1
00:00:04,600 --> 00:00:07,160
Speaker 1: Hello, and welcome to Stephanomics, the podcast that brings the

2
00:00:07,160 --> 00:00:16,239
Speaker 1: global economy to you this week with a Southeast Asian

3
00:00:16,280 --> 00:00:19,919
Speaker 1: feel because I'm spending a few days in Singapore. We've

4
00:00:19,920 --> 00:00:22,360
Speaker 1: been talking a lot recently about the global slowdown and

5
00:00:22,400 --> 00:00:25,680
Speaker 1: where it might lead. It's worth remembering that we also

6
00:00:25,840 --> 00:00:29,960
Speaker 1: saw trade and global manufacturing take a step downwards back

7
00:00:30,000 --> 00:00:34,640
Speaker 1: in and that didn't cause a global recession. In fact,

8
00:00:34,680 --> 00:00:36,960
Speaker 1: we look back on it now more as a pause

9
00:00:37,000 --> 00:00:40,600
Speaker 1: for breath in a long global recovery. But back then

10
00:00:41,120 --> 00:00:44,280
Speaker 1: China in effect came to the rescue with a massive

11
00:00:44,320 --> 00:00:47,240
Speaker 1: dose of stimulus for its economy. One of the things

12
00:00:47,240 --> 00:00:50,720
Speaker 1: that makes people uneasy about this latest slowdown is that

13
00:00:50,760 --> 00:00:54,160
Speaker 1: the Chinese authorities look much less likely to rescue the

14
00:00:54,240 --> 00:00:58,040
Speaker 1: global economy today. They're just too worried about where excessive

15
00:00:58,080 --> 00:01:03,120
Speaker 1: stimulus might lead. That's forcing some difficult conversations for policymakers

16
00:01:03,160 --> 00:01:06,320
Speaker 1: in countries such as Australia who have benefited so much

17
00:01:06,400 --> 00:01:09,680
Speaker 1: from China's economic momentum in the past. We'll hear more

18
00:01:09,720 --> 00:01:12,560
Speaker 1: about that from our Asia Managing editor Malcolm Scott in

19
00:01:12,560 --> 00:01:15,080
Speaker 1: a few minutes. But of course, the other reason this

20
00:01:15,160 --> 00:01:18,080
Speaker 1: time feels different is that the source of the trouble

21
00:01:18,440 --> 00:01:21,840
Speaker 1: is the US administration and its assault on global trade.

22
00:01:22,560 --> 00:01:26,560
Speaker 1: Bloomberg's Asia Economy correspondent Michelle jam Risco is going to

23
00:01:26,640 --> 00:01:29,880
Speaker 1: talk to me about Southeast Asia's response to Donald Trump's

24
00:01:29,880 --> 00:01:32,400
Speaker 1: trade wars in a little bit, But first, our Real

25
00:01:32,440 --> 00:01:36,480
Speaker 1: Economy editor Sarah McGregor, who's based in Los Angeles, has

26
00:01:36,480 --> 00:01:38,840
Speaker 1: been catching up with an old school friend of hers

27
00:01:39,040 --> 00:01:41,560
Speaker 1: who wanted to set up a new business there and

28
00:01:41,640 --> 00:01:57,240
Speaker 1: found herself right in the front lines. What were the

29
00:01:57,280 --> 00:02:00,680
Speaker 1: first days of starting your business? Line the funny throughout

30
00:02:00,720 --> 00:02:03,240
Speaker 1: my kitchen table. I'm not gonna lie. It wasn't glamorous

31
00:02:03,280 --> 00:02:05,160
Speaker 1: at all. I think like it was exciting for me

32
00:02:05,240 --> 00:02:11,720
Speaker 1: and scary. It took a huge leap of faith for

33
00:02:11,840 --> 00:02:14,320
Speaker 1: Darava Echio to leave her day job and start a

34
00:02:14,320 --> 00:02:18,600
Speaker 1: beauty company in Los Angeles five years ago. Dara knew

35
00:02:18,639 --> 00:02:21,560
Speaker 1: she had the qualities to be a successful entrepreneur. Like

36
00:02:21,639 --> 00:02:25,920
Speaker 1: industry expertise, she also has a tireless work ethic that

37
00:02:26,080 --> 00:02:28,720
Speaker 1: was instilled by her parents, who fled the Southeast Asian

38
00:02:28,800 --> 00:02:31,120
Speaker 1: nation of Laos with nothing when she was an infant

39
00:02:31,480 --> 00:02:35,560
Speaker 1: and worked their way into the middle class. Best of all,

40
00:02:35,680 --> 00:02:39,120
Speaker 1: Dara had a great idea to create a cosmetics branding

41
00:02:39,160 --> 00:02:43,320
Speaker 1: company she called Venom. In doing that, she chose a

42
00:02:43,360 --> 00:02:46,440
Speaker 1: growing industry that can often weather the ups and downs

43
00:02:46,440 --> 00:02:50,560
Speaker 1: of even the toughest economic times. Research has noted the

44
00:02:50,560 --> 00:02:54,239
Speaker 1: lipstick effect, which shows makeup and lingerie stores thrive in

45
00:02:54,320 --> 00:02:59,000
Speaker 1: tougher economic times as consumers treat themselves to lower cost luxuries.

46
00:03:00,840 --> 00:03:04,079
Speaker 1: Fast forward to today, and she's moved her operations from

47
00:03:04,080 --> 00:03:06,360
Speaker 1: her kitchen table to an office in West l A.

