1 00:00:02,560 --> 00:00:09,119 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. China is not easy. 2 00:00:09,280 --> 00:00:11,120 Speaker 1: We want to open up China. It'll be a great 3 00:00:11,160 --> 00:00:12,800 Speaker 1: thing for China, a great thing for the rest of 4 00:00:12,840 --> 00:00:13,280 Speaker 1: the world. 5 00:00:22,480 --> 00:00:25,920 Speaker 2: I'm Stephanie Flanders, head of Government and Economics at Bloomberg, 6 00:00:25,960 --> 00:00:28,520 Speaker 2: and welcome to trump Andomics, the podcast that looks at 7 00:00:28,520 --> 00:00:32,680 Speaker 2: the economic world of Donald Trump, how he's already shaped 8 00:00:32,720 --> 00:00:35,479 Speaker 2: the global economy, and what on earth is going to 9 00:00:35,520 --> 00:00:39,560 Speaker 2: happen next. This week, we're recording Trumpomics in front of 10 00:00:39,600 --> 00:00:43,240 Speaker 2: an audience from Bloomberg invest Hong Kong, and we're looking 11 00:00:43,280 --> 00:00:47,200 Speaker 2: at what Trumpomics means for this part of Asia, notably 12 00:00:47,440 --> 00:00:50,720 Speaker 2: mainland China and Hong Kong. We've seen the latest round 13 00:00:50,720 --> 00:00:54,120 Speaker 2: of trade talks in London between the US and China 14 00:00:54,320 --> 00:00:59,560 Speaker 2: conclude with what our Bloomberg geoeconomics analyst Michael Deng has 15 00:00:59,640 --> 00:01:04,720 Speaker 2: called a tactical de escalation but not a strategic reset. 16 00:01:05,400 --> 00:01:08,559 Speaker 2: So we're none the wiser on where tariff rates will 17 00:01:08,640 --> 00:01:13,720 Speaker 2: end up or how deep the much discussed decoupling of 18 00:01:13,760 --> 00:01:17,840 Speaker 2: the world's two largest economies will go. But we have 19 00:01:18,120 --> 00:01:21,240 Speaker 2: plenty to discuss and I'm sure plenty of theories as 20 00:01:21,280 --> 00:01:24,280 Speaker 2: to what direction we're going about all of that and 21 00:01:24,800 --> 00:01:28,560 Speaker 2: maybe also the future of the dollar. I have some 22 00:01:28,640 --> 00:01:32,600 Speaker 2: great guests to help me talk this through. My colleague 23 00:01:32,800 --> 00:01:36,759 Speaker 2: Rebecca John Wilkins, Asia Economics and Government reporter for US 24 00:01:36,880 --> 00:01:41,039 Speaker 2: at Bloomberg, Howhong Managing Partner and chief investment officer at 25 00:01:41,080 --> 00:01:45,600 Speaker 2: Lotus Asset Management, and Robin Ching, the chief China economist 26 00:01:45,920 --> 00:01:53,680 Speaker 2: at Morgan Stanley. Rebecca, I'll take advantage of you as 27 00:01:53,680 --> 00:01:56,440 Speaker 2: the reporter in the room. Take us up to speed 28 00:01:56,600 --> 00:01:59,560 Speaker 2: on how you're reading that statement we had out of London, 29 00:02:00,040 --> 00:02:02,480 Speaker 2: and I think we're still expecting a statement from the 30 00:02:02,560 --> 00:02:04,120 Speaker 2: Chinese about those talks as well. 31 00:02:04,960 --> 00:02:07,040 Speaker 3: Yes, I mean not a lot of detail in fact 32 00:02:07,040 --> 00:02:09,760 Speaker 3: from both sides, largely all of the detail coming from 33 00:02:09,840 --> 00:02:12,160 Speaker 3: the US side here, but more than twenty hours of 34 00:02:12,240 --> 00:02:15,760 Speaker 3: negotiations over two days, both the sort of heavy hitters 35 00:02:15,800 --> 00:02:19,240 Speaker 3: from the US and the China side. Essentially we are 36 00:02:19,320 --> 00:02:22,359 Speaker 3: back too. I think that point in the Geneva truce 37 00:02:22,400 --> 00:02:25,280 Speaker 3: where both sides were sitting down saying yep, maybe something 38 00:02:25,280 --> 00:02:26,720 Speaker 3: can happen, maybe we can do a deal. 39 00:02:26,720 --> 00:02:28,120 Speaker 4: We're going back to that pause. 40 00:02:28,680 --> 00:02:30,799 Speaker 3: But it's important to understand why there was that sort 41 00:02:30,840 --> 00:02:33,400 Speaker 3: of breakdown in the Geneva truce in the first place, 42 00:02:33,440 --> 00:02:35,600 Speaker 3: and it really fundamentally. 43 00:02:34,880 --> 00:02:37,160 Speaker 4: Is over this issue of rare earth. 44 00:02:37,720 --> 00:02:41,160 Speaker 3: China introduced restrictions on seven different rare earths. These were 45 00:02:41,200 --> 00:02:45,600 Speaker 3: global restrictions, essentially requiring licenses from companies all over the world, 46 00:02:45,720 --> 00:02:49,720 Speaker 3: now not just US, but in addition, there was effectively 47 00:02:49,760 --> 00:02:53,240 Speaker 3: a shadow ban on US requiring these licenses. Now, as 48 00:02:53,280 --> 00:02:56,280 Speaker 3: part of the Geneva truce, a really critical part of 49 00:02:56,280 --> 00:03:00,320 Speaker 3: that truce was this agreement that the Chinese side would 50 00:03:00,320 --> 00:03:05,840 Speaker 3: effectively lift that shadow bank and allow licenses. Now, the 51 00:03:06,040 --> 00:03:08,960 Speaker 3: whole disagreement and the reason why we saw this breakdown 52 00:03:08,960 --> 00:03:11,640 Speaker 3: between the US and China side is precisely what that meant. 53 00:03:11,639 --> 00:03:15,079 Speaker 3: What does it actually mean for Beijing to expedite these licenses. 54 00:03:15,120 --> 00:03:17,600 Speaker 3: How quickly is that going to come through? On the 55 00:03:17,680 --> 00:03:21,519 Speaker 3: China side, of course, we are talking about an entirely 56 00:03:21,560 --> 00:03:25,079 Speaker 3: new system of export controls over seven different substances. It's 57 00:03:25,120 --> 00:03:28,560 Speaker 3: a global program, steply complex, forty five days of a 58 00:03:28,600 --> 00:03:32,200 Speaker 3: review process, etc. And it does seem on the US 59 00:03:32,280 --> 00:03:35,040 Speaker 3: side that there was an expectation that once that Geneva 60 00:03:35,080 --> 00:03:37,480 Speaker 3: agreement was made, that there would be a much more 61 00:03:37,720 --> 00:03:42,200 Speaker 3: rapid introduction implementation, So that's really at the crux, it 62 00:03:42,360 --> 00:03:45,520 Speaker 3: seems of where there was a sort of breakdown in 63 00:03:45,560 --> 00:03:47,560 Speaker 3: relationships between the US and China. 64 00:03:48,120 --> 00:03:50,480 Speaker 4: So now it seems it seems. 65 00:03:50,200 --> 00:03:51,920 Speaker 3: I said it very tentatively because we don't have a 66 00:03:51,960 --> 00:03:54,080 Speaker 3: lot of details, but it seems like there is a 67 00:03:54,120 --> 00:04:00,240 Speaker 3: quote unquote framework to allow this expeditive process or allow 68 00:04:00,400 --> 00:04:04,600 Speaker 3: these rare US to continue being exported into the US. 69 00:04:04,960 --> 00:04:07,640 Speaker 3: We do not have any details on what that might mean, 70 00:04:07,760 --> 00:04:10,080 Speaker 3: and both sides still do need to go back to 71 00:04:10,120 --> 00:04:13,600 Speaker 3: their respective leaders and effectively run this by their bosses. 