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Speaker 1: Good morning. It's Friday, the eleventh of August. This is

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Speaker 1: the BlueBag Daybacate podcast. I'm Caroline Hepka.

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Speaker 2: And I'm Stephen Carroll. Coming up today, China's once top

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Speaker 2: property developer turns into a penny stock as Biden calls

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Speaker 2: the Chinese economy a ticking time bomb.

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Speaker 1: Up to thirty five thousand tiny Chinese hedge funds could

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Speaker 1: close as Beijing announces new regulations for the sector, and.

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Speaker 2: US inflation data leads the FEDS rate setters to favor

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Speaker 2: another hold in rates.

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Speaker 1: Let's start with a round up of our top stories.

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Speaker 2: China's once largest developer by sale has become a penny

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Speaker 2: stock amid growing death concerns. Country Gardens now lost more

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Speaker 2: than ninety three percent of its market value after peaking

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Speaker 2: at fifty billion dollars in twenty eighteen. But two Ha Chow,

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Speaker 2: head of Fixed Income Asia at Rebecco, says, it's easy

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Speaker 2: to read too much into the news.

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Speaker 3: You know, not everything is broken. The propertiesies side of

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Speaker 3: things is extremely stress but these are cyclical elements. Restructuring

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Speaker 3: within this industry has already been happening in the last

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Speaker 3: year in terms of the way it operates. It's a

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Speaker 3: bit unfortunate for our company that has survived, you know,

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Speaker 3: near two years of very difficult i would say, very

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Speaker 3: difficult circumstances to kind of get to the state.

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Speaker 2: Despite two Hatchow's view, debt continues to be a problem

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Speaker 2: in other parts of the economy. Beijing says it will

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Speaker 2: now allow provincial level governments to raise about one trillion

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Speaker 2: u wan or almost one hundred and forty billion dollars

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Speaker 2: via bond sales. The program will in effect bail out

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Speaker 2: weaker issuers, including local government financing vehicles, shifting the debt

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Speaker 2: burden to the state.

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Speaker 1: Now, China's economic problems are quote a ticking time bomb,

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Speaker 1: according to Joe Biden. Speaking at a political fundraiser, the

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Speaker 1: US President said that slowing Chinese growth means the country

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Speaker 1: is in trouble, with the highest unemployment rate going Bloomberg.

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Speaker 1: Stephen Engel says that Biden's comments will have an impact.

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Speaker 2: This is a comment to donor in a politically charged environment,

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Speaker 2: but the world is small now.

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Speaker 4: Comments like this go far.

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Speaker 3: China will latch onto this and use it to their advantage.

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Speaker 1: Steven Angel also pointed out that it's not the first

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Speaker 1: time that Biden's off the cuff remarks have undercut efforts

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Speaker 1: to stabilize ties between the two nations. In June, he

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Speaker 1: likened she to a dictator, just a day after the

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Speaker 1: US Secretary of State had visited visited Beijing.

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Speaker 2: China's army of hedge funds is bracing for a shakeup

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Speaker 2: that will likely drive thousands of them out of business.

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Speaker 2: Bloomberg's Brian Curtis has more from Hong Kong.

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Speaker 5: New rules are coming as soon as next month. They

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Speaker 5: are expected to force the liquidation of about thirty seven

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Speaker 5: percent of all existing hedge funds. That's about thirty five

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Speaker 5: thousand products. The rules would impose a ten million yuan

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Speaker 5: asset minimum or about one point four million US dollars.

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Speaker 5: The rules would also cap leverage levels and the size

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Speaker 5: of investments in single securities. China wants to professionalized the industry.

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Speaker 5: It's grown sevenfold over the past decade and stands out

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Speaker 5: globally for its large number of players in Hong Kong.

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Speaker 5: Brian Curtis Spoomberg Daybreak.