48
00:03:07,680 --> 00:03:11,560
Speaker 1: Dara has six employees and contracts to develop and manufacture

49
00:03:11,840 --> 00:03:15,760
Speaker 1: customize beauty products in the millions of dollars. My mom

50
00:03:15,800 --> 00:03:18,000
Speaker 1: and my father being like really hard working, I guess

51
00:03:18,000 --> 00:03:21,320
Speaker 1: like taught us those values and we would see them

52
00:03:21,360 --> 00:03:23,600
Speaker 1: working like really late hours and just seeing them like

53
00:03:23,639 --> 00:03:25,240
Speaker 1: really grind for us, you know. So I feel like

54
00:03:25,360 --> 00:03:28,600
Speaker 1: my work ethic today comes from having them as role models.

55
00:03:29,080 --> 00:03:30,720
Speaker 1: Nothing was hard given to us, so we would have

56
00:03:30,760 --> 00:03:34,440
Speaker 1: to really like learn it ourselves. But last year, Dara's

57
00:03:34,520 --> 00:03:37,840
Speaker 1: dreams collided with the Trump Administration's trade war with China.

58
00:03:38,520 --> 00:03:41,240
Speaker 1: She was drawn into a conflict. She wanted nothing to

59
00:03:41,280 --> 00:03:45,800
Speaker 1: do with President Donald Trump's tariffs on Chinese goods hit

60
00:03:45,920 --> 00:03:49,000
Speaker 1: all sorts of items, including lipstick and I make up.

61
00:03:50,120 --> 00:03:54,040
Speaker 1: Almost overnight, Dara realized the harsh reality that her very

62
00:03:54,040 --> 00:03:56,960
Speaker 1: own supply chains in China were in the firing line. Yeah,

63
00:03:56,960 --> 00:03:58,520
Speaker 1: it was weird because I didn't I actually didn't think

64
00:03:58,520 --> 00:04:00,000
Speaker 1: about it, and I was like, Oh, it's gonna be fine.

65
00:04:00,040 --> 00:04:02,920
Speaker 1: We already have paid our you know, our people, and

66
00:04:03,240 --> 00:04:05,480
Speaker 1: it's good. We already have these purchase orders in place.

67
00:04:05,480 --> 00:04:07,840
Speaker 1: But what I didn't realize how bad it was was

68
00:04:07,920 --> 00:04:11,080
Speaker 1: going from zero to zero to ten. Because when we

69
00:04:11,120 --> 00:04:14,800
Speaker 1: do our deals with our clients, we have probably put

70
00:04:14,840 --> 00:04:17,760
Speaker 1: everything on paper and done the planning and or deals

71
00:04:17,800 --> 00:04:20,599
Speaker 1: about eight months prior, so that fixed costs that we

72
00:04:20,640 --> 00:04:23,360
Speaker 1: agreed to with our client has been that all on

73
00:04:23,440 --> 00:04:27,159
Speaker 1: one cost. So if we get charged something eight months

74
00:04:27,200 --> 00:04:29,000
Speaker 1: down the role that we didn't predict to fix into

75
00:04:29,040 --> 00:04:34,160
Speaker 1: our costs, then who pays for that? American consumers may

76
00:04:34,200 --> 00:04:37,080
Speaker 1: hear more about whether prices will be rising for familiar

77
00:04:37,200 --> 00:04:42,000
Speaker 1: China made goods like iPhones, Craton barrel furniture, or Adidas sneakers,

78
00:04:42,520 --> 00:04:45,800
Speaker 1: but the tariffs have been particularly painful for small businesses,

79
00:04:46,200 --> 00:04:49,000
Speaker 1: which are a powerful engine of the U S economy.

80
00:04:49,080 --> 00:04:53,679
Speaker 1: Accounting for about fort of GDP and employing almost half

81
00:04:53,720 --> 00:04:57,960
Speaker 1: of American workers. According to JP Morgan, they play a

82
00:04:58,040 --> 00:05:01,359
Speaker 1: key role in global commerce, producing about a third of

83
00:05:01,400 --> 00:05:05,200
Speaker 1: all exports that leave America's shores worth nearly half a

84
00:05:05,240 --> 00:05:09,960
Speaker 1: trillion dollars a year. Robert Heiblum, a business owner and

85
00:05:10,080 --> 00:05:13,719
Speaker 1: chair of the Small Business Council of the Consumer Technology Association,

86
00:05:14,440 --> 00:05:17,400
Speaker 1: explains why smaller businesses can be more vulnerable to the

87
00:05:17,440 --> 00:05:23,520
Speaker 1: trade wark followed than large ones. The problem is limited

88
00:05:23,560 --> 00:05:30,000
Speaker 1: castital cash, and this takes cash. Secondarily, it's they don't

89
00:05:30,040 --> 00:05:34,239
Speaker 1: have diverse businesses. They're not multinational. They cannot or set

90
00:05:34,279 --> 00:05:40,039
Speaker 1: their business losses here with business games elsewhere. Third is

91
00:05:40,200 --> 00:05:44,520
Speaker 1: most small companies don't have tremendous pricing power, and so

92
00:05:44,720 --> 00:05:49,480
Speaker 1: they're subject to the market, and that's very limiting, particularly

93
00:05:49,480 --> 00:05:53,680
Speaker 1: when when tariffs are twenty five or too much to absorb,

94
00:05:54,440 --> 00:05:58,000
Speaker 1: yet some of their big competitors will. As a matter

95
00:05:58,080 --> 00:06:02,800
Speaker 1: of course, Trump campaigned on a message of resurrecting the

96
00:06:02,839 --> 00:06:06,440
Speaker 1: by gone glory days of manufacturing and bringing back jobs.

