1
00:00:00,040 --> 00:00:02,840
Speaker 1: Well, China is consumer inflation, as we've been hearing, accelerated

2
00:00:02,880 --> 00:00:05,480
Speaker 1: in July to the highest level in two years. Joining

3
00:00:05,559 --> 00:00:07,840
Speaker 1: us from our Hong Kong studio to discuss is in

4
00:00:07,960 --> 00:00:12,240
Speaker 1: the current Bloomberg's Chief Asia Economics correspondent, So not unique

5
00:00:12,280 --> 00:00:14,560
Speaker 1: with high prices in but how much is this going

6
00:00:14,560 --> 00:00:17,079
Speaker 1: to complicate things for the ps P BOC that's trying

7
00:00:17,079 --> 00:00:20,520
Speaker 1: to stimulate the economy. So on the headline basis, that

8
00:00:20,600 --> 00:00:25,080
Speaker 1: does suggest inflation in China is accelerating. Juliet in particular,

9
00:00:25,079 --> 00:00:27,200
Speaker 1: what's driving up the headline number has been a big

10
00:00:27,280 --> 00:00:30,400
Speaker 1: uptick in the price of food. Pork prices actually gained

11
00:00:31,320 --> 00:00:34,839
Speaker 1: on year, and fresh fruit and veg also up in

12
00:00:34,880 --> 00:00:37,240
Speaker 1: the double digit area as well. So food is a

13
00:00:37,240 --> 00:00:40,760
Speaker 1: big part of what's happening, and it might suggest that

14
00:00:40,880 --> 00:00:43,519
Speaker 1: China's inflation is accelerating, except I would point out to

15
00:00:43,520 --> 00:00:47,560
Speaker 1: you that on a core basis, China's inflation actually only

16
00:00:47,600 --> 00:00:49,960
Speaker 1: gained zero point eight percent, So on a core basis,

17
00:00:50,200 --> 00:00:52,320
Speaker 1: which is really what a lot of central banks ultimately

18
00:00:52,320 --> 00:00:54,920
Speaker 1: look at strips out of price of oil and food

19
00:00:54,920 --> 00:00:58,400
Speaker 1: and everything else, it's fairly modest. So I'm not sure

20
00:00:58,680 --> 00:01:02,800
Speaker 1: that this will change the game that much. In China.

21
00:01:02,880 --> 00:01:05,120
Speaker 1: We know premiarily catching himself a saide by the way,

22
00:01:05,120 --> 00:01:07,200
Speaker 1: that as long as you keep inflation, say below three

23
00:01:07,200 --> 00:01:09,520
Speaker 1: and a half percent, an unemployment below five and a

24
00:01:09,560 --> 00:01:12,399
Speaker 1: half percent, they can kind of nurse things along. Okay.

25
00:01:12,440 --> 00:01:14,919
Speaker 1: So so you know, on a headline basis, yes, China's

26
00:01:14,920 --> 00:01:17,080
Speaker 1: inflation is accelerating. You could say that's pointing towards the

27
00:01:17,080 --> 00:01:18,800
Speaker 1: global trend, but I don't see it as a game changer.

28
00:01:19,160 --> 00:01:21,080
Speaker 1: You look at the trade data that we had earlier

29
00:01:21,120 --> 00:01:24,760
Speaker 1: in the weekend, particularly the export numbers very robust. I

30
00:01:24,800 --> 00:01:27,040
Speaker 1: can't recall I think it was eighteen percent. Was that

31
00:01:27,160 --> 00:01:30,040
Speaker 1: the game? And so when you look at what's happening

32
00:01:30,120 --> 00:01:33,440
Speaker 1: with producer prices, an increase of four point two percent.

33
00:01:33,520 --> 00:01:35,280
Speaker 1: And I think it's also fair to point out that

34
00:01:35,280 --> 00:01:38,800
Speaker 1: there has been a substantial pullback in the price of

35
00:01:38,880 --> 00:01:42,440
Speaker 1: crude oil, probably since the survey data for the month

36
00:01:42,480 --> 00:01:45,960
Speaker 1: of July was put together. So the producer price story

37
00:01:45,959 --> 00:01:48,080
Speaker 1: in Shina is a dramatic turnaround from where a war

38
00:01:48,120 --> 00:01:50,560
Speaker 1: a year ago. So today's numbers did show, like you mentioned,

39
00:01:50,760 --> 00:01:53,320
Speaker 1: a producer prices are cooling, and that's for two reasons.

