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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.

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Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Doug Prisner.

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Speaker 2: You can join Brian Curtis and myself for the stories,

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Speaker 2: making news and moving markets in the APEC region. You

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Speaker 2: can subscribe to the show anywhere you get your podcast

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Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the

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Speaker 2: Bloomberg Business app.

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Speaker 3: Joining us now on the program is Sean Darby, Managing

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Speaker 3: director at Mizuho Securities Asia. Sean, thanks very much for

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Speaker 3: being with us. So a pretty impressive day to day,

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Speaker 3: all sectors higher. In fact, it's been a hell of

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Speaker 3: a week. Really, it's the mirror opposite of what we

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Speaker 3: saw last week. Down four percent last week, this week

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Speaker 3: getting back almost all of it. What really happened, good morning.

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Speaker 4: I think two things happening in the background. One is

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Speaker 4: that the bomb market has done a lot of the

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Speaker 4: easing already the front end for the federal reserve, and

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Speaker 4: the fact that we've had the whole yield curve shift

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Speaker 4: downwards has been a monetary easing, so as presumably part

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Speaker 4: of the equity market is discounting the fact that we're

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Speaker 4: already in a policy shift quite an aggressive one. I

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Speaker 4: think the second one it doesn't really necessarily come through

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Speaker 4: in the CPI data now, but there's a lot of

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Speaker 4: wind of deflation out there. If you look for everything

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Speaker 4: from steel prices to gasoline to China export pricing, it

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Speaker 4: suggests that we're going to get quite aggressive drops in

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Speaker 4: the CPI coming into the Christmas period. So I think

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Speaker 4: in a way for the equity markets, they've got a

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Speaker 4: reasonably nice tailwind. You've got still decent employment conditions. You

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Speaker 4: can look through and see that there's going to be

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Speaker 4: a much lower CPI prints going in through Christmas, and

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Speaker 4: by and largely there's been a massive policy easing already,

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Speaker 4: simply by where the shape of the Yelk curve in

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Speaker 4: the United States is presently.

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Speaker 2: Brian was talking a short while ago about a piece

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Speaker 2: in the Wall Street Journal indicating that Fed policymakers were

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Speaker 2: considering whether or not to cut by either twenty five

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Speaker 2: or fifty basis points. And I'm wondering whether when you

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Speaker 2: look at overall financial conditions, that things are maybe a

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Speaker 2: little too easy for the Fed right now. Much higher

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Speaker 2: stocks and a big rally in the bond market, and

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Speaker 2: maybe that's causing a little concern. What do you think.

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Speaker 4: I actually have a lot of sympathy with that view.

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Speaker 4: If you look at some of the other developed markets,

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Speaker 4: Australia and New Zealand, they're the central banks would also

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Speaker 4: like to do more aggressive rate cutting, particularly in Australia,

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Speaker 4: which hasn't started yet. But the thing that's holding them

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Speaker 4: back is house prices, and as you see these Yielk

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Speaker 4: curves dropping, what you're beginning to see is the mortgage

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Speaker 4: markets reigniting again, and this is going to go back

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Speaker 4: and put pressure on CPI and the economy later on.

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Speaker 4: So I have a lot of sympathy with the view

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Speaker 4: that we saw a big change in monetary policy really

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Speaker 4: after the regional banking crisis in first quarter twenty twenty three,

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Speaker 4: and that in itself, I think has been washing through

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Speaker 4: the US and global economies since then. So if you

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Speaker 4: look at Chicago financial conditions, it's been loose and remains

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Speaker 4: very loose compared to where it was twelve or eighteen

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Speaker 4: months ago.

