WEBVTT - Andrew Browne on China (Radio)

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<v Speaker 1>Andrew, thanks very much for joining us his partner at

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<v Speaker 1>Brunswick Group, and here to talk about the outlook for China.

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<v Speaker 1>And Andrew, we all expected a rough ride in terms

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<v Speaker 1>of the reopening. That is indeed exactly what we're getting.

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<v Speaker 1>Where do you see things heading from here? Yeah, well,

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<v Speaker 1>I think we can take all of the statistics that

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<v Speaker 1>are coming out of China with a very large pinch

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<v Speaker 1>of salt. Um. They're no longer testing UM, they no

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<v Speaker 1>longer contact tracing, so numbers for infections UM a massively understated.

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<v Speaker 1>And even though they say that nobody or hardly anybody

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<v Speaker 1>has died UM, journalists who have been through hospitals, morgues,

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<v Speaker 1>crematoriums report seeing bodies everywhere. UM. But this is going

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<v Speaker 1>to be chaotic. The markets were incredibly naive. I mean,

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<v Speaker 1>I think they all thought that a lot of investors

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<v Speaker 1>thought this was risk on that you know, you can

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<v Speaker 1>have a couple of months of chaos and then the

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<v Speaker 1>Chinese economy was going to snap back. And I think

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<v Speaker 1>there's now a much more sober view has taken hold that. Uh.

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<v Speaker 1>In fact, zero covid um has simply, you know, brought

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<v Speaker 1>forward a great reckoning for the Chinese economy and that

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<v Speaker 1>you know, the the endgame for COVID is really the

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<v Speaker 1>beginning of China's economic problems. So are we looking at

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<v Speaker 1>this from the standpoint of a humanitarian disaster and that

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<v Speaker 1>a number of people aren't vaccinated and thus um may

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<v Speaker 1>suffer greatly because the virus will be transmitted rather easily

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<v Speaker 1>now the end of COVID zero, or are we looking

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<v Speaker 1>at more from a market point of view that it

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<v Speaker 1>will just disrupt the reopening because we're not really reporting

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<v Speaker 1>deaths or even case count in most countries around the world. Yes,

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<v Speaker 1>it's important in China because it's a change age. But

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<v Speaker 1>is it more from the humanitarian side or just the

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<v Speaker 1>difficulty in reopening the economy. Well, there's two things. I mean,

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<v Speaker 1>arguably the end of zero COVID, this incredible flip flop,

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<v Speaker 1>this this this U turn that they've just executed, had

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<v Speaker 1>to do with the economic reality that they were staring

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<v Speaker 1>UH into an economic abyss. The economy was in dire straits.

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<v Speaker 1>Of course you had these protests that broke out, but

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<v Speaker 1>the decisive fact was that they're looking at an economy

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<v Speaker 1>in ruin. Now you are going to have and in

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<v Speaker 1>emerging from COVID a humanitarian disaster. I think that's pretty

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<v Speaker 1>clear that they've decided to let it rip and get

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<v Speaker 1>it over with. The infections, the deaths, the anguish, the suffering,

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<v Speaker 1>everything that the West has experienced, New York experience, Hong

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<v Speaker 1>Kong experienced, actually, um, Europe experienced, and they want to

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<v Speaker 1>get over that as soon as they can get it

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<v Speaker 1>out the way, get back to business. But I think

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<v Speaker 1>from the economic point of view, Um, you know, what

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<v Speaker 1>I would say is that the this anticipation of a

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<v Speaker 1>snap back to where we were revenge spending, you know,

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<v Speaker 1>a big bump in consumer demand is a fantasy. Uh

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<v Speaker 1>it may, it may happen, But then reality is going

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<v Speaker 1>to uh kick in, which is that they can't go

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<v Speaker 1>back to the old method, the old model of growth,

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<v Speaker 1>which is based on investment in infrastructure and real estate.

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<v Speaker 1>They're going to have to revive investor consumer confidence starting

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<v Speaker 1>at from a very very low base. Consumer confidence in

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<v Speaker 1>China has been shattered by zero COVID. Yeah, it's going

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<v Speaker 1>to be an interesting journey. As you say, you can

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<v Speaker 1>no longer rely on that old model of just you know,

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<v Speaker 1>berzookers and building a way out of these things that

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<v Speaker 1>We've heard a lot about dual circulation before the pandemic,

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<v Speaker 1>but as you say, once that gathers itself, once the

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<v Speaker 1>pandemic is behind us, what's what's the realistic looking growth

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<v Speaker 1>number for China? Well, you know, they they're they're probably

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<v Speaker 1>looking at trying to bring bring things back to five

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<v Speaker 1>percent or thereabouts, but you know, so much depends on

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<v Speaker 1>leadership uh and and the economic system that they put

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<v Speaker 1>in place. And frankly, the approach to COVID zero and

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<v Speaker 1>the chaotic departure from COVID zero doesn't inspire confidence. It's

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<v Speaker 1>been this top down, heavy handed command and control flip

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<v Speaker 1>flop when what it's going to be required. As great subtlety,

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<v Speaker 1>I gotta sneak at a quick question. Does this threaten

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<v Speaker 1>Shi Jinping in your view? No, I don't think it

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<v Speaker 1>threatens him. Look, you know we've seen the way they're

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<v Speaker 1>spinning this. I mean, first of all, they're not spinning

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<v Speaker 1>it at all. They're just not going to be reporting

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<v Speaker 1>on infections and not going to be reporting on death dolls.

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<v Speaker 1>And don't forget he's spent the last ten years for

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<v Speaker 1>witting in place a state that is designed to head

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<v Speaker 1>off descent we'll have to leave it there, Andrew, but

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<v Speaker 1>thank you very much for joining us. Andrew Brown from

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<v Speaker 1>the Brunswick Group. This is Bloomberg