40
00:01:53,320 --> 00:01:55,880
Speaker 1: And one base effect, it's being compared to a big

41
00:01:55,880 --> 00:01:58,600
Speaker 1: surge one year ago. A number two, like you mentioned,

42
00:01:58,880 --> 00:02:02,080
Speaker 1: commodity prices me off the boil and the oil prices

43
00:02:02,120 --> 00:02:05,080
Speaker 1: coming off the ball. Remember that oil actually is back

44
00:02:05,080 --> 00:02:07,320
Speaker 1: to where it was before the Russian invasion of Ukraine.

45
00:02:07,360 --> 00:02:09,720
Speaker 1: So all of that is lending itself towards taking pressure

46
00:02:09,720 --> 00:02:12,920
Speaker 1: off China's factory cost space. That would be good for

47
00:02:12,960 --> 00:02:16,240
Speaker 1: their profits, and you know, at the margins, it might

48
00:02:16,360 --> 00:02:19,520
Speaker 1: sort of take pressure off the global inflation story because

49
00:02:19,520 --> 00:02:21,840
Speaker 1: the Chinese factors won't be under as much pressure to

50
00:02:21,919 --> 00:02:25,280
Speaker 1: lift their own prices to the global consumers. But when

51
00:02:25,280 --> 00:02:28,040
Speaker 1: you take the PPI slowdown in its totality in China,

52
00:02:28,080 --> 00:02:29,560
Speaker 1: th it just kind of adds to the picture of

53
00:02:29,560 --> 00:02:31,760
Speaker 1: saying a few moments ago that, okay, you can say

54
00:02:31,800 --> 00:02:35,000
Speaker 1: headline inflation is picking up, but the overall inflation story

55
00:02:35,040 --> 00:02:40,000
Speaker 1: in China remains certainly relatively subdued and even somewhat subdued really,

56
00:02:40,240 --> 00:02:42,480
Speaker 1: and I think that the authorities won't be too concerned

57
00:02:42,480 --> 00:02:44,720
Speaker 1: about it, and they will continue to tap some money

58
00:02:44,760 --> 00:02:47,240
Speaker 1: into the economy to keep things taking over all, right,

59
00:02:47,320 --> 00:02:50,360
Speaker 1: continue to stimulate then, and looking ahead as well into

60
00:02:50,360 --> 00:02:53,000
Speaker 1: what kind of I guess impact we've seen from the

61
00:02:53,040 --> 00:02:56,120
Speaker 1: COVID lockdowns and and how much further that could complicate

62
00:02:56,160 --> 00:03:00,480
Speaker 1: things too. There's no doubt that the ongo in COVID

63
00:03:00,480 --> 00:03:03,160
Speaker 1: lockdowns are complicated the recovery, especially on the services and

64
00:03:03,160 --> 00:03:05,200
Speaker 1: the consumer side. That's one of the reasons inflation is

65
00:03:05,240 --> 00:03:09,000
Speaker 1: somewhat subdued. Juliet, You know there there has been clearly

66
00:03:09,000 --> 00:03:12,280
Speaker 1: the export story has recovered. Maybe that's a mixture of

67
00:03:12,480 --> 00:03:15,000
Speaker 1: factories getting back online. Now for the lockdowns, maybe it

68
00:03:15,000 --> 00:03:18,120
Speaker 1: does reflect ongoing robust global demand, but there are some

69
00:03:18,120 --> 00:03:20,519
Speaker 1: sounds of weakness in the numbers. But nonetheless, the really

70
00:03:20,560 --> 00:03:23,480
Speaker 1: soft part of the economy remains the real estate sector,

71
00:03:24,040 --> 00:03:27,240
Speaker 1: the consumer spending sector, in the services sector, and COVID

72
00:03:27,320 --> 00:03:29,520
Speaker 1: zero is kind of having casting a long shadow over

73
00:03:29,560 --> 00:03:33,200
Speaker 1: all of that. And obviously, with the variant of omercron

74
00:03:33,280 --> 00:03:35,480
Speaker 1: that we all know about, that's going to continue testing

75
00:03:35,600 --> 00:03:38,280
Speaker 1: China strategy. And you could argue China's over the worst

76
00:03:38,360 --> 00:03:40,839
Speaker 1: this lockdowns. Shanghai came out of that brutal two months

77
00:03:40,880 --> 00:03:43,800
Speaker 1: lockdown at the end of May, and perhaps China is

78
00:03:43,840 --> 00:03:46,000
Speaker 1: pulling clear of that, but nobody can say that for certain.