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Speaker 1: Europe now when it comes to ubs, it says that

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Speaker 1: it no longer needs the Swiss government's protection for any

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Speaker 1: losses or liquidity strains due to acquiring Credit Sweez, and

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Speaker 1: has repaid the government in full for its fifty seven

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Speaker 1: billion dollar liquidity backstop. The Swiss lender voluntarily waived its

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Speaker 1: multi billion dollar agreement with the Swiss government. The deal

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Speaker 1: had been in place to protect the bank after it

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Speaker 1: acquired Credit Sweez over a weekend to protect it from collapse.

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Speaker 2: The Federal Reserve has now increasingly likely to leave interest

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Speaker 2: rates unchanged at their next meeting. After underlying US inflation

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Speaker 2: rows only modestly. Core consumer prices excluding food and energy

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Speaker 2: costs increase by zero point two percent in July, the

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Speaker 2: same as June's print, despite that being the smallest back

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Speaker 2: to back rise in more than two years. San Francisco

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Speaker 2: FED president Mary Daily says the fight is not over.

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Speaker 6: It is not a data point that says victory as ours.

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Speaker 6: There's still more work to do and the FED is

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Speaker 6: fully committed to resolutely bringing inflation back down to its

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Speaker 6: two percent target.

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Speaker 2: Mary Daily was speaking to Yahoo Financed, adding that she

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Speaker 2: remains data dependent and won't prejudge future hikes.

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Speaker 1: Here in the UK, most companies are not meeting emissions

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Speaker 1: targets as new rules loom begs un pots has more.

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Speaker 7: UK businesses are set to be hit by a fresh

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Speaker 7: wave of climate regulations, but according to a study, most

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Speaker 7: UK companies aren't setting targets to cut their emissions, putting

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Speaker 7: them on a collision course with increasingly strict regulations. According

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Speaker 7: to analysis by Baning Company and nonprofit CDP, around sixty

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Speaker 7: four percent of corporate emissions in Britain are still not

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Speaker 7: covered by targets. As UK companies fall short on reporting

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Speaker 7: their emissions. They're also signs that money managers are lagging behind.

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Speaker 7: According to a separate report led by the University of Exeter,

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Speaker 7: Britain's funds are quote dramatically underestimating climate risk. Corporate dithering

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Speaker 7: could be another risk to the UK failing to meet

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Speaker 7: its carbon net zero targets. In London Immune Pots Bloomberg

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Speaker 7: day Break.

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Speaker 2: Europe KKR has signed a preliminary agreement with the Italian

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Speaker 2: government over its twenty three billion eurobid for the nation's

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Speaker 2: phone network. The US private equity firm signed a memorandum

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Speaker 2: of understanding that could give Italy's treasury as much as

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Speaker 2: a twenty percent stake in Telecomatalia. The company needs to

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Speaker 2: sell assets to slash its death pile, but the deal

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Speaker 2: is not yet certain, giving Vivendi, the French media conglamorate

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Speaker 2: and Tellacomatalia's largest shareholder, has repeatedly said it values the

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Speaker 2: grid at around thirty billion euros.

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Speaker 1: Right, those are a few our top stories, and today

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Speaker 1: it's Friday, so perhaps this is appropriate. There is an

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Speaker 1: amazing story out on the BlueBag terminal for how it

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Speaker 1: shows the difference in terms of generations Britain's Gen Z workers.

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Speaker 1: So these are sort of in their twenties born nineteen

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Speaker 1: ninety six, are looking for lower stressed jobs. They're not

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Speaker 1: looking for the hustle. Apparently this generational shift is really big.

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Speaker 1: I know that we've talked about it before like quiet

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Speaker 1: quitting and stuff, but this is another iteration of this,

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Speaker 1: and it's really significant for the UK, which has got

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Speaker 1: a very tight labor market. But it does show that

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Speaker 1: a lot of companies are now really worried about this

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Speaker 1: idea that maybe this new generation doesn't want to work

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Speaker 1: in the same way that previous ones did.