97
00:06:07,120 --> 00:06:11,280
Speaker 1: He was essentially selling the American dream, But for business

98
00:06:11,320 --> 00:06:14,960
Speaker 1: people like Dara, the tariff war he started is making

99
00:06:15,000 --> 00:06:17,919
Speaker 1: it much harder to get ahead even with hard work

100
00:06:17,960 --> 00:06:21,720
Speaker 1: and grit. The uncertainty and dragon business has made that

101
00:06:21,839 --> 00:06:38,040
Speaker 1: dream a little further out of reach for the small

102
00:06:38,120 --> 00:06:41,400
Speaker 1: businesses in terms of the questions that they have is

103
00:06:41,880 --> 00:06:45,960
Speaker 1: how can we plan, how can we realistically plan for

104
00:06:46,120 --> 00:06:50,160
Speaker 1: inventories or our plan for the movement of our goods

105
00:06:50,200 --> 00:06:54,280
Speaker 1: that we need if there's this threat of global tariff.

106
00:06:54,760 --> 00:06:58,440
Speaker 1: Maria Selina's is president of the Los Angeles Area Chamber

107
00:06:58,480 --> 00:07:02,000
Speaker 1: of Commerce. She says her region has really been hit

108
00:07:02,040 --> 00:07:04,880
Speaker 1: hard by the tariffs since it has one of America's

109
00:07:04,960 --> 00:07:09,720
Speaker 1: largest concentrations of smaller businesses. Our advice to them is

110
00:07:10,120 --> 00:07:14,680
Speaker 1: to be as planful as possible. Is very difficult to

111
00:07:15,120 --> 00:07:19,960
Speaker 1: manage a business when there's uncertainty, and especially in international markets,

112
00:07:20,480 --> 00:07:23,480
Speaker 1: it's important for them to make sure they understand all

113
00:07:23,520 --> 00:07:27,240
Speaker 1: the different levers that are at their fingertips in order

114
00:07:27,240 --> 00:07:31,960
Speaker 1: to react to conditions like tariffs. But those those are

115
00:07:32,000 --> 00:07:37,240
Speaker 1: all really challenging conversations for small businesses to have because

116
00:07:37,280 --> 00:07:43,160
Speaker 1: they really do not have the flexibility that larger organizations

117
00:07:43,240 --> 00:07:48,520
Speaker 1: have in being able to make a movement in in

118
00:07:48,640 --> 00:07:53,920
Speaker 1: how their products flow. Over the years, Dara has visited

119
00:07:54,000 --> 00:07:56,800
Speaker 1: China many times and She plans to go again in December,

120
00:07:57,720 --> 00:08:00,040
Speaker 1: one conversation at a time. She's built a person o

121
00:08:00,160 --> 00:08:03,559
Speaker 1: rapport with factory owners and managers. She's developed a small

122
00:08:03,600 --> 00:08:06,360
Speaker 1: network of factories she can call on to deliver her

123
00:08:06,480 --> 00:08:10,360
Speaker 1: orders at high quality and in a reliable way. She's

124
00:08:10,400 --> 00:08:13,280
Speaker 1: found that factories in China operate at such a low cost,

125
00:08:13,320 --> 00:08:16,040
Speaker 1: with a quick turnaround, and have a personal touch that

126
00:08:16,080 --> 00:08:20,000
Speaker 1: she just hasn't found in the United States. Some bigger

127
00:08:20,040 --> 00:08:23,080
Speaker 1: companies are able to relocate their supply chains to Vietnam

128
00:08:23,440 --> 00:08:27,559
Speaker 1: and other cheaper nations, but for Dara, doing that would

129
00:08:27,560 --> 00:08:30,320
Speaker 1: mark a big setback in her efforts. Over the past

130
00:08:30,360 --> 00:08:34,240
Speaker 1: few years. We spend years and years betting our factories,

131
00:08:34,400 --> 00:08:36,960
Speaker 1: the investment, the money that it takes to like test

132
00:08:37,080 --> 00:08:39,800
Speaker 1: and work and make sure that because we spent a

133
00:08:39,800 --> 00:08:42,760
Speaker 1: lot of time like even like helping raise their quality

134
00:08:42,800 --> 00:08:46,440
Speaker 1: standard and create these like specifications for inspection and like

135
00:08:46,440 --> 00:08:48,800
Speaker 1: because we have a certain quality of bar that we're

136
00:08:48,840 --> 00:08:52,080
Speaker 1: known for. It so years and years and even like Matt,

137
00:08:52,160 --> 00:08:54,000
Speaker 1: you know, like just the time it takes to get

138
00:08:54,040 --> 00:08:56,800
Speaker 1: our factories to that point in training. But we'd have

139
00:08:56,880 --> 00:08:58,559
Speaker 1: to start from scratch, and God knows, like it might

140
00:08:58,640 --> 00:09:01,000
Speaker 1: take like another two years to get this new Vietnamese

141
00:09:01,040 --> 00:09:03,079
Speaker 1: which is fine. You know, if this is going to continue,

142
00:09:03,120 --> 00:09:04,800
Speaker 1: then maybe we would make the plan to do that.

143
00:09:04,840 --> 00:09:08,400
Speaker 1: But is it better to invest in that or to

144
00:09:08,520 --> 00:09:10,840
Speaker 1: just like reinvest in what we're already doing and then

145
00:09:10,880 --> 00:09:12,400
Speaker 1: just take the head and just like wait it up.

