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Speaker 1: Joining us now is someone with tons of contexts, both
Speaker 1: when it comes to strategy as well as when it
Speaker 1: comes to the economy in China. Leland Miller of the
Speaker 1: China Paige Book. Leland, great to see you, Thank you
Speaker 1: for being here. I want to start with this question
Speaker 1: of what is at stake in order to even get
Speaker 1: a phone call between Jijinping and Donald Trump, something that
Speaker 1: we've heard a couple times before, but that from what
Speaker 1: we understand, hasn't yet happened.
Speaker 3: A phone call should be very easy, but I think
Speaker 3: the reality is that the Chinese side is very skeptical
Speaker 3: that the US side will keep whatever commitments that it
Speaker 3: that it that it's that it asks for, and that
Speaker 3: it will convey exactly what it wants, and that it
Speaker 3: will have a point person that will be able to
Speaker 3: have the authority to be able to make a deal
Speaker 3: for what, you know, for whatever the us I want. So,
Speaker 3: you know, a call is easy, a meeting is easy.
Speaker 3: There's nothing that you really have to give away in
Speaker 3: order to do that. But I think that the in
Speaker 3: Beijing right now there's a worry that if they come
Speaker 3: to the table and and President she looks bad, then
Speaker 3: this this will uh, you know, this will be a
Speaker 3: net negative for the for the for the relationship, and
Speaker 3: for for China's leverage. So they're holding off on that
Speaker 3: until they think that they have a have a better hand.
Speaker 4: We'll see if it happens.
Speaker 5: Is week Leland, the ranimbee is up one and a
Speaker 5: half percent this year versus a dollar, yet it's fallen
Speaker 5: in each of the last three years. I had a
Speaker 5: number of friends and attendance at the JP Morgan Global
Speaker 5: China Summit last week and they all came away with
Speaker 5: this bias toward a weaker dollar. Does that mean a
Speaker 5: weaker dollar relative.
Speaker 4: To the yuon.
Speaker 3: Well, the dollar and the yu wan are tied very
Speaker 3: closely together. I mean, you know, we pretend like the
Speaker 3: yuan is a free floating currency.
Speaker 4: It's not. It's pegged to the dollars.
Speaker 3: So if you have a weaker dollar, you're going to
Speaker 3: have pressure on the yuan to fall. But I think
Speaker 3: that China will want to keep it a little bit
Speaker 3: up relative to that, because their bias is for a
Speaker 3: little bit of upside appreciation in a falling dollar world.
Speaker 3: So yeah, if you have reciprocal tariffs and the US
Speaker 3: China relationship and all these other things weighing on the
Speaker 3: dollar and the dollars falling, then then the yuan will
Speaker 3: be pulled down a little bit, but it will They'll
Speaker 3: want to have a little bit of an upward bias
Speaker 3: for it. So yeah, you should expect upward, some mild
Speaker 3: modest upward appreciation in a falling dollar world.
Speaker 5: Leland, it was only a few years ago when multinationals
Speaker 5: claimed that they couldn't afford to pull out of China
Speaker 5: given the economy size, its overall influence. What are your
Speaker 5: thoughts on China as an investment destination from the perspective
Speaker 5: of a US institutional investor, is China investable now?
Speaker 3: Well, I think you made a nice distinction between you know,
Speaker 3: institutional investors and those companies that are in there with
Speaker 3: hard assets and a presence throughout China very difficult to
Speaker 3: extricate themselves at that point. If you're an institutional investor
Speaker 3: and you're looking at China, then you have to be
Speaker 3: asking yourself, what edge do I have here?
Speaker 4: Am I just waiting for.
Speaker 3: This ridiculous thesis of you know, things have been down
Speaker 3: for eleven years, but now they're going to bounce back
Speaker 3: in the stock market? Do you have an edge in
Speaker 3: a technology sector but that it's going to be closed
Speaker 3: off by export controls or by teriffs in the near future.
Speaker 3: You know, it's not impossible to trade in China, but
Speaker 3: it's getting very dangerous. And most of the people who
Speaker 3: have traditionally done this have done this very lackadaisically. They
Speaker 3: look at, you know, Chinese data, they've got a DC
Speaker 3: consultant that tells them a little bit about China, and
Speaker 3: then they, you know, they buy.