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Speaker 2: Yeah, and perhaps they need to make changes as a

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Speaker 2: result to attract some staff there as well. This is

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Speaker 2: coming from data in the job site ad Zuna provided

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Speaker 2: to Bloomberg which shows that clicks on jobs like office administrators,

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Speaker 2: account managers or marketing associates have surged in fact one

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Speaker 2: hundred and thirty one percent if for the first half

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Speaker 2: of twenty twenty three compared to the second half of

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Speaker 2: last year. Also increased interest and the likes of data

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Speaker 2: analyst roles. These are seen as being jobs where there

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Speaker 2: is more flexibility, there are more options for things like

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Speaker 2: working from home. But at the same time, this is

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Speaker 2: decisions that people are making to perhaps earn a little

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Speaker 2: bit less money to have a little bit more of

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Speaker 2: a life.

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Speaker 1: I get that, but this caused such controversy in the

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Speaker 1: newsroom when we were talking about it earlier, because the

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Speaker 1: idea was work from home, flexible hours, no big responsibilities,

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Speaker 1: but you can still live your life at thirty five pounds.

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Speaker 1: That was what ad Zuna was sort of saying, is

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Speaker 1: you know the kind of work life balanced. I sort

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Speaker 1: of wondered whether that's sustainable over your whole career, whether

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Speaker 1: it's possible to have a kind of chill job and

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Speaker 1: still earn a decent amount. I don't know. It caused

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Speaker 1: lots of back and forth between producers and me.

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Speaker 2: Today, I think it's a very interesting idea, and I

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Speaker 2: think it's, you know, perhaps a reflection of a lot

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Speaker 2: of people who were in this age category are looking

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Speaker 2: and saying, well, I'm never going to be able to

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Speaker 2: buy a house, So perhaps actually being that ambitious about

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Speaker 2: earning a higher salary isn't that important to me, And

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Speaker 2: perhaps I'd rather be able to try and balance what

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Speaker 2: I can afford to earn with what I can live with.

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Speaker 1: I'm going to underline the fact that I'm not part

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Speaker 1: of gen Z and yeah, and just say that I

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Speaker 1: remember the huge bomb that was at the Sheryl Sandberg

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Speaker 1: book lee in so it's like the opposite of that.

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Speaker 1: Now I've got quiet quitting. And apparently there is this

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Speaker 1: new monica it's called lazy Girl Jobs. But yeah, I

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Speaker 1: don't know why girl.

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Speaker 4: But anyway, I.

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Speaker 2: Mean that's a whole other debate as well. Anyway, that's

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Speaker 2: one story definitely got us talking this Friday in morning.

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Speaker 2: Let's get back though to our top story this morning

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Speaker 2: around the Chinese property developer Country Garden, It shares plummeting

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Speaker 2: even further in Hong Kong today, becoming a penny stock

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Speaker 2: amid mounting liquidity concerns. Our China Economy and Government editor

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Speaker 2: Jail Lisis joins us for more on this story. Now, Jill,

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Speaker 2: how big are the problems at Country Gardeners. We've seen

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Speaker 2: this slide and shares over the past week.

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Speaker 8: Hey, Stephen, Yes, the problems are quite bad, aren't they.

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Speaker 8: I mean, look, you alluded to this earlier. But even

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Speaker 8: though Country Garden used to be the China's largest developer

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Speaker 8: by sales is no more. It's still the country's sixth largest.

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Speaker 8: It's got many projects in development, It's employed somewhere around

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Speaker 8: seventy thousand people at the end of last year. And

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Speaker 8: you know, we've heard from a few analysts that have

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Speaker 8: worn this could be a bigger problem than evergrind was.

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Speaker 8: We got a sense of how bad the depth that

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Speaker 8: the funding challenges are at this company yesterday when they

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Speaker 8: said that they expected to post a net loss of

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Speaker 8: as much as seventy or fifty five billion you on

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Speaker 8: for the first half of the year. That's like seven

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Speaker 8: point six billion US dollars. This is a company that

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Speaker 8: may need to restructure. So, yes, the problems here are

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Speaker 8: quite sizeable.

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Speaker 1: Yeah, what are the next deadlines then that the company

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Speaker 1: is facing? As you say, Jill, this is a major issue.

