WEBVTT - Daybreak Europe: January 17, 2023

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<v Speaker 1>This is Bloomberg Daybreak here for this Tuesday, the seventeenth

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<v Speaker 1>of January in London. Coming up this hour, growing pains.

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<v Speaker 1>China's economy expands at the slowest rate since the nineteen seventies,

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<v Speaker 1>pretty much gone. The Bank of England governor says the

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<v Speaker 1>trust premium on UK assets has faded. Risky business CEOs

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<v Speaker 1>at davas one of global recession is on the cards.

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<v Speaker 1>Billions in UK tax go uncollected. Remote learning to combat

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<v Speaker 1>teacher strikes and ill health costling the economy one hundred

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<v Speaker 1>and fifty billion pounds a year. Those are the stories

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<v Speaker 1>we're looking at in today's papers. And I'm leanne Karen's

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<v Speaker 1>cluss trial and tribulation muskheads to court over tweets saying

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<v Speaker 1>that he would take Tesla privates. That's all straight ahead

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<v Speaker 1>on Bloomberg Daybreak Europe on DAB Digital Radio London, Bloomberg

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<v Speaker 1>eleven three oh New York, Bloomberg Washington d C, Bloomberg

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<v Speaker 1>one oh six one, Boston, Bloomberg nine sixties, San Francisco,

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<v Speaker 1>syrus XM Channel one nineteen and around the world on

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<v Speaker 1>Bloomberg Radio dot com and via the Bloomberg Business Set.

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<v Speaker 1>Good morning. I'm Stephen Carroll and I'm Caroline Hipke. Here

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<v Speaker 1>are the stories that we're following today. China's economy grew

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<v Speaker 1>at the second slowest pace since the nineteen seventies last year.

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<v Speaker 1>GDP growth slow to three percent in twenty two as

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<v Speaker 1>the country doubled down on it's now abandoned COVID zero policy,

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<v Speaker 1>but the future looks brighter. In the fourth quarter of

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<v Speaker 1>the world second largest economy expanded by two point nine

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<v Speaker 1>percent compared to a year earlier. Vanessa Chan, head of

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<v Speaker 1>Asian fixed Income investment directing at Fidelity, says they're seeing

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<v Speaker 1>a welcome shift from Beijing. I think to begin worth,

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<v Speaker 1>we do see the policy changed in tontal stance compared

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<v Speaker 1>to last year. So first of all, they've become a

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<v Speaker 1>lot more pro growth and just some extempro business fidelities,

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<v Speaker 1>Vanessa Chan spoke as new data also shows that China's

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<v Speaker 1>population shrank in twenty two for the time in six decades.

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<v Speaker 1>Over one point four billion people lived in the country

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<v Speaker 1>at the end of last year and now the risk

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<v Speaker 1>premium on UK assets has all but gone, according to

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<v Speaker 1>the Bank of England Governor Andrew Bailey, but the country

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<v Speaker 1>isn't out of the woods yet. Speaking to the Treasury

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<v Speaker 1>Select Committee, Bailey said that we're still recovering from the

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<v Speaker 1>impact of Liz Trust's many budgets. To be honest, I mean,

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<v Speaker 1>I think, you know, it's going to take some time

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<v Speaker 1>to you know, convince everybody that we're sort of back

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<v Speaker 1>to where we were before. I mean, not because I

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<v Speaker 1>doubt the current government. I'm not saying to be negative.

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<v Speaker 1>It's just obviously there is a something of of a

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<v Speaker 1>hangover effect. The Bank of England governor also warned MPs

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<v Speaker 1>that the ultra tight jobs market in the UK could

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<v Speaker 1>derail any drop in the rate of inflation. The World

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<v Speaker 1>Economic Forums annual meeting is underway in Davos with a

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<v Speaker 1>gloomy economic backdrop corporate executives and economists. They're warning that

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<v Speaker 1>a global recession is likely this year. Nearly three quarters

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<v Speaker 1>of business lead year surveyed by p WC thought global

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<v Speaker 1>growth would decline in three That's the highest proportion since

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<v Speaker 1>poling began back in twleven. Black Rock vice chairman Philip

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<v Speaker 1>Hilderbrand says he doesn't see central banks coming to the rescue.