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Speaker 3: It's funny because when you started you talked a little

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Speaker 3: bit about how there are some deflationary conditions out there,

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Speaker 3: and we've seen a big drop in commodity price and

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Speaker 3: such and that the CPI would be moving down. So

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Speaker 3: a little surprised to hear you respond in the way

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Speaker 3: you just did. I was listening to Jim Bianco earlier

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Speaker 3: this week, and he said that he would be more

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Speaker 3: worried if you did have a rapid drop in inflation,

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Speaker 3: because that would actually be an indication that growth is

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Speaker 3: falling off, that inflation would fall that quickly. And so

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Speaker 3: from a standpoint like that, he probably liked the numbers

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Speaker 3: that we got this week because it shows you that

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Speaker 3: you know, you still have you still have growth kind

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Speaker 3: of hanging in there while prices are moderating slightly.

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Speaker 4: So just to clarify, during the sort of deflation or

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Speaker 4: disinflation period coming into COVID, we had exactly that, very

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Speaker 4: very low inflation, but very robust house prices and asset market.

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Speaker 4: So maybe the equity market is discounting that in some ways.

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Speaker 4: The only difficulty I have with the mister Jim Bianke's

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Speaker 4: theories for equity investors in the first instance, it may

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Speaker 4: not be necessarily good news. What I mean by that

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Speaker 4: is that bonds, of course, like the lower CPI prints

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Speaker 4: the lower producer price prints, But for equities that's our

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Speaker 4: corporate prices. That's how our revenues are generated. So you

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Speaker 4: may in the short term get actually quite a big

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Speaker 4: drop in profits simply because pricing has dropped away. And

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Speaker 4: I think that's actually the major concern I think for

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Speaker 4: parts of the equity market is that you go from

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Speaker 4: really good profits to just modestly good, which is what

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Speaker 4: you've normally had for the last fifteen to twenty years,

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Speaker 4: and that in a sense maybe alter the course of

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Speaker 4: this ascendency in the S and P and other equity markets.

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Speaker 2: So disinflation, that's the story in the US, it's deflation

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Speaker 2: in China. How concerned are you about the fact that

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Speaker 2: China may be falling into a bit of a trap

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Speaker 2: here that's going to be very, very difficult from which

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Speaker 2: to emerge.

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Speaker 4: Well, again, I have a lot of sympathy with that.

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Speaker 4: I think what's interesting is if you look at the

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Speaker 4: Dutch Global Trade Organization and they produce export prices for

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Speaker 4: China and US dollar terms, which are before tariffs, and

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Speaker 4: goodness me, the numbers that have been coming out of

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Speaker 4: China in the last nine to twelve months have been

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Speaker 4: exceptionally even in its China's own modern history. So the

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Speaker 4: first thing to say is that China's exporting its deflation

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Speaker 4: into the system, and you can see that through tariff's coming,

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Speaker 4: onto steal and so forth. I think the second thing

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Speaker 4: is that we all know that, but one of the

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Speaker 4: ironies about deflation is it causes everyone to oversave. You

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Speaker 4: get the most, you've got the very oddest thing happening

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Speaker 4: to you, which is people actually go back and save

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Speaker 4: more as the CPI prints get worse, And the only

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Speaker 4: way you can counteract that is by someone in the

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Speaker 4: system opening their balance sheet. As you saw initially in

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Speaker 4: Japan it was the government, and then later on as

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Speaker 4: we went through this curred in the West, it was

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Speaker 4: the central bank. So at the moment in China you

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Speaker 4: could argue both the government and the central bank are

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Speaker 4: too tight, and that's really why you're getting such aggressive

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Speaker 4: levels of deflation. My own personal view is that if

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Speaker 4: you look through China's history since the nineteen eighties nineteen nineties,

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Speaker 4: monetary solutions have always been the way out of their

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Speaker 4: sort of fiscal problems, and I think it's going to

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Speaker 4: be no different now. I think Pangon Sheen will do

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Speaker 4: his own form of QEF. He's not already beginning to

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Speaker 4: do it, and that's how China's going to resolve its issues.

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Speaker 4: But yeah, point well taken. I don't think China's recognized

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Speaker 4: just how bad and how fierce the deflation cycle has

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Speaker 4: been embedded in the economy.

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Speaker 3: So are we getting anywhere near an inflection point where

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Speaker 3: they do actually say, look, we really have to do

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Speaker 3: something and do it in a big way.

