WEBVTT - Broadcom Earnings, China Eco Policy

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg

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<v Speaker 1>Daybreak Asia podcast. I'm Doug Krisner. You can join Brian

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<v Speaker 1>Curtis and myself for the stories making news and moving

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<v Speaker 1>markets in the APEC region. You can subscribe to the

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<v Speaker 2>We'll take a closer look at further comments from JR.

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<v Speaker 2>Own Pale, and we'll also talk a little bit about

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<v Speaker 2>US China relations and also the big story of this

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<v Speaker 2>week here in this part of the world was China's

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<v Speaker 2>NPC meetings. And joining us now for some discussion is

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<v Speaker 2>Leo pai Chen, who is Asia economist at Fidelity International.

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<v Speaker 2>So on balance here, how do you read the output

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

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<v Speaker 2>to consider.

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<v Speaker 3>Thank you for having me today. Yes, a session has

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<v Speaker 3>been the main focus of our part of the world.

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<v Speaker 3>The growth target has been exactly in line with market

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<v Speaker 3>expectations at around five percent, but I think most participants

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<v Speaker 3>agree that this is a very challenging goal to achieve.

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<v Speaker 3>There has been signals that PLC makers are keen to

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<v Speaker 3>foster a stronger sequential growth momentum, particularly given that the

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<v Speaker 3>low based effect from the pandemic would like to fade

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<v Speaker 3>from this year. So there are moderately stronger aims to

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<v Speaker 3>support such targets, such as fiscal policy expansion, as well

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<v Speaker 3>as some of those initiatives and campaigns around consumption upgrading

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<v Speaker 3>as well as manufacturing sector upgrading.

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

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<v Speaker 1>but a lot of it seems supply side driven rather

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<v Speaker 1>than consumption. Does that concern you at all?

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<v Speaker 3>Yes? I think probably mostly referring to the priority to

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<v Speaker 3>expand manufacturing sector investments, and that could tell lead to

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<v Speaker 3>more supplies coming through China given that there has been

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<v Speaker 3>some incremental policy supporting consumption. So I think on balance

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<v Speaker 3>we're probably looking at China with a relatively stable domestic

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<v Speaker 3>demand recovery, but much more so from the supply side,

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<v Speaker 3>so load inflation is our ba.

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<v Speaker 2>Case, miss Leo. There seems to be a gap between

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<v Speaker 2>the way we perceive growth in China at the moment

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<v Speaker 2>and the way policymakers do. I mean, the headlines are

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<v Speaker 2>all that you know, you've got a property crisis, you've

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<v Speaker 2>got slumping sales, but then we have days like yesterday

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<v Speaker 2>where we saw trade pretty strong, exports actually blew away estimates.

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<v Speaker 2>And when you look at the policymakers themselves, they seem

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<v Speaker 2>to be kind of comfortable with where China is, albeit

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<v Speaker 2>with a number of measures of fine tuning. You know,

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<v Speaker 2>how should we really read this.

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<v Speaker 3>Well? I think that boils down to a balancing act

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<v Speaker 3>from the policymakers between supporting a cyclical upturn compared to

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<v Speaker 3>their priorities of a structural transition in the long run.

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<v Speaker 3>So in my perspective, I think the policymakers are trying

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<v Speaker 3>to balance between both. From a cyclical perspective, as you

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<v Speaker 3>mentioned about, incremental is in policies that stabilizes growth. So

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<v Speaker 3>in our case scenario within controlled sulation is probably the

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<v Speaker 3>best way to describe what is happening in China right now,

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<v Speaker 3>whereby from a cyclical perspective, growth momentum is likely to

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<v Speaker 3>stabilize with incremental growth, but the focus really is on

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<v Speaker 3>the long term structural shift away from property as a

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<v Speaker 3>driver of growth to seeking of new drivers of growth

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<v Speaker 3>along the way.