72 00:04:14,320 --> 00:04:17,400 Speaker 2: But on the other side, there had been some excitement 73 00:04:17,480 --> 00:04:20,160 Speaker 2: in the last couple of days when the Commerce Secretary, 74 00:04:20,240 --> 00:04:23,680 Speaker 2: Howard Litnik actually mentions export controls and was also apparently 75 00:04:23,720 --> 00:04:27,120 Speaker 2: thinking about some of the US export controls on China, 76 00:04:27,200 --> 00:04:29,440 Speaker 2: which have been a very sore point for the Chinese. 77 00:04:29,760 --> 00:04:32,920 Speaker 2: Do we have any clarity on which of those controls 78 00:04:32,960 --> 00:04:35,359 Speaker 2: were discussed, because there's some are much more important than others. 79 00:04:35,680 --> 00:04:37,520 Speaker 4: Absolutely, so sort of yes and no. 80 00:04:37,640 --> 00:04:41,920 Speaker 3: Here we think that some of the immediate retaliatory export 81 00:04:41,960 --> 00:04:44,760 Speaker 3: controls that the US rolled out when they believe that 82 00:04:44,960 --> 00:04:47,520 Speaker 3: the Chinese side were not living up to their expectations 83 00:04:47,720 --> 00:04:50,480 Speaker 3: and the agreement on rare US will be lifted. So 84 00:04:50,520 --> 00:04:55,160 Speaker 3: that includes restrictions on things like software technology for developing semiconductors, 85 00:04:55,600 --> 00:04:59,400 Speaker 3: nuclear materials, chemicals, some jet engine parts. So these are 86 00:04:59,400 --> 00:05:03,360 Speaker 3: the late package of retaliatory measures that we've seen coming 87 00:05:03,400 --> 00:05:06,240 Speaker 3: out of the US since that breakdown in the Geneva truth. 88 00:05:06,680 --> 00:05:09,640 Speaker 3: It's unclear if this will involve some of these more 89 00:05:09,720 --> 00:05:13,000 Speaker 3: fundamental issues over export controls over semiconductors. 90 00:05:13,240 --> 00:05:15,719 Speaker 4: That of course is the big sticking point, these. 91 00:05:15,600 --> 00:05:18,919 Speaker 3: Restrictions that were rolled out under Biden and continue to 92 00:05:18,960 --> 00:05:20,000 Speaker 3: be expanded. 93 00:05:20,360 --> 00:05:23,040 Speaker 2: Well, Robin seeing you know, of course Rebecca has to 94 00:05:23,120 --> 00:05:25,400 Speaker 2: stick to absolutely what she knows. But you get to 95 00:05:25,520 --> 00:05:30,599 Speaker 2: just speculate wildly on the basis of very serious economic analysis. 96 00:05:30,839 --> 00:05:33,599 Speaker 2: How are you reading where we've got to? And I 97 00:05:33,600 --> 00:05:35,600 Speaker 2: guess what will you be looking for in terms of 98 00:05:35,640 --> 00:05:39,039 Speaker 2: the economic impact of these ongoing talks. 99 00:05:39,320 --> 00:05:42,880 Speaker 5: Thank you, definitely, I like the word you used, speculating. 100 00:05:43,120 --> 00:05:47,400 Speaker 5: Human all the flip flop about trade talks so far, 101 00:05:47,720 --> 00:05:51,200 Speaker 5: the bid after gap between US and China is still 102 00:05:51,360 --> 00:05:54,320 Speaker 5: very wide. If you look at the readouts from the 103 00:05:54,440 --> 00:05:58,000 Speaker 5: US side, they are leader focusing on traded deer on 104 00:05:58,240 --> 00:06:03,160 Speaker 5: upcoming logistics for Real Earth, as Rebecca You elaborated, but 105 00:06:03,600 --> 00:06:08,039 Speaker 5: the Chinese version, Beijing's readoubt covered a much bigger picture. 106 00:06:08,320 --> 00:06:11,839 Speaker 5: They want to reset the grand relationship between US and China, 107 00:06:12,279 --> 00:06:17,839 Speaker 5: covering tech curves student with geopolitical issues. So apparently Beijing 108 00:06:17,920 --> 00:06:21,279 Speaker 5: wanted a grand bargaining deal. So I think there is 109 00:06:21,320 --> 00:06:25,440 Speaker 5: a huge gap between the bid ask and that means 110 00:06:25,480 --> 00:06:29,120 Speaker 5: the ongoing talks won't be easy. Maybe they can extend. 111 00:06:29,279 --> 00:06:33,320 Speaker 5: It's a trade tariff did on, but what Beijing wanted 112 00:06:33,520 --> 00:06:37,360 Speaker 5: is beyond tariffs. And Rebecca you mentioned the Real Earth. 113 00:06:37,839 --> 00:06:40,799 Speaker 5: Now China is using it more like a strategic card. 114 00:06:41,440 --> 00:06:45,120 Speaker 5: So what you said, it's like Beijings thinking if you 115 00:06:45,200 --> 00:06:48,800 Speaker 5: cut our chips, I will cut your magnets. And over 116 00:06:48,800 --> 00:06:51,800 Speaker 5: the last seven years since the first trade war in 117 00:06:51,880 --> 00:06:57,320 Speaker 5: twenty eighteen, China has strengthened these dominance in key supply 118 00:06:57,400 --> 00:07:00,680 Speaker 5: chains like Real Earth. Today they control more than eighty 119 00:07:00,680 --> 00:07:05,120 Speaker 5: percent of real refining capacity, more than ninety percent of 120 00:07:05,279 --> 00:07:09,800 Speaker 5: the magnet production, which is widely used in next generation 121 00:07:10,000 --> 00:07:14,640 Speaker 5: of attack, and the supply chain including TV cars, humanoids, robotics, 122 00:07:14,920 --> 00:07:18,960 Speaker 5: even modern defense system So now China is using that 123 00:07:19,480 --> 00:07:23,920 Speaker 5: in exchange for potential relaxation of tech curves. That's also 124 00:07:24,280 --> 00:07:29,840 Speaker 5: part of Beijing's strategic play, sending a message to US allies. 125 00:07:30,160 --> 00:07:33,640 Speaker 5: It's making them think twice about aliging too closely to 126 00:07:33,720 --> 00:07:36,200 Speaker 5: the tech curbs on China. So I do think all 127 00:07:36,320 --> 00:07:39,600 Speaker 5: these showed China wanted the grand bargaining deer covering not 128 00:07:39,720 --> 00:07:44,120 Speaker 5: just the tariff but attack and geopolitical issues. Given that's 129 00:07:44,200 --> 00:07:47,680 Speaker 5: not going to be easy, you may see continued uncertainty 130 00:07:47,760 --> 00:07:51,240 Speaker 5: on trade tards so our base cases. By end of 131 00:07:51,280 --> 00:07:54,560 Speaker 5: this year, the US terminal tariff rate on China will 132 00:07:54,600 --> 00:07:58,600 Speaker 5: probably stay similar to today's level thirty percent forty percent. 133 00:07:59,040 --> 00:08:02,040 Speaker 5: Given all these, if the divergent felt for Beijing and 134 00:08:02,080 --> 00:08:05,080 Speaker 5: the Washington for redoubt and that going to cost the 135 00:08:05,120 --> 00:08:08,240 Speaker 5: foreign forum margins, they cost the Chinese ex quarters the job. 136 00:08:08,600 --> 00:08:11,560 Speaker 1: So if downside the ryth to the economy. 