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Speaker 4: Well, I think he's setting it out at the moment.

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Speaker 4: He's trying to move the yield curve to seven day

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Speaker 4: repo pricing at the short end, bond and bond and

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Speaker 4: of government bonds at the long end. He's moral using

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Speaker 4: moral suasion on the banks for mortgage rates. But ultimately

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Speaker 4: you've got to really expand that balance sheet and push

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Speaker 4: the money into the system, because all I see at

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Speaker 4: the moment is every part of the economy, households, corporates,

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Speaker 4: for saving it's clutching up.

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Speaker 2: You mentioned Japan a moment ago. We got a BOJ

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Speaker 2: meeting next week. Are they being maybe a little bit

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Speaker 2: too conservative here? Is there a problem that they have

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Speaker 2: to deal with and raise rates quickly?

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Speaker 4: That's a very good point, and I think ironically you

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Speaker 4: could argue that that is exactly the problem they have.

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Speaker 4: They have slowing growth but actually rising inflation. And in

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Speaker 4: that instance, given that the labor markets still look really

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Speaker 4: rich and in Japan, the path is to further tightening.

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Speaker 4: The best way to look at it in Japan is

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Speaker 4: that service prices, which are very well correlated to wage growth,

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Speaker 4: are running at around three and a half four percent,

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Speaker 4: and that's you know, that's pretty uncomfortable for the BOJ.

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Speaker 4: So it's got back inflation, but it's got back to

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Speaker 4: a degree that the BOJ would never have imagined eighteen

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Speaker 4: months ago coming out of the pandemic. So to answer

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Speaker 4: your question, the path, the path of least resistance in

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Speaker 4: Japan seems to be towards more tightening of the cash rate.

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Speaker 3: The elephant in the room probably is AI And you know,

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Speaker 3: some of these megacaps you've seen a real bounds this week.

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Speaker 3: You're still have Nvidia and Broadcom maybe ten percent ten

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Speaker 3: to fifteen percent off their earlier highs from the year,

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Speaker 3: but they've really come back. Is this a good sign

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Speaker 3: in your view or does this sort of bring back

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Speaker 3: these issues of overvaluation?

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Speaker 4: Well, I think since we had the carry trade unwind

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Speaker 4: tech has rebounded, But what's really happened in the background,

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Speaker 4: is that the boring low value and as we say,

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Speaker 4: price stick your price in elastic sectors like healthcare utilities,

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Speaker 4: some cent banks have all actually touched globally fifty two

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Speaker 4: week highs and also record highs. So out there you

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Speaker 4: could argue that the battle between the sort of growth

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Speaker 4: and inflation is falling towards the view that we early

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Speaker 4: earlier highlighted that actually prices may come down in the

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Speaker 4: short term much more aggressively, and that the equity market's

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Speaker 4: been thinking that actually we want to be in sectors

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Speaker 4: that hold their price in power, even though there are

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Speaker 4: really good stories of growth out there. And I think

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Speaker 4: that's the way the market's been making that assessment in

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Speaker 4: the last sort of five to six weeks.

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Speaker 3: All right, Sean, thank you. You are a guy who's

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Speaker 3: been with us for all of these nine years. Two

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Speaker 3: thumbs up. Yeah. Absolutely. In fact, Sean and I go

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Speaker 3: back even to the RTHG days and way back in time.

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Speaker 3: Sean Darby with is managing director at the zoo Ho

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Speaker 3: Securities Asia, joining us in our studios right here in

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Speaker 3: Hong Kong. Old friend Mark conan Cio at AIA Group

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Speaker 3: with us to take a look at markets. All of

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Speaker 3: a sudden, the mood has improved from last week. In

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Speaker 3: your mind, mark what happened?

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Speaker 5: I guess markets tended to be a little too reactive

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Speaker 5: to the concern that the economy, certainly in the US,

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Speaker 5: was slowing. I think there was a few initially that

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Speaker 5: the inflation number wasn't as good as expected, although we

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Speaker 5: felt that it was more or less in line with expectations.

