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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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Speaker 1: Daybreak Asia podcast. I'm Doug Krisner. You can join Brian

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Speaker 1: Curtis and myself for the stories making news and moving

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Speaker 1: markets in the APEC region. You can subscribe to the

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Speaker 1: show anywhere you get your podcast and always on Bloomberg Radio,

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Speaker 1: the Bloomberg Terminal, and the Bloomberg Business app.

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Speaker 2: We'll take a closer look at further comments from JR.

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Speaker 2: Own Pale, and we'll also talk a little bit about

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Speaker 2: US China relations and also the big story of this

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Speaker 2: week here in this part of the world was China's

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Speaker 2: NPC meetings. And joining us now for some discussion is

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Speaker 2: Leo pai Chen, who is Asia economist at Fidelity International.

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Speaker 2: So on balance here, how do you read the output

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Speaker 2: that we've got from policymakers, because there's an awful lot

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Speaker 2: to consider.

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Speaker 3: Thank you for having me today. Yes, a session has

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Speaker 3: been the main focus of our part of the world.

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Speaker 3: The growth target has been exactly in line with market

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Speaker 3: expectations at around five percent, but I think most participants

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Speaker 3: agree that this is a very challenging goal to achieve.

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Speaker 3: There has been signals that PLC makers are keen to

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Speaker 3: foster a stronger sequential growth momentum, particularly given that the

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Speaker 3: low based effect from the pandemic would like to fade

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Speaker 3: from this year. So there are moderately stronger aims to

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Speaker 3: support such targets, such as fiscal policy expansion, as well

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Speaker 3: as some of those initiatives and campaigns around consumption upgrading

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Speaker 3: as well as manufacturing sector upgrading.

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Speaker 1: I hear what you're saying about consumption upgrade. I'm sorry,

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Speaker 1: but a lot of it seems supply side driven rather

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Speaker 1: than consumption. Does that concern you at all?

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Speaker 3: Yes? I think probably mostly referring to the priority to

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Speaker 3: expand manufacturing sector investments, and that could tell lead to

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Speaker 3: more supplies coming through China given that there has been

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Speaker 3: some incremental policy supporting consumption. So I think on balance

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Speaker 3: we're probably looking at China with a relatively stable domestic

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Speaker 3: demand recovery, but much more so from the supply side,

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Speaker 3: so load inflation is our ba.

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Speaker 2: Case, miss Leo. There seems to be a gap between

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Speaker 2: the way we perceive growth in China at the moment

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Speaker 2: and the way policymakers do. I mean, the headlines are

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Speaker 2: all that you know, you've got a property crisis, you've

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Speaker 2: got slumping sales, but then we have days like yesterday

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Speaker 2: where we saw trade pretty strong, exports actually blew away estimates.

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Speaker 2: And when you look at the policymakers themselves, they seem

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Speaker 2: to be kind of comfortable with where China is, albeit

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Speaker 2: with a number of measures of fine tuning. You know,

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Speaker 2: how should we really read this.

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Speaker 3: Well? I think that boils down to a balancing act

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Speaker 3: from the policymakers between supporting a cyclical upturn compared to

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Speaker 3: their priorities of a structural transition in the long run.

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Speaker 3: So in my perspective, I think the policymakers are trying

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Speaker 3: to balance between both. From a cyclical perspective, as you

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Speaker 3: mentioned about, incremental is in policies that stabilizes growth. So

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Speaker 3: in our case scenario within controlled sulation is probably the

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Speaker 3: best way to describe what is happening in China right now,

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Speaker 3: whereby from a cyclical perspective, growth momentum is likely to

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Speaker 3: stabilize with incremental growth, but the focus really is on

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Speaker 3: the long term structural shift away from property as a

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Speaker 3: driver of growth to seeking of new drivers of growth

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Speaker 3: along the way.