146
00:09:14,120 --> 00:09:17,720
Speaker 1: Dar is just one example of many businesses across America

147
00:09:17,800 --> 00:09:20,760
Speaker 1: who are suffering the impact of the trade war. It's

148
00:09:20,760 --> 00:09:23,920
Speaker 1: slowing down their investments and hiring decisions and disrupting their

149
00:09:23,960 --> 00:09:27,120
Speaker 1: supply chains. Add it all up and it can be

150
00:09:27,160 --> 00:09:29,640
Speaker 1: a matter of life or death for some small businesses.

151
00:09:30,000 --> 00:09:32,920
Speaker 1: It is frustrating because I feel like when there was

152
00:09:33,880 --> 00:09:36,880
Speaker 1: material increases and stuff, we might cover it, you know,

153
00:09:36,880 --> 00:09:39,360
Speaker 1: because it's just a small thing because we don't try

154
00:09:39,360 --> 00:09:41,720
Speaker 1: to nickel a dime everything. But when it comes to

155
00:09:42,640 --> 00:09:45,319
Speaker 1: a huge loss like that, like in the Purien a

156
00:09:45,400 --> 00:09:48,840
Speaker 1: tax on your commercial goods, that is it's pretty big

157
00:09:52,480 --> 00:10:00,600
Speaker 1: for Bloomberg News. I'm Sarah McGregor. So that's how the

158
00:10:00,640 --> 00:10:04,600
Speaker 1: trade wars feel for a small business sitting in California.

159
00:10:04,800 --> 00:10:06,920
Speaker 1: But I wanted to take advantage of being here in

160
00:10:06,920 --> 00:10:09,800
Speaker 1: Singapore to get the other side of the story. You

161
00:10:09,800 --> 00:10:13,680
Speaker 1: know here in Southeast Asia, these economies famously have used

162
00:10:13,800 --> 00:10:16,400
Speaker 1: exporting to the rest of the world as their ticket

163
00:10:16,480 --> 00:10:21,360
Speaker 1: to national prosperity, and Bloomberg's Asia Economy correspondent Michelle jem

164
00:10:21,440 --> 00:10:24,520
Speaker 1: Riscoe spends her days here in Singapore and around the

165
00:10:24,559 --> 00:10:29,439
Speaker 1: region analyzing every twist and turn in that story. Michelle,

166
00:10:29,520 --> 00:10:31,280
Speaker 1: you were you were listening to that? I mean, does

167
00:10:31,320 --> 00:10:35,600
Speaker 1: does any of her experience bear similarity to what companies

168
00:10:35,600 --> 00:10:38,240
Speaker 1: are experiencing here? Well, it certainly does in the sense

169
00:10:38,280 --> 00:10:40,960
Speaker 1: that Dara's story is the struggle to adapt to the

170
00:10:41,040 --> 00:10:44,679
Speaker 1: US tariffs and in any way possible, But the conversation

171
00:10:44,720 --> 00:10:46,800
Speaker 1: is a little bit different in Southeast Asia. I mean,

172
00:10:46,840 --> 00:10:49,920
Speaker 1: I think of basically three other avenues that they're they're

173
00:10:49,920 --> 00:10:52,600
Speaker 1: dealing with three other challenges. One is how to compete

174
00:10:52,600 --> 00:10:55,080
Speaker 1: for the attention of those companies that are actually reworking

175
00:10:55,080 --> 00:10:57,520
Speaker 1: their supply chains out of China and to get that

176
00:10:57,920 --> 00:11:00,800
Speaker 1: extra business. Conversely, the I can could be how to

177
00:11:00,840 --> 00:11:04,240
Speaker 1: manage expectations and overflows of orders, you know, when that

178
00:11:04,240 --> 00:11:07,280
Speaker 1: comes all of a sudden these companies rework those supply chains.

179
00:11:07,720 --> 00:11:10,280
Speaker 1: And the third is that they sort of political one

180
00:11:10,320 --> 00:11:13,080
Speaker 1: they don't want to be seen these businesses as taking asides,

181
00:11:13,320 --> 00:11:17,000
Speaker 1: whether it be the US of China or not favoring either.

182
00:11:17,120 --> 00:11:20,199
Speaker 1: So there are a few different quirks to the story

183
00:11:20,240 --> 00:11:22,360
Speaker 1: here in the region. Yeah, and I think it's interesting

184
00:11:22,360 --> 00:11:25,360
Speaker 1: that that actually rushing to take advantage of the trade

185
00:11:25,360 --> 00:11:28,600
Speaker 1: wars rather than rather than to dodge them, even with

186
00:11:28,640 --> 00:11:31,200
Speaker 1: some of the politic politics that comes with that. Now,

187
00:11:31,240 --> 00:11:33,800
Speaker 1: some people listening might remember that you brought us a

188
00:11:33,840 --> 00:11:38,280
Speaker 1: great story from the factory flaws of Vietnam when Vietnam

189
00:11:38,400 --> 00:11:41,760
Speaker 1: was considered to be a great winner from the US

190
00:11:41,880 --> 00:11:44,040
Speaker 1: China trade war, and then we had to follow up

191
00:11:44,040 --> 00:11:45,960
Speaker 1: a few months later, which showed us that there's an

192
00:11:45,960 --> 00:11:49,040
Speaker 1: alternative risk that you can be too successful taking advantage

193
00:11:49,040 --> 00:11:52,000
Speaker 1: of trade wars. And then the spotlight moves to you

194
00:11:52,080 --> 00:11:54,360
Speaker 1: remind us what's happened to Vietnam? Right, Well, it is

195
00:11:54,400 --> 00:11:57,160
Speaker 1: a complicated story, even if you just look at this year.

