WEBVTT - Enda Curran on China Data (Audio)

0:00:00.040 --> 0:00:02.840
<v Speaker 1>Well, China is consumer inflation, as we've been hearing, accelerated

0:00:02.880 --> 0:00:05.480
<v Speaker 1>in July to the highest level in two years. Joining

0:00:05.559 --> 0:00:07.840
<v Speaker 1>us from our Hong Kong studio to discuss is in

0:00:07.960 --> 0:00:12.240
<v Speaker 1>the current Bloomberg's Chief Asia Economics correspondent, So not unique

0:00:12.280 --> 0:00:14.560
<v Speaker 1>with high prices in but how much is this going

0:00:14.560 --> 0:00:17.079
<v Speaker 1>to complicate things for the ps P BOC that's trying

0:00:17.079 --> 0:00:20.520
<v Speaker 1>to stimulate the economy. So on the headline basis, that

0:00:20.600 --> 0:00:25.080
<v Speaker 1>does suggest inflation in China is accelerating. Juliet in particular,

0:00:25.079 --> 0:00:27.200
<v Speaker 1>what's driving up the headline number has been a big

0:00:27.280 --> 0:00:30.400
<v Speaker 1>uptick in the price of food. Pork prices actually gained

0:00:31.320 --> 0:00:34.839
<v Speaker 1>on year, and fresh fruit and veg also up in

0:00:34.880 --> 0:00:37.240
<v Speaker 1>the double digit area as well. So food is a

0:00:37.240 --> 0:00:40.760
<v Speaker 1>big part of what's happening, and it might suggest that

0:00:40.880 --> 0:00:43.519
<v Speaker 1>China's inflation is accelerating, except I would point out to

0:00:43.520 --> 0:00:47.560
<v Speaker 1>you that on a core basis, China's inflation actually only

0:00:47.600 --> 0:00:49.960
<v Speaker 1>gained zero point eight percent, So on a core basis,

0:00:50.200 --> 0:00:52.320
<v Speaker 1>which is really what a lot of central banks ultimately

0:00:52.320 --> 0:00:54.920
<v Speaker 1>look at strips out of price of oil and food

0:00:54.920 --> 0:00:58.400
<v Speaker 1>and everything else, it's fairly modest. So I'm not sure

0:00:58.680 --> 0:01:02.800
<v Speaker 1>that this will change the game that much. In China.

0:01:02.880 --> 0:01:05.120
<v Speaker 1>We know premiarily catching himself a saide by the way,

0:01:05.120 --> 0:01:07.200
<v Speaker 1>that as long as you keep inflation, say below three

0:01:07.200 --> 0:01:09.520
<v Speaker 1>and a half percent, an unemployment below five and a

0:01:09.560 --> 0:01:12.399
<v Speaker 1>half percent, they can kind of nurse things along. Okay.

0:01:12.440 --> 0:01:14.919
<v Speaker 1>So so you know, on a headline basis, yes, China's

0:01:14.920 --> 0:01:17.080
<v Speaker 1>inflation is accelerating. You could say that's pointing towards the

0:01:17.080 --> 0:01:18.800
<v Speaker 1>global trend, but I don't see it as a game changer.

0:01:19.160 --> 0:01:21.080
<v Speaker 1>You look at the trade data that we had earlier

0:01:21.120 --> 0:01:24.760
<v Speaker 1>in the weekend, particularly the export numbers very robust. I

0:01:24.800 --> 0:01:27.040
<v Speaker 1>can't recall I think it was eighteen percent. Was that

0:01:27.160 --> 0:01:30.040
<v Speaker 1>the game? And so when you look at what's happening

0:01:30.120 --> 0:01:33.440
<v Speaker 1>with producer prices, an increase of four point two percent.

0:01:33.520 --> 0:01:35.280
<v Speaker 1>And I think it's also fair to point out that

0:01:35.280 --> 0:01:38.800
<v Speaker 1>there has been a substantial pullback in the price of

0:01:38.880 --> 0:01:42.440
<v Speaker 1>crude oil, probably since the survey data for the month

0:01:42.480 --> 0:01:45.960
<v Speaker 1>of July was put together. So the producer price story

0:01:45.959 --> 0:01:48.080
<v Speaker 1>in Shina is a dramatic turnaround from where a war

0:01:48.120 --> 0:01:50.560
<v Speaker 1>a year ago. So today's numbers did show, like you mentioned,

0:01:50.760 --> 0:01:53.320
<v Speaker 1>a producer prices are cooling, and that's for two reasons.