Speaker 4: A bunch of Chinese tech companies. You can't do that anymore.
Speaker 3: So if you're still in China, then you better have
Speaker 3: a tremendous edge in terms of investing.
Speaker 6: There Leilan, the Chinese tenure rate is a near one
Speaker 6: point seven percent, near multi decade lows. Is there any
Speaker 6: ignoaled to take from that about underlying Chinese economic health,
Speaker 6: mostly as we consider the rest of the world where
Speaker 6: long and yields are screaming higher.
Speaker 4: Yeah, absolutely, there is a signals.
Speaker 3: If you look at our credit data, China Basebook credit data,
Speaker 3: it's remarkable what's happening on the monetary easing side, and
Speaker 3: we've seen rates continue to go down, down, down, down down,
Speaker 3: and this is a this is a time in which
Speaker 3: there's elevated inflation elsewhere. So what they're trying to do is,
Speaker 3: you know, on the fiscal front there they're manning the
Speaker 3: you know, the army, the cannons. On the monetary side,
Speaker 3: they continue to cut rates. There's a downside to doing
Speaker 3: that because you're hitting the profitability of banks and.
Speaker 4: You're you're you're hurting savers.
Speaker 3: But right now they're just trying to keep the economy
Speaker 3: going during during the early onset of this of these
Speaker 3: trade tensions, you know, trade War two point zero.
Speaker 4: So they're cutting.
Speaker 3: Rates, but it has a lot of a detrimental effect,
Speaker 3: you know, down downstreaming the economy.
Speaker 6: How much fiscal firepower do you think that China has.
Speaker 6: There seems to be an assumption that China has a
Speaker 6: lot more room than other countries around the world.
Speaker 4: Is that the case, It is the case.
Speaker 3: What's interesting is that for several years, while every headline,
Speaker 3: you know, we'd see every day was, you know, China stimulus,
Speaker 3: promising stimulus, pledging stimulus, it.
Speaker 4: Was never happening.
Speaker 3: In twenty twenty two, twenty three, twenty four, we got
Speaker 3: to the very end of twenty twenty four and early
Speaker 3: twenty twenty five, you know, we have a fiscal activity index.
Speaker 3: It showed significant things were happening and a significant borrowing
Speaker 3: and bond issuance by transportation construction firms. So they were
Speaker 3: really getting ready for what might be a real downside scenario.
Speaker 3: We've seen that eb off a little bit, so we
Speaker 3: have not seen the blast to any type of canon,
Speaker 3: but they are preparing in a way very differently than
Speaker 3: they did.
Speaker 4: The last three years. This this should have been expected.
Speaker 3: China does not want to do big stimulus, but at
Speaker 3: the end of the day, they're going to have to
Speaker 3: batten down the hatches their economy if they get a
Speaker 3: larger trade tip with the United States, which is.
Speaker 1: The reason why le Lynn and I think that all
Speaker 1: of us are trying to get at the ultimate question,
Speaker 1: which is who has the most leverage, who's in the
Speaker 1: better position economically right now as a US and China
Speaker 1: go head to head. We got this data overnight that
Speaker 1: China's private factory gauge punched the weeks going back to
Speaker 1: twenty twenty two. It went against some of the official data.
Speaker 1: Some people are saying it's messier, it's a smaller sample size.
Speaker 1: Do you think that China is hurting more or the
Speaker 1: US is hurting more? Is it possible to even make
Speaker 1: that equation?
Speaker 3: Well, look, first, on the Sisheen survey, I mean, we
Speaker 3: agree with the official data here. We're much much bigger
Speaker 3: than Serve Hall, a lot more companies than Saisheen does,
Speaker 3: and we actually saw it improvement in manufacturing activity.
Speaker 4: Not great.
Speaker 3: It's down from a year ago, but it's up from
Speaker 3: the lows that we've seen in the last couple of months,
Speaker 3: so there's something there. There's a lot more resilience both
Speaker 3: in the consumption side, which is surprising, and the manufacturing side,
Speaker 3: which is not in China right now, so I would
Speaker 3: take that away from the economic data.
