Speaker 1: Welcome to Bloomberg Opinion. I'm Vonnie Quinn this week. It's
Speaker 1: terrible to move ahead with something that looks like a
Speaker 1: partisan prosecution, but it's also terrible to let a president
Speaker 1: get away with crimes. Jonathan Bernstein on the progress of
Speaker 1: the House January six Committee, and later a look at
Speaker 1: China's economic woes with Julie Ren and Tim Coulban. First,
Speaker 1: people might be coming back to big cities post pandemic.
Speaker 1: One thing that never went away though, and is in
Speaker 1: fact proliferating even more post pandemic big box apartment buildings.
Speaker 1: I spoke to Justin Fox about housing renting and all
Speaker 1: the problems associated with So justin mortgage rates finally topped
Speaker 1: six percent, So I imagine there's going to be a
Speaker 1: lot more renters out there. Is that a question of
Speaker 1: supply and demand as to how prices go. I mean,
Speaker 1: clearly we've been switching to more people renting versus owning
Speaker 1: over the past ten or fifteen years, and I think
Speaker 1: right now, yeah, if somebody who was looking to buy
Speaker 1: a house with a mortgage is suddenly going to be
Speaker 1: a much different situations, so they'll probably be more demand
Speaker 1: to rent both houses and apartments. The thing is in
Speaker 1: New York City and I imagine other large cities, pandemic
Speaker 1: rents meant that it was possible for artists and people
Speaker 1: who didn't make a whole lot of money to move
Speaker 1: into the city. Are they all now being pushed out
Speaker 1: of the city, the ones that had the courage to move. Yeah.
Speaker 1: And I don't know that there were all that many
Speaker 1: people who did that or thought that the lower rents
Speaker 1: would stick forever, but definitely rents went up in all
Speaker 1: of these suburban areas and in cities like Boise, and
Speaker 1: those have settled down some, but cities where they fell
Speaker 1: a lot, especially in New York, they've come careening back up.
Speaker 1: We're hearing stories about the median price increasing third base
Speaker 1: effects involved. These are obviously above pre pandemic rerants, but
Speaker 1: it's a different city as well. Yeah, I mean there's
Speaker 1: a lot of demand to rent apartments. I guess there
Speaker 1: were some people who thought, in the depths of the
Speaker 1: pandemic in two thousand twenty that no one would ever
Speaker 1: want to live in a city again, But that's not
Speaker 1: what's happened. Which brings me to one of your recent
Speaker 1: columns about Big Boxy apart buildings, which really I guess
Speaker 1: went out of style during the pandemic because you were
Speaker 1: beating in everybody else's air. There was a lot of
Speaker 1: people walking in out of the buildings and so on.
Speaker 1: I mean, I don't know, I don't think they ever
Speaker 1: went out of style, but definitely you would have thought
Speaker 1: they would have. Given all the rhetoric against cities and
Speaker 1: apartment buildings and all, and you know, for a couple
Speaker 1: of months there as someone who lives in an apartment building,
Speaker 1: and you know it would have been nice not to
Speaker 1: have to share the air with everyone else. Well, you
Speaker 1: looked into the data, and apparently they're actually getting more
Speaker 1: and more plentiful. In fact, yeah, there's this great annual
Speaker 1: data release from the Census Bureau that is sort of
Speaker 1: my favorite data release, and I've seen it be the
Speaker 1: only person favorite data release who who looks out for it,
Speaker 1: because it's all these great things like how many fireplaces
Speaker 1: there are in new houses and how many bedrooms and bathrooms.
Speaker 1: One of the things they keep track of is just
Speaker 1: housing units completed by the size of the building in
Speaker 1: multifamily apartment buildings. And something kind of remarkable happened last
Speaker 1: year that more apartments were built in Buildings of fifty
Speaker 1: units are more than ever before in US history. Two
Speaker 1: D are we talking about across the United States? Across
Speaker 1: the US where mostly the South is overall where most
Speaker 1: construction is happening. So just about half we're in the South,
Speaker 1: and then a lot in the West and less in
Speaker 1: the Midwest and a bunch of the Northeast. What's the
Speaker 1: impetus for these big buildings. Part of it is that
Speaker 1: there's been an increase in demand for apartments, partly because
Speaker 1: of this slight switch away from ownership since the financial
Speaker 1: crisis that will now get sort of renewed boost with
Speaker 1: high mortgage rates. Also, it's that in big metropolitan areas
Speaker 1: there's limited space on which to build. It's often close
Speaker 1: to commercial districts because you're less likely to have NIMBI
Speaker 1: homeowners saying don't build an apartment building there. And increasingly
Speaker 1: the development of apartment buildings is sort of driven by
Speaker 1: these big institutional actors, and you know, for them, it's
Speaker 1: not worth it to build a couple of duplexes. They
Speaker 1: to build big projects. So what you get is these
Speaker 1: larger buildings. And I mean another aspect is this change
Speaker 1: in building codes and adaptation by builders to it has
Speaker 1: resulted in this specific kind of building, mostly called the
Speaker 1: five over one, which is five usually five stories of
Speaker 1: wood framed building over the bottom floor of concrete, and
Speaker 1: it can be sometimes it's six over two. Their variants.