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<v Speaker 1>The central banks are going to continue on their tightening path.

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<v Speaker 1>They're going to be very careful, very focused on not

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<v Speaker 1>losing the long term inflation expectation anchor. H And so

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<v Speaker 1>I think we're going to see, you know, I don't

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<v Speaker 1>see any chances, frankly, of easing this year. I think

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<v Speaker 1>the market has that wrong. So they're going to make

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<v Speaker 1>sure that we can really not just get from nine

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<v Speaker 1>to four, but also limit any kind of risks that

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<v Speaker 1>inflation expectations become un anchored. That's Philip Hilderbrand speaking exclusively

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<v Speaker 1>to Bloomberg in Davos. Will be live there later today

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<v Speaker 1>with Germany's Olaf Schultz, who's set to speak in a

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<v Speaker 1>one on one interview with Bloomberg's editor in chief John Michethwaite.

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<v Speaker 1>Now two top corporate news memestock investor Ron Cohen is

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<v Speaker 1>said to have taken a stake in Ali Barber and

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<v Speaker 1>is calling on the Chinese tech giant to increase its

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<v Speaker 1>shared by backs. A source says that Cohen built up

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<v Speaker 1>a holding worth hundreds of millions of dollars in the

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<v Speaker 1>second half of last year. Cohen has a strong following

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<v Speaker 1>among so called meme stock investors and played a central

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<v Speaker 1>role in the frenzy of a game stop. The next

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<v Speaker 1>chapter in Elon Musk's life drama will begin to play

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<v Speaker 1>out in the San Francisco Federal Court today. It's all

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<v Speaker 1>to do it tweets about Tesla. Bloomberg's at Baxter has

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<v Speaker 1>the story. The issue was a number of tweets in

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<v Speaker 1>twenty eighteen saying that he had lined up the financing

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<v Speaker 1>to pay for US seventy two billion dollar buy out

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<v Speaker 1>of Tesla. He then followed up making it sound as

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<v Speaker 1>if the transaction would be imminent. It fueled a stock rally,

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<v Speaker 1>which abruptly ended a week later and culminated in a

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<v Speaker 1>forty million dollar settlement with the SEC. The trial will

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<v Speaker 1>make him explain his actions and intentions under oath in

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<v Speaker 1>San Francisco. I'm at Baxter, Bloomberg, Gaybreak Europe. Those are

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<v Speaker 1>a few of our top stories. Then this morning, we

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<v Speaker 1>are very pleased to have so much coverage life from Davos,

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<v Speaker 1>including Hildebrand that you that we heard from earlier. But

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<v Speaker 1>also I think just thinking about what CEOs are most

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<v Speaker 1>concerned about this year. The PwC survey was very interesting. Yeah,

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<v Speaker 1>I mean, apart from the forecast for a recession on hiring,

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<v Speaker 1>which I think was one of the really interesting ones

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<v Speaker 1>to watch is that the majority that we've seen of

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<v Speaker 1>executives do actually expect for them to retain staff. That

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<v Speaker 1>they're not looking at cutting staff, six plan not to

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<v Speaker 1>reduce headcount, not cutting pay, and that's because they're still

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<v Speaker 1>trying to hang on to employees rather than go through

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<v Speaker 1>expensive recruitment processes. So at a time when we're talking

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<v Speaker 1>about some of the big names cutting jobs, interesting to

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<v Speaker 1>see that sentiment at least globally among CEOs that perhaps

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<v Speaker 1>they are going to hold onto their staff this year

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<v Speaker 1>and they're not so worried about the prospect of big

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<v Speaker 1>job cuts. Okay, well that's the private sector. Here in

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<v Speaker 1>the UK, we're much more focused on the public sector.