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Speaker 8: Yeah, Caroline. Still look, I think at this point we

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Speaker 8: know that they missed these payment deadlines on a couple

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Speaker 8: of coupons they were supposed to deliver this week. They

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Speaker 8: do have a thirty day grace period to make those mispayments.

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Speaker 8: They didn't respond to our questions yesterday about whether they

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Speaker 8: had made those payments already, so you know, but the

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Speaker 8: still there's potentially some time a few weeks there. But

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Speaker 8: if they don't make those payments, they could join a

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Speaker 8: slew of other defaulters, including of course Evergrand.

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Speaker 2: What does this story around Country Garden Jill tell us

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Speaker 2: about the wider state of the property market in China.

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Speaker 8: I think at this point it just shows you that

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Speaker 8: these ongoing problems within the property market that we've been

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Speaker 8: talking about for years, at this point really just haven't

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Speaker 8: gone away. I mean, the property industry, including related industries,

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Speaker 8: makes up about a fifth of China's GDP. It's pretty sizable.

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Speaker 8: We've taught. We've heard so much from the government about

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Speaker 8: how much they want to help increase funding support for

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Speaker 8: developers make sure that they're meeting their reasonable financing needs.

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Speaker 8: I mean, there's a reason why it's really important all

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Speaker 8: this attention has been focused on the property sector because

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Speaker 8: of how big these these problems are and how much

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Speaker 8: that has these spillover effects on the rest of the economy.

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Speaker 8: I mean, you know, a big story this week out

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Speaker 8: of China was about consumer deflation and how both of

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Speaker 8: these measures CPI and PPI entered deflation together for the

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Speaker 8: first time since twenty twenty. A big part of the

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Speaker 8: problem with the deflation threat has to do with, you know, confidence,

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Speaker 8: depressed confidence and home buyers are just not very confident

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Speaker 8: in the property market right now, and that is a

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Speaker 8: big driver.

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Speaker 1: Yeah, Okay. The overall issh of debt though in China enormous,

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Speaker 1: isn't it. Because another story that we've been reporting on

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Speaker 1: today the Chinese government debt a move to shift liabilities

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Speaker 1: to provincial administrations. What can you tell us about that?

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Speaker 8: Yes, So, what we've heard from people familiar with this

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Speaker 8: is that this program would it would in effect bail

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Speaker 8: out weaker issuers, including what call local government financing vehicles,

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Speaker 8: and so that would shift the debt burden that they

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Speaker 8: have to provincial governments instead. The idea being that China

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Speaker 8: would allow these provincial level governments to raise about one

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Speaker 8: hundred trillion. One that's about you know, one hundred and

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Speaker 8: forty billion US dollars via bond sales. So this is

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Speaker 8: what would describe as as a debt swap program. This

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Speaker 8: is what I would call a small step toward addressing

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Speaker 8: these really big issues with local debt and financial stability

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Speaker 8: within China. You know, it's what they're trying to do

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Speaker 8: is address this problem with hidden debt that refers to

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Speaker 8: funds raised by government related entities such as those local

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Speaker 8: government financing vehicles which borrow from banks and bond markets

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Speaker 8: to finance infrastructure spending and other public projects. So you know,

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Speaker 8: those really big drivers of growth in economicivity. The one

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Speaker 8: thing I'd warned though, is that the amount of money

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Speaker 8: covered under this debt swap program is really a drop

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Speaker 8: in the bucket compared to what the IMF estimates some

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Speaker 8: sixty six trillion on that these lgfbs will hold by

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Speaker 8: the end of this year. So it's a step, but

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Speaker 8: it's a small step.

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Speaker 2: Okay, Jail, thanks so much for bringing U up to

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Speaker 2: date on those stories. That's our China Government and Economy

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Speaker 2: editor at Jill disis there up next to UK investment

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Speaker 2: in China tech to be reviewed and women flex their

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Speaker 2: spending power.

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Speaker 7: Now the paper review on blue Bird Daybreak Europe, the

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Speaker 7: news you need to know from today's papers.