196
00:11:57,240 --> 00:11:59,400
Speaker 1: I mean, of course, we we have been tracing the

197
00:11:59,440 --> 00:12:02,040
Speaker 1: successes is of the both the furniture maker that you

198
00:12:02,040 --> 00:12:05,199
Speaker 1: mentioned as well as countless others that are seeing renewed

199
00:12:05,280 --> 00:12:09,640
Speaker 1: interest in Vietnam, and sometimes the interest is outrunning the reality. Um,

200
00:12:09,760 --> 00:12:12,000
Speaker 1: so you know there are two kind of cautionary tales

201
00:12:12,040 --> 00:12:14,520
Speaker 1: that we've been also tracing for Vietnam's case this year,

202
00:12:14,520 --> 00:12:17,079
Speaker 1: and one is, you know what you mentioned, uh, not

203
00:12:17,520 --> 00:12:21,000
Speaker 1: not trying to boast too much of one's success, is uh,

204
00:12:21,040 --> 00:12:23,280
Speaker 1: you know, for fear that a tweet could turn it around,

205
00:12:23,400 --> 00:12:26,200
Speaker 1: or or other tools by the US. We've seen, of course,

206
00:12:26,240 --> 00:12:29,320
Speaker 1: the currency manipulation report by the U. S. Treasury taking

207
00:12:29,360 --> 00:12:32,520
Speaker 1: away of duty free preferences that they just did with Thailand,

208
00:12:33,080 --> 00:12:36,280
Speaker 1: or you know, even extra tariffs. And in the case

209
00:12:36,280 --> 00:12:39,160
Speaker 1: of Vietnam, this this happened as well, that tariffs were

210
00:12:39,200 --> 00:12:43,320
Speaker 1: applied as sort of a penalty for transhipment issues that

211
00:12:43,360 --> 00:12:45,800
Speaker 1: the US felt that too many of the steel products

212
00:12:45,800 --> 00:12:48,960
Speaker 1: were we're actually originating in other countries, and Vietnam wasn't

213
00:12:49,000 --> 00:12:51,720
Speaker 1: doing enough to uh kind of stop that sort of

214
00:12:52,080 --> 00:12:54,640
Speaker 1: end running of the tariffs that had been imposed. So

215
00:12:54,720 --> 00:12:56,560
Speaker 1: you know, there's there's all sorts of penalties that they

216
00:12:56,600 --> 00:12:58,960
Speaker 1: can they could face. And then the other of course

217
00:12:59,000 --> 00:13:02,680
Speaker 1: being you know, they they're they're constantly fearing that they're

218
00:13:02,720 --> 00:13:05,840
Speaker 1: just not catching up enough in terms of development and

219
00:13:06,360 --> 00:13:10,240
Speaker 1: advancing their infrastructure enough to handle the inflows. So that's

220
00:13:10,240 --> 00:13:13,160
Speaker 1: certainly an issue with Vietnam, where they're looking at much

221
00:13:13,200 --> 00:13:16,000
Speaker 1: needed infrastructure investment that's just not moving fast enough, and

222
00:13:16,040 --> 00:13:19,400
Speaker 1: the views of many regulations are are still tight around

223
00:13:19,480 --> 00:13:22,240
Speaker 1: and around some things is if you talk to businesses,

224
00:13:22,280 --> 00:13:25,480
Speaker 1: they're looking for faster training of employees, UM, you know,

225
00:13:25,600 --> 00:13:29,920
Speaker 1: better labor regulations, easier ways to buy land and property UM,

226
00:13:29,960 --> 00:13:32,079
Speaker 1: and really just the basics of road and rail to

227
00:13:32,160 --> 00:13:35,080
Speaker 1: kind of get things around the country and move products around.

228
00:13:35,160 --> 00:13:37,840
Speaker 1: So a lot of adjustments need to be made, and

229
00:13:37,840 --> 00:13:40,160
Speaker 1: I think sometimes they're just not moving fast enough. I

230
00:13:40,160 --> 00:13:42,160
Speaker 1: guess the other thing, which certainly I hear a lot

231
00:13:42,600 --> 00:13:46,440
Speaker 1: talking to officials and business people in Europe, but we

232
00:13:46,520 --> 00:13:50,559
Speaker 1: also had this morning talking to officials and others in Singapore,

233
00:13:50,600 --> 00:13:55,000
Speaker 1: is this perception that UM globalization is now going to

234
00:13:55,080 --> 00:13:56,880
Speaker 1: be sort of torn in half, that there's going to

235
00:13:56,960 --> 00:14:00,080
Speaker 1: be a US side and a China side UH, and

236
00:14:00,240 --> 00:14:03,640
Speaker 1: disputes around companies like Huawei are going to force people

237
00:14:03,720 --> 00:14:05,559
Speaker 1: to take sides. Am I going to go the kind

238
00:14:05,559 --> 00:14:11,199
Speaker 1: of Huawei Chinese oriented technologies even if that means I

239
00:14:11,280 --> 00:14:13,280
Speaker 1: might get cut out of deals in the US, or

240
00:14:13,320 --> 00:14:15,160
Speaker 1: do I have to pick the US? You know, in

241
00:14:15,200 --> 00:14:18,160
Speaker 1: Europe in general, when you raise that to European businesses.