137 00:08:12,120 --> 00:08:16,640 Speaker 2: How hung I mean, it feels like the US side 138 00:08:17,320 --> 00:08:23,480 Speaker 2: had not fully grasped how reliant key parts of the 139 00:08:23,640 --> 00:08:26,040 Speaker 2: US supply chain was on these rares. So and I'm 140 00:08:26,120 --> 00:08:29,600 Speaker 2: kind of reminded of the depiction someone had of the 141 00:08:29,760 --> 00:08:32,599 Speaker 2: ongoing debate, which is the US has decided they absolutely 142 00:08:32,600 --> 00:08:35,560 Speaker 2: want a divorce from China in ten years time, but 143 00:08:35,720 --> 00:08:38,920 Speaker 2: lived together in the interim for the entire ten years. 144 00:08:39,160 --> 00:08:40,840 Speaker 2: You know, that is the challenge that you see in 145 00:08:40,880 --> 00:08:42,360 Speaker 2: some of these talks. 146 00:08:42,640 --> 00:08:45,680 Speaker 6: Yeah, well, I think it's similar to a couple fighting 147 00:08:45,720 --> 00:08:49,520 Speaker 6: through a divorce process, right, so the two parties don't 148 00:08:49,559 --> 00:08:52,000 Speaker 6: see each other in the future, but then at the 149 00:08:52,040 --> 00:08:54,480 Speaker 6: same time they still have to live with the consequence 150 00:08:54,520 --> 00:08:57,760 Speaker 6: and how to divide up the assets. Rebecca and Robin 151 00:08:58,040 --> 00:09:01,320 Speaker 6: mentioned about the rare earth is because the counter off 152 00:09:01,440 --> 00:09:05,000 Speaker 6: from the US part is probably not good enough for China, right. So, 153 00:09:05,200 --> 00:09:07,440 Speaker 6: I think as a result, even though China has agreed 154 00:09:07,480 --> 00:09:11,600 Speaker 6: to restart the approval process for rare exports at the 155 00:09:11,600 --> 00:09:17,520 Speaker 6: Geneva session, the Chinese can always run slower than expected 156 00:09:17,600 --> 00:09:18,800 Speaker 6: process to approve it. 157 00:09:18,960 --> 00:09:19,080 Speaker 7: Right. 158 00:09:19,160 --> 00:09:21,679 Speaker 6: So, normally it takes probably one to two weeks to 159 00:09:21,760 --> 00:09:24,079 Speaker 6: approve to get a permit for exports, and now it 160 00:09:24,120 --> 00:09:27,319 Speaker 6: takes two months. Right then, that way, on the surface, 161 00:09:27,360 --> 00:09:29,960 Speaker 6: on paper, Chinese is not violating the agreement, but then 162 00:09:30,000 --> 00:09:31,880 Speaker 6: at the same time it's still not getting your key 163 00:09:31,960 --> 00:09:34,840 Speaker 6: ingredient for your GPUs. So I think China can do 164 00:09:34,880 --> 00:09:37,400 Speaker 6: a lot of these things to slow down the process, 165 00:09:37,520 --> 00:09:40,319 Speaker 6: and also at the same time, people have to recognize 166 00:09:40,360 --> 00:09:45,320 Speaker 6: the situation that the American consumers probably can't live for 167 00:09:45,400 --> 00:09:49,680 Speaker 6: much longer at the higher prospect of much substantial higher invasion. 168 00:09:50,120 --> 00:09:52,400 Speaker 6: And then at the same same time, because of the 169 00:09:52,520 --> 00:09:55,200 Speaker 6: process of this tradel on how this trail will started, 170 00:09:55,559 --> 00:10:00,720 Speaker 6: it actually somehow united the Chinese people together, right, So 171 00:10:00,800 --> 00:10:02,720 Speaker 6: if you're in mainland China, you can you can really 172 00:10:02,760 --> 00:10:06,360 Speaker 6: feel the atmosphere rooting for President she and us also 173 00:10:06,440 --> 00:10:09,040 Speaker 6: rooting for China in this negotiation process. 174 00:10:09,160 --> 00:10:10,640 Speaker 1: So I think the Chinese. 175 00:10:10,400 --> 00:10:13,280 Speaker 6: People is very famous for it bitter, right, So in 176 00:10:13,320 --> 00:10:17,160 Speaker 6: the Chinese culture it bitter means it can endure substantial 177 00:10:17,200 --> 00:10:19,760 Speaker 6: hardship for a very long time. So as a result, 178 00:10:20,040 --> 00:10:22,320 Speaker 6: you can see this group of people is ready to fight. 179 00:10:22,440 --> 00:10:25,880 Speaker 6: But then at the same time, the American consumers really 180 00:10:25,880 --> 00:10:28,520 Speaker 6: want to get cheap goods. So then that way you 181 00:10:28,559 --> 00:10:30,960 Speaker 6: can see the China can afford to wait. And so 182 00:10:31,040 --> 00:10:34,200 Speaker 6: I think it's setting a stage for the negotiation. So 183 00:10:34,240 --> 00:10:37,160 Speaker 6: I think one shouldn't be too surprised that as China 184 00:10:37,240 --> 00:10:40,520 Speaker 6: Jet one, then the Americans would have to give more 185 00:10:40,559 --> 00:10:44,200 Speaker 6: concession during the process, and then towards the end we 186 00:10:44,280 --> 00:10:47,959 Speaker 6: probably get a result that is more favorable than expected 187 00:10:48,040 --> 00:10:48,920 Speaker 6: for the Chinese people. 188 00:10:49,440 --> 00:10:51,400 Speaker 2: And just to follow up on that, the World Banks 189 00:10:51,400 --> 00:10:55,200 Speaker 2: obviously brought out some new forecasts this week, and it's 190 00:10:55,240 --> 00:10:58,160 Speaker 2: cut the growth forecast for seventy percent of the world's economies, 191 00:10:58,160 --> 00:11:01,240 Speaker 2: almost all of the world's biggest economies. It's halved this 192 00:11:01,360 --> 00:11:04,800 Speaker 2: year's forecast for the US. The only country that it 193 00:11:04,840 --> 00:11:08,160 Speaker 2: hasn't cut the forecast for this year next is China. 194 00:11:08,240 --> 00:11:10,280 Speaker 2: So I guess to come back to you, how long 195 00:11:10,800 --> 00:11:13,079 Speaker 2: at this point, it's China winning the trade war. It's 196 00:11:13,120 --> 00:11:15,480 Speaker 2: China coming out of this certainly and much better than 197 00:11:15,480 --> 00:11:15,960 Speaker 2: the US. 198 00:11:16,440 --> 00:11:20,360 Speaker 6: Yeah, well, I think it's much better than the trailer 199 00:11:20,400 --> 00:11:23,440 Speaker 6: phase one in twenty eighteen, right, So I think during 200 00:11:23,440 --> 00:11:25,880 Speaker 6: the current trade war, Chinese more prepared than before. And 201 00:11:25,920 --> 00:11:30,280 Speaker 6: also Chinese is ready to use the asymmetric retaliation towards 202 00:11:30,280 --> 00:11:32,920 Speaker 6: the US counterpart. So I think as a result, on 203 00:11:32,960 --> 00:11:36,280 Speaker 6: the surface, but the Chinese growth is steady, Chinese exports 204 00:11:36,320 --> 00:11:38,800 Speaker 6: is steady, and if you look at the Chinese domestic economy, 205 00:11:39,120 --> 00:11:41,440 Speaker 6: you're seeing two parts of the economy. One part is 206 00:11:41,600 --> 00:11:45,200 Speaker 6: export manufacturing driven that is doing really well. So even 207 00:11:45,200 --> 00:11:47,600 Speaker 6: though the exports to the US has been down, like 208 00:11:47,760 --> 00:11:50,120 Speaker 6: one third, but then to the rest of the world 209 00:11:50,200 --> 00:11:52,679 Speaker 6: is really booming. And then at the same time, if 210 00:11:52,720 --> 00:11:54,520 Speaker 6: you want to bury on the Chinese economy, you can 211 00:11:54,520 --> 00:11:57,880 Speaker 6: look at the consumer sector right, which is way below 212 00:11:57,920 --> 00:12:00,440 Speaker 6: expectation and it's still not recovering. And if you look 213 00:12:00,480 --> 00:12:03,760 Speaker 6: at the housing sector, the housing bubble bursting process is 214 00:12:03,760 --> 00:12:06,079 Speaker 6: still dragging on. So depending on which part of the 215 00:12:06,200 --> 00:12:08,560 Speaker 6: Chinese economy you will get and then you can draw 216 00:12:08,720 --> 00:12:09,840 Speaker 6: very different conclusions. 