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Speaker 1: Joining us this money me basically and Garren some more details.

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Speaker 1: Let's start with The Times which has a headline investment

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Speaker 1: in China tech to be reviewed. So another China story,

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Speaker 1: but from a different perspectively on.

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Speaker 4: Yes, indeed, Caroline, because you were obviously speaking earlier on

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Speaker 4: the show about China's economic problems are a ticking time bomb.

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Speaker 4: According to Joe Biden, now this is all about tech.

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Speaker 4: So the government that you U government could be planning

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Speaker 4: to follow in the footsteps of the US when it

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Speaker 4: comes to blocking UK companies from investing in Chinese tech businesses.

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Speaker 4: We did discuss this earlier in the week. The Times

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Speaker 4: Newspapers says some senior ministers are warning Beijing is posing

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Speaker 4: as significant threat to security here in the UK, and

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Speaker 4: of course, earlier this week, Joe Biden says he wants

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Speaker 4: to ban US investment in Chinese businesses developing technology in

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Speaker 4: areas that could be critical for the military awful surveillance.

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Speaker 4: So this ban includes things like quantum computing, semiconductors and

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Speaker 4: some other artificial intelligence systems. However, Rishi Sunag believes to

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Speaker 4: be weighing similar restrictions on British firms, but insists such

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Speaker 4: a decision to control outbound investment should be taken with caution.

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Speaker 4: So Rishi Sunac thinking this course of Vince Cable, the

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Speaker 4: former leader of the lib DEM's party and business minister,

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Speaker 4: was on Bloomberg Radio and I remember he was saying

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Speaker 4: really something interesting in an interview with yourself. He was

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Speaker 4: saying that, you know, we shouldn't always bow to the

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Speaker 4: pressure of the US, because in some ways investment from

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Speaker 4: China could help us rather than hinder us.

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Speaker 2: Yeah, and that whole inter is available on the UK

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Speaker 2: Partics podcast if you want to listen to it. Let's

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Speaker 2: go to the Wall Street Journal nex Leanne The summer

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Speaker 2: Women flex their spending power.

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Speaker 4: Yeah, this is a pretty cool straory actually, and something

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Speaker 4: I hadn't thought about before. But we are spashing big

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Speaker 4: apparently this summer. And it's not just on like tickets

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Speaker 4: to our favorite events. Basically, women are buying all these

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Speaker 4: tickets to go and see Taylor Swift, Beyonce and Barbie.

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Speaker 4: But along with those tickets, we're going with groups of

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Speaker 4: friends mothers and daughters. And when we go to things

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Speaker 4: like the Barbie movie, apparently we're buying loads of pink outfits.

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Speaker 4: We're painting our nails multi colors for Taylor Swift, and

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Speaker 4: we're just doing all of these kind of things. And

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Speaker 4: basically the Wall Street journal is calling this the woman's

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Speaker 4: multiplier effect, so their spending power is growing, and this

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Speaker 4: is helping the US economy. Local economies are also massively

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Speaker 4: benefiting from this. And we've heard this, haven't we every

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Speaker 4: time Taylor Swift does a concert somewhere and massively boosts

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Speaker 4: the hotel industry and helps the economy locally. And I

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Speaker 4: really like the story because it's saying, listen, this is

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Speaker 4: not activism, but it's more entertainment. As women are joining

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Speaker 4: the summer's hottest events and we are compiled by a

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Speaker 4: common theme. Aren't made by women? Speaks to the experience

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Speaker 4: of being a female. So I quite like this idea, Caroline,

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Speaker 4: And apparently we're taking groups of friends all dressing up

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Speaker 4: to go to the different concerts. But we love it

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Speaker 4: so much we're going back again.

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Speaker 2: This is Bloomberg Daybreak Europe, your morning brief on the

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Speaker 2: stories making news from London to Wall Street and beyond.

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Speaker 1: I'm Caroline Hipka and.

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Speaker 2: I'm Stephen Carroll. Join us again tomorrow morning for all

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Speaker 2: on Bloomberg day Break Europe