Speaker 1: You're listening to Asia Centric from Bloomberg Intelligence, the podcast
Speaker 1: that explores the big ideas and trends moving money across
Speaker 1: the region. I'm young leaving Hong Kong.
Speaker 2: I'm Kajdmitrieva, also in Hong Kong. The Fed last week
Speaker 2: delivered a much awaited interest rate cut, but they moved
Speaker 2: by fifty basis points, not twenty five, which is what
Speaker 2: most economists had anticipated. This is going to have ramifications
Speaker 2: across the world, but perhaps nowhere more so than in Asia.
Speaker 2: And joining us today to break down the potential effects
Speaker 2: across the region is Alicia Garcia Herrero. She's chief economist
Speaker 2: for Asia Pacific at Ina Texas.
Speaker 3: Welcome, Alicia, really a real pleasure to be with you
Speaker 3: all here today.
Speaker 2: Well, big news last week, the Fed cut by half
Speaker 2: a point that was largely unexpected by most economists who
Speaker 2: saw a twenty five basis point cut. Was surprising for you.
Speaker 3: Well, it was surprising for our US team if you
Speaker 3: asked me at No Texas. But basically they've been very
Speaker 3: cautious on the cuts in twenty twenty four, and I
Speaker 3: think rightly so, because we had this inflation data right before.
Speaker 3: You know, it wasn't really so clear that inflation was
Speaker 3: fully under control, or inflation service inflation.
Speaker 4: Secondly, I mean.
Speaker 3: Retail sales data was good, so the whole idea of
Speaker 3: a very rapid deceleration or heart landing for me, was
Speaker 3: out of the questions. But taking that into consideration, to me,
Speaker 3: when I read and especially the press conference, I felt
Speaker 3: it was very like a political decision. I kind of
Speaker 3: sense that they really wanted to do two things. They
Speaker 3: wanted to really sign off a new era, so we
Speaker 3: are on an easy era, and we want to do
Speaker 3: this convincingly and frankly. Probably also US elections, and you know,
Speaker 3: having a lot done at the beginning might make their
Speaker 3: lives easy as the date of the elections gets closer.
Speaker 3: So for these two reasons, it was more say, it
Speaker 3: was so economically driven as maybe I would imagine. I
Speaker 3: mean the size of the cut, of course, not the
Speaker 3: actual cut, which was long over deal. I mean, we've
Speaker 3: been waiting for this for so long, and age and
Speaker 3: economies have been waiting for it for so loon, which
Speaker 3: is what we're going to this cust next.
Speaker 4: I'm sure.
Speaker 2: Yeah, I was just about to ask you, making my
Speaker 2: job very easier, just about to ask you about that
Speaker 2: exact thing. A lot of central banks, especially across Southeast
Speaker 2: Asia East Asia, have been waiting for this easy cycle
Speaker 2: to begin. So what is next? We have the FED
Speaker 2: cutting by fifty basis points? Does that change the math
Speaker 2: on or your outlook? Maybe before the cuts on who's
Speaker 2: next and by how much they'll cut?
Speaker 3: So first of all, I would say that there's a
Speaker 3: couple of out liars in Asia. I'm sure everybody was rejoicing,
Speaker 3: but some less than others. And I think the say
Speaker 3: the BOJ, but even the Central Bank of China CBC.
Speaker 4: They are in a different situation.
Speaker 3: BOJ needs to get out of this massive FeAs in
Speaker 3: and I think having a big cut by the FED
Speaker 3: just makes it very difficult for them to hike because
Speaker 3: it's a very rapid reduction of the spread and that
Speaker 3: will push the end. And I think if there is
Speaker 3: something that government that doesn't really want to see happening again,
Speaker 3: is that black Man Day and a very rapid application
Speaker 3: of the end. So I think for the BOJ, I
Speaker 3: would say, well, I'm not sure it was such good
Speaker 3: news if you see what I mean, Because I think
Speaker 3: paced FED would help the BOJ center back of China.
Speaker 3: I mean, the column is booming in Taiwan, and they
Speaker 3: never hiked enough as you know, I mean the intergate
Speaker 3: differential they kept while the FED was hiking because this
Speaker 3: is a low interest rate environment.
Speaker 4: They just couldn't follow the Fed.