217 00:12:10,240 --> 00:12:13,000 Speaker 2: We have debates in Bloomberg and with the economists as well, 218 00:12:13,040 --> 00:12:17,360 Speaker 2: because we'll have analysis of the growth trajectory being lower 219 00:12:17,400 --> 00:12:19,600 Speaker 2: for China and what that means in terms of people's 220 00:12:19,600 --> 00:12:23,800 Speaker 2: expectations after years of double digit growth. But alongside that 221 00:12:23,880 --> 00:12:27,560 Speaker 2: sort of pessimism around the Chinese economy, you know, we'll 222 00:12:27,559 --> 00:12:31,720 Speaker 2: also be reading the latest release of the breakthrough deep 223 00:12:31,760 --> 00:12:36,000 Speaker 2: seek or the latest incredible charging technology for electric cars, 224 00:12:36,040 --> 00:12:38,640 Speaker 2: where China seems to be powering ahead much faster. 225 00:12:38,400 --> 00:12:39,320 Speaker 1: Than people expected. 226 00:12:39,360 --> 00:12:42,760 Speaker 2: So how do you deal with that schizophrenia day to 227 00:12:42,840 --> 00:12:45,640 Speaker 2: day when people are asking you how's the China economy? 228 00:12:46,320 --> 00:12:48,720 Speaker 3: Well, I think to how Hung's point, to a certain extent, 229 00:12:48,720 --> 00:12:51,600 Speaker 3: it really depends where you look. And clearly there are 230 00:12:51,600 --> 00:12:56,600 Speaker 3: areas where we've had most notably high quality manufacturing, where 231 00:12:56,920 --> 00:12:59,760 Speaker 3: enormous amounts of investment has been pouring in, and you 232 00:12:59,840 --> 00:13:04,160 Speaker 3: do you see the clear emergence of winners among Chinese firms. 233 00:13:04,200 --> 00:13:08,000 Speaker 3: Think about electric cars, think about deep seek ai. These 234 00:13:08,000 --> 00:13:11,240 Speaker 3: are investments that have been going in for the last. 235 00:13:11,080 --> 00:13:11,920 Speaker 4: Decade or so. 236 00:13:11,960 --> 00:13:14,720 Speaker 3: We can think about the China twenty twenty five plans, 237 00:13:14,760 --> 00:13:18,880 Speaker 3: for example, by and large, aside from semiconductors, China has 238 00:13:18,960 --> 00:13:22,280 Speaker 3: met all of its aspirations in becoming either a global 239 00:13:22,360 --> 00:13:25,120 Speaker 3: leader or one of a global leader in those key sectors. 240 00:13:25,600 --> 00:13:28,840 Speaker 3: So in some ways, China is meeting its own tests. 241 00:13:29,200 --> 00:13:31,720 Speaker 3: But on the other hand, to how Hong's point, there 242 00:13:31,880 --> 00:13:36,480 Speaker 3: is still this quite painful transformation that is being ushered 243 00:13:36,840 --> 00:13:41,520 Speaker 3: away from a debt driven property investment led society, and 244 00:13:41,559 --> 00:13:44,880 Speaker 3: that clearly does still provide drags on the economy. I know, 245 00:13:45,040 --> 00:13:47,600 Speaker 3: Morgan Stanley that you have your own sort of social 246 00:13:47,880 --> 00:13:51,480 Speaker 3: metric index of content in China. That's one way to 247 00:13:51,520 --> 00:13:53,600 Speaker 3: put it. But another way is when you kind of look, 248 00:13:53,720 --> 00:13:56,760 Speaker 3: for example, private data sets at protests in China. Now 249 00:13:56,840 --> 00:13:59,800 Speaker 3: they're relatively small scale, we're talking about in the hundreds, 250 00:14:00,120 --> 00:14:03,080 Speaker 3: but by and large, we have seen those continue to climb, 251 00:14:03,120 --> 00:14:06,080 Speaker 3: particularly over the course of this year. They tend to 252 00:14:06,120 --> 00:14:09,880 Speaker 3: be very economic focus. These are economic issues. They're rarely political. 253 00:14:09,920 --> 00:14:12,840 Speaker 3: In fact, actually they're off and around housing issues, They're 254 00:14:12,880 --> 00:14:16,760 Speaker 3: often around unpaid wages. So to that point of knowing 255 00:14:16,760 --> 00:14:19,120 Speaker 3: sort of where to look is you can see these 256 00:14:19,520 --> 00:14:23,640 Speaker 3: pockets of real tension, particularly at the local government level 257 00:14:23,680 --> 00:14:27,160 Speaker 3: where finances are really strained. And then over we think 258 00:14:27,200 --> 00:14:31,680 Speaker 3: about the consumer mood. Of course, most consumer indexes will 259 00:14:31,720 --> 00:14:32,440 Speaker 3: still show that we. 260 00:14:32,400 --> 00:14:35,120 Speaker 4: Are pretty far from where we were pre. 261 00:14:35,160 --> 00:14:38,720 Speaker 3: Pandemic as well, so overall that mood is different. But 262 00:14:38,800 --> 00:14:40,560 Speaker 3: to how Hung's point, I will say, there has been 263 00:14:40,560 --> 00:14:43,720 Speaker 3: a remarkable transformation and how this is all viewed as 264 00:14:43,800 --> 00:14:46,240 Speaker 3: a result of the trade war. When we think about 265 00:14:46,360 --> 00:14:51,240 Speaker 3: last year, all of these stories about deflation, Robin extensively 266 00:14:51,280 --> 00:14:54,120 Speaker 3: about concerns about the property market when we're going to 267 00:14:54,120 --> 00:14:57,720 Speaker 3: see a bottom and really the cost for ordinary people 268 00:14:57,760 --> 00:15:01,520 Speaker 3: of Presidencyedion Ping's pushed to transform economy. Was this really 269 00:15:01,560 --> 00:15:03,520 Speaker 3: going to pay off the end of the boom years? 270 00:15:03,560 --> 00:15:05,640 Speaker 3: So were these sort of quite existential questions we are 271 00:15:05,680 --> 00:15:10,160 Speaker 3: asking now we are seeing this extraordinary support from many 272 00:15:10,200 --> 00:15:13,920 Speaker 3: parts of the economy for presidency, backing China standing up, 273 00:15:14,200 --> 00:15:16,640 Speaker 3: and this sort of resurgence of sort of a nationalism 274 00:15:16,800 --> 00:15:20,400 Speaker 3: and a nationalist feeling and patriotic feeling as well. So 275 00:15:20,920 --> 00:15:22,520 Speaker 3: you know, in some ways that's nothing to do with 276 00:15:22,520 --> 00:15:25,360 Speaker 3: the Chinese economy. We're talking about the sort of enemy 277 00:15:25,360 --> 00:15:28,160 Speaker 3: that the US has created for itself that has changed 278 00:15:28,160 --> 00:15:29,440 Speaker 3: the national mood in China. 