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<v Speaker 1>Nurses announced more industrial action, more strikes for the six

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<v Speaker 1>seventh of February, and then also we had that news

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<v Speaker 1>out that teachers have voted to strike. I think that's

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<v Speaker 1>going to be the kind of big unknown. What does

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<v Speaker 1>that mean for the UK economy if the schools are

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<v Speaker 1>closed and so on, sending a chill down the spine

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<v Speaker 1>of parents everywhere, and having to do with clothes schools

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<v Speaker 1>potentially with that strike as well. Okay, up next billions

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<v Speaker 1>in UK tax school and collected remote learning to comeback,

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<v Speaker 1>teacher strikes and ill health casting the economy a hundred

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<v Speaker 1>and fifty billion pounds a year. Now the paper review

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<v Speaker 1>on blue Bird Daybreak Europe. The news you need to

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<v Speaker 1>know from today's papers. Now joining us is Bluemberg's Leanne

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<v Speaker 1>Garan's with the front pages of this morning's newspapers. Good morning, Caroline,

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<v Speaker 1>good morning to you. So look, a lot of the

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<v Speaker 1>newspapers are leading on a story that we haven't mentioned yet.

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<v Speaker 1>This is the conviction of a Metropolitan Police officer, David Carrick.

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<v Speaker 1>I want to mention it though he admitted to committing

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<v Speaker 1>twenty four counts of rape, and it is really another

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<v Speaker 1>major scandal for Metropolitan Police given that he's a very

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<v Speaker 1>senior officer, came to the attention of police nine times

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<v Speaker 1>that remained as serving officer. So that I think locally

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<v Speaker 1>for London is what a lot of people are thinking about.

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<v Speaker 1>But then there are some other news stories, including the

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<v Speaker 1>Financial Times which leads on UK tax billions going uncollected.

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<v Speaker 1>Tell us about that. But Caroline, just before we get

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<v Speaker 1>to that, just touching on that case of David Carrick,

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<v Speaker 1>that you've mentioned there all over the front pages of

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<v Speaker 1>the newspapers. In light of this case, Scotland Yard is

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<v Speaker 1>now reviewing more than sixteen hundred cases where police officers

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<v Speaker 1>and staff are accused of sexual and domestic violence offenses.

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<v Speaker 1>So we do know that this is now coming to

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<v Speaker 1>light here off the back of that case. But we

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<v Speaker 1>will move on to have a look at the headline

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<v Speaker 1>in the Financial Times, and as you said, it's about taxes,

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<v Speaker 1>and the newspaper reports on comments by the Treasury Minister.

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<v Speaker 1>That's Victoria Atkins who says almost two thousand, three hundred

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<v Speaker 1>stars have been transferred to work on Brexit cases or

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<v Speaker 1>the COVID nineteen loan scheme, which we do know have

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<v Speaker 1>been the subject of fraud. Now this amounts for around

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<v Speaker 1>ten percent of compliance staff at h M r C.

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<v Speaker 1>And due to this movement, billions of pounds of tax

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<v Speaker 1>is just not being collected. So it's been left uncollected.

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<v Speaker 1>And Sarah Olney, she's the Liberal Democrat treasury spokesman, she

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<v Speaker 1>has put the question to the Treasury Minister Victoria Atkins,

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<v Speaker 1>who has admitted that there's been this big transfer of

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<v Speaker 1>staff leaving this whole when it comes to collecting money,

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<v Speaker 1>and the Lib Dem Party says civil servants have been

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<v Speaker 1>moved from one crisis to another in a constant game

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<v Speaker 1>of whack a mole, leaving taxes uncollected. So there we

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<v Speaker 1>are the latest on uncollected taxes. Okay, that's on the