Speaker 3: And now of course they don't have any room to cut,
Speaker 3: you know, because they are in booming and frankly with
Speaker 3: a high underlying inflation. We might not see it in
Speaker 3: the day, but it's there as a price inflation. And
Speaker 3: so for these two times, I actually think it's bad
Speaker 3: news with the bad news, because all of the rest
Speaker 3: is relatively good news. But yes, it's not coffee for everybody,
Speaker 3: if you see what I mean, Like, some are not happy,
Speaker 3: and I think and Central Bank of China are the
Speaker 3: key examples of this situation.
Speaker 2: Central Back of China being the Taiwan. So Taiwan and
Speaker 2: Japan odd ones out.
Speaker 3: Yeah, Taiwan is just because the economy is on a
Speaker 3: very different cycle than the FED, and you know they
Speaker 3: are semi packed, so that doesn't help them at all.
Speaker 3: We expect, for example, for RBI, we expect very little
Speaker 3: for India because you know some might not Again I
Speaker 3: mentioned Taiwan as you know, an even clear example some
Speaker 3: might not necessary benefit for a huge reduction of rates,
Speaker 3: so you have to be careful with that, and then
Speaker 3: you could have a bubble on top of a bubble.
Speaker 4: So think about India.
Speaker 3: You know, up until the elections, you don't want to
Speaker 3: see an overheated market. Think about India with the with
Speaker 3: the booming luxury real estate market at the moment, So
Speaker 3: do you want to cut rates aggressively. So again, the
Speaker 3: FED is important, but it's not everything under the sun.
Speaker 3: I mean, these central bands have to cope with very
Speaker 3: different situations at the moment.
Speaker 2: What about the good news?
Speaker 3: The good news is that some bunking nation, you know,
Speaker 3: they cut even before the FED.
Speaker 4: They were like already cheering.
Speaker 3: And why And I think this is very important is
Speaker 3: that if you calculate the real interestrate, this is true
Speaker 3: for China, but this is true across the board. The
Speaker 3: real interest rate in Southeast Asia is just very high
Speaker 3: because inflation never reached the levels you know reached in
Speaker 3: the US, and therefore they had to cope with these
Speaker 3: high interest rates on the real economy. And I think
Speaker 3: they've been waiting. They thought it would be very temporary,
Speaker 3: but it wasn't. It became entrenched so they got into
Speaker 3: this situation with nominal rates, they couldn't cut an inflation
Speaker 3: that was below the rest of the world. I think,
Speaker 3: you know, the fact also that China has been underwhelming
Speaker 3: wise didn't help because you know, these economies weren't supported.
Speaker 4: By Chinese imports.
Speaker 3: So the combination of high real interest rates the weak
Speaker 3: Chinese economy, you know, kind of made them despair for
Speaker 3: this cut from the Fed. Yeah, and I think this
Speaker 3: is why we've seen the stock markets. I mean, it's
Speaker 3: clearly very positive, let alone from Hong Kong. If you
Speaker 3: ask me which economy should rejoice the most, I mean
Speaker 3: probably is China and Hong Kong. These were economies Hong
Speaker 3: Kong in particular, since you know you're sitting there so
Speaker 3: I'm sure you feel it. Yeah, it's like they just
Speaker 3: couldn't cope with these rates. Sending over look at the
Speaker 3: state of the real estate sector in both economies. For
Speaker 3: Hong Kong, this straight jacket at such a difficult moment,
Speaker 3: even in terms of retail sales, et cetera, was just
Speaker 3: too much too bear. So for Hong Kong, I would
Speaker 3: say you, if I have to rank the biggest beneficiaries
Speaker 3: in terms of the room. That's obviously Hong Kong, and
Speaker 3: I think the handstand is proving this right.
Speaker 4: Yeah.
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Speaker 1: for the benefit of the listeners. Now, Hong Kong is
Speaker 1: an interesting case because the currency is pegged to the
Speaker 1: US dollars, so Hong Kong pretty much had to raise
Speaker 1: interest rates along with the FED, even though there wasn't
Speaker 1: an inflation problem.
Speaker 3: Right exactly, So yes, for the benefit of the listeners.
Speaker 3: You're absolute right. Let me try to go through this case.