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Speaker 1: I'm wondering if we can talk about geopolitics US China

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Speaker 1: right now. We just did a story a short while

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Speaker 1: ago about the US Congress attempting to force the Chinese

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Speaker 1: parent of TikTok to essentially sell the platform because of

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Speaker 1: US national security concerns. Is the tension right now enough

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Speaker 1: between these two superpowers to significantly restrain China's growth? Is

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Speaker 1: that one of the main obstacles here?

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Speaker 3: Well, I think just commenting that from a Chinese growth

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Speaker 3: outlook perspective, unfavorable our geopolitical environment is definitely going to

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Speaker 3: hamper China's growth in some areas like high tech breakthroughs,

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Speaker 3: as well as to some extent trade developments. But that

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Speaker 3: being said, China has its own set of challeges domestically

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Speaker 3: as well. Most notably, we're facing structural headwinds from the

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Speaker 3: property sectors slow down and LGFV sector is also facing

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Speaker 3: rising that risks. So I think from a structural perspective,

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Speaker 3: the policy settings are somewhat of accommodative policy stunts, that is,

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Speaker 3: with a focused to resolve the domestic sector risks.

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Speaker 2: At this moment, we're seeing local governments selling a lot

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Speaker 2: more assets here to try to show up their position,

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Speaker 2: their revenue and their overall balance sheets is that something

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Speaker 2: that you know is a good sign or a bad sign.

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Speaker 3: Well, I think we probably need to take this in

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Speaker 3: consideration from a broader context on the fiscal shift from China. Yes,

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Speaker 3: local government are facing more risks, but local governments are

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Speaker 3: actively resolving these risks by various means. The asset sales

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Speaker 3: in absence of lend sales revenue is perhaps one of

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Speaker 3: the resolutions. But if we zoom out to a broader context,

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Speaker 3: we have seen initiating the issuance of ultra long sovereign

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Speaker 3: bounds from the central government. That's expansion by one trillion

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Speaker 3: this year, and they were likely to be more done.

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Speaker 3: I think this is a fiscal pivot in China's context,

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Speaker 3: where the central government will be taking more responsibility in

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Speaker 3: terms of fiscal spending, while allowing the local government to

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Speaker 3: focus much more on resolving the debt by alleviating some

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Speaker 3: of the burdens from the local government.

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Speaker 1: Miss Leo, I'm wondering if we can pivot to Japan next,

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Speaker 1: because we are seeing a much much stronger currency right

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Speaker 1: now where the dollar is concerned. We're trading roughly one

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Speaker 1: forty seven ninety Earlier in the week, we were we

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Speaker 1: learned that Japanese wage growth accelerated in the month of January,

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Speaker 1: the fastest clip since June. And right now the swaps

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Speaker 1: market is betting that we're going to get a change

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Speaker 1: in monetary policy at this month's meeting. Do you think

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Speaker 1: it's too soon for the bo J to change course.

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Speaker 3: Yeah. For Japan, the developments recently has been very interesting.

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Speaker 3: We have all been saying that Japan is gradually preparing

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Speaker 3: the market for an exit executive interest policy before the

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Speaker 3: office lived off, which is one of their main considerations

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Speaker 3: to declare that deflation is officially over in Japan. So

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Speaker 3: we have seen some positive news from both the shunto

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Speaker 3: wage negotiations, Spring labor wage negotiation results as well as

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Speaker 3: earnings that's being much higher than expected. So all these

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Speaker 3: are supportive of BOGS to kickstart is normalizing process. Wile

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Speaker 3: based case is still of a pro lifting of negative

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Speaker 3: interest rate, but it does look more gradually likely that

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Speaker 3: they could perhaps start moving March as a risk case.

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Speaker 2: All right, I think we'll leave it there, Miss Lee.

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Speaker 2: Thanks very much. Leu Paigen joining us here Asia Economists

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Speaker 2: Fidelity International.

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Speaker 1: the stories making news and moving markets in the Asia Pacific.

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