Speaker 1: They're not allowed in New York City, but in other
Speaker 1: cities and suburbs all across the country. That's the form
Speaker 1: that most of these buildings are taking. Knew, that's what
Speaker 1: they were called five over one or six over two.
Speaker 1: I presume that I prefer to call them stump ees,
Speaker 1: but that hasn't really fought on. Rents for these buildings
Speaker 1: are not exactly cheap, and when we're talking about media
Speaker 1: and rents plus for many of these buildings, they're considered
Speaker 1: almost luxury buildings. They're often marketed as luxury buildings. I
Speaker 1: mean mostly that just means stainless steel appliances. They're not
Speaker 1: it's like they're not that luxurious. It's just that's how
Speaker 1: you market these things. Very often they're at higher rents
Speaker 1: than some surrounding buildings. But I think over all the evidences,
Speaker 1: you build more stuff like this, and it it puts
Speaker 1: some downward pressure on prices. Now, how do the pandemic
Speaker 1: affect builders that we're building these apartments, because I guess
Speaker 1: building was one of the things that didn't really shut down.
Speaker 1: It kept going out. Yeah, I mean it's shut down
Speaker 1: for a couple of months in some places, and in
Speaker 1: some places it didn't at all. I mean, one thing
Speaker 1: about this is it takes a while to get a
Speaker 1: large apartment building built. So all these buildings that were
Speaker 1: being completed in two thousand twenty one, I think the
Speaker 1: majority of them were actually they got the permits and
Speaker 1: it was in the works before the pandemic, and there
Speaker 1: actually was a dip in permits for the first six
Speaker 1: months or so of the pandemic, but then since late
Speaker 1: permits of skyrocket, and it looks like if you go
Speaker 1: by the it takes like nineteen months or so to
Speaker 1: get one of these buildings built. They're going to set
Speaker 1: another record in two thousand twenty three, and there are
Speaker 1: people to live in all of these I guess. So,
Speaker 1: I mean part of it is, you know that with
Speaker 1: the lead time, they may be opening all these new
Speaker 1: buildings into a weak market if there's a recession, but
Speaker 1: maybe not. I mean, it does seem like for the
Speaker 1: most part, they're able to fill them all up. You
Speaker 1: have a great chart here housing apartments issued for Austin
Speaker 1: round Rock in more than twenty five and a half thousand.
Speaker 1: But I guess we are seeing a lot of companies
Speaker 1: build new headquarters in other cities. I mean, Austin's booming,
Speaker 1: Nashville's booming, Salt Lake cities booming. What's just interesting is
Speaker 1: that traditionally these booming cities, and this is still true
Speaker 1: of like Atlanta, Dallas, Houston, the vast majority of that
Speaker 1: new housing is single family. But increasingly what's happening in
Speaker 1: even inland metro areas is what's happened a while on
Speaker 1: the coast, is that almost all the constructions that's happening
Speaker 1: as apartment buildings because there's either just too much opposition
Speaker 1: or these places just can't sprawl any farther out. Justin Fox.
Speaker 1: The House January six committee is several public hearings into
Speaker 1: its investigation of the attack on the capitol. Seventeen months ago,
Speaker 1: I spoke with Jonathan Bernstein about what we've discovered so far.
Speaker 1: We just literally heard that we might actually be getting
Speaker 1: more hearings than we originally thought because there are new
Speaker 1: pieces of evidence available to the committee. What's the outlook, Jonathan,
Speaker 1: what happens after recess? Well, apparently after recess they're going
Speaker 1: to have at least two more, but they may schedule
Speaker 1: more after that. And you know, I hate to do
Speaker 1: and I told you so, but I've been screaming for
Speaker 1: months that one of the reasons to get to the
Speaker 1: hearings is because hearings themselves may produce additional evidence. And
Speaker 1: apparently that's what happened. We spoke about that on this program.
Speaker 1: At this point, they're really starting to hit a hard
Speaker 1: deadline because they have to write the report, which is
Speaker 1: somewhat important, but all they have is the end of
Speaker 1: this Congress to do it, and we're going into election season.