Speaker 4: So I think at this point, you.
Speaker 3: Know, look, we have to be watching the data closely,
Speaker 3: but also keeping in mind that China is looking a
Speaker 3: little bit more resilient than we thought going into the
Speaker 3: Geneva talks and beyond.
Speaker 1: Leilan Miller of China Page Book, thank you so much
Speaker 1: for your insight. It's really helpful. Meta signing a twenty
Speaker 1: year contract with Constellation and Energy to buy power from
Speaker 1: an Illinois nuclear plant more evidence of technology companies appetite
Speaker 1: for energy to run data centers, and AI is the
Speaker 1: promise of that technology potentially transforms the world we live in.
Speaker 1: PwC out with its twenty twenty five AI Jobs Barometer,
Speaker 1: which was a link between AI adoption and productivity growth.
Speaker 1: Matt Wood of PwC joins us now and Matt, you're
Speaker 1: answering the questions that a lot of people have been asking,
Speaker 1: which is basically, how many of us are going to
Speaker 1: lose our jobs and become irrelevant because of some of
Speaker 1: this new technology.
Speaker 7: Well, it's looking like right now none of us. In fact, counterintuitively,
Speaker 7: the number of jobs and the wages associated to them
Speaker 7: are actually going up, not going down. So we looked
Speaker 7: at over a billion job postings globally from twenty four
Speaker 7: different countries, and we found that for organizations, whether they
Speaker 7: were advanced in their aiuse or early in the AIR use,
Speaker 7: they had more job hostings than they had before. We
Speaker 7: found that the productivity of people working inside those organizations
Speaker 7: was up. We found that the revenue generation for those
Speaker 7: workers was three x higher than it's ever been before,
Speaker 7: and that the wages associated with those workers were also
Speaker 7: going up. And so it's a little canterintuitive to what
Speaker 7: maybe some other folks are seen, but our barometer shows
Speaker 7: a very very different picture, a.
Speaker 1: Really optimistic look for people who have the tools, have
Speaker 1: the capability of using artificial intelligence and machine learning to
Speaker 1: actually become more efficient, become more relevant. At a time
Speaker 1: where Microsoft is cutting hundreds of jobs because a number
Speaker 1: of people currently own their roles can be replaced by
Speaker 1: artificial intelligence, how messy would this transition be? Because even
Speaker 1: though there are some people who get paid more, be
Speaker 1: more productive, and be more in demand if they have
Speaker 1: those skills, they're going to be even more people potentially
Speaker 1: who lag behind that and can't catch up quickly.
Speaker 4: Enough.
Speaker 7: Well, for sure, the way that we are going to
Speaker 7: work is going to change. And for those organizations that
Speaker 7: are furthest a head on the AI journey, these skills
Speaker 7: are changing the fastest. And this is a this is
Speaker 7: a very humane problem. This is not a technical problem.
Speaker 7: This is a problem that we have to work through
Speaker 7: with all of our workers, with all of our staff,
Speaker 7: and as leaders, we need to really sure that we're
Speaker 7: investing to make sure that all of our workers in
Speaker 7: every industry have the access to the skills and the
Speaker 7: education and upskilling to be able to take advantage of
Speaker 7: this dramatic productivity game.
Speaker 5: Matt, the courts are going to they just gave Donald
Speaker 5: Trump approval to take away half a million visas here
Speaker 5: in the US. What impact is that going to have
Speaker 5: on the AI sector.
Speaker 7: Well, education is remarkably vibrant place for AI to not
Speaker 7: just be used, but also to be created. AI is
Speaker 7: very very very early, and a lot of the research
Speaker 7: that we need to do to advance the state of
Speaker 7: the art is going to come out of those sorts
Speaker 7: of organizations, those sort of institutions super important that they
Speaker 7: remain funded and remain active.
Speaker 5: Well, Matt, let's talk data centers. For a second, because
Speaker 5: we've got this big news in the market with MATA.