79
00:03:46,360 --> 00:03:48,640
Speaker 1: Still a long time before the Party Congress comes up

80
00:03:48,640 --> 00:03:51,000
Speaker 1: in November. So if there's not a resolution to the

81
00:03:51,040 --> 00:03:53,600
Speaker 1: fact that the property market is still suffering right now,

82
00:03:53,640 --> 00:03:57,320
Speaker 1: sales continue to shrink. If there's not a resolution, does

83
00:03:57,360 --> 00:03:59,480
Speaker 1: that mean that there is the probability that we're going

84
00:03:59,560 --> 00:04:02,800
Speaker 1: to see even more of a drag when it comes

85
00:04:02,840 --> 00:04:06,200
Speaker 1: to inflationary pressures on the retail level. Because the property

86
00:04:06,200 --> 00:04:09,600
Speaker 1: market is in such dire straits, I don't think anybody

87
00:04:09,640 --> 00:04:12,200
Speaker 1: is yet calling a bottom or turnaround for the real

88
00:04:12,320 --> 00:04:15,080
Speaker 1: estate sector. And as you say, when you consider the

89
00:04:15,120 --> 00:04:19,160
Speaker 1: outside effect that has on people's sense of self worth,

90
00:04:19,240 --> 00:04:23,240
Speaker 1: on household net worth in terms of overall economic activity,

91
00:04:23,720 --> 00:04:27,240
Speaker 1: the estimates are up to maybe around twenty percent economic activity.

92
00:04:27,400 --> 00:04:29,080
Speaker 1: So if you have the housing sector in the slump

93
00:04:29,120 --> 00:04:32,440
Speaker 1: that it is, with salesman continue to be weak, and anyway,

94
00:04:32,480 --> 00:04:35,520
Speaker 1: the ongoing practical disruptions linked with COVID zero in terms

95
00:04:35,520 --> 00:04:38,200
Speaker 1: of what that means for finishing developments and people getting

96
00:04:38,200 --> 00:04:40,359
Speaker 1: in about of course, that's going to continue to be

97
00:04:40,440 --> 00:04:45,040
Speaker 1: a drag on the broader economy. And nonetheless, though the

98
00:04:45,360 --> 00:04:47,880
Speaker 1: consensus is that Sean's second half will still be better

99
00:04:47,960 --> 00:04:51,120
Speaker 1: than the first half, that things will be improving that

100
00:04:51,200 --> 00:04:54,640
Speaker 1: the infrastructure spending is getting accelerated at the local government level.

101
00:04:54,839 --> 00:04:57,800
Speaker 1: That will start up some activity that the authorities will

102
00:04:57,839 --> 00:05:00,520
Speaker 1: put a floor under the under the realist its sectory

103
00:05:00,720 --> 00:05:03,280
Speaker 1: already they are taking measures, remember talk for special fund

104
00:05:03,680 --> 00:05:05,960
Speaker 1: to help those developers get those projects finished, and of

105
00:05:05,960 --> 00:05:08,360
Speaker 1: course mortgage forgiveness for those people who don't want to

106
00:05:08,480 --> 00:05:11,800
Speaker 1: pay the mortgages until the developments are done. So there's

107
00:05:11,839 --> 00:05:13,760
Speaker 1: a suggestion that maybe they might put a floor under it.

108
00:05:13,960 --> 00:05:15,920
Speaker 1: But again, a lot of ifs and boats in all

109
00:05:15,920 --> 00:05:18,080
Speaker 1: of this. You would have to say, this still remains

110
00:05:18,120 --> 00:05:20,520
Speaker 1: a lot of pressure on China's economy and if the

111
00:05:20,560 --> 00:05:22,840
Speaker 1: export story does come off the ball the way people

112
00:05:22,880 --> 00:05:24,599
Speaker 1: have been calling for a long time now, then it

113
00:05:24,600 --> 00:05:26,080
Speaker 1: could be a bumpy end of the year for them.