242
00:14:18,600 --> 00:14:22,120
Speaker 1: They tend to think that Europe will will if it

243
00:14:22,200 --> 00:14:25,680
Speaker 1: has to, would end up siding with the US. Obviously,

244
00:14:25,720 --> 00:14:28,760
Speaker 1: it's it's not so much of a question here because

245
00:14:28,800 --> 00:14:32,360
Speaker 1: people are so caught up with the China's economy and

246
00:14:32,400 --> 00:14:35,360
Speaker 1: trade with China. But the companies that you talk to,

247
00:14:35,560 --> 00:14:37,880
Speaker 1: how are they approaching that question if there really is

248
00:14:37,920 --> 00:14:39,280
Speaker 1: going to be a point where you have to take

249
00:14:39,280 --> 00:14:42,120
Speaker 1: sides in this global economy? Yeah, well, some you know,

250
00:14:42,200 --> 00:14:44,440
Speaker 1: they want to hedge their bets. They want to kind

251
00:14:44,440 --> 00:14:46,880
Speaker 1: of put investments everywhere and make sure that they're not

252
00:14:47,040 --> 00:14:50,160
Speaker 1: upsetting either side. Um and you know, they in a

253
00:14:50,160 --> 00:14:52,480
Speaker 1: way they've kind of had to act like governments. They've

254
00:14:52,520 --> 00:14:55,120
Speaker 1: had to, you know, think, how do I both lobby

255
00:14:55,840 --> 00:14:58,080
Speaker 1: from my perspective on how I don't think the tariffs

256
00:14:58,200 --> 00:15:00,520
Speaker 1: might be helping or you know, it's it's getting harder

257
00:15:00,560 --> 00:15:03,000
Speaker 1: to adapt or I need this or that to set

258
00:15:03,040 --> 00:15:04,720
Speaker 1: up in a new country. But at the same time,

259
00:15:04,760 --> 00:15:06,880
Speaker 1: I don't want to push too hard in the sense

260
00:15:06,920 --> 00:15:09,840
Speaker 1: of you know, upsetting either side, and and and as

261
00:15:09,840 --> 00:15:12,320
Speaker 1: you say, picking sides, um and certainly we see that

262
00:15:12,360 --> 00:15:16,320
Speaker 1: playing out in things like five G and Company. Based debates,

263
00:15:16,480 --> 00:15:19,400
Speaker 1: So it's it's gotten really sticky on that front. And

264
00:15:19,480 --> 00:15:21,560
Speaker 1: when you talk about the U. S and China, particularly

265
00:15:21,600 --> 00:15:24,520
Speaker 1: in this region, it's a very sensitive conversation. For a

266
00:15:24,520 --> 00:15:27,840
Speaker 1: long time, China has been the top trading partner of

267
00:15:27,880 --> 00:15:31,000
Speaker 1: most of the top economies in Southeast Asia, but at

268
00:15:31,000 --> 00:15:33,320
Speaker 1: the same time, a lot of them have very strong security,

269
00:15:33,400 --> 00:15:36,560
Speaker 1: investment and strategic ties to the US. So it's it's

270
00:15:36,560 --> 00:15:39,760
Speaker 1: not an easy decision, and one that you'll hear Singapore

271
00:15:39,800 --> 00:15:43,400
Speaker 1: policymakers especially constantly harp that they don't want to ever

272
00:15:43,440 --> 00:15:45,280
Speaker 1: see the day where they have to pick a side.

273
00:15:45,640 --> 00:15:47,720
Speaker 1: Many people think that is where we're heading, because this

274
00:15:47,800 --> 00:15:50,000
Speaker 1: doesn't seem to be something that's got This change in

275
00:15:50,040 --> 00:15:52,920
Speaker 1: the U. S. China relationship doesn't seem to be something

276
00:15:52,920 --> 00:15:54,520
Speaker 1: that was going to change even if we get a

277
00:15:54,600 --> 00:15:59,440
Speaker 1: change of administration in twenty We've talked about before. People

278
00:15:59,480 --> 00:16:03,120
Speaker 1: in Congress, and certainly many of the Democratic presidential candidates

279
00:16:03,560 --> 00:16:08,320
Speaker 1: are just as suspicious about China and have some of

280
00:16:08,360 --> 00:16:11,440
Speaker 1: the same approach that we've seen from President Trump. So

281
00:16:11,600 --> 00:16:13,760
Speaker 1: for a country like Singapore that's always been a gateway

282
00:16:14,240 --> 00:16:17,520
Speaker 1: between West and East, gosh, that's a the risk is

283
00:16:17,560 --> 00:16:20,840
Speaker 1: that they will feel really torn torn in half in

284
00:16:20,920 --> 00:16:24,280
Speaker 1: terms of their economic model. Michelle, thanks very much for

285
00:16:24,360 --> 00:16:35,560
Speaker 1: chatting to me and being here in Singapore. Thanks for Finally,

286
00:16:35,840 --> 00:16:38,960
Speaker 1: I wanted to chat briefly with our managing editor for

287
00:16:39,040 --> 00:16:42,920
Speaker 1: Economics in all of Asia, Malcolm Scott, because his team

288
00:16:42,920 --> 00:16:46,200
Speaker 1: had produced an interesting story this week about three central

289
00:16:46,200 --> 00:16:48,960
Speaker 1: banks in the region who you'd have to say had

290
00:16:48,960 --> 00:16:52,760
Speaker 1: a good global financial crisis ten years ago, but are

291
00:16:52,760 --> 00:16:56,360
Speaker 1: looking a bit more vulnerable to another downturn now. It's

292
00:16:56,400 --> 00:17:00,360
Speaker 1: South Korea, Australia and New Zealand. Malcolm Fak thanks for

293
00:17:00,400 --> 00:17:04,880
Speaker 1: doing this down the line from Sydney. Remind us how

294
00:17:05,080 --> 00:17:09,720
Speaker 1: those three countries managed to avoid doing anything that dramatic

295
00:17:09,920 --> 00:17:12,240
Speaker 1: with their monetary policy last time around in the global