Speaker 5: You know, I've seen some statistics that last year, for
Speaker 5: the four year twenty twenty four, you're in the US
Speaker 5: data center build out accounted for roughly or more than
Speaker 5: eighty percent of the entire US economy's capital expenditures for
Speaker 5: the full year. You know, first we had Microsoft scaling
Speaker 5: backets plans following Deep Seek. Now we have Meta, you know,
Speaker 5: buying it or leasing a nuclear plant. Who are today's investors,
Speaker 5: who are like, who's going to provide the long term
Speaker 5: takeout capital for these data centers after all is said
Speaker 5: and done here.
Speaker 7: Well, data center is super interesting because they're not just
Speaker 7: data centers. It's actually more of a full vertically integrated
Speaker 7: stack of investment that covers just an entirely new ecosystem
Speaker 7: that is being built out across industries because of AI.
Speaker 7: So if you think of just the real estate that
Speaker 7: those data centers have to sit on, the energy infrastructure
Speaker 7: that has to surround those data centers, the data centers
Speaker 7: themselves with all of their discs and their GPUs and
Speaker 7: all of the infrastructure required to house and cool them,
Speaker 7: then you've got the large language models that sit inside
Speaker 7: that infrastructure. You've got the applications that sit on top
Speaker 7: of those language model. So there's a full ecosystem that
Speaker 7: bleeds from real estate to energy, to computer science to
Speaker 7: big tech, which just didn't exist before. And this blurring
Speaker 7: of industries into new ecosystems is happening around data centers
Speaker 7: because of AI, and I think we expect to see
Speaker 7: it across multiple different industries going forward.
Speaker 6: Given the massive investment we've seen from all these companies
Speaker 6: into AI infrastructure, how are you thinking about monetization, mostly
Speaker 6: as you've seen competition pick up, What will the returns
Speaker 6: look like for all of this investment?
Speaker 7: I think it's I think it's an interesting question. I
Speaker 7: don't personally see it as an investment that most organizations
Speaker 7: should be seeking a return from.
Speaker 4: Today.
Speaker 7: AI is more like intellectual infrastructure for your organization. We
Speaker 7: don't look at internet access inside an organization and say, hey,
Speaker 7: what's the return on investment of my bandwidth? Instead, you say, well,
Speaker 7: all of my work is done in a completely different way,
Speaker 7: and in a much more efficient way, in a much
Speaker 7: more productive way, three times more productive in the case
Speaker 7: of AI. What is the impact of not doing that?
Speaker 7: And so you see very very few organizations today that
Speaker 7: don't enable broad fast internet access to their organizations and
Speaker 7: to their teams. We'll see the same thing with AI.
Speaker 7: Most organizations will want for upskilling and retention and for
Speaker 7: hiring the very best people and keeping productive the people
Speaker 7: they've already got. They're going to want the most robust
Speaker 7: AI intellectual infrastructure inside their organization, similar to networking.
Speaker 1: How advanced of companies been in the US and adopt
Speaker 1: adapting to some of these new tools Given the fact
Speaker 1: that it is quickly evolving, the bigger have an advantage
Speaker 1: with respect to data, with respect to resources. How much
Speaker 1: is this really bifurcated this sphere from big to small companies,
Speaker 1: it's not.
Speaker 7: So much big to small. It's actually again the little counterintuitive.
Speaker 7: So those organizations that we see moving the quickest are
Speaker 7: actually the regulated industries, so financial services, insurance, healthcare, manufacturing,
Speaker 7: those sorts of domains where the compliance with the regulations
Speaker 7: around that they've had to live with the past twenty
Speaker 7: years and maybe have felt like a bit of a headwind,
Speaker 7: particularly around data governance and data quality. Those are all
Speaker 7: the things that you need to get right to be
Speaker 7: successful in artificial intelligence, and so whilst that headwind has
Speaker 7: been there, it's actually driven all the right investments for
Speaker 7: those organizations to be successful with artificial intelligence. And as
Speaker 7: a result, the aipiece is just a small incremental lift
Speaker 7: on top of that and they're able to move much
Speaker 7: more quickly.
Speaker 1: Matt Word of PwC, thank you so much for being
Speaker 1: with us.