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<v Speaker 1>I'm wondering if we can talk about geopolitics US China

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<v Speaker 1>right now. We just did a story a short while

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<v Speaker 1>ago about the US Congress attempting to force the Chinese

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<v Speaker 1>parent of TikTok to essentially sell the platform because of

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<v Speaker 1>US national security concerns. Is the tension right now enough

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<v Speaker 1>between these two superpowers to significantly restrain China's growth? Is

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<v Speaker 1>that one of the main obstacles here?

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<v Speaker 3>Well, I think just commenting that from a Chinese growth

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<v Speaker 3>outlook perspective, unfavorable our geopolitical environment is definitely going to

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<v Speaker 3>hamper China's growth in some areas like high tech breakthroughs,

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<v Speaker 3>as well as to some extent trade developments. But that

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<v Speaker 3>being said, China has its own set of challeges domestically

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

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<v Speaker 3>property sectors slow down and LGFV sector is also facing

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<v Speaker 3>rising that risks. So I think from a structural perspective,

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<v Speaker 3>the policy settings are somewhat of accommodative policy stunts, that is,

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<v Speaker 3>with a focused to resolve the domestic sector risks.

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<v Speaker 2>At this moment, we're seeing local governments selling a lot

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<v Speaker 2>more assets here to try to show up their position,

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<v Speaker 2>their revenue and their overall balance sheets is that something

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<v Speaker 2>that you know is a good sign or a bad sign.

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<v Speaker 3>Well, I think we probably need to take this in

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<v Speaker 3>consideration from a broader context on the fiscal shift from China. Yes,

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<v Speaker 3>local government are facing more risks, but local governments are

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<v Speaker 3>actively resolving these risks by various means. The asset sales

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<v Speaker 3>in absence of lend sales revenue is perhaps one of

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<v Speaker 3>the resolutions. But if we zoom out to a broader context,

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<v Speaker 3>we have seen initiating the issuance of ultra long sovereign

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<v Speaker 3>bounds from the central government. That's expansion by one trillion

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<v Speaker 3>this year, and they were likely to be more done.

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<v Speaker 3>I think this is a fiscal pivot in China's context,

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<v Speaker 3>where the central government will be taking more responsibility in

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<v Speaker 3>terms of fiscal spending, while allowing the local government to

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<v Speaker 3>focus much more on resolving the debt by alleviating some

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<v Speaker 3>of the burdens from the local government.

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

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<v Speaker 1>because we are seeing a much much stronger currency right

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<v Speaker 1>now where the dollar is concerned. We're trading roughly one

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<v Speaker 1>forty seven ninety Earlier in the week, we were we

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<v Speaker 1>learned that Japanese wage growth accelerated in the month of January,

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<v Speaker 1>the fastest clip since June. And right now the swaps

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<v Speaker 1>market is betting that we're going to get a change

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<v Speaker 1>in monetary policy at this month's meeting. Do you think

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<v Speaker 1>it's too soon for the bo J to change course.

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<v Speaker 3>Yeah. For Japan, the developments recently has been very interesting.

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<v Speaker 3>We have all been saying that Japan is gradually preparing

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<v Speaker 3>the market for an exit executive interest policy before the

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<v Speaker 3>office lived off, which is one of their main considerations

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<v Speaker 3>to declare that deflation is officially over in Japan. So

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<v Speaker 3>we have seen some positive news from both the shunto

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<v Speaker 3>wage negotiations, Spring labor wage negotiation results as well as

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<v Speaker 3>earnings that's being much higher than expected. So all these

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<v Speaker 3>are supportive of BOGS to kickstart is normalizing process. Wile

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<v Speaker 3>based case is still of a pro lifting of negative

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<v Speaker 3>interest rate, but it does look more gradually likely that

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<v Speaker 3>they could perhaps start moving March as a risk case.

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

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<v Speaker 2>Thanks very much. Leu Paigen joining us here Asia Economists

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<v Speaker 2>Fidelity International.

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<v Speaker 1>This has been the Bloomberg Daybreak Asia podcast, bringing you

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