279 00:15:29,520 --> 00:15:32,360 Speaker 2: I think, well, Robin, I think we've established that Rebecca 280 00:15:32,440 --> 00:15:34,080 Speaker 2: is a very careful reader. 281 00:15:33,760 --> 00:15:34,920 Speaker 4: Of your work. 282 00:15:35,960 --> 00:15:38,880 Speaker 2: But I'm interested in how you see that. And I 283 00:15:38,920 --> 00:15:42,840 Speaker 2: think also we see maybe a change in the mood 284 00:15:43,280 --> 00:15:47,600 Speaker 2: supporting the leadership, But have we also seen a change 285 00:15:47,640 --> 00:15:50,600 Speaker 2: of direction from the leadership in terms of its commitment 286 00:15:50,640 --> 00:15:53,640 Speaker 2: to rebalancing the economy or is that just wishful thinking 287 00:15:53,680 --> 00:15:55,800 Speaker 2: on the part of the Americans, you know, a commitment 288 00:15:56,200 --> 00:15:59,240 Speaker 2: from the top to a more consumption led economy, which 289 00:15:59,280 --> 00:16:02,520 Speaker 2: is of course what economists have been lecturing the Chinese 290 00:16:02,520 --> 00:16:03,680 Speaker 2: about for many years. 291 00:16:04,120 --> 00:16:07,600 Speaker 5: Well's definitely, I think Rebecca, you are spot on about 292 00:16:07,840 --> 00:16:08,600 Speaker 5: the change. 293 00:16:08,360 --> 00:16:14,520 Speaker 7: Of because she's been reading, you know, I have been wondering, right, 294 00:16:14,600 --> 00:16:19,080 Speaker 7: and the decline of readership readership of Mind Definition report 295 00:16:20,200 --> 00:16:24,440 Speaker 7: last year it was all dominated by definition, housing adjustment, 296 00:16:24,600 --> 00:16:25,480 Speaker 7: over capacity. 297 00:16:26,240 --> 00:16:29,440 Speaker 5: Then suddenly, as Rebecca you mentioned, there is a changing 298 00:16:29,520 --> 00:16:33,360 Speaker 5: narrative and how you also briefly touched it. At least 299 00:16:33,480 --> 00:16:37,240 Speaker 5: right now, despite China is nothing a sustainable recovery path, 300 00:16:37,400 --> 00:16:42,360 Speaker 5: yet at least there is a bification of the narrative 301 00:16:42,640 --> 00:16:46,440 Speaker 5: a tale of two economies. You have a very dynamic 302 00:16:46,520 --> 00:16:50,000 Speaker 5: tech economy. Every other week you heard the new technology progress, 303 00:16:50,360 --> 00:16:54,720 Speaker 5: either AI model or next generation of batteries, or self 304 00:16:54,800 --> 00:16:58,920 Speaker 5: driving cars, or even recently China's a healthcare boutech had 305 00:16:58,960 --> 00:17:03,440 Speaker 5: its own deep thick moment able to make fast follow 306 00:17:03,640 --> 00:17:05,680 Speaker 5: drugs at competitive. 307 00:17:05,160 --> 00:17:07,840 Speaker 1: Quality at a fraction of the US cost. 308 00:17:08,320 --> 00:17:10,680 Speaker 5: So all of these are showing a very dynamic tech 309 00:17:10,760 --> 00:17:13,520 Speaker 5: economy that helped Hong Kong. I think in your Hong 310 00:17:13,600 --> 00:17:16,960 Speaker 5: Kong conference today is becoming bigger partially because Hong Kong 311 00:17:17,040 --> 00:17:20,879 Speaker 5: is back with the ecosystem. Private acity invest in tech 312 00:17:21,240 --> 00:17:24,400 Speaker 5: using Hong Kong as acts the channel creating new money. 313 00:17:24,520 --> 00:17:28,200 Speaker 5: That animal spirity is largely back. But once you take 314 00:17:28,280 --> 00:17:33,000 Speaker 5: off your augmented reality glass you look at conventional consumers 315 00:17:33,000 --> 00:17:38,120 Speaker 5: as are mentioned or housing construction, they are pretty much 316 00:17:38,160 --> 00:17:41,879 Speaker 5: stuck with definition and as the economists, we have to 317 00:17:41,960 --> 00:17:46,840 Speaker 5: explain why these sifications happened. I think fundamentally China has 318 00:17:46,880 --> 00:17:52,160 Speaker 5: not shifted from a supply centric business model policy approach 319 00:17:52,320 --> 00:17:54,160 Speaker 5: towards consumption centric. 320 00:17:54,640 --> 00:17:55,480 Speaker 1: They did some. 321 00:17:55,400 --> 00:17:59,400 Speaker 5: Baby steps social welfare or consumer trading, but these are 322 00:17:59,480 --> 00:18:05,240 Speaker 5: too little. Fundamentally, the local government incentives, the GDPKPI, the 323 00:18:05,320 --> 00:18:09,400 Speaker 5: government revenue largely relying on at which is linked to production, 324 00:18:09,960 --> 00:18:13,360 Speaker 5: all of these are showing past dependency. They are still 325 00:18:13,400 --> 00:18:17,679 Speaker 5: pretty much in supply centric mentality. We proposed they should 326 00:18:17,880 --> 00:18:21,840 Speaker 5: upgrade their Made in China twenty twenty five to something 327 00:18:21,880 --> 00:18:26,560 Speaker 5: called an open China Market tunicity, focusing on boosting domestic 328 00:18:26,680 --> 00:18:31,760 Speaker 5: demand and consumption in a sustainable way, providing deep social 329 00:18:31,760 --> 00:18:36,399 Speaker 5: safety net that social welfare household centric reform to unlock 330 00:18:36,560 --> 00:18:41,600 Speaker 5: China's consumption potential. However, according to Bloomberg, they are probably 331 00:18:41,640 --> 00:18:44,840 Speaker 5: still debating on doubling down on PECK and the supply 332 00:18:44,920 --> 00:18:47,760 Speaker 5: side in the next five year plan. So I do 333 00:18:47,840 --> 00:18:51,720 Speaker 5: think that's the reason of the bification of the economy, 334 00:18:51,920 --> 00:18:55,840 Speaker 5: a tale of two economies. Unfortunately, for a bigger part 335 00:18:55,920 --> 00:18:59,199 Speaker 5: of the macroeconomy, they are still stuck with deflation. So 336 00:18:59,359 --> 00:19:03,560 Speaker 5: volume grow fine definitely. You mentioned many people maintained or 337 00:19:03,640 --> 00:19:07,520 Speaker 5: upgraded their China forecast to four and a half cent 338 00:19:07,800 --> 00:19:10,680 Speaker 5: or higher for this year, but that's for real GDP, 339 00:19:10,800 --> 00:19:13,720 Speaker 5: that's for volume. Once you look at the value or 340 00:19:14,080 --> 00:19:16,880 Speaker 5: nominal side, we think China's normal. 341 00:19:16,720 --> 00:19:19,359 Speaker 1: Or GDP growth was there at the subdual level of. 342 00:19:19,840 --> 00:19:23,280 Speaker 5: Three and a halfvent throughout maybe the end of next year, 343 00:19:23,640 --> 00:19:26,600 Speaker 5: given the deflation problem and the recent the example of 344 00:19:26,760 --> 00:19:30,760 Speaker 5: they did some interesting introduction of self driving cars, but 345 00:19:30,840 --> 00:19:34,000 Speaker 5: meanwhile you see all these cut through the pricing war 346 00:19:34,119 --> 00:19:37,360 Speaker 5: during IV car among all these TV cut firms. So 347 00:19:37,400 --> 00:19:40,399 Speaker 5: that's a perfect example of the supply versus a demand 348 00:19:40,560 --> 00:19:42,840 Speaker 5: imbalance is quite persistent in China. 