Speaker 4: Welcome.
Speaker 1: Republican Congressman Andy Barr of Kentucky voted in favor of
Speaker 1: the President's bill last month, and he joins us now. Congressman,
Speaker 1: thank you so much for being with us today.
Speaker 4: Morning, Lisa, Good morning.
Speaker 1: So I want to start with asking about the deficit,
Speaker 1: and I'm watching that thirty year bond yield as everyone
Speaker 1: on Washington in Washington, DC is do you believe what
Speaker 1: President Trump said on his truth social posts last night
Speaker 1: that this doesn't add to the deficit, even though you
Speaker 1: have a whole host of different estimates saying that it
Speaker 1: will add three trillion dollars to the deficit over the
Speaker 1: next ten years.
Speaker 8: Well, Republicans are also watching the thirty year We're watching
Speaker 8: the tenure, We're watching instability in the bond market. We're
Speaker 8: looking at weakness in demand for treasuries, but blaming the
Speaker 8: Big Beautiful Bill for weakness in the treasury market or
Speaker 8: instability in the treasury market is like blaming the firefighter.
Speaker 8: The arsonists blaming the firefighter for the inferno. We just
Speaker 8: went through four years of a drunken sailor spending spree
Speaker 8: by the Democrats that put.
Speaker 4: Us way behind the eight ball.
Speaker 8: Also COVID, and there was some bipartisan spending associated with COVID,
Speaker 8: But it's very rich for Democrats to accuse Republicans of
Speaker 8: fiscal irresponsibility when we just went through this spending binge
Speaker 8: that produced forty year high inflation, twenty percent increase in price.
Speaker 4: Look, the bottom line is, we know we have to.
Speaker 8: Achieve a greater fiscal discipline and frankly, we need some
Speaker 8: bipartisan work on mandatory spending reform. But we also need
Speaker 8: is economic growth. We will never balance the budget, we
Speaker 8: will never get our fiscal house in order without robust
Speaker 8: economic growth.
Speaker 4: I believe, as Kevin.
Speaker 8: Hassett has argued, that this legislation, this one big beautiful
Speaker 8: bill could produce, along with the deregulatory project, along with
Speaker 8: more energy production in the United States, that we could
Speaker 8: achieve that three to four percent GDP growth. That's the
Speaker 8: kind of dynamism that is not accounted for by the
Speaker 8: Congressional Budget Office and some of these static scores.
Speaker 1: So let's talk about that why it's not being accounted
Speaker 1: for that in places like the Committee for a Responsible
Speaker 1: Federal Budget that expects us to increase the deficit and
Speaker 1: says it only cut spending by zero point eight percent
Speaker 1: of GDP. Where are people not including growth that you
Speaker 1: see as being part of this bill.
Speaker 4: Well, I mean, the CBO just doesn't.
Speaker 8: They were off a trillion dollars underestimating revenue reflow that
Speaker 8: came as a result of growth from the Tax Cuts
Speaker 8: and Jobs Act in twenty seventeen. The CBO has a
Speaker 8: terrible track record of not including the dynamic impacts of
Speaker 8: these tax cuts. And in this bill, not only does
Speaker 8: it make key features permanent, providing that certainty instability for
Speaker 8: private sector investors, but the business tax cuts are really
Speaker 8: the rocket fuel that are included in the bill. So
Speaker 8: bonus appreciation for five years pulling forward all that capex.
Speaker 8: There's a reason why the Atlanta Fed is projecting four
Speaker 8: percent GDP in the second quarter because business businesses and
Speaker 8: business optimism is increasing because of anticipation of R and
Speaker 8: D interest deductibility, increasing the small business pass through deduction
Speaker 8: from twenty to twenty three percent, making that permanent. So
Speaker 8: these business tax cuts are really increasing business sentiment and
Speaker 8: I think again pulling forward that investment that can really
Speaker 8: allow this economy.
Speaker 4: To take off.
Speaker 5: Congressman Eastid on the House Select Committee on the Strategic
Speaker 5: competition between the US and Chinese Communist Party, what is
Speaker 5: going on between President she and President Trump? Where are
Speaker 5: we with that relationship right now?