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<v Speaker 1>front page of the Flantel Times this morning. The Telegraph. Meanwhile,

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<v Speaker 1>headline at school's told to use volunteers and remote learning

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<v Speaker 1>to combat true strikes. Yes, and you just touched on

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<v Speaker 1>strikes earlier with Caroline there Stephen and A mass walkout

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<v Speaker 1>of teachers who are National Education Union members is now

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<v Speaker 1>scheduled to begin on the first of February. Now remember

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<v Speaker 1>that is a significant date because they will coincide with

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<v Speaker 1>the Trade Unions Congress National Right to Strike Day. We

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<v Speaker 1>also know the PCs is going on strike their hundreds

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<v Speaker 1>of thousands of civil servants and with more strike dates

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<v Speaker 1>in February and March, schools could be closed for four

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<v Speaker 1>strike days in total in the coming weeks. Now, schools

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<v Speaker 1>are under pressure to make effort to limit the disruption

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<v Speaker 1>to pupil's Remember pupils went through so much disruption, especially

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<v Speaker 1>during the pandemic. And on Monday, the Department of Education

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<v Speaker 1>is published guidance which urges schools to consider bringing in

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<v Speaker 1>volunteers to help look after children and to keep the

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<v Speaker 1>classrooms open during walkouts because as we know, there's a

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<v Speaker 1>lot of parents who have to go to work who

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<v Speaker 1>probably can't take this time off. It's currently really unclear

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<v Speaker 1>how many of the nu Ease three hundred thousand members

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<v Speaker 1>will choose to walk up, but as we know, yesterday

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<v Speaker 1>teachers did choose to strike. Okay um. Just lastly, the

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<v Speaker 1>Times headline is rising levels of ill health costing the

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<v Speaker 1>economy a hundred and fifty billion pounds per year. Yes,

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<v Speaker 1>and this report in the newspaper touches on how ill

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<v Speaker 1>health among working age people is costing the economy the

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<v Speaker 1>equivalent of seven percent of the UK's GDP. That is

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<v Speaker 1>a pretty significant number and this is according to an

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<v Speaker 1>analysis by the paper's own Health Commission. So the Time

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<v Speaker 1>has been looking at all these figures now. Really, since

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<v Speaker 1>the start of the pandemic, more than three hundred sixty

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<v Speaker 1>thousand people have been forced to leave the workforce because

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<v Speaker 1>they are suffering from a health condition that does affect

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<v Speaker 1>their ability to work. So there we are just the

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<v Speaker 1>cost of the economy when people aren't made able to

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<v Speaker 1>make it into the workforce. Release dark figures. Earlean Garrans,

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<v Speaker 1>thank you very much with that review of today's papers.

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<v Speaker 1>Let's turn next to the story out of China today

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<v Speaker 1>the growth figures showing the expansion in the economy was

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<v Speaker 1>hammered last year, but still come in better than forecast.

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<v Speaker 1>In the final quarter, annual growth of GDP slowds just

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<v Speaker 1>three percent. The pace in the fourth quarter, though, was

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<v Speaker 1>two point nine percent of potential. Bright spot there, let's

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<v Speaker 1>get the details from our China Economy editor James Meager,

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<v Speaker 1>who joins us now took us through then. James, the

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<v Speaker 1>hit that the Chinese economy suffered from COVID last year.