114
00:05:26,600 --> 00:05:28,160
Speaker 1: Speaking of getting out and about I know you've been

115
00:05:28,160 --> 00:05:31,799
Speaker 1: closely monitoring, both for your job and personally what's happening

116
00:05:31,800 --> 00:05:34,240
Speaker 1: in Hong Kong with the reduction of quarantine. To what

117
00:05:34,279 --> 00:05:37,279
Speaker 1: are you hearing from analysts in terms of whether or

118
00:05:37,279 --> 00:05:39,880
Speaker 1: not this is going to be able to revive and

119
00:05:39,880 --> 00:05:43,000
Speaker 1: support Hong Kong's role as a key financial center. Well,

120
00:05:43,000 --> 00:05:45,640
Speaker 1: it's obviously it's Stockholm syndrome. Again, you would have to

121
00:05:45,680 --> 00:05:48,559
Speaker 1: say when they cook quarantines from seven nights and three nights,

122
00:05:48,720 --> 00:05:51,880
Speaker 1: that's clearly a positive. It does will lend itself towards

123
00:05:51,920 --> 00:05:55,279
Speaker 1: better mobility and will help both residents and business people

124
00:05:55,560 --> 00:05:58,159
Speaker 1: getting into and out of Hong Kong going forward. But

125
00:05:58,440 --> 00:06:00,719
Speaker 1: of course let's not forget where we are a relative

126
00:06:00,760 --> 00:06:02,920
Speaker 1: to the rest of the world. It's still not just

127
00:06:03,000 --> 00:06:06,400
Speaker 1: quarantine but several kind of layers of defense or trip

128
00:06:06,440 --> 00:06:11,000
Speaker 1: wires that prohibit passengers or travelers getting tuned from Hong Kong.

129
00:06:11,080 --> 00:06:13,760
Speaker 1: So that's going to continue to drag on the mobility,

130
00:06:13,800 --> 00:06:16,039
Speaker 1: on its role as a global hub, on the ability

131
00:06:16,080 --> 00:06:17,840
Speaker 1: to do business with the rest of the world, especially

132
00:06:17,839 --> 00:06:21,599
Speaker 1: when New York and London, Singapore have reconnected with everybody else.

133
00:06:21,839 --> 00:06:24,160
Speaker 1: There is a feeling that the authorities are in the

134
00:06:24,320 --> 00:06:27,080
Speaker 1: path or trajectory now that they will continue to ease

135
00:06:27,440 --> 00:06:31,240
Speaker 1: barring some kind of another massive outbreak with variants, etcetera.

136
00:06:31,680 --> 00:06:33,760
Speaker 1: That remains to be seen. They're obviously being very cautious

137
00:06:33,760 --> 00:06:36,520
Speaker 1: as they are. Um there is supposed to be a

138
00:06:36,520 --> 00:06:38,560
Speaker 1: big financial summit in November. People looked at that and

139
00:06:38,720 --> 00:06:40,880
Speaker 1: maybe a deadline for when they might ease up in

140
00:06:40,920 --> 00:06:42,600
Speaker 1: the following three days and move to some kind of

141
00:06:42,640 --> 00:06:46,279
Speaker 1: a PC or testing thing. But you know, operating within

142
00:06:46,360 --> 00:06:49,080
Speaker 1: the political system that they are obviously on a headline basis,

143
00:06:49,120 --> 00:06:51,320
Speaker 1: you would say it's a positive for Hong Kong. It's

144
00:06:51,360 --> 00:06:53,800
Speaker 1: it's that they're stepping forward, but you know clearly it's

145
00:06:53,800 --> 00:06:55,200
Speaker 1: a negative at the same time, we have along way

146
00:06:55,200 --> 00:06:58,080
Speaker 1: to go. All right, Well, that's how it. Penda might

147
00:06:58,080 --> 00:06:59,520
Speaker 1: be able to see you in November in the Karen

148
00:06:59,520 --> 00:07:03,080
Speaker 1: Bloomberg's chief Asia Economics correspondent with US in Hong Kong,