 --> 0:14:18.400 if we're at the finishing line, the finishing line of 0:14:18.480 --> 0:14:20.960 a one beter hurdle rays or is there really much 0:14:21.000 --> 0:14:23.680 more about marathon? And I think it's about those long 0:14:23.800 --> 0:14:28.520 term issues you absolutely nail the immediacy of the trade deal. 0:14:29.480 --> 0:14:34.040 Was this document written for the trade deal discussion or 0:14:34.080 --> 0:14:36.920 do they look at as China, as Beijing look at 0:14:36.960 --> 0:14:40.800 the trade deals separate from the seven eight nine menu 0:14:40.920 --> 0:14:46.200 items that came out with for the National People's Congress. Well, 0:14:46.240 --> 0:14:49.680 I think, um, you know, the discussions they're much much 0:14:49.720 --> 0:14:52.720 longer than just having this as part of the trade 0:14:52.760 --> 0:14:55.880 discussions with Trump. But again, because this is also about 0:14:56.000 --> 0:14:59.480 much more long term strategic decisions, it will feature in 0:14:59.600 --> 0:15:02.280 that as. Oh again, this trait is few than the 0:15:02.320 --> 0:15:04.160 traite where as you're team right now, it's really not 0:15:04.240 --> 0:15:07.720 so much about trade. It is about much larger structural 0:15:07.800 --> 0:15:13.720 issues and perhaps a global big power valory. What does 0:15:13.720 --> 0:15:16.360 the vet Tex dynamic mean They're going to reduce the 0:15:16.440 --> 0:15:22.280 VT tax for manufacturing in China? Well, I think you know, 0:15:22.520 --> 0:15:27.520 it's certainly meant to um improve economic process that China 0:15:27.640 --> 0:15:31.880 is entering this period of showing signs of weakness UM 0:15:31.920 --> 0:15:34.520 and you know, the Trump administration is very well aware 0:15:34.560 --> 0:15:37.240 of that and things are part of um them being 0:15:37.240 --> 0:15:39.880 in a much stronger negotiating position. Yeah, and this is 0:15:39.920 --> 0:15:42.560 really important because you know, you know Heathrow. They've got 0:15:42.560 --> 0:15:45.720 the line there for the vet tax checkout for Americans. 0:15:45.760 --> 0:15:49.000 The whole that tax thing is like wicked foreign In 0:15:49.040 --> 0:15:53.160 our collective memory is in Canada they try to do 0:15:53.200 --> 0:15:56.920 a vat tax and literally brought down the government at 0:15:56.920 --> 0:15:59.720 one point, were very destructive. That tax is a very 0:15:59.720 --> 0:16:03.120 dis active for the poorest in society typically. That's what 0:16:03.240 --> 0:16:05.960 really struck me in the Chinese announcement. Yeah, but it's 0:16:06.000 --> 0:16:10.040 for manufacturing. It's for a sector specific sector. Marianne, just 0:16:10.120 --> 0:16:11.960 in terms of what is happening in China, how much 0:16:11.960 --> 0:16:15.200 of it is engineered by the Chinese, the domestic slowdown, 0:16:15.320 --> 0:16:19.640 and how much of it is engineered by the US administration. Well, 0:16:19.680 --> 0:16:22.560 I think so far it is mostly about the domestic 0:16:22.560 --> 0:16:26.760 issues in China, primarily because the tariffs and the retaliatory 0:16:26.840 --> 0:16:30.360 tears they are significant, but really overall, in the scheme 0:16:30.440 --> 0:16:34.800 of things, it's it's minor UM. And so even though 0:16:35.120 --> 0:16:39.120 obviously for the prospects of economic growth, this delay of 0:16:39.320 --> 0:16:42.920 UM cariffs and UM, you know, also normal long we're 0:16:42.920 --> 0:16:46.880 talking about additional tariffs of two hundred sixties seven UM. 0:16:47.000 --> 0:16:52.160 That is certainly positive, but I wouldn't overestimate the impact 0:16:52.240 --> 0:16:54.640 that has had Marianne has been really interesting over the 0:16:54.720 --> 0:16:57.200 last couple of weeks. This narrative that is built up, 0:16:57.280 --> 0:16:59.960 fueled by events in the Oval Office, that there seems 0:17:00.040 --> 0:17:02.960 to be a spread between the deal the President of 0:17:03.000 --> 0:17:05.760 the United States wants and the deal that some of 0:17:05.800 --> 0:17:10.440 his China hawks would ultimately like. Is that just the narrative, 0:17:10.520 --> 0:17:12.760 Is that just the false perception of what is happening, 0:17:12.840 --> 0:17:15.800 or do you think there's something to that? Well, I 0:17:15.840 --> 0:17:19.080 think there's something to this because there's various m priorities 0:17:19.119 --> 0:17:21.600 that the Trump administration has raised when it