0:01:53.320 --> 0:01:55.880
<v Speaker 1>And one base effect, it's being compared to a big

0:01:55.880 --> 0:01:58.600
<v Speaker 1>surge one year ago. A number two, like you mentioned,

0:01:58.880 --> 0:02:02.080
<v Speaker 1>commodity prices me off the boil and the oil prices

0:02:02.120 --> 0:02:05.080
<v Speaker 1>coming off the ball. Remember that oil actually is back

0:02:05.080 --> 0:02:07.320
<v Speaker 1>to where it was before the Russian invasion of Ukraine.

0:02:07.360 --> 0:02:09.720
<v Speaker 1>So all of that is lending itself towards taking pressure

0:02:09.720 --> 0:02:12.920
<v Speaker 1>off China's factory cost space. That would be good for

0:02:12.960 --> 0:02:16.240
<v Speaker 1>their profits, and you know, at the margins, it might

0:02:16.360 --> 0:02:19.520
<v Speaker 1>sort of take pressure off the global inflation story because

0:02:19.520 --> 0:02:21.840
<v Speaker 1>the Chinese factors won't be under as much pressure to

0:02:21.919 --> 0:02:25.280
<v Speaker 1>lift their own prices to the global consumers. But when

0:02:25.280 --> 0:02:28.040
<v Speaker 1>you take the PPI slowdown in its totality in China,

0:02:28.080 --> 0:02:29.560
<v Speaker 1>th it just kind of adds to the picture of

0:02:29.560 --> 0:02:31.760
<v Speaker 1>saying a few moments ago that, okay, you can say

0:02:31.800 --> 0:02:35.000
<v Speaker 1>headline inflation is picking up, but the overall inflation story

0:02:35.040 --> 0:02:40.000
<v Speaker 1>in China remains certainly relatively subdued and even somewhat subdued really,

0:02:40.240 --> 0:02:42.480
<v Speaker 1>and I think that the authorities won't be too concerned

0:02:42.480 --> 0:02:44.720
<v Speaker 1>about it, and they will continue to tap some money

0:02:44.760 --> 0:02:47.240
<v Speaker 1>into the economy to keep things taking over all, right,

0:02:47.320 --> 0:02:50.360
<v Speaker 1>continue to stimulate then, and looking ahead as well into

0:02:50.360 --> 0:02:53.000
<v Speaker 1>what kind of I guess impact we've seen from the

0:02:53.040 --> 0:02:56.120
<v Speaker 1>COVID lockdowns and and how much further that could complicate

0:02:56.160 --> 0:03:00.480
<v Speaker 1>things too. There's no doubt that the ongo in COVID

0:03:00.480 --> 0:03:03.160
<v Speaker 1>lockdowns are complicated the recovery, especially on the services and

0:03:03.160 --> 0:03:05.200
<v Speaker 1>the consumer side. That's one of the reasons inflation is

0:03:05.240 --> 0:03:09.000
<v Speaker 1>somewhat subdued. Juliet, You know there there has been clearly

0:03:09.000 --> 0:03:12.280
<v Speaker 1>the export story has recovered. Maybe that's a mixture of

0:03:12.480 --> 0:03:15.000
<v Speaker 1>factories getting back online. Now for the lockdowns, maybe it

0:03:15.000 --> 0:03:18.120
<v Speaker 1>does reflect ongoing robust global demand, but there are some

0:03:18.120 --> 0:03:20.519
<v Speaker 1>sounds of weakness in the numbers. But nonetheless, the really

0:03:20.560 --> 0:03:23.480
<v Speaker 1>soft part of the economy remains the real estate sector,

0:03:24.040 --> 0:03:27.240
<v Speaker 1>the consumer spending sector, in the services sector, and COVID

0:03:27.320 --> 0:03:29.520
<v Speaker 1>zero is kind of having casting a long shadow over

0:03:29.560 --> 0:03:33.200
<v Speaker 1>all of that. And obviously, with the variant of omercron

0:03:33.280 --> 0:03:35.480
<v Speaker 1>that we all know about, that's going to continue testing

0:03:35.600 --> 0:03:38.280
<v Speaker 1>China strategy. And you could argue China's over the worst

0:03:38.360 --> 0:03:40.839
<v Speaker 1>this lockdowns. Shanghai came out of that brutal two months

0:03:40.880 --> 0:03:43.800
<v Speaker 1>lockdown at the end of May, and perhaps China is

0:03:43.840 --> 0:03:46.000
<v Speaker 1>pulling clear of that, but nobody can say that for certain.