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Speaker 5: So there was there was a bit of a concern

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Speaker 5: that perhaps that that sort of hearsal for potential recession

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Speaker 5: was starting to play out. But then I think it

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Speaker 5: regained its poise, and I think we're now much more

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Speaker 5: focused on looking through the numbers and thinking about the

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Speaker 5: impact of these rates cuts which are pending, and.

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Speaker 1: How do you see the rate cuts playing out? What

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Speaker 1: do you think, which assets do you think outperform, and

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Speaker 1: which assets do you think benefit the most.

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Speaker 5: Yeah, so if you look back at the last ten

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Speaker 5: rate cut cycles, it goes back to nineteen seventy. In

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Speaker 5: four of those rate cut cycles, there hasn't been a

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Speaker 5: recession following, and the market's done extremely well. The market,

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Speaker 5: the stop market has been up at eight percent over

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Speaker 5: three months and eighteen percent over six months after those

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Speaker 5: rate cuts were initiated. We don't think that we're in

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Speaker 5: line for a recession over the next twelve months. We

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Speaker 5: think the economy is in good shape. We think the

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Speaker 5: wage pressure is cooled, we think there's there are disinflationary

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Speaker 5: forces at play, and we think corporate earnings are in

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Speaker 5: pretty good shape. So if you look at history, the

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Speaker 5: expectation is that the equity market is going to sort

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Speaker 5: of be underpinned by good earnings outcomes, and that means

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Speaker 5: the market's going to make further progress. If you look

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Speaker 5: at the two may asset classes, equitism and fixed income,

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Speaker 5: bonds are really discounting or look to be discounting a recession,

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Speaker 5: and that's going to have to readjust so, we think

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Speaker 5: bonds are going to retrace some of the gains that

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Speaker 5: they've made most recently.

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Speaker 3: So if you look at credit and you look at equity,

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Speaker 3: is it looks pretty rosy. And then if you look

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Speaker 3: at the bond market, maybe not so much. One of

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Speaker 3: the things that happens a lot now is that news

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Speaker 3: gets discounted very quickly, maybe faster than before. So maybe

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Speaker 3: FED rate cuts already pretty much discounted in the markets

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Speaker 3: I don't know how you feel about that.

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Speaker 5: Is that a possibility, Well, certainly expectations are for something

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Speaker 5: like ten eleven or so cuts. We think that's overplayed,

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Speaker 5: and we think the bond market has really focused, probably

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Speaker 5: a little bit too much on the near term the

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Speaker 5: reaction to the news, and as I say that, the

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Speaker 5: yield declines that we've seen, we'll retrace by about twenty

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Speaker 5: to forty basis points over the curve. So that misalignment,

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Speaker 5: if you like, between risk assets and bond markets has

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Speaker 5: to be addressed, and it will and it will do so.

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Speaker 5: So in answer to your question, Brian, the bond market

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Speaker 5: probably is going to it's probably going to go through

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Speaker 5: a little bit of an adjustment near term, and equities

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Speaker 5: will continue to make progress.

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Speaker 1: So Mark, I will ask you what Brian asked me earlier.

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Speaker 1: Are you concerned about valuations in equity markets?

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Speaker 5: No, because as long as earnings keeps pace that that's

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Speaker 5: good news. If you look at productivity gains and obviously

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Speaker 5: putting aside different policy initiatives that may ensue after the election,

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Speaker 5: it looks as though, you know, job creation is reasonable.

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Speaker 5: You may be worried by the fact that a large

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Speaker 5: portion of those new jobs are related to the public sector,

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Speaker 5: but in a way that's good news for the private

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Speaker 5: sector because that means the private sector is still is

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Speaker 5: still moving forward and becoming more productive because the earnings

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Speaker 5: are indeed forthcoming. So we do expect a broadening out

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Speaker 5: of the equity market supported by earning. So valuations no,

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Speaker 5: not worried.