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<v Speaker 1>I mean, in the headline growth number three is the

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<v Speaker 1>lowest since and that was numbers the lowest since six,

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<v Speaker 1>which is the end of the Culture Revolution, which was

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<v Speaker 1>a decade of chaos and China's economy. So you know

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<v Speaker 1>the data last year and what happened to the economy

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<v Speaker 1>last year, it was pretty damaging. You saw massive lockdowns

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<v Speaker 1>in Shanghai and nother sues across the country, and uh,

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<v Speaker 1>you know, we were facing more lockdowns at dat of

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<v Speaker 1>the year when the government's suddenly decided to open and

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<v Speaker 1>basically everyone in China got it seems to have got

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<v Speaker 1>COVID in December and January. So it's been a massive

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<v Speaker 1>a year of massive disruption for for people here and

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<v Speaker 1>and as you see in the data, also for for

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<v Speaker 1>the economy. The hope is that that now that you know,

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<v Speaker 1>this outbreak which is continuing right now, once that are

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<v Speaker 1>sort of subsided somewhat, people will be willing to go

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<v Speaker 1>out and spend again. People willing to go out shop again,

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<v Speaker 1>and you'll see if we're rebounded in consumer spending and

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<v Speaker 1>also in demand for the housing sector, because last year

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<v Speaker 1>one of the big problems for the economy that wasn't

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<v Speaker 1>COVID was this you know, more than year long slump

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<v Speaker 1>in housing demand, which you know, it was one of

0:12:42.480 --> 0:12:44.480
<v Speaker 1>the pillars of the Chinese economy, was seen as being

0:12:44.480 --> 0:12:47.480
<v Speaker 1>about a quarter of GDP was related directly related to

0:12:47.520 --> 0:12:49.720
<v Speaker 1>the housing sector, and that is really the bottom has

0:12:49.760 --> 0:12:51.679
<v Speaker 1>fallen out of that market. So the hope is that

0:12:51.800 --> 0:12:53.800
<v Speaker 1>this year people willing to go out and spend again,

0:12:53.840 --> 0:12:57.240
<v Speaker 1>go shopping also by homes um. Whether that actually happens

0:12:57.280 --> 0:13:01.480
<v Speaker 1>or not, that's a that's an open question. Yeah, absolutely. Gosh,

0:13:01.480 --> 0:13:04.080
<v Speaker 1>you described such a difficult year for for China, James.

0:13:04.840 --> 0:13:08.640
<v Speaker 1>But this story also has caught our attention. On the demographics.

0:13:08.760 --> 0:13:12.040
<v Speaker 1>China's population started shrinking last year for the first time

0:13:12.080 --> 0:13:18.319
<v Speaker 1>in six decades. This really has hugely profound implications, doesn't it, right,

0:13:18.760 --> 0:13:21.760
<v Speaker 1>And there are some there are some demographers who said

0:13:21.760 --> 0:13:23.360
<v Speaker 1>that actually started a number of years ago and the

0:13:23.400 --> 0:13:26.080
<v Speaker 1>government has just been fiddling with the numbers basically. But

0:13:26.320 --> 0:13:28.319
<v Speaker 1>you know, whether it happened in or whether it happened

0:13:28.320 --> 0:13:30.880
<v Speaker 1>in two is kind of a mood point. When you're

0:13:30.880 --> 0:13:33.199
<v Speaker 1>talking about one point four billion people, give or take

0:13:33.200 --> 0:13:35.720
<v Speaker 1>a hundred million, I guess it's not so so important.

0:13:35.880 --> 0:13:38.720
<v Speaker 1>But yeah, as you say that that that slump or

0:13:38.760 --> 0:13:41.600
<v Speaker 1>that the start of a real fall in in the

0:13:41.600 --> 0:13:43.960
<v Speaker 1>population is an important story. And as you see in

0:13:43.960 --> 0:13:45.840
<v Speaker 1>other countries in each stage or in other countries around

0:13:45.840 --> 0:13:49.199
<v Speaker 1>the world, Japan, South Korea, UM, that will not be reversed.