0:03:46.360 --> 0:03:48.640
<v Speaker 1>Still a long time before the Party Congress comes up

0:03:48.640 --> 0:03:51.000
<v Speaker 1>in November. So if there's not a resolution to the

0:03:51.040 --> 0:03:53.600
<v Speaker 1>fact that the property market is still suffering right now,

0:03:53.640 --> 0:03:57.320
<v Speaker 1>sales continue to shrink. If there's not a resolution, does

0:03:57.360 --> 0:03:59.480
<v Speaker 1>that mean that there is the probability that we're going

0:03:59.560 --> 0:04:02.800
<v Speaker 1>to see even more of a drag when it comes

0:04:02.840 --> 0:04:06.200
<v Speaker 1>to inflationary pressures on the retail level. Because the property

0:04:06.200 --> 0:04:09.600
<v Speaker 1>market is in such dire straits, I don't think anybody

0:04:09.640 --> 0:04:12.200
<v Speaker 1>is yet calling a bottom or turnaround for the real

0:04:12.320 --> 0:04:15.080
<v Speaker 1>estate sector. And as you say, when you consider the

0:04:15.120 --> 0:04:19.160
<v Speaker 1>outside effect that has on people's sense of self worth,

0:04:19.240 --> 0:04:23.240
<v Speaker 1>on household net worth in terms of overall economic activity,

0:04:23.720 --> 0:04:27.240
<v Speaker 1>the estimates are up to maybe around twenty percent economic activity.

0:04:27.400 --> 0:04:29.080
<v Speaker 1>So if you have the housing sector in the slump

0:04:29.120 --> 0:04:32.440
<v Speaker 1>that it is, with salesman continue to be weak, and anyway,

0:04:32.480 --> 0:04:35.520
<v Speaker 1>the ongoing practical disruptions linked with COVID zero in terms

0:04:35.520 --> 0:04:38.200
<v Speaker 1>of what that means for finishing developments and people getting

0:04:38.200 --> 0:04:40.359
<v Speaker 1>in about of course, that's going to continue to be

0:04:40.440 --> 0:04:45.040
<v Speaker 1>a drag on the broader economy. And nonetheless, though the

0:04:45.360 --> 0:04:47.880
<v Speaker 1>consensus is that Sean's second half will still be better

0:04:47.960 --> 0:04:51.120
<v Speaker 1>than the first half, that things will be improving that

0:04:51.200 --> 0:04:54.640
<v Speaker 1>the infrastructure spending is getting accelerated at the local government level.

0:04:54.839 --> 0:04:57.800
<v Speaker 1>That will start up some activity that the authorities will

0:04:57.839 --> 0:05:00.520
<v Speaker 1>put a floor under the under the realist its sectory

0:05:00.720 --> 0:05:03.280
<v Speaker 1>already they are taking measures, remember talk for special fund

0:05:03.680 --> 0:05:05.960
<v Speaker 1>to help those developers get those projects finished, and of

0:05:05.960 --> 0:05:08.360
<v Speaker 1>course mortgage forgiveness for those people who don't want to

0:05:08.480 --> 0:05:11.800
<v Speaker 1>pay the mortgages until the developments are done. So there's

0:05:11.839 --> 0:05:13.760
<v Speaker 1>a suggestion that maybe they might put a floor under it.

0:05:13.960 --> 0:05:15.920
<v Speaker 1>But again, a lot of ifs and boats in all

0:05:15.920 --> 0:05:18.080
<v Speaker 1>of this. You would have to say, this still remains

0:05:18.120 --> 0:05:20.520
<v Speaker 1>a lot of pressure on China's economy and if the

0:05:20.560 --> 0:05:22.840
<v Speaker 1>export story does come off the ball the way people

0:05:22.880 --> 0:05:24.599
<v Speaker 1>have been calling for a long time now, then it

0:05:24.600 --> 0:05:26.080
<v Speaker 1>could be a bumpy end of the year for them.