Speaker 8: I think President Trump is the first president Republican or
Speaker 8: Democrat in our lifetime who has taken the threat from
Speaker 8: China seriously. Under this president, no more unfair trade deals,
Speaker 8: no more Chinese fentanyl poisoning our people through the southern border,
Speaker 8: and no more spy balloons coming across the continental United
Speaker 8: States deterrence, peace through strength, that is the idea the
Speaker 8: Big Beautiful Bill. To the extent we increase spending in there,
Speaker 8: there's more military modernization dedicated for the Western Pacific theater.
Speaker 4: That's what we need. We need to win this competition.
Speaker 8: We need to be the best version of ourselves. We
Speaker 8: need to enhance, of course, our investment in defense, but
Speaker 8: we also have to be strong economically, and we have
Speaker 8: to grow. China has its problems, we have a debt problem,
Speaker 8: but we can produce growth by being free market capitalists.
Speaker 1: There is a question, though, in your quest to be
Speaker 1: free market capitalists of both getting revenue from tariffs that
Speaker 1: have to do with continued trade, albeit with something of attacks,
Speaker 1: versus decoupling in its entirety. And what you see from
Speaker 1: a lot of the data right now is that trade
Speaker 1: is going down quite considerably and exports from the US
Speaker 1: are going down quite considerably. So how do you account
Speaker 1: for some of the revenue and the growth from some
Speaker 1: of these tariffs if you're also talking about potentially decoupling
Speaker 1: in certain key industries between some of the biggest economies
Speaker 1: out there.
Speaker 8: I liked what Jamie Diamond said at the Reagan Economic
Speaker 8: Forum in California.
Speaker 4: When he's said.
Speaker 8: When he talked about, you know, strategic de risking from
Speaker 8: China on those national security sensitive industries, not complete decoupling
Speaker 8: on things like tennisuees or basketball shoes or apparel or
Speaker 8: things that do not implicate national security. What I would
Speaker 8: say about that in general as a free trader, why
Speaker 8: I support President Trump's agenda is because of the enormous
Speaker 8: potential that this has to actually open up markets for
Speaker 8: American exporters. If we can open up India, for example,
Speaker 8: and reduce their protectionism and their trade barriers against our exporters,
Speaker 8: that is massive. And if you think about it, from
Speaker 8: where we were on liberation data, now we're back in
Speaker 8: basically a bull market.
Speaker 4: With a correction embedded.
Speaker 8: Every trade deal that is inked from here on out
Speaker 8: is again jet fuel for the economy. We get the
Speaker 8: certainty of trade deals in place with more market access
Speaker 8: for American exporters, plus deregulation, plus the tax cuts.
Speaker 4: I do see four percent GDP.
Speaker 1: What do you think the Senate is going to do
Speaker 1: to change the bill that you would be okay with
Speaker 1: in terms of cutting salt tax deductions, potentially adding back
Speaker 1: and potentially even increasing some of the CBO's score for
Speaker 1: the deficits with respect to medicaid. What are you going
Speaker 1: to be okay with?
Speaker 8: Well, look, we've got to get this done. I think
Speaker 8: we have to have an ability to compromise on some
Speaker 8: of these details, whether it's salt, whether it's Medicaid.
Speaker 4: I welcome fiscal.
Speaker 8: Hawks in the Senate saying hey, we need to do
Speaker 8: more on the spending restraint side. So Ron Johnson, my
Speaker 8: colleague Ran Paul from Kentucky. Good for them for asking
Speaker 8: for a reduced size and scope of the federal bureaucracy.
Speaker 8: I like that, let's codify some of the doughe savings.
Speaker 8: But at the end of the day, we have to
Speaker 8: get this done and deliver this. Seventy seven million Americans
Speaker 8: voted for this pro growth agenda. I think at the
Speaker 8: end of the day, we'll come together, we'll get it done.
Speaker 1: Congresspin, thank you so much for being here. Great to
Speaker 1: do with Congressman Andy Barr here in New York.
Speaker 2: This is the Bloomberg Seventans podcast, bringing you the best
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Speaker 1: Mm hmm.