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Speaker 2: We'll take a closer look at further comments from JR.
Speaker 2: Own Pale, and we'll also talk a little bit about
Speaker 2: US China relations and also the big story of this
Speaker 2: week here in this part of the world was China's
Speaker 2: NPC meetings. And joining us now for some discussion is
Speaker 2: Leo pai Chen, who is Asia economist at Fidelity International.
Speaker 2: So on balance here, how do you read the output
Speaker 2: that we've got from policymakers, because there's an awful lot
Speaker 2: to consider.
Speaker 3: Thank you for having me today. Yes, a session has
Speaker 3: been the main focus of our part of the world.
Speaker 3: The growth target has been exactly in line with market
Speaker 3: expectations at around five percent, but I think most participants
Speaker 3: agree that this is a very challenging goal to achieve.
Speaker 3: There has been signals that PLC makers are keen to
Speaker 3: foster a stronger sequential growth momentum, particularly given that the
Speaker 3: low based effect from the pandemic would like to fade
Speaker 3: from this year. So there are moderately stronger aims to
Speaker 3: support such targets, such as fiscal policy expansion, as well
Speaker 3: as some of those initiatives and campaigns around consumption upgrading
Speaker 3: as well as manufacturing sector upgrading.
Speaker 1: I hear what you're saying about consumption upgrade. I'm sorry,
Speaker 1: but a lot of it seems supply side driven rather
Speaker 1: than consumption. Does that concern you at all?
Speaker 3: Yes? I think probably mostly referring to the priority to
Speaker 3: expand manufacturing sector investments, and that could tell lead to
Speaker 3: more supplies coming through China given that there has been
Speaker 3: some incremental policy supporting consumption. So I think on balance
Speaker 3: we're probably looking at China with a relatively stable domestic
Speaker 3: demand recovery, but much more so from the supply side,
Speaker 3: so load inflation is our ba.
Speaker 2: Case, miss Leo. There seems to be a gap between
Speaker 2: the way we perceive growth in China at the moment
Speaker 2: and the way policymakers do. I mean, the headlines are
Speaker 2: all that you know, you've got a property crisis, you've
Speaker 2: got slumping sales, but then we have days like yesterday
Speaker 2: where we saw trade pretty strong, exports actually blew away estimates.
Speaker 2: And when you look at the policymakers themselves, they seem
Speaker 2: to be kind of comfortable with where China is, albeit
Speaker 2: with a number of measures of fine tuning. You know,
Speaker 2: how should we really read this.
Speaker 3: Well? I think that boils down to a balancing act
Speaker 3: from the policymakers between supporting a cyclical upturn compared to
Speaker 3: their priorities of a structural transition in the long run.
Speaker 3: So in my perspective, I think the policymakers are trying
Speaker 3: to balance between both. From a cyclical perspective, as you
Speaker 3: mentioned about, incremental is in policies that stabilizes growth. So
Speaker 3: in our case scenario within controlled sulation is probably the
Speaker 3: best way to describe what is happening in China right now,
Speaker 3: whereby from a cyclical perspective, growth momentum is likely to
Speaker 3: stabilize with incremental growth, but the focus really is on
Speaker 3: the long term structural shift away from property as a
Speaker 3: driver of growth to seeking of new drivers of growth
Speaker 3: along the way.
Speaker 1: I'm wondering if we can talk about geopolitics US China
Speaker 1: right now. We just did a story a short while
Speaker 1: ago about the US Congress attempting to force the Chinese
Speaker 1: parent of TikTok to essentially sell the platform because of
Speaker 1: US national security concerns. Is the tension right now enough
Speaker 1: between these two superpowers to significantly restrain China's growth? Is
Speaker 1: that one of the main obstacles here?
Speaker 3: Well, I think just commenting that from a Chinese growth
Speaker 3: outlook perspective, unfavorable our geopolitical environment is definitely going to
Speaker 3: hamper China's growth in some areas like high tech breakthroughs,
Speaker 3: as well as to some extent trade developments. But that
Speaker 3: being said, China has its own set of challeges domestically
Speaker 3: as well. Most notably, we're facing structural headwinds from the
Speaker 3: property sectors slow down and LGFV sector is also facing
Speaker 3: rising that risks. So I think from a structural perspective,
Speaker 3: the policy settings are somewhat of accommodative policy stunts, that is,
Speaker 3: with a focused to resolve the domestic sector risks.
Speaker 2: At this moment, we're seeing local governments selling a lot
Speaker 2: more assets here to try to show up their position,
Speaker 2: their revenue and their overall balance sheets is that something
Speaker 2: that you know is a good sign or a bad sign.
Speaker 3: Well, I think we probably need to take this in
Speaker 3: consideration from a broader context on the fiscal shift from China. Yes,
Speaker 3: local government are facing more risks, but local governments are
Speaker 3: actively resolving these risks by various means. The asset sales
Speaker 3: in absence of lend sales revenue is perhaps one of
Speaker 3: the resolutions. But if we zoom out to a broader context,
Speaker 3: we have seen initiating the issuance of ultra long sovereign
Speaker 3: bounds from the central government. That's expansion by one trillion
Speaker 3: this year, and they were likely to be more done.
Speaker 3: I think this is a fiscal pivot in China's context,
Speaker 3: where the central government will be taking more responsibility in
Speaker 3: terms of fiscal spending, while allowing the local government to
Speaker 3: focus much more on resolving the debt by alleviating some
Speaker 3: of the burdens from the local government.
Speaker 1: Miss Leo, I'm wondering if we can pivot to Japan next,
Speaker 1: because we are seeing a much much stronger currency right
Speaker 1: now where the dollar is concerned. We're trading roughly one
Speaker 1: forty seven ninety Earlier in the week, we were we
Speaker 1: learned that Japanese wage growth accelerated in the month of January,
Speaker 1: the fastest clip since June. And right now the swaps
Speaker 1: market is betting that we're going to get a change
Speaker 1: in monetary policy at this month's meeting. Do you think
Speaker 1: it's too soon for the bo J to change course.
Speaker 3: Yeah. For Japan, the developments recently has been very interesting.
Speaker 3: We have all been saying that Japan is gradually preparing
Speaker 3: the market for an exit executive interest policy before the
Speaker 3: office lived off, which is one of their main considerations
Speaker 3: to declare that deflation is officially over in Japan. So
Speaker 3: we have seen some positive news from both the shunto
Speaker 3: wage negotiations, Spring labor wage negotiation results as well as
Speaker 3: earnings that's being much higher than expected. So all these
Speaker 3: are supportive of BOGS to kickstart is normalizing process. Wile
Speaker 3: based case is still of a pro lifting of negative
Speaker 3: interest rate, but it does look more gradually likely that
Speaker 3: they could perhaps start moving March as a risk case.
Speaker 2: All right, I think we'll leave it there, Miss Lee.
Speaker 2: Thanks very much. Leu Paigen joining us here Asia Economists
Speaker 2: Fidelity International.
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