296
00:17:12,280 --> 00:17:15,720
Speaker 1: financial crisis. Well, to start with, they had much higher

297
00:17:15,760 --> 00:17:19,040
Speaker 1: cash rates than they do now, much higher benchmark interest rates,

298
00:17:19,080 --> 00:17:22,879
Speaker 1: so they did cut aggressively. They also had aggressive fiscal

299
00:17:22,960 --> 00:17:26,520
Speaker 1: responses when demand fell off a cliff h during the

300
00:17:26,560 --> 00:17:29,359
Speaker 1: financial crisis, but they had a lot of policy room

301
00:17:29,480 --> 00:17:32,280
Speaker 1: to work with and they used it very efficiently. In

302
00:17:32,280 --> 00:17:35,720
Speaker 1: Australia's case, there was even checks posted out to most

303
00:17:35,760 --> 00:17:38,679
Speaker 1: citizens to to go and spend in the stores and

304
00:17:38,760 --> 00:17:43,080
Speaker 1: that meant all three, uh, you know, avoided the worst

305
00:17:43,119 --> 00:17:45,879
Speaker 1: of the global financial crisis. And then their links to

306
00:17:46,000 --> 00:17:49,879
Speaker 1: China helped. In New Zealand's case, it was dairy white

307
00:17:50,200 --> 00:17:52,760
Speaker 1: gold they called it at the time. In Australia it

308
00:17:52,880 --> 00:17:55,760
Speaker 1: was mining investment. That massive stimulus we saw in China

309
00:17:56,160 --> 00:17:59,200
Speaker 1: really helped rev up Australia's economy as well. And in

310
00:17:59,320 --> 00:18:04,080
Speaker 1: Korea's case, the tech cycle really didn't suffer so much

311
00:18:04,480 --> 00:18:09,520
Speaker 1: and they saw a big V shaped recovery into that

312
00:18:09,560 --> 00:18:13,360
Speaker 1: really moded them out of the hard times. Now we're

313
00:18:13,359 --> 00:18:16,800
Speaker 1: in a very different situation. Yes, And I was, I mean,

314
00:18:16,840 --> 00:18:18,520
Speaker 1: it's interesting, I said at the start of the program

315
00:18:18,600 --> 00:18:21,360
Speaker 1: that we had had, you know, in the previous slowdowns,

316
00:18:21,400 --> 00:18:25,000
Speaker 1: even in the in this current recovery, and for example,

317
00:18:25,080 --> 00:18:26,680
Speaker 1: you know, the big thing that came to rescue the

318
00:18:26,680 --> 00:18:30,840
Speaker 1: global economy was China. China stimulus. Um, you don't we

319
00:18:30,880 --> 00:18:33,040
Speaker 1: don't have that anymore, which is important for all of

320
00:18:33,080 --> 00:18:36,479
Speaker 1: the world, but it's particularly important for this region. So

321
00:18:36,680 --> 00:18:38,520
Speaker 1: your piece this week, or the piece from your team,

322
00:18:38,560 --> 00:18:41,600
Speaker 1: said that those three economies were now just one shock

323
00:18:41,640 --> 00:18:45,359
Speaker 1: away from using quantitative ease NG doing the bond purchases

324
00:18:45,400 --> 00:18:47,639
Speaker 1: in order to boost the money supply that we saw

325
00:18:48,200 --> 00:18:51,240
Speaker 1: in so many other countries during the global financial crisis.

326
00:18:51,359 --> 00:18:54,359
Speaker 1: Is that something people are talking about there. It's something

327
00:18:54,400 --> 00:18:56,440
Speaker 1: that a lot of people are talking about because all

328
00:18:56,440 --> 00:18:59,320
Speaker 1: of the central bank governors have started to mention it

329
00:18:59,480 --> 00:19:02,920
Speaker 1: from the three economies now, they've done it reluctantly so far,

330
00:19:03,119 --> 00:19:05,360
Speaker 1: and each one of them have said, hey, we may

331
00:19:05,440 --> 00:19:07,760
Speaker 1: have to start looking at this, but we don't anticipate

332
00:19:07,880 --> 00:19:10,000
Speaker 1: will have to use it. That's been pretty much the

333
00:19:10,040 --> 00:19:13,920
Speaker 1: consistent message. But just the very fact that they've acknowledged

334
00:19:14,200 --> 00:19:17,479
Speaker 1: that they're running out of room in conventional space and

335
00:19:17,560 --> 00:19:20,560
Speaker 1: have acknowledged that they're starting to look at policy options

336
00:19:20,560 --> 00:19:24,640
Speaker 1: in the unconventional space has really got economists, you know,

337
00:19:25,000 --> 00:19:28,680
Speaker 1: running their game plays, running the scenario analysis, looking at

338
00:19:28,840 --> 00:19:32,720
Speaker 1: what sort of quee, what sort of unorthodox policies each

339
00:19:32,760 --> 00:19:35,960
Speaker 1: of the banks might take should they continue to need

340
00:19:36,000 --> 00:19:39,280
Speaker 1: to stimulate their economies, And do you think I mean,

341
00:19:39,280 --> 00:19:42,160
Speaker 1: this has been a region that has in the past,

342
00:19:42,160 --> 00:19:44,680
Speaker 1: certainly Australia and New Zealand led the way and some

343
00:19:45,040 --> 00:19:48,520
Speaker 1: of the innovations we've seen in central banking, making them

344
00:19:48,560 --> 00:19:52,480
Speaker 1: central banks independent, having inflation targets. You know, both of

345
00:19:52,480 --> 00:19:56,760
Speaker 1: those things were first tried or fully developed in Australia