349 00:19:43,320 --> 00:19:45,639 Speaker 2: And just to unpack a little bit for people listening 350 00:19:45,720 --> 00:19:48,280 Speaker 2: to you and not always listening to the sort of economist 351 00:19:48,280 --> 00:19:50,760 Speaker 2: debates about this, when you talk about the rebalancing and 352 00:19:50,800 --> 00:19:54,080 Speaker 2: when you talk about still focus on supply and some 353 00:19:54,119 --> 00:19:56,560 Speaker 2: of the incentives. I mean, it's an economy that is 354 00:19:56,640 --> 00:20:01,160 Speaker 2: geared around an extraordinarily high level of investment many many years, 355 00:20:01,440 --> 00:20:04,400 Speaker 2: and much lower consumption than you see in most economies, 356 00:20:04,440 --> 00:20:07,800 Speaker 2: certainly advanced economies but also economies of a similar income. 357 00:20:08,080 --> 00:20:10,240 Speaker 2: And what you were saying, Robin, is that the local 358 00:20:10,280 --> 00:20:14,360 Speaker 2: government officials are incentivized still around just pushing out output 359 00:20:14,920 --> 00:20:18,679 Speaker 2: rather than getting income to households or providing welfare services. 360 00:20:19,119 --> 00:20:22,200 Speaker 2: How and then when we discussed this before the session, 361 00:20:22,720 --> 00:20:24,840 Speaker 2: you made the point that this was about not just 362 00:20:24,920 --> 00:20:28,880 Speaker 2: rebalancing the Chinese economy but also the US economy. I'm 363 00:20:28,880 --> 00:20:30,679 Speaker 2: not sure that's the way the US sees that, but 364 00:20:30,760 --> 00:20:32,240 Speaker 2: just explain that briefly to us. 365 00:20:32,440 --> 00:20:35,679 Speaker 6: Yeah, well, I think to rebellance, both sides has to 366 00:20:35,720 --> 00:20:39,280 Speaker 6: work together. I think the Chinese consume too little, invest 367 00:20:39,320 --> 00:20:42,960 Speaker 6: too much, and then the US is still reverse. If 368 00:20:42,960 --> 00:20:45,320 Speaker 6: you want to rebalance this structure, the US has to 369 00:20:45,359 --> 00:20:48,400 Speaker 6: produce more, consume less, and then vice versa for the Chinese. 370 00:20:48,680 --> 00:20:51,280 Speaker 6: I think for China is a monumental task in the 371 00:20:51,320 --> 00:20:54,200 Speaker 6: sense that if you look at the domestic economy just now, 372 00:20:54,200 --> 00:20:57,520 Speaker 6: we have mentioned about the housing bubble bursting process. Now, 373 00:20:57,560 --> 00:21:01,399 Speaker 6: in this process, indebted department of the Chinese economy is 374 00:21:01,440 --> 00:21:05,080 Speaker 6: really the household. The household is borrowed up to their eyeballs. 375 00:21:05,280 --> 00:21:07,800 Speaker 6: The non financial that the GDP racio is about three 376 00:21:07,840 --> 00:21:11,199 Speaker 6: hundred percent in China. So when you have this department 377 00:21:11,480 --> 00:21:14,640 Speaker 6: that is borrowing heavily to buy our properties, and then 378 00:21:14,680 --> 00:21:17,920 Speaker 6: now we're in a property priced inflationary process. It's very 379 00:21:17,920 --> 00:21:21,479 Speaker 6: difficult for this department to deleverage because this department cannot 380 00:21:21,480 --> 00:21:22,080 Speaker 6: print money. 381 00:21:22,359 --> 00:21:23,640 Speaker 1: But then on the other hand, the. 382 00:21:23,640 --> 00:21:26,240 Speaker 6: US is a different situation where you have the public 383 00:21:26,320 --> 00:21:29,199 Speaker 6: department that is boring up a lot of that, and 384 00:21:29,240 --> 00:21:32,480 Speaker 6: then the US households deservice racial is all it's still 385 00:21:32,480 --> 00:21:35,960 Speaker 6: at odd time low. In this kind of economic structure, 386 00:21:36,200 --> 00:21:39,800 Speaker 6: then you'll see an inflationary process. The US government can't 387 00:21:39,880 --> 00:21:41,680 Speaker 6: keep its budget deficit down, but then at the same 388 00:21:41,680 --> 00:21:44,199 Speaker 6: time you're facing higher and high inflationary pressure. 389 00:21:44,560 --> 00:21:45,320 Speaker 1: And then in. 390 00:21:45,320 --> 00:21:48,240 Speaker 6: Chinese the opposite. If you really want to rebalance, it's 391 00:21:48,280 --> 00:21:51,520 Speaker 6: a global rebalance process. It's not just about China. If 392 00:21:51,560 --> 00:21:55,480 Speaker 6: you look at China, so the way we manage our economy, right, 393 00:21:55,520 --> 00:21:58,679 Speaker 6: so we try to rebalance it for like decades I 394 00:21:58,760 --> 00:22:02,320 Speaker 6: remember still since two thousand and seven, right, so when 395 00:22:02,440 --> 00:22:05,720 Speaker 6: the ex covernment was in charge, there was this saying 396 00:22:05,800 --> 00:22:09,240 Speaker 6: about the Chinese managing Chinese economy is about it's riding 397 00:22:09,240 --> 00:22:12,120 Speaker 6: a bicycle, right, so if you're too fast too slow, 398 00:22:12,200 --> 00:22:14,679 Speaker 6: it will tep over. I think you know, if you 399 00:22:14,800 --> 00:22:17,719 Speaker 6: look back now, almost twenty years later, we look at 400 00:22:17,720 --> 00:22:21,719 Speaker 6: the Chinese economy is actually more investment driven than before 401 00:22:22,160 --> 00:22:24,760 Speaker 6: and less consumption, so that it is telling you that 402 00:22:24,880 --> 00:22:28,520 Speaker 6: whatever happened in the past two decades hasn't been successful. 403 00:22:28,640 --> 00:22:31,720 Speaker 6: We have to change the way of thinking for China. 404 00:22:31,920 --> 00:22:34,480 Speaker 6: Just rebalancing on its own it hasn't been successful. I 405 00:22:34,520 --> 00:22:36,880 Speaker 6: think it's a global rebalancing process. 406 00:22:37,960 --> 00:22:40,240 Speaker 2: I want to just have a just say something a 407 00:22:40,240 --> 00:22:44,359 Speaker 2: bit about not just the rebalancing of the individual US 408 00:22:44,400 --> 00:22:47,600 Speaker 2: and China economies, but I would say globally there's a 409 00:22:47,640 --> 00:22:50,960 Speaker 2: sort of rebalancing in markets that's happening. We're seeing the 410 00:22:51,040 --> 00:22:55,359 Speaker 2: dollar fall relative to every currency, but certainly many around here, 411 00:22:55,920 --> 00:23:00,760 Speaker 2: and we are seeing a reallocation of investment. People are 412 00:23:00,800 --> 00:23:03,240 Speaker 2: still heavily invested in the US it's hard to avoid, 413 00:23:03,640 --> 00:23:07,679 Speaker 2: but certainly at the margin we're seeing money flow, particularly 414 00:23:07,720 --> 00:23:11,000 Speaker 2: perhaps into this region. Rebecca, just tell us a little 415 00:23:11,000 --> 00:23:13,600 Speaker 2: bit about how you see the impact for Hong Kong 416 00:23:14,000 --> 00:23:17,240 Speaker 2: as a financial system, for the relative role of the 417 00:23:17,320 --> 00:23:20,159 Speaker 2: dollar here and investment sentiment. 