Speaker 3: Hong Kong not only respect to the dollar that would
Speaker 3: be in itself you know, as you said, that would
Speaker 3: oblige Hong Kong to follow the FED to keep its
Speaker 3: change rate. Actually, we have a one percent badge to
Speaker 3: be you know, fully clear with our listeners. They do move,
Speaker 3: I mean the exchange rate move a little bit and
Speaker 3: the interest rate on the Hong Kong dollar so called
Speaker 3: hyber can also go up and down a little bit
Speaker 3: depending on.
Speaker 4: The exchang rate expectations.
Speaker 3: Yeah, this, this little band, the Hong Kong economy now
Speaker 3: is extremely depending on the mainland, not on the US,
Speaker 3: even for financial flows. So we actually made some estimation
Speaker 3: even before COVID, and I was surprised to see. I mean,
Speaker 3: the real economy, well know, Hong Kong, you know, because
Speaker 3: of visitors from the mainland, et cetera, is very linked
Speaker 3: to the mainland. But I thought financial flows would be
Speaker 3: more linked to the US. I thought so, and it
Speaker 3: wasn't the case, even in twenty nineteen, stock connect, bond connect,
Speaker 3: you name. It is just so linked to the mainland
Speaker 3: now even financially that following the US as.
Speaker 4: Far as interest rates are concerned. And of course the
Speaker 4: currency is.
Speaker 3: Increasingly costly in terms of you know that this location
Speaker 3: of where the economy is and where your financial conditions are.
Speaker 3: So for Hong Kong, this cut is coming from heaven really,
Speaker 3: because the economy is still doing poorly. And I'm not
Speaker 3: saying this will solve all of the problems, but there
Speaker 3: was no other way. The Mainland is a different case.
Speaker 3: There were other ways. They just didn't stimulate the economy.
Speaker 3: They could have that more fiscal they could have even
Speaker 3: cut rates. To be frank, Hong Kong had no choice
Speaker 3: but to follow. And I think this is extremely important
Speaker 3: given the state of the real estate sectoring.
Speaker 2: So Hong Kong needed the FED cut, China needed the
Speaker 2: FED cut. Japan makes it harder for them to hike Taiwan.
Speaker 2: You said, the economy is booming, So which economy, which
Speaker 2: central bank is next? Who's up next in terms of
Speaker 2: cutting in your view? In Asia?
Speaker 3: Well, I mean I could tell you a little bit.
Speaker 3: You know, the straight off cuts we have. So as
Speaker 3: I said, already cut, I mean Hong Kong obviously immediately.
Speaker 3: We do have cuts for literally everybody except MALAYSI yeah
Speaker 3: this we are not Yeah, not Malaysia. We have a
Speaker 3: cat in South Korea, we have Australia. Australia is tricky
Speaker 3: because we were expecting a cat in October and then
Speaker 3: well lift it because of inflation expectations, you know, being
Speaker 3: a little But now the question is if the FED
Speaker 3: cuts again by October, will the RBA manage to keep
Speaker 3: that call until next year?
Speaker 4: So you know, it's like I think.
Speaker 3: The fifty bps accelerates the decisions in a way because
Speaker 3: if they feel that the FED is going to front load,
Speaker 3: they may have issues about their change rate. You know,
Speaker 3: everybody has to run a little bit faster. So yeah,
Speaker 3: so we questioned Mark on October for the RBA.
Speaker 1: In my view, Alicia, we should tell the audience that
Speaker 1: we're recording this podcast on the twenty fourth of September,
Speaker 1: just literally hours before the RBA decision. So I know
Speaker 1: most economies don't expectes.
Speaker 3: Of course, I'm not expecting anything today, You're right, I
Speaker 3: need to explain also the audience here that I'm in Berlin,
Speaker 3: so you know, I know, it's like none in on Kong.
Speaker 3: I believe that when we'll know more about RBA, but
Speaker 3: for me it's kind of it's really far in time.
Speaker 3: We're not expecting any cuts for RBA today. I'm talking
Speaker 3: of October, and that I think will depend very much
Speaker 3: on how much more the fact might do, but also
Speaker 3: how much the Australian economy decelerates.
Speaker 4: We wrote a little watch for today on the RB.