comes to 0:17:21.600 --> 0:17:24.560 trade with China. For the President, it seems to be 0:17:25.200 --> 0:17:28.640 mostly about forcing China to be boost the bilateral trade 0:17:28.680 --> 0:17:31.240 surplus with the United States. And here it's important to 0:17:31.280 --> 0:17:35.879 keep in mind that China accounts for about of the 0:17:35.960 --> 0:17:40.679 US's global trade deficit. But various concerns about you know this, 0:17:40.960 --> 0:17:43.879 this focus on the billateral data trade deficit, it is 0:17:44.080 --> 0:17:49.520 isly misguided. Um Whereas others in the administration, particular Robert Leheiser, 0:17:49.640 --> 0:17:53.200 the United States Trade Representative, and his concern is much 0:17:53.240 --> 0:17:57.240 more about the structural issues, so tackling unfair trade practices. 0:17:57.560 --> 0:18:00.679 When it comes to force technology transfer key staffs, and 0:18:00.720 --> 0:18:03.920 I think on that point um the Trump administration has 0:18:04.200 --> 0:18:08.520 much much more legitimate concern but the methods to address 0:18:08.560 --> 0:18:11.040 those are wrong, so pears aren't really going to do 0:18:11.160 --> 0:18:14.760 much about it. Much more importantly would be to build 0:18:14.760 --> 0:18:17.560 a global alliance, to put the United States to work 0:18:17.560 --> 0:18:24.040 together with you and Japan to um jointly for China 0:18:24.119 --> 0:18:27.240 to change their practices, and to some extent, we're seeing 0:18:27.280 --> 0:18:31.840 that DSDU and Japan have had trilateral talks and have 0:18:32.000 --> 0:18:34.119 issued a number of statements over the last years that 0:18:34.160 --> 0:18:38.520 there is potential opportunity for collaboration. Mariana. Often hear this 0:18:38.720 --> 0:18:41.440 that tariffs aren't the right way forward, But what's interesting 0:18:41.480 --> 0:18:44.480 to me is that the status quo what we had before, 0:18:44.920 --> 0:18:47.359 the traditional approach of getting the Chinese to do whatever 0:18:47.400 --> 0:18:50.119 one thought the Chinese should do, wasn't working either. What 0:18:50.160 --> 0:18:52.040 it's pretty interesting is the Chinese are actually at the 0:18:52.040 --> 0:18:55.160 table now, so quite clearly tarriffs to some degree are working. Marianne. 0:18:55.160 --> 0:18:57.399 It's got the Chinese to come to the table and 0:18:57.480 --> 0:19:00.440 consider doing things that they have talked about I haven't 0:19:00.440 --> 0:19:04.640 done for a long time. Again, it's a negotiating tactic, 0:19:04.680 --> 0:19:06.639 and yes, you're absolutely right that that has worked in 0:19:06.680 --> 0:19:09.119 from of bringing the Chinese to the table A. The 0:19:09.240 --> 0:19:12.159 key question is what will come after this? Are we 0:19:12.280 --> 0:19:14.960 just going to see a quick deal that leaves many 0:19:15.040 --> 0:19:18.479 of those issues that are structural UM, you know, just 0:19:18.720 --> 0:19:22.280 in limbo and kind of add to this lingering uncertainty. 0:19:22.720 --> 0:19:25.080 And the other question is of will it be tough 0:19:25.200 --> 0:19:28.639 enough to actually have UM an enforcement mechanism move that 0:19:28.760 --> 0:19:31.760 has keeth and that I think UM is not yet 0:19:31.840 --> 0:19:35.359 quite clear. Marian, Thank you so much, Marian Schneider Petsinger 0:19:35.640 --> 0:19:39.520 UH with Chatham House this morning. We greatly appreciate her. 0:19:40.119 --> 0:19:54.480 Tennis Daniel Katsa with us with being p Parry, but 0:19:54.680 --> 0:19:58.119 this is an important conversation on foreign exchange. Daniel, with 0:19:58.160 --> 0:20:00.320 all the news on China, give us an up date 0:20:00.359 --> 0:20:04.040 on Renminbi dynamics. What do we need to know about 0:20:04.080 --> 0:20:08.080 the president all upset about Chinese manipulation, give us a 0:20:08.160 --> 0:20:10.960 b MP Perry Bob brief on that with BMP berry 0:20:11.000 --> 0:20:14.600 bas legacy in China. Well, I think you know, from 0:20:14.640 --> 0:20:18.600 the US perspective, there's been a longstanding press to get 0:20:18.800 --> 0:20:21.840 UH dollar China moving in a more market driven way. 0:20:22.240 --> 0:20:24.720 UH Lately, though, the message that we're getting from press 0:20:24.760 --> 0:20:27.680 reports at least, is that there may be some room 0:20:27.760 --> 0:20:30.439 for UH an agreement with with China to kind of 0:20:30.560 --> 0:20:33.960 UH allow the currency to be stable around the current 0:20:34.040 --> 0:20:36.200 range as part of the trade talks that are happening. 