346
00:19:56,840 --> 00:19:59,159
Speaker 1: and New Zealand. Do you think they they might be

347
00:19:59,200 --> 00:20:03,160
Speaker 1: looking for ways to innovate with quanstant dive easing as well,

348
00:20:03,200 --> 00:20:05,320
Speaker 1: you know, given that a lot of people in in

349
00:20:05,400 --> 00:20:08,960
Speaker 1: Europe and America are actually questioning whether quantitative easing is

350
00:20:08,960 --> 00:20:13,439
Speaker 1: really that effective, whether they innovate stefinitely, or whether they

351
00:20:13,440 --> 00:20:15,560
Speaker 1: have just had the benefit of being able to see

352
00:20:15,600 --> 00:20:18,760
Speaker 1: what has worked and what hasn't in the major economies

353
00:20:19,000 --> 00:20:22,239
Speaker 1: and therefore contailor a package with the benefit of that

354
00:20:22,359 --> 00:20:25,919
Speaker 1: decade of watching and observing, you know. The rb A

355
00:20:26,000 --> 00:20:30,480
Speaker 1: governor in Australia, Philip Lowers, has said that from his

356
00:20:30,640 --> 00:20:34,600
Speaker 1: viewing around you know, the other other examples of unorthodox policies,

357
00:20:34,840 --> 00:20:37,560
Speaker 1: from what he sees, it's a package of measures, no

358
00:20:37,680 --> 00:20:41,400
Speaker 1: one particular unconventional option that works best. It's it's how

359
00:20:41,400 --> 00:20:44,840
Speaker 1: you formulate the package. You know. In other cases we're

360
00:20:44,920 --> 00:20:48,600
Speaker 1: talking about some real reluctance to go towards a negative rate.

361
00:20:49,000 --> 00:20:53,280
Speaker 1: Perhaps asset purchases are going to be maybe favored, but

362
00:20:53,320 --> 00:20:55,719
Speaker 1: then there's other question marks about well bond yields are

363
00:20:55,640 --> 00:20:59,000
Speaker 1: already so low. You know what can what can asset

364
00:20:59,119 --> 00:21:03,360
Speaker 1: purchases really? Do you know what real significance in an

365
00:21:03,440 --> 00:21:06,840
Speaker 1: era where there's that reluctance to invest in the business community,

366
00:21:06,880 --> 00:21:11,840
Speaker 1: does it really matter? So, you know, innovations, Whether there's

367
00:21:11,880 --> 00:21:14,440
Speaker 1: going to be some new policy, I'm not so sure.

368
00:21:14,800 --> 00:21:17,639
Speaker 1: I think it'll be the packaging and the experience of

369
00:21:17,640 --> 00:21:20,360
Speaker 1: the last ten years that will help them as they

370
00:21:20,400 --> 00:21:23,520
Speaker 1: formulate these goals. Should they need to adopt them, well

371
00:21:23,760 --> 00:21:25,840
Speaker 1: it might help them. I guess the rest of us

372
00:21:25,840 --> 00:21:27,320
Speaker 1: can feel a bit sad that they're not going to

373
00:21:27,440 --> 00:21:32,040
Speaker 1: get more bright ideas coming out of Australasia for for

374
00:21:32,160 --> 00:21:36,280
Speaker 1: responding to this this downturn. These are the countries, in

375
00:21:36,320 --> 00:21:39,000
Speaker 1: the case of Australia that managed to avoid recession altogether.

376
00:21:39,040 --> 00:21:41,600
Speaker 1: If they're running out of good, good options, then that

377
00:21:41,640 --> 00:21:43,480
Speaker 1: seems like bad news for the rest of us. But

378
00:21:43,520 --> 00:21:46,360
Speaker 1: we shall see. Um, Malcolm Scott, thank you very much,

379
00:21:47,280 --> 00:21:58,800
Speaker 1: Thanks Stephanie, thanks for listening to Stephanomics. We'll be back

380
00:21:58,840 --> 00:22:01,240
Speaker 1: next week with more on the ground insights into the

381
00:22:01,240 --> 00:22:03,600
Speaker 1: global economy. I think I'll be back in London then.

382
00:22:04,160 --> 00:22:07,920
Speaker 1: In the meantime you can find us on the Bloomberg Terminal, website, app,

383
00:22:08,000 --> 00:22:10,280
Speaker 1: or wherever you get your podcasts. We'd love it if

384
00:22:10,280 --> 00:22:12,080
Speaker 1: you took the time to rate and review our show

385
00:22:12,200 --> 00:22:15,000
Speaker 1: so it can reach more listeners and For more news

386
00:22:15,000 --> 00:22:18,560
Speaker 1: and analysis during the week from Bloomberg Economics, follow at

387
00:22:18,600 --> 00:22:21,359
Speaker 1: Economics on Twitter, and you can also find me on

388
00:22:21,560 --> 00:22:24,920
Speaker 1: at my Stephanomics. The story in this episode was written

389
00:22:24,960 --> 00:22:28,160
Speaker 1: and reported by Sarah McGregor. It was produced by Magnus

390
00:22:28,200 --> 00:22:31,480
Speaker 1: Hendrickson and edited by Scott Lamman, who is also the

391
00:22:31,480 --> 00:22:35,520
Speaker 1: executive producer of Stephanomics. Special thanks this week to Michelle

392
00:22:35,560 --> 00:22:40,240
Speaker 1: jam Risco, Malcolm Scott, Richard Lewis, and Kevin Tan Francesco

393
00:22:40,320 --> 00:22:42,480
Speaker 1: Levy is the head of Bloomberg Podcast