Speaker 3: I think the most important thing to note, beyond the
Speaker 3: fact that inflation is indeed quite sticky still now is
Speaker 3: that disposable income is indeed decelerating in Australia. Labor market
Speaker 3: is quite okay, but disposable income is. So, you know,
Speaker 3: I think it's like saying, quite frankly, that households do
Speaker 3: need lower mortgage. I would put it this way. You know,
Speaker 3: it's like they've been quite resilient.
Speaker 4: Frankly.
Speaker 3: You know, if you think about what we thought would happen,
Speaker 3: it didn't happen. The real sector in Australia, the housing
Speaker 3: market actually reacted quite well for what was expected to
Speaker 3: happen if you recall. But I think by now it's
Speaker 3: a question of can you keep this much much longer? So,
Speaker 3: you know, I would imagine that the RBA would have
Speaker 3: to review this today's decision, which I think is going
Speaker 3: to be paused in the light of deccelerating dis possible
Speaker 3: income for the months took up.
Speaker 4: This is for me, the key issue for RBA.
Speaker 1: Arguably the consumer in Australia and possibly also a career
Speaker 1: as well. They've been impacted probably more by these high
Speaker 1: interest rates because in the US, you know, people have
Speaker 1: a mortgage, probably took out a fixed twenty year long
Speaker 1: so they probably took it out when interest rates were low,
Speaker 1: but places in like Australia that would hit automatically with
Speaker 1: high interest expense.
Speaker 3: Yes, and remember that there were also some I would
Speaker 3: say even worse in the sense that at the beginning
Speaker 3: during COVID, you remember there was this decision to facilitate
Speaker 3: the repayment of mortgages so they were protected, and then
Speaker 3: suddenly rates started to hike. You know, it's like an
Speaker 3: unprotected so you know, it's like a double womy if
Speaker 3: you are a household. And this is why I actually
Speaker 3: think that the Australian economy has been extremely resilient. Let's
Speaker 3: not forget that all of it happened at the time
Speaker 3: where you know, you had the lingering effect of the
Speaker 3: trade work with China, which then was resolved, but you
Speaker 3: had all of those shocks.
Speaker 4: Yeah, and I.
Speaker 3: Actually think that Australia did really really well. And the
Speaker 3: other issues that during COVID, they didn't have any increasing population,
Speaker 3: which is a big driver of growth in Australia because
Speaker 3: you know, all the sorts were closed. So yes, there
Speaker 3: was a little bit of a push through population increased
Speaker 3: through immigration, which of course South Korea didn't have. South
Speaker 3: Korea's solution came from the turn in the semiconductor cycle
Speaker 3: and AI revolution, but not everybody benefits from that, and
Speaker 3: this is the same things. I want to be frank,
Speaker 3: I don't have figures, but I'm convinced that income distribution
Speaker 3: worsened in South Korea and in Taiwan.
Speaker 4: You know, it's not the same type of growth as Australia.
Speaker 3: So the social implications of high rates in South Korea,
Speaker 3: I'm sure stronger than in Australia, and that makes the
Speaker 3: decision to cut highly politically, if you see. So it's
Speaker 3: a different cut. I just want to clarify that. I
Speaker 3: think South Korea's cut is more like coming from the
Speaker 3: social pressure of households, as you said, really not being
Speaker 3: able to cope any longer. I think for Australia, yes,
Speaker 3: this possible income is dicelebrity, but it's much smoother and
Speaker 3: I think more across the board employment is being created.
Speaker 3: It's a different it's a different ballgame. And we had
Speaker 3: export date. Actually it was really negative for South Korea,
Speaker 3: but I think it's about the number of days. So
Speaker 3: experts are still okay, notwith something that that data that
Speaker 3: we just had, but that doesn't help everybody, So I
Speaker 3: agree with you. I think we have a problem with
Speaker 3: the high rates.
Speaker 2: In Korea's interesting point there that you make about how
Speaker 2: each of the economy is potentially cutting for different reasons.
Speaker 2: It's not a one size fits all. Now is this
Speaker 2: sort of a new era as well as the fact
Speaker 2: ease as we're getting into the cycle. But it seems
Speaker 2: like each economy kind of is focusing on domestic issues
Speaker 2: and they're all ideosyncratic indeed.