418 00:23:20,600 --> 00:23:22,199 Speaker 4: In this part of the world, not just in Hong 419 00:23:22,280 --> 00:23:23,000 Speaker 4: Kong but in Asia. 420 00:23:23,040 --> 00:23:26,320 Speaker 3: This broader question of the role of the US dollar 421 00:23:26,400 --> 00:23:29,520 Speaker 3: going forward. There'll be people in this room who, over 422 00:23:29,560 --> 00:23:32,360 Speaker 3: the last year, whether it was trading the Taiwan currency, 423 00:23:32,480 --> 00:23:35,800 Speaker 3: whether it was trading the Japanese carry trade, who have 424 00:23:35,880 --> 00:23:39,199 Speaker 3: been on the forefront of feeling this sort of this 425 00:23:39,320 --> 00:23:42,440 Speaker 3: shift in the tectonic place. Essentially, there was a big 426 00:23:42,480 --> 00:23:45,160 Speaker 3: debate over whether or not actually we were seeing some 427 00:23:45,280 --> 00:23:49,119 Speaker 3: kind of reversal of the Asian financial crisis, essentially declining 428 00:23:49,160 --> 00:23:53,680 Speaker 3: confidence in the dollar, strengthening local currencies, and whether or 429 00:23:53,760 --> 00:23:57,080 Speaker 3: not that would essentially mean a massive return of capital 430 00:23:57,200 --> 00:24:00,680 Speaker 3: back home. Now that sort of phenomenal It hasn't really 431 00:24:00,720 --> 00:24:04,520 Speaker 3: started already yet in massive numbers, but certainly we are 432 00:24:04,560 --> 00:24:07,680 Speaker 3: already starting to see that playing out. And I think 433 00:24:07,680 --> 00:24:11,359 Speaker 3: for many Asian countries broadly speaking, economically, there's this question 434 00:24:11,400 --> 00:24:14,560 Speaker 3: of how that impacts their export driven economies that have 435 00:24:14,640 --> 00:24:19,439 Speaker 3: of course so relied on that currency disparity. But also 436 00:24:19,880 --> 00:24:22,080 Speaker 3: from a sort of financial markets point of view, there 437 00:24:22,119 --> 00:24:25,560 Speaker 3: will be this question of how deep and liquid home 438 00:24:25,640 --> 00:24:30,119 Speaker 3: markets are and their capacity to absorb back that home currency, 439 00:24:30,560 --> 00:24:34,000 Speaker 3: and whether if they are sort of I suppose mature enough. 440 00:24:33,720 --> 00:24:36,600 Speaker 4: To start to start adapting that back. But by and large, 441 00:24:36,840 --> 00:24:37,240 Speaker 4: there is this. 442 00:24:37,320 --> 00:24:40,600 Speaker 3: Potential good news story that we will see the sort 443 00:24:40,640 --> 00:24:43,719 Speaker 3: of reinvestment back into home currencies. 444 00:24:44,119 --> 00:24:46,480 Speaker 4: I took a trip to the US not so long ago. 445 00:24:46,520 --> 00:24:49,359 Speaker 3: I spoke to a lot of US fund managers, particularly 446 00:24:49,400 --> 00:24:50,760 Speaker 3: outside of New. 447 00:24:50,680 --> 00:24:52,919 Speaker 4: York, in places in New England and so on. 448 00:24:52,960 --> 00:24:55,560 Speaker 3: And what struck me that was sort of really remarkable 449 00:24:55,600 --> 00:24:57,480 Speaker 3: is anecdotally, although a lot of them. 450 00:24:57,680 --> 00:25:00,200 Speaker 4: Are persisting with their various. 451 00:25:00,080 --> 00:25:03,000 Speaker 3: Macro and global trades and bullish on the US, they 452 00:25:03,040 --> 00:25:05,879 Speaker 3: still believe in the US exceptionalism story. By and large, 453 00:25:05,920 --> 00:25:08,280 Speaker 3: Almost every single one of them told me that when 454 00:25:08,320 --> 00:25:10,879 Speaker 3: it comes to their personal investments, they were all worried 455 00:25:10,880 --> 00:25:14,280 Speaker 3: about overexposure to the dollar. They're all worried about thinking 456 00:25:14,359 --> 00:25:17,480 Speaker 3: about where else I diversify, what other currencies do we 457 00:25:17,520 --> 00:25:19,840 Speaker 3: go to gold? Even though it's too late, except I 458 00:25:19,920 --> 00:25:22,200 Speaker 3: just had this conversation come up again and again and again. 459 00:25:22,280 --> 00:25:25,520 Speaker 3: It's so interesting taking that into the Asian context and 460 00:25:25,520 --> 00:25:30,159 Speaker 3: how that resonates with traders and investors here as well. 461 00:25:30,240 --> 00:25:32,560 Speaker 2: Robin, you mentioned the role of Hong Kong, but do 462 00:25:32,600 --> 00:25:36,720 Speaker 2: you also see just a long term shift, this reversal 463 00:25:36,760 --> 00:25:38,800 Speaker 2: of the age of financial crisis if you like. 464 00:25:38,960 --> 00:25:43,120 Speaker 5: For this reason, Hong Kong benefited from three waves of inflows. 465 00:25:43,240 --> 00:25:46,560 Speaker 5: You mentioned about the capital flows. First the wave think 466 00:25:46,760 --> 00:25:51,320 Speaker 5: September last year. Part of the maker in Beijing believe 467 00:25:51,880 --> 00:25:55,120 Speaker 5: stock marketing is a very important and confidence vote, confidence 468 00:25:55,160 --> 00:25:58,119 Speaker 5: of prography. So in terms of the national team or 469 00:25:58,200 --> 00:26:02,639 Speaker 5: reserve management or as a sovereign worth education. Now they 470 00:26:02,720 --> 00:26:05,320 Speaker 5: value Hong Kong more than ever before that was a 471 00:26:05,480 --> 00:26:10,199 Speaker 5: stage wark more driven by government. Then after this earlier 472 00:26:10,240 --> 00:26:13,960 Speaker 5: this year deepsick moment, people realized that Okay, China still 473 00:26:13,960 --> 00:26:17,919 Speaker 5: has these innovation capabilities and due to LAXI issues, a 474 00:26:17,960 --> 00:26:21,000 Speaker 5: lot of big tech laans are listed in Hong Kong, 475 00:26:21,240 --> 00:26:22,640 Speaker 5: not in on shore China. 476 00:26:22,760 --> 00:26:23,440 Speaker 1: So Hong Kong. 477 00:26:23,400 --> 00:26:27,560 Speaker 5: Benefited from that narrative change. Okay China innovation and animal 478 00:26:27,600 --> 00:26:32,120 Speaker 5: spirit in tech is back. Recently the April second Deliberation 479 00:26:32,359 --> 00:26:35,639 Speaker 5: day and as you Stephanie and Rebeccom mentioned, people are 480 00:26:35,680 --> 00:26:41,800 Speaker 5: debating on the falling of US exceptionalism, weakening US dollar 481 00:26:42,400 --> 00:26:46,360 Speaker 5: and the third wave of influence. If not from global 482 00:26:46,359 --> 00:26:53,159 Speaker 5: money yet it's from Chinese offshore money. High networks individuals 483 00:26:53,240 --> 00:26:56,359 Speaker 5: or exporters who parked too much of their money in 484 00:26:56,520 --> 00:26:58,520 Speaker 5: US asses in the last five years. 