0:05:26.600 --> 0:05:28.160
<v Speaker 1>Speaking of getting out and about I know you've been

0:05:28.160 --> 0:05:31.799
<v Speaker 1>closely monitoring, both for your job and personally what's happening

0:05:31.800 --> 0:05:34.240
<v Speaker 1>in Hong Kong with the reduction of quarantine. To what

0:05:34.279 --> 0:05:37.279
<v Speaker 1>are you hearing from analysts in terms of whether or

0:05:37.279 --> 0:05:39.880
<v Speaker 1>not this is going to be able to revive and

0:05:39.880 --> 0:05:43.000
<v Speaker 1>support Hong Kong's role as a key financial center. Well,

0:05:43.000 --> 0:05:45.640
<v Speaker 1>it's obviously it's Stockholm syndrome. Again, you would have to

0:05:45.680 --> 0:05:48.559
<v Speaker 1>say when they cook quarantines from seven nights and three nights,

0:05:48.720 --> 0:05:51.880
<v Speaker 1>that's clearly a positive. It does will lend itself towards

0:05:51.920 --> 0:05:55.279
<v Speaker 1>better mobility and will help both residents and business people

0:05:55.560 --> 0:05:58.159
<v Speaker 1>getting into and out of Hong Kong going forward. But

0:05:58.440 --> 0:06:00.719
<v Speaker 1>of course let's not forget where we are a relative

0:06:00.760 --> 0:06:02.920
<v Speaker 1>to the rest of the world. It's still not just

0:06:03.000 --> 0:06:06.400
<v Speaker 1>quarantine but several kind of layers of defense or trip

0:06:06.440 --> 0:06:11.000
<v Speaker 1>wires that prohibit passengers or travelers getting tuned from Hong Kong.

0:06:11.080 --> 0:06:13.760
<v Speaker 1>So that's going to continue to drag on the mobility,

0:06:13.800 --> 0:06:16.039
<v Speaker 1>on its role as a global hub, on the ability

0:06:16.080 --> 0:06:17.840
<v Speaker 1>to do business with the rest of the world, especially

0:06:17.839 --> 0:06:21.599
<v Speaker 1>when New York and London, Singapore have reconnected with everybody else.

0:06:21.839 --> 0:06:24.160
<v Speaker 1>There is a feeling that the authorities are in the

0:06:24.320 --> 0:06:27.080
<v Speaker 1>path or trajectory now that they will continue to ease

0:06:27.440 --> 0:06:31.240
<v Speaker 1>barring some kind of another massive outbreak with variants, etcetera.

0:06:31.680 --> 0:06:33.760
<v Speaker 1>That remains to be seen. They're obviously being very cautious

0:06:33.760 --> 0:06:36.520
<v Speaker 1>as they are. Um there is supposed to be a

0:06:36.520 --> 0:06:38.560
<v Speaker 1>big financial summit in November. People looked at that and

0:06:38.720 --> 0:06:40.880
<v Speaker 1>maybe a deadline for when they might ease up in

0:06:40.920 --> 0:06:42.600
<v Speaker 1>the following three days and move to some kind of

0:06:42.640 --> 0:06:46.279
<v Speaker 1>a PC or testing thing. But you know, operating within

0:06:46.360 --> 0:06:49.080
<v Speaker 1>the political system that they are obviously on a headline basis,

0:06:49.120 --> 0:06:51.320
<v Speaker 1>you would say it's a positive for Hong Kong. It's

0:06:51.360 --> 0:06:53.800
<v Speaker 1>it's that they're stepping forward, but you know clearly it's

0:06:53.800 --> 0:06:55.200
<v Speaker 1>a negative at the same time, we have along way

0:06:55.200 --> 0:06:58.080
<v Speaker 1>to go. All right, Well, that's how it. Penda might

0:06:58.080 --> 0:06:59.520
<v Speaker 1>be able to see you in November in the Karen

0:06:59.520 --> 0:07:03.080
<v Speaker 1>Bloomberg's chief Asia Economics correspondent with US in Hong Kong,