Speaker 3: So this is why I think probably markets we see
Speaker 3: that are reacting very positively. Ahia has a high growth environment,
Speaker 3: so you know, all of these cuts are just in
Speaker 3: a way. You know, if you are into an index
Speaker 3: or a passive investor, you may not care about the
Speaker 3: arguments we're making. Now, you know, just go ahead and
Speaker 3: we'll just find ahiav area appealing because of the cuts.
Speaker 3: But if you think longer term, how you know these
Speaker 3: markets are going to react longer term? I think we
Speaker 3: need to see first do they need the cut and
Speaker 3: why do they need the cut? And in the case
Speaker 3: of Hong Kong, I think yes, this will help, but
Speaker 3: I'm not sure the market will act positively for very long.
Speaker 3: Now we have two positive needs for Hong Kong, the
Speaker 3: China stimulus and the fat so it should be like
Speaker 3: party time.
Speaker 1: But the question is Hong Kong stocks of jumping up
Speaker 1: right now?
Speaker 3: Yes, yes, I know, I know it's part of that
Speaker 3: I checked. But the issue is will it be permanent
Speaker 3: or how permanent will this be? And there I think
Speaker 3: we need to answer to questions how important are financial
Speaker 3: conditions for Hong Kong households. I mean, Hong Kong is
Speaker 3: seventy percent consumption, so are there financially constrained? How big
Speaker 3: is this impact if you look at the date, Actually
Speaker 3: it's little the case that Hong Kong houses are financially
Speaker 3: constrained because of a number of reasons that payment, so
Speaker 3: will it last?
Speaker 4: That impact?
Speaker 3: And then on China, I think it all depends on
Speaker 3: whether the stimulus is for real and you know it
Speaker 3: changes the nature of growth at least cyclically.
Speaker 2: You're talking or not about the FED cuts, but about
Speaker 2: the stimulus that was announced. People be listening to this
Speaker 2: on Thursday, but announced on Tuesday the various uh, you
Speaker 2: know are our our cut and cuts to the mortgage rates.
Speaker 2: It was a lot.
Speaker 3: Yeah, the announcement is a lot, but let's not forget
Speaker 3: that so far we had Friday nothing. They didn't cut
Speaker 3: the long prime rate, which is the benchmark for mortgages.
Speaker 3: So what has happened since Friday? You know, like then
Speaker 3: they cut which I think was a four signal, the
Speaker 3: fourteen days reverse ripple, and that is not I mean
Speaker 3: that the news was big cut is an irrelevant cut
Speaker 3: as everybody, I mean those dealing with the PVC now,
Speaker 3: because this is really just confirming the seven day cut
Speaker 3: because this is the reverse report, so you needed and
Speaker 3: they took so long for them to do that thing,
Speaker 3: which was kind of natural to cut the fourteen day after.
Speaker 4: The seventh day.
Speaker 3: So you know, when you observe all of this and
Speaker 3: you observe the announcement and I know stock markets are rejoicing,
Speaker 3: the question is who's in charge?
Speaker 4: Because you know, you could have.
Speaker 3: Done this in a more structure way and it sounds
Speaker 3: like a little bit I wouldn't say panicky, but it
Speaker 3: sounds like suddenly you come with this. You could have
Speaker 3: done it more naturally and I would have perhaps even
Speaker 3: used a third pleno to make a big story out
Speaker 3: of the stimulus.
Speaker 2: Do you think they did it? Because the Fed cut
Speaker 2: by more than expected it kind of created some room
Speaker 2: for them, but they.
Speaker 3: Could have cut on Friday, the long primary, So still
Speaker 3: did they not want to show that they would cut
Speaker 3: immediately after the FED. Then I wouldn't do it now.
Speaker 3: It's just too early. But for me, it sounds like
Speaker 3: a reluctant stimulus. I call it a reluctant stimulus. It
Speaker 3: seems like some are not into the stimulus, others are.
Speaker 3: There's no agreement, so they kind of drag their feet
Speaker 3: towards the stimulus, and those are not the stimuli that
Speaker 3: work best because you need to believe in it, you
Speaker 3: need to be convincing about it. So I think the
Speaker 3: impact today is positive, but how long will it last?
Speaker 3: To me, it's really a big question mark because it
Speaker 3: doesn't look convincing that they're going to continue on this path.
Speaker 3: You have a long way to.