485 00:26:58,640 --> 00:27:01,320 Speaker 1: They were too exposed to US dollar assets. 486 00:27:01,760 --> 00:27:05,120 Speaker 5: Now they are participating in things like Hong Kong asses 487 00:27:05,240 --> 00:27:08,240 Speaker 5: or Hong Kong ipo, so called the high quality. They 488 00:27:08,320 --> 00:27:11,560 Speaker 5: may be assets listed in Hong Kong. So Hong Kong 489 00:27:11,600 --> 00:27:15,400 Speaker 5: benefited from that. But the final wave, the most important one, 490 00:27:15,840 --> 00:27:19,240 Speaker 5: has not come yet, global money allocating to China and 491 00:27:19,320 --> 00:27:23,480 Speaker 5: Hong Kong. Well, China is participating in this debate on 492 00:27:23,680 --> 00:27:26,800 Speaker 5: week dollars. Maybe China can benefit from that, but I 493 00:27:26,800 --> 00:27:29,920 Speaker 5: don't think they are fully ready to seize this moment. 494 00:27:30,240 --> 00:27:33,560 Speaker 5: They need to improve policy transparency, They need to refleate 495 00:27:33,720 --> 00:27:38,200 Speaker 5: and the rebalance, try to get rid of the definition problem. 496 00:27:38,440 --> 00:27:41,520 Speaker 5: If Beijing can deliver this, I think they will benefit 497 00:27:41,680 --> 00:27:45,359 Speaker 5: much more and fully seizing this opportunity of so called 498 00:27:45,440 --> 00:27:49,800 Speaker 5: diversification away from US dollar. But SOFA Hong Kong money 499 00:27:49,840 --> 00:27:54,080 Speaker 5: is mostly Chinese money, either from Beijing or from offshore Chinese. 500 00:27:54,440 --> 00:27:56,800 Speaker 5: That's the way they benefit the sofa. 501 00:27:57,400 --> 00:27:58,360 Speaker 1: How long we'll have. 502 00:27:58,359 --> 00:28:00,640 Speaker 2: The last word? Do you agree with Robin that we're 503 00:28:00,720 --> 00:28:02,640 Speaker 2: just at the first stage of a process. That's quite 504 00:28:02,680 --> 00:28:04,600 Speaker 2: a few steps to go if we're going to have 505 00:28:04,680 --> 00:28:08,280 Speaker 2: this shift in the center of financial gravity in this direction. 506 00:28:08,800 --> 00:28:10,840 Speaker 6: Yeah, well, I think more likely than not, you know, 507 00:28:10,920 --> 00:28:14,720 Speaker 6: the US dollar will continue its depression process over the 508 00:28:14,760 --> 00:28:17,680 Speaker 6: next couple of years. I think a very strong US 509 00:28:17,720 --> 00:28:20,159 Speaker 6: dollars has been a symptom of the global imbalance. And 510 00:28:20,200 --> 00:28:23,439 Speaker 6: also the Chinese currency is way too weak. And I 511 00:28:23,480 --> 00:28:26,399 Speaker 6: think one of the reasons why the Chinese currency was 512 00:28:26,520 --> 00:28:30,439 Speaker 6: so weak was because firstly, we have to maintain the 513 00:28:30,600 --> 00:28:34,080 Speaker 6: edge in our export sector. And then at the same time, 514 00:28:34,160 --> 00:28:37,960 Speaker 6: I think the Chinese currency rate is more driven by 515 00:28:38,040 --> 00:28:41,080 Speaker 6: capital flow rather than trade flows. So I think as 516 00:28:41,120 --> 00:28:42,880 Speaker 6: a result in the past couple of years, usually seeing 517 00:28:42,880 --> 00:28:45,960 Speaker 6: the capital keep flowing out of China and going into 518 00:28:46,000 --> 00:28:49,400 Speaker 6: the US capital market, and also for the US dollars 519 00:28:49,400 --> 00:28:52,840 Speaker 6: that the Chinese export have been receiving, they have been 520 00:28:52,960 --> 00:28:56,160 Speaker 6: keeping it overseas to be reinvested in. 521 00:28:56,120 --> 00:28:57,320 Speaker 1: The US market. 522 00:28:57,760 --> 00:28:59,239 Speaker 6: So I think as a result you can see, you know, 523 00:28:59,280 --> 00:29:02,320 Speaker 6: in the past years, the Chinese currency has been weak. 524 00:29:02,360 --> 00:29:04,960 Speaker 6: You know, it's because of the direction of the capital 525 00:29:05,000 --> 00:29:08,600 Speaker 6: flow has not been favorable to the Chinese currency. But 526 00:29:08,640 --> 00:29:11,680 Speaker 6: now the table has turned. I think the narrative of 527 00:29:11,720 --> 00:29:15,720 Speaker 6: the Trump administration is making it itself hostile not only 528 00:29:15,800 --> 00:29:18,640 Speaker 6: to the Chinese economy, but also to the global economy 529 00:29:18,680 --> 00:29:21,440 Speaker 6: actually hitting hard on the airlines as well. All right, 530 00:29:21,480 --> 00:29:24,680 Speaker 6: So I think in this process, and also after the 531 00:29:24,720 --> 00:29:27,840 Speaker 6: Russian and the Ukraine War, I think people start to 532 00:29:27,880 --> 00:29:30,760 Speaker 6: realize that, you know, the US or the holding may 533 00:29:30,800 --> 00:29:33,480 Speaker 6: not be as safe as they once were, and now 534 00:29:33,840 --> 00:29:36,760 Speaker 6: you know, they have to thing for themselves. So I 535 00:29:36,760 --> 00:29:38,920 Speaker 6: think as a result, you know, we're seeing money being 536 00:29:39,000 --> 00:29:43,320 Speaker 6: reallocating out of the US market. Otherwise how could you explain. Right, So, 537 00:29:43,400 --> 00:29:46,840 Speaker 6: after a very significant risk of events on the liberation Day, 538 00:29:47,280 --> 00:29:50,960 Speaker 6: the US or to continue to depreciate, and I think 539 00:29:50,960 --> 00:29:53,720 Speaker 6: the the process could accelerate from here. 540 00:29:54,520 --> 00:29:58,000 Speaker 2: Well, this is making me feel a bit old talking 541 00:29:58,040 --> 00:30:01,160 Speaker 2: about the full circle for the age of financial crisis, 542 00:30:01,200 --> 00:30:03,760 Speaker 2: because my first ever trip to Hong Kong was in 543 00:30:03,800 --> 00:30:07,680 Speaker 2: the autumn of nineteen ninety seven with the US Treasury. 544 00:30:07,720 --> 00:30:09,760 Speaker 2: I just joined the US Treasury. There was the World 545 00:30:09,760 --> 00:30:12,040 Speaker 2: Bank meetings, and we were just getting to grips with 546 00:30:12,680 --> 00:30:15,240 Speaker 2: at that point the crisis in Thailand, but of course 547 00:30:15,280 --> 00:30:18,680 Speaker 2: it became the financial crisis. I'm not sure we're full 548 00:30:18,720 --> 00:30:21,040 Speaker 2: circle stance then, but we've certainly come a very long way, 549 00:30:21,080 --> 00:30:30,720 Speaker 2: and in this region, probably most of all. Thank you 550 00:30:30,800 --> 00:30:33,800 Speaker 2: very much for listening to Trumpanomics from Bloomberg. It was 551 00:30:33,800 --> 00:30:36,840 Speaker 2: hosted by me Stephanie Flanders. I was joined by Bloomberg's 552 00:30:36,840 --> 00:30:41,800 Speaker 2: Rebecca Chong Wilkins, Morgan Stanley's Robin Singh and Lotuses how Hong. 553 00:30:42,040 --> 00:30:45,200 Speaker 2: With special thanks to the team at Bloomberg Hong Kong 554 00:30:45,280 --> 00:30:46,680 Speaker 2: invest Thanks very much.