Speaker 1: Andrew, thanks very much for joining us his partner at
Speaker 1: Brunswick Group, and here to talk about the outlook for China.
Speaker 1: And Andrew, we all expected a rough ride in terms
Speaker 1: of the reopening. That is indeed exactly what we're getting.
Speaker 1: Where do you see things heading from here? Yeah, well,
Speaker 1: I think we can take all of the statistics that
Speaker 1: are coming out of China with a very large pinch
Speaker 1: of salt. Um. They're no longer testing UM, they no
Speaker 1: longer contact tracing, so numbers for infections UM a massively understated.
Speaker 1: And even though they say that nobody or hardly anybody
Speaker 1: has died UM, journalists who have been through hospitals, morgues,
Speaker 1: crematoriums report seeing bodies everywhere. UM. But this is going
Speaker 1: to be chaotic. The markets were incredibly naive. I mean,
Speaker 1: I think they all thought that a lot of investors
Speaker 1: thought this was risk on that you know, you can
Speaker 1: have a couple of months of chaos and then the
Speaker 1: Chinese economy was going to snap back. And I think
Speaker 1: there's now a much more sober view has taken hold that. Uh.
Speaker 1: In fact, zero covid um has simply, you know, brought
Speaker 1: forward a great reckoning for the Chinese economy and that
Speaker 1: you know, the the endgame for COVID is really the
Speaker 1: beginning of China's economic problems. So are we looking at
Speaker 1: this from the standpoint of a humanitarian disaster and that
Speaker 1: a number of people aren't vaccinated and thus um may
Speaker 1: suffer greatly because the virus will be transmitted rather easily
Speaker 1: now the end of COVID zero, or are we looking
Speaker 1: at more from a market point of view that it
Speaker 1: will just disrupt the reopening because we're not really reporting
Speaker 1: deaths or even case count in most countries around the world. Yes,
Speaker 1: it's important in China because it's a change age. But
Speaker 1: is it more from the humanitarian side or just the
Speaker 1: difficulty in reopening the economy. Well, there's two things. I mean,
Speaker 1: arguably the end of zero COVID, this incredible flip flop,
Speaker 1: this this this U turn that they've just executed, had
Speaker 1: to do with the economic reality that they were staring
Speaker 1: UH into an economic abyss. The economy was in dire straits.
Speaker 1: Of course you had these protests that broke out, but
Speaker 1: the decisive fact was that they're looking at an economy
Speaker 1: in ruin. Now you are going to have and in
Speaker 1: emerging from COVID a humanitarian disaster. I think that's pretty
Speaker 1: clear that they've decided to let it rip and get
Speaker 1: it over with. The infections, the deaths, the anguish, the suffering,
Speaker 1: everything that the West has experienced, New York experience, Hong
Speaker 1: Kong experienced, actually, um, Europe experienced, and they want to
Speaker 1: get over that as soon as they can get it
Speaker 1: out the way, get back to business. But I think
Speaker 1: from the economic point of view, Um, you know, what
Speaker 1: I would say is that the this anticipation of a
Speaker 1: snap back to where we were revenge spending, you know,
Speaker 1: a big bump in consumer demand is a fantasy. Uh
Speaker 1: it may, it may happen, But then reality is going
Speaker 1: to uh kick in, which is that they can't go
Speaker 1: back to the old method, the old model of growth,
Speaker 1: which is based on investment in infrastructure and real estate.
Speaker 1: They're going to have to revive investor consumer confidence starting
Speaker 1: at from a very very low base. Consumer confidence in
Speaker 1: China has been shattered by zero COVID. Yeah, it's going
Speaker 1: to be an interesting journey. As you say, you can
Speaker 1: no longer rely on that old model of just you know,
Speaker 1: berzookers and building a way out of these things that
Speaker 1: We've heard a lot about dual circulation before the pandemic,
Speaker 1: but as you say, once that gathers itself, once the
Speaker 1: pandemic is behind us, what's what's the realistic looking growth
Speaker 1: number for China? Well, you know, they they're they're probably
Speaker 1: looking at trying to bring bring things back to five
Speaker 1: percent or thereabouts, but you know, so much depends on
Speaker 1: leadership uh and and the economic system that they put
Speaker 1: in place. And frankly, the approach to COVID zero and
Speaker 1: the chaotic departure from COVID zero doesn't inspire confidence. It's
Speaker 1: been this top down, heavy handed command and control flip
Speaker 1: flop when what it's going to be required. As great subtlety,
Speaker 1: I gotta sneak at a quick question. Does this threaten
Speaker 1: Shi Jinping in your view? No, I don't think it
Speaker 1: threatens him. Look, you know we've seen the way they're
Speaker 1: spinning this. I mean, first of all, they're not spinning
Speaker 1: it at all. They're just not going to be reporting
Speaker 1: on infections and not going to be reporting on death dolls.
Speaker 1: And don't forget he's spent the last ten years for
Speaker 1: witting in place a state that is designed to head
Speaker 1: off descent we'll have to leave it there, Andrew, but
Speaker 1: thank you very much for joining us. Andrew Brown from
Speaker 1: the Brunswick Group. This is Bloomberg