Speaker 1: Go, Alicia. So with the China news, you don't expect
Speaker 1: economists to suddenly raise their economic forecast next year or
Speaker 1: this year.
Speaker 3: Well, we just had like an influential forecast. Is the
Speaker 3: IIF problem because they're semi official and they just cut
Speaker 3: to four point seven simply because the second semesters expected
Speaker 3: to be much lower than the first real interesrates in
Speaker 3: China are too high, which is absolutely true. If you
Speaker 3: hold a mortgage in China, you know what real rates
Speaker 3: are all about. I mean it's really high, much higher
Speaker 3: than anywhere else of any relevant economy in the world,
Speaker 3: because if you use the GDP inflator, for example, it's
Speaker 3: like you have five to six percent real rates on
Speaker 3: mortgages in China just to.
Speaker 2: Pull back a bit. So with the combo of the
Speaker 2: FED cutting rates by fifty pips, maybe freeing up some
Speaker 2: space for China to cut as well. Plus this new package,
Speaker 2: will that move the needle for China's economy?
Speaker 3: Do you think I think they need to really convince
Speaker 3: the market there in a new era exactly like Poweled
Speaker 3: it if you listen to I'm sure you have to
Speaker 3: Bowels state it's very clear. It's like nobody has any
Speaker 3: doubt the FED will cut again and again and again.
Speaker 3: The communication was clear. We know maybe for some they
Speaker 3: will cut one hundred, one hundred and twenty five for
Speaker 3: US seventy five, but everybody knows they're going to cut
Speaker 3: all the way even next year. In China, this is
Speaker 3: not clear. It might be that they don't cut again.
Speaker 3: There's no consensus as to whether this is big stimulus.
Speaker 3: This is just one off cut again, because you know
Speaker 3: how long has it take?
Speaker 4: Where's the cycle?
Speaker 3: The PBOC has been cut in so slowly that I
Speaker 3: don't know where they started cutting. We say that they're
Speaker 3: starting now, or can we say that it started a
Speaker 3: year ago or.
Speaker 4: Two years ago? There's no path, so they need.
Speaker 3: To convince the market for the economy to recover that
Speaker 3: they say path that they're going to go.
Speaker 4: They could do some forward guidance.
Speaker 3: They could say, look, our real indust rates are at
Speaker 3: this level and our potential growth is x, so we
Speaker 3: need to bring them down one hundred basis points. We'll
Speaker 3: do this slowly and steadily according to data driven But
Speaker 3: this is our path that would be very different. That's
Speaker 3: not what they're doing.
Speaker 4: So I have not.
Speaker 3: Convinced that this will help. So the question is why
Speaker 3: are they cut in? Is it because consumption is underwhelming?
Speaker 4: I doubt so. What's the trigger?
Speaker 3: And if you ask me, the trigger is the state
Speaker 3: of Chinese banks, I mean their financial situation. If that's
Speaker 3: the trigger, is a liquidity move, you need to inject liquidity.
Speaker 3: They may cut are more, they may find some you know,
Speaker 3: like targeted instruments for bigger banks to lend to smaller banks,
Speaker 3: you name it. And that's a different type of cut
Speaker 3: because if people start reading, oh there's financial risk in China,
Speaker 3: maybe the economy won't recover.
Speaker 4: So I'm not.
Speaker 3: Sure this will hit the needle to reach the five
Speaker 3: percent target if that's what they want.
Speaker 2: You mentioned you're in Berlin right now. I know you
Speaker 2: have a lot of meetings with companies with clients. I'm
Speaker 2: just wondering, after the FED cut by fifty basis points,
Speaker 2: what have been some of the top comments that you're
Speaker 2: getting from people that you're meeting with about this cut.
Speaker 2: How are people taking it?
Speaker 3: Well, we're in the euro area, Katya, and people talk
Speaker 3: about the ACB here. It's probably the only place in
Speaker 3: the world where the FED is not the central Bank.
Speaker 3: And you know the ECB cut twice, Yeah, twenty five
Speaker 3: based responds, So you know that's very positive. But the
Speaker 3: problems of the European economy are structured, especially in Germany now,
Speaker 3: so the FED sounds like okay, fine, but you know
Speaker 3: it's very, very very far from what the issues are
Speaker 3: here at the moment. It helps, I mean, if you
Speaker 3: are a big company and you borrowing dollar. You have
Speaker 3: operations in the US, you know many do, But I
Speaker 3: would say compared to Asia, this is by no means
Speaker 3: the same conversation, by no means at leasta.