0:13:49.240 --> 0:13:51.160
<v Speaker 1>There is no way, there is no government in the

0:13:51.200 --> 0:13:54.200
<v Speaker 1>world that has successfully reversed these kind of like long

0:13:54.320 --> 0:13:57.400
<v Speaker 1>term demographic changes. Where as people get richer, as they

0:13:57.440 --> 0:14:00.000
<v Speaker 1>become more educated, they have less children, they have fewer children,

0:14:00.000 --> 0:14:03.240
<v Speaker 1>and um, and that you know what the Chinese government

0:14:03.240 --> 0:14:05.120
<v Speaker 1>has tried to do to try and reverse that. What

0:14:05.160 --> 0:14:07.160
<v Speaker 1>they've talked about has been tried in other countries and

0:14:07.200 --> 0:14:09.120
<v Speaker 1>has failed, and so there's no reason to believe that

0:14:09.120 --> 0:14:11.439
<v Speaker 1>would be successful in China. And so what does that mean?

0:14:11.520 --> 0:14:14.400
<v Speaker 1>You know, less demand for housing, less demand for education.

0:14:14.559 --> 0:14:16.760
<v Speaker 1>If you're an education provider in the US or Australia

0:14:16.840 --> 0:14:19.120
<v Speaker 1>or the UK, and you rely on Chinese students coming

0:14:19.160 --> 0:14:22.160
<v Speaker 1>from students come from China to buy your university courses,

0:14:22.440 --> 0:14:24.120
<v Speaker 1>there will be fewer and few of those as time

0:14:24.160 --> 0:14:28.840
<v Speaker 1>goes on, and less demand for commodities from other countries. Uh,

0:14:29.040 --> 0:14:31.320
<v Speaker 1>maybe this will mean less maybe this will mean less

0:14:31.360 --> 0:14:33.880
<v Speaker 1>consumer demand in the country. Obviously, you know, you can

0:14:33.960 --> 0:14:36.600
<v Speaker 1>make there are some changes the government can make to

0:14:36.680 --> 0:14:39.360
<v Speaker 1>try and slow down the effects of this. For example,

0:14:39.400 --> 0:14:41.800
<v Speaker 1>you look at Japan, the population has been shrinking for

0:14:41.840 --> 0:14:43.320
<v Speaker 1>a decade now, but the number of people in the

0:14:43.360 --> 0:14:46.160
<v Speaker 1>labor forces continue to rise because more and more all

0:14:46.280 --> 0:14:49.240
<v Speaker 1>people are working. So that that is one thing that

0:14:49.240 --> 0:14:51.240
<v Speaker 1>the government, you know, the Chinese government could also do

0:14:51.360 --> 0:14:53.400
<v Speaker 1>lots to do to sort of keep more people in

0:14:53.440 --> 0:14:56.720
<v Speaker 1>the workforce longer. But obviously, as you see in many countries,

0:14:56.760 --> 0:14:58.760
<v Speaker 1>in on the world. It's a very very unpopular decision.

0:14:59.040 --> 0:15:01.640
<v Speaker 1>There are strikes and f on that exact issue about

0:15:01.720 --> 0:15:03.920
<v Speaker 1>raising the working raising and retirement, as you have to

0:15:03.920 --> 0:15:05.880
<v Speaker 1>work longer before you can get the pension. It's also

0:15:05.920 --> 0:15:08.640
<v Speaker 1>a very very unpopular decision in China. The government has

0:15:08.680 --> 0:15:10.440
<v Speaker 1>been trying to do that now for a decade or more,

0:15:10.760 --> 0:15:12.640
<v Speaker 1>and basically every time they talk about it, there's such

0:15:12.640 --> 0:15:15.240
<v Speaker 1>a backlash that there they stop talking about it. So, yeah,

0:15:15.240 --> 0:15:17.000
<v Speaker 1>there's some things that the government can do, but this

0:15:17.080 --> 0:15:19.960
<v Speaker 1>change is inevitable, and I mean the decline is inevitable,

0:15:20.240 --> 0:15:23.440
<v Speaker 1>and it's gonna cause profound changes to China's economy and

0:15:23.440 --> 0:15:27.760
<v Speaker 1>to the blobble bore. This is Bloomberg Daybreak Europe, your

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