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Speaker 3: Is also because you know, we've had earnings up ten

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Speaker 3: percent this year, projections for fourteen percent next year, and

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Speaker 3: that's with a slowing economy. Now, maybe it's not tanking,

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Speaker 3: but even if it's slowing, how do you make the

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Speaker 3: jump to get earnings up fourteen percent next year.

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Speaker 5: Well, you're right, Brian, the economy is slow, is slowing,

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Speaker 5: but it's very gradual, so the sort of disinflationary forces

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Speaker 5: are at play. The opportunity for the Fed to cut

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Speaker 5: is supportive of the broader economy. And don't forget, this

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Speaker 5: is all in context of a massive fiscal deficit and

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Speaker 5: ongoing commitment for fiscal spending. If you looked at the

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Speaker 5: presidential debate this week, one thing you can take out

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Speaker 5: of it is that spending is going to continue, So

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Speaker 5: that's underpinning everything. It's very unusual to see rates coming

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Speaker 5: down at a time when you've got huge fiscal expansion.

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Speaker 5: But that is in fact the case. If you look

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Speaker 5: at the US treasury market, per annum that's paying out

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Speaker 5: in coupon's about one point two trillion dollars, unbelievable amounts

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Speaker 5: of money. So you know, we're spending it exactly and

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Speaker 5: it's being and it's being spent. So depending on policies

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Speaker 5: as we roll through the election, you know, on one hand,

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Speaker 5: it may be a little bit more expansive for the

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Speaker 5: average consumer. On the other hand, it may not be.

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Speaker 5: But overall, you know, consumption is in reasonable shape, and

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Speaker 5: even the property market it's starting to is starting to

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Speaker 5: call and you know, its representation in terms of cost

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Speaker 5: base is starting to pull back. So overall in good shape.

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Speaker 5: It's the economy is being extremely well managed.

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Speaker 1: So Mark, let's talk a little bit about the budget

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Speaker 1: deficit you mentioned. Is it is it something we should

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Speaker 1: be worried about or is it only something we worry

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Speaker 1: about when it comes time to worry about it.

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Speaker 5: Where they're clearly are going to be consequences. You know,

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Speaker 5: we're going to see the usual sort of you know,

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Speaker 5: political rancoring as as budgets are being promulgated and and

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Speaker 5: need to and need to be approved as is required.

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Speaker 5: It's probably good news for markets in this part of

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Speaker 5: the world. As you see rates come down and investors

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Speaker 5: focus on issues like the deficit, the dollar will weaken

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Speaker 5: and that that will probably readjust fun flows globally.

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Speaker 3: Okay, perhaps a tongue in cheek question. Uh, former President

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Speaker 3: Trump didn't perform too well in this latest debate. Did

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Speaker 3: the Republicans replace him?

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Speaker 5: Certainly tongue. You know how how performance is gauged depends

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Speaker 5: on what you're trying to achieve, so difficult to read,

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Speaker 5: but you know, we we try and look through the

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Speaker 5: debate and focus on the policies, and there are some

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Speaker 5: clear differences between the two.

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Speaker 3: Yeah, there are some that would say that the president,

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Speaker 3: the former president performed as badly as President Biden did

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Speaker 3: in his debate. But that was kind of a tongue

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Speaker 3: in cheait question. And you played ball with us more

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Speaker 3: as usual. Mark Conan with us from AIA. This is Blomberg.

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Speaker 3: I'm Brian Curtis in Hong Kong, along with Mary and

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Speaker 3: Nicola in Singapore. Let's say good morning to our guest

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Speaker 3: Louis House APAC chief economists from S and P Global Ratings. Well,

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Speaker 3: we got a lot of time here, louis that we

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Speaker 3: can cover a number of economies around the global starre

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Speaker 3: off with US because we've had some data of late.

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Speaker 3: You know, we had Janet Yellen earlier saying that there

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Speaker 3: weren't any red lights flashing in the US economy. Do

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Speaker 3: you agree? And is your reading that investors should be

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Speaker 3: nervous about recession possibilities or not so much?