Speaker 1: I have to ask, you're in Germany, if I could
Speaker 1: just like ask a question outside of monetary policy. Yes,
Speaker 1: everything we read in the news, the Germans seem to
Speaker 1: be afraid of these cheap electric vehicle cars from China, Like,
Speaker 1: how big of a threat is China's cheap cars to
Speaker 1: Germany's auto industry.
Speaker 3: Well, this is such a good question because I also
Speaker 3: thought Germans would be scared of Chinese selectric vehicles because
Speaker 3: of their industry. But it's just fascinating what happens in
Speaker 3: this country. And I've been here a couple of times
Speaker 3: the last couple of months, so I can only tell
Speaker 3: you that the reading about Chinese selectric vehicles is so
Speaker 3: different across the different situences. So the large auto makers
Speaker 3: in Germany, which should be the ones asking for protection,
Speaker 3: are not because they are suffering the tariffs on their
Speaker 3: production in China. So they prefer to produce in China
Speaker 3: and export to Europe, which would have been unheard of
Speaker 3: only years ago. Is that the direction was the opposite,
Speaker 3: So they didn't want those tariffs. They prefer to produce
Speaker 3: in China and export to Europe. Germans remain very committed
Speaker 3: to the green transition. They have this very strong view
Speaker 3: that Okay, no matter where the cars come from, no
Speaker 3: matter where the solar pantels come from, we need to transition.
Speaker 4: The world is more important than who makes the money
Speaker 4: out of this.
Speaker 3: So I would argue as an economist that I don't
Speaker 3: believe that these tariffs will make a difference in price
Speaker 3: because the numbers are quite clear.
Speaker 2: You know one thing, I want to get your thoughts
Speaker 2: on the risks to what we're talking about, so you
Speaker 2: haven't easy cycle kicking off. But central banks across Asia
Speaker 2: are not just thinking about the feather, might be thinking
Speaker 2: about the US election and Trump versus Harris. Does that
Speaker 2: complicate things here? Ken central banks sort of hold out
Speaker 2: in Asia see how the fifty basis points plays out
Speaker 2: and wait until after the election. Is that a factor
Speaker 2: for them as well?
Speaker 3: I think there's so much confusion about what Trump or
Speaker 3: Harris will do for Asia or against Asia, depends on
Speaker 3: how to look at it, that I'm not sure it's
Speaker 3: such a big factor at the moment. It's just so
Speaker 3: hard to tell. We've heard about tariffs from Trump, but
Speaker 3: at the same time we know that Trump is very pragmatic.
Speaker 3: We have the Taiwan issue. He looks much more accommodating.
Speaker 3: In my view on the Taiwan issue. That's good news
Speaker 3: for Asia because they get that out of the way.
Speaker 3: So you know, the balance of benefits versus cast is
Speaker 3: to me not very clear. So I would argue central
Speaker 3: banks won't focus as much, but they will focus on
Speaker 3: the FED. So if the FED stays and that's cut
Speaker 3: because of the election getting closer, and try not to
Speaker 3: interfere either in the result or even right after the elections.
Speaker 3: Let's not forget what Trump said about the FAT. If
Speaker 3: I were power, that would just pause. Especially if you
Speaker 3: win the elections. You would just say, look, I'm not
Speaker 3: helping you. The FED reaction to the elections is relevant,
Speaker 3: but I don't think they will over read the elections
Speaker 3: on their own site because that would be too complicated.
Speaker 4: So I would just through the FAT. To answer your.
Speaker 1: Question, Yeah, Katia, We've literally gone around the world today.
Speaker 1: We've discussed so many economies, Fed Asian central banks.
Speaker 2: We had a pet stop in Germany.
Speaker 1: Yeah, Lisia, thanks for coming on the show on such
Speaker 1: short notice.
Speaker 2: I'm John Lee in Hong Kong and I'm Katted Mitriva.
Speaker 1: This podcast was produced by Clara Chen and you've been
Speaker 1: listening to the Asia Centric podcast