0:20:36.240 --> 0:20:38.800 So it's a man, it's a managed currency. It's still 0:20:38.840 --> 0:20:41.840 a man. It's not a floating currency. I mean, it's 0:20:41.880 --> 0:20:45.720 increasingly more market determined for sure, um and it moves 0:20:46.080 --> 0:20:48.439 much more than it did UH ten years ago or so, 0:20:48.480 --> 0:20:50.879 but it has still aspects of a managed currency. To 0:20:51.000 --> 0:20:53.040 Daniel with you your great experience, I want to get 0:20:53.080 --> 0:20:56.320 the dollar ambiguity right now. What is a BMP Perry 0:20:56.400 --> 0:21:00.679 BA call on the US dollar structurally seker over the 0:21:00.720 --> 0:21:03.280 next year or two, we think as the FED you know, 0:21:03.320 --> 0:21:05.199 continues to be on hold and the markets start to 0:21:05.200 --> 0:21:07.720 prepare for FED easing at some point, the dollar is 0:21:07.720 --> 0:21:10.399 going to be very vulnerable. For now, though, we're in 0:21:10.440 --> 0:21:15.080 a very pro carry environment across markets. Volatility has fallen 0:21:15.119 --> 0:21:19.000 across markets. Investors are looking for carry type strategies and 0:21:19.359 --> 0:21:21.440 within the G ten the dollar benefits as a higher 0:21:21.480 --> 0:21:24.800 yielding currency. It's called doing a Kansas jargon or carry 0:21:24.840 --> 0:21:28.720 on my wayward son, What does cary, what does carry well? 0:21:28.800 --> 0:21:33.280 Simply the strategies that look for higher yielding asset at 0:21:33.280 --> 0:21:36.440 a time when market volatility is low and volatility is low, 0:21:36.960 --> 0:21:39.960 it's a good strategy to look for for yield and 0:21:39.960 --> 0:21:43.159 and investors like those types of strategies. The danger is 0:21:43.200 --> 0:21:45.960 that at some point volatility picks up very quickly and 0:21:46.000 --> 0:21:48.560 you see a rush to exit from positions like that. 0:21:48.640 --> 0:21:52.680 Any reason we think pick up anytime soon down well, 0:21:52.720 --> 0:21:54.720 you know, we can think of any number of things 0:21:54.720 --> 0:21:57.840 that could be disturbing for markets. Uh seems you know, 0:21:57.920 --> 0:22:01.000 sometimes strange that volatile these are so low, given all 0:22:01.040 --> 0:22:06.120 the uncertainties we see in trade policy, geopolitics, the economic outlook, etcetera. 0:22:06.480 --> 0:22:08.080 So it wouldn't be hard to make a list of 0:22:08.119 --> 0:22:10.320 things that could jar the market out of their current 0:22:10.760 --> 0:22:14.440 level of low volatility. Fascinating to see cross asset vault 0:22:14.520 --> 0:22:16.920 drive lower tom of the way it has done at 0:22:17.200 --> 0:22:19.600 the Federal Reserved Retreat, not just in foreign exchange, but 0:22:20.280 --> 0:22:22.520 in treasuries as well, And it leads me to an 0:22:22.520 --> 0:22:24.239 important question that a lot of people are now are 0:22:24.280 --> 0:22:27.080 asking down we've actually been very range bound in the 0:22:27.160 --> 0:22:30.399 effects market, in the treasury market as well, do you 0:22:30.440 --> 0:22:32.399 think we stay in that range down or are you 0:22:32.440 --> 0:22:34.640 thinking about other things? What't me through you thinking right now? 0:22:35.480 --> 0:22:37.480 So for now, all the G ten central banks have 0:22:37.640 --> 0:22:40.800 signaled patients and and and a desire to be on hold. 0:22:41.040 --> 0:22:44.119 And that's broad volatility down across these asset markets, and 0:22:44.119 --> 0:22:46.920 it's very hard to see UM those ranges in g 0:22:47.080 --> 0:22:50.480 t FX breaking over the more medium term, maybe beyond 0:22:50.520 --> 0:22:52.800 a month or two. We think the dollar is at 0:22:52.920 --> 0:22:55.480 very elevated levels, so there is scope for a big 0:22:55.520 --> 0:22:58.560 move lower, which would mean these ranges break on the 0:22:58.600 --> 0:23:01.119 dollar weak side. I me think that will happen probably 0:23:01.119 --> 0:23:03.320 in the second half of the year and market, but 0:23:03.320 --> 0:23:05.240 it could happen very quickly when it once it starts, 0:23:05.240 --> 0:23:07.840 that could happen very quickly. Could President Rock stand in 0:23:07.880 --> 0:23:11.280 the way of that? Um, Yeah, there's not a lot 0:23:11.280 --> 0:23:13.240 of ammunition on the E C B side. They've already 0:23:13.280 --> 0:23:16.200