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Speaker 6: Hi, Brian. Yeah, so you know, the US economy is cooling,

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Speaker 6: and we see that in some of the economic activity

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Speaker 6: data and even well actually especially also some of the

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Speaker 6: labor market data, fewer job openings. But in our assessment,

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Speaker 6: you know, we can never we can definitely not rule

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Speaker 6: out a recession, but there are no signs that there

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Speaker 6: is a very you know, a very significant reduction in growth,

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Speaker 6: let alone you know, a path towards a recesion. So

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Speaker 6: we don't think that the US economy is moving into

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Speaker 6: a recession.

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Speaker 1: So the big question, the big question now is is

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Speaker 1: it twenty five basis points or is it fifty? What

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Speaker 1: camp do you fall in?

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Speaker 6: Yeah, I think for now we are falling into twenty

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Speaker 6: five basis points camp. You know, there is no great

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Speaker 6: rush for the FED, right, like, they need to make

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Speaker 6: sure that they don't have to do U turns in

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Speaker 6: this trajectory. Like, so, we kind of all agree that

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Speaker 6: that broadly speaking, US rates will come down, but we

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Speaker 6: don't yet know and they don't know either. Because we

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Speaker 6: don't know the data, we don't know how fast and

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Speaker 6: when it will be, you know, at its terminal rate.

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Speaker 6: So I think they will err on the side of

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Speaker 6: making sure that they don't have to do U turn

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Speaker 6: So I think twenty five sounds about right.

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Speaker 3: And Louis, does it feel like they have some time here?

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Speaker 3: I mean, we know that the FED funds rate at

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Speaker 3: five and a quarter to five and a half percent

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Speaker 3: is well above what is perceived to be the neutral rate,

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Speaker 3: So there is some room there, and there's also some time.

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Speaker 3: Do you do it quickly or do you just kind

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Speaker 3: of let the data advise?

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Speaker 6: Yeah? So I think that you know, the the officials

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Speaker 6: in the FED would make these decisions. They meet pretty regularly,

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Speaker 6: so they will have quite a number of opportunities to

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Speaker 6: make further cuts, right, And so I think given that

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Speaker 6: the most recent data on inflation.

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Speaker 3: Wasn't that soft.

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Speaker 6: You know, I think that the market sometimes seem to

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Speaker 6: be pricing in a lot of cuts. We definitely are

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Speaker 6: in the camp of cuts, but we don't expect as

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Speaker 6: many cuts as the market.

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Speaker 1: So let's shift gears a little bit towards China, a

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Speaker 1: little bit closer to home. Obviously, the data from China

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Speaker 1: has been incredibly disappointing. Where do you see the economy

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Speaker 1: headed over the next six to twelve months.

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Speaker 6: Yeah, so the news in China is not good, right, Like,

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Speaker 6: the only thing that the only component of demand as

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Speaker 6: we call it, that is doing well is exports. Anything

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Speaker 6: related to domestic demand is looking pretty poor. The housing

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Speaker 6: downturn continues to be a huge drag on the economy,

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Speaker 6: and that is affecting things not just directly, but also

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Speaker 6: in terms of confidence and people worry about the price

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Speaker 6: for so we have weak consumption. We have we've been having,

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Speaker 6: of course weak real estate investment for quite some time.

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Speaker 6: We now also see some cracks in investment outside of

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Speaker 6: real estate. So overall, really soft economy. And then we

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Speaker 6: have a government that doesn't seem to be having a

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Speaker 6: lot of appetite to ease fiscal policy. And so our

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Speaker 6: outlook is for economical mentum to soften further in the

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Speaker 6: second half, and we expect, on current trends, China to

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Speaker 6: miss its five percent growth target this year, So we're

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Speaker 6: looking at a bit around four point five four point

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Speaker 6: six percent growth this year, a bit below that next year.

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Speaker 3: It makes for some interesting reading the latest from the

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Speaker 3: IMF about US China and US with its claims that

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Speaker 3: overcapacity is definitely hurting countries, that China's dumping in a

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Speaker 3: sense a lot of its industrial overproduction. The IMF report

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Speaker 3: suggests that this really is not the case, that a

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Speaker 3: lot of the exports from China, that they account for

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Speaker 3: a very small amount, these areas of software, electric vehicles,

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Speaker 3: computer chips, green technology, that they are a small fraction

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Speaker 3: of overseas shipments. Do you care to weigh in on

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Speaker 3: this debate at all about over capacity Louis.

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Speaker 6: Yeah, sure, I think they makes some comments. Brian, you know,

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Speaker 6: I think we already touched on the weak demand in China,

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Speaker 6: and I think you know, the Chinese manufacturing sector is huge.

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Speaker 6: It's also very competitive. We cannot get around it. That's

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Speaker 6: a very competitive manufacturing sector. It's very very rich in

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Speaker 6: terms of a huge landscape of of of suppliers labor

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Speaker 6: markets that make that a very competitive manufacturing sector. So

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Speaker 6: even without significant subsidies, this is hard to compete with,

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Speaker 6: and that is what we are seeing globally. I think

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Speaker 6: the problem in China is a macro economic one. Demand

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Speaker 6: is very weak compared to supply, and so for China

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Speaker 6: to you know, reduce the pressure both in terms of

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Speaker 6: its own you know, deflation risk and the pressure on

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Speaker 6: profit model, but also reduce the pressure on the global

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Speaker 6: economy in terms of all these exports that are making

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Speaker 6: life hard across the globe. I think the way to

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Speaker 6: solve that would be for China to improve, like to

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Speaker 6: boost its own domestic demand so that all these exporters

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Speaker 6: have less of all these these manufacturers have you know,

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Speaker 6: less of a need to venture abroad. And I think

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Speaker 6: secondly also there's something needed more discipline in the financial

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Speaker 6: sector and among companies, because you know, people outside of

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Speaker 6: China often talk about, as you said, Brian, you know,

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Speaker 6: big subsidies. A lot of this is not so much

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Speaker 6: driven by government subsidies, but it's much more companies that

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Speaker 6: are able and willing to produce with extremely low profits,

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Speaker 6: sometimes even no profits, and there seems to be a

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Speaker 6: patience for that both among these companies themselves and they're creditors,

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Speaker 6: and that of course, there's also, you know, a reason

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Speaker 6: why we see these what we tend to call access capacity,

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Speaker 6: but that is often a reflection of the business strategy

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Speaker 6: of these companies.

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Speaker 1: So Louis, just before we round up on China, just

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Speaker 1: a quick question on local governments. So we had a

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Speaker 1: piece out on the terminal this morning about local governments

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Speaker 1: turning to austerity. This is probably something we see as

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Speaker 1: a good thing, but have they gone too far the

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Speaker 1: other way? And where's the right balance given the weakness

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Speaker 1: and growth.

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Speaker 6: I think something that we see in China more so

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Speaker 6: than in other countries, is an unfortunate situation where when

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Speaker 6: demand and the economy is weak, the government behavior like

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Speaker 6: fiscal policy kind of starts to add to it. You know,

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Speaker 6: you would want what you would want, right, and that

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Speaker 6: is what cains what became famous for. If there is

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Speaker 6: very little appetite for spending among the private sector and

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Speaker 6: the household, you want the government to spend as a

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Speaker 6: spender of last resort. In China, that's often the other

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Speaker 6: way around. In difficult times, local government and other government

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Speaker 6: departments are asked to tighten their belt, and that is

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Speaker 6: actually aggravating the situation from that macroeconomic perspective, and that

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Speaker 6: is from a macro perspective quite unfortunately.

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Speaker 3: All Right, Louis, thank you very much for joining us

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Speaker 3: here on the program. Louis cows Apak, Chief Economist, S

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Speaker 3: and P Global Ratings.

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Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you

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Speaker 2: the stories making news and moving markets in the Asia Pacific.

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Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more

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Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to

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Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen,

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Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the

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Speaker 2: Bloomberg Business Appo.