Speaker 1: As we get closer to the mid terms, it becomes
Speaker 1: increasingly difficult for them to put these hearings on without
Speaker 1: acting as if they are electioneering. And part of the
Speaker 1: importance of this is to try to appeal to people
Speaker 1: who will be turned off by electioneering. So there is
Speaker 1: some suggestion out there, Jonathan, that if there were to
Speaker 1: be delaying tactics we might reach into the next Congress
Speaker 1: that would be a different speaker that might change things.
Speaker 1: I mean is that a possibility. Well, if we assume
Speaker 1: that Republicans will take over the majority in the next Congress,
Speaker 1: which certainly seems very likely, it's impossible to imagine basically
Speaker 1: a Republican majority Congress continuing anything of this stuff. So realistically,
Speaker 1: they've got till the end of the year, and I
Speaker 1: think it's unlikely that they'll come back in September and
Speaker 1: do further public hearings. So really they just have the
Speaker 1: end of July until the August recess unless there's something
Speaker 1: so spectacular that they feel they have to do it.
Speaker 1: They do have the option of coming back in a
Speaker 1: lame duck session after the election, but again, they have
Speaker 1: to write a report. So I think that they're really
Speaker 1: in a time crunch and the impetus will be to
Speaker 1: get this done. Well, we have had four public hearings,
Speaker 1: will have x amount more. We have heard from people
Speaker 1: that were completely anonymous before the hearings. Has the committee
Speaker 1: done a good job so far? I think given the
Speaker 1: parameters they set for themselves of having a small number
Speaker 1: of fearing starting this late, I think that they've done
Speaker 1: an excellent job. A couple of things, in particular, the
Speaker 1: restraint the members have shown you know, they're having just
Speaker 1: the chair and Representative Chaney the vice chair speak in
Speaker 1: each hearing, but outside of that, just one member is
Speaker 1: designated to interview entire panels, and in fact, around the
Speaker 1: Tuesday edition, we had you know, Adam Shift interviewing both panels.
Speaker 1: Every other member sits there like a stone, doesn't say anything.
Speaker 1: That's a really hard thing to get members of Congress
Speaker 1: to agree to do on something which is a major
Speaker 1: publicity opportunity. The other thing they've done extremely well is
Speaker 1: using video, using physical evidence, tweets and documents and all that,
Speaker 1: and coordinating that with questioning in a way that makes
Speaker 1: the presentations very compelling television. What were the most salient
Speaker 1: facts uncovered? You know, I think that while there have
Speaker 1: been some specific facts that have been uncovered, for example,
Speaker 1: they really emphasized the extent to which people told Donald
Speaker 1: Trump that he lost the election. So there's been some
Speaker 1: progress on digging out specifics, but I think what's most
Speaker 1: important is the overview and telling things, some of which
Speaker 1: we learned as early as before January six, you know,
Speaker 1: his call pressuring Georgia officials and other state legislative officials,
Speaker 1: but putting it all in one piece explaining how all
Speaker 1: of the different pieces of what Trump and his allies
Speaker 1: were doing added up to an attempt to, put it bluntly,
Speaker 1: overthrow the government, which doesn't mean that it's actually going
Speaker 1: to impact anything in the future when it comes to
Speaker 1: the former president running again or even having an impact
Speaker 1: on the primary so far as certainly doesn't seem like
Speaker 1: there's been any negative influence on the primaries, you know.
Speaker 1: I mean, Trump has not had a particularly good primary
Speaker 1: season during these midterm primary but I wouldn't credit the
Speaker 1: January six investigation particularly. I think it is possible that
Speaker 1: the events of January six in the first place may
Speaker 1: have turned some people off from Trump. But I think
Speaker 1: that what the hearings can do in terms of the
Speaker 1: audiences that they have some Republicans who may have been
Speaker 1: willing to go along with Trump but weren't real comfortable
Speaker 1: with that may be affected. That won't necessarily affect primary
Speaker 1: elections this year, but long term that may have some
Speaker 1: consequences for his influence within the party. Um. I think
Speaker 1: also to the extent that it changes press coverage going forward.
Speaker 1: The one attentive group is the media itself and people
Speaker 1: in the media who think of themselves as neutral, pounding
Speaker 1: it into them that being neutral about these things includes
Speaker 1: accepting the truth of what Trump actually tried to do. Well.
Speaker 1: The other thing is, we still don't have firm evidence
Speaker 1: tying Trump exactly to violence or groups that were violenced
Speaker 1: that day. Do the details really matter? We still don't
Speaker 1: have firm evidence tying Trump to violence or groups that
Speaker 1: were violenced that day. Do the details really matter? They
Speaker 1: may matter for prosecution and what exactly he can be
Speaker 1: prosecuted for. One of the audiences here is the Justice Department.
Speaker 1: And the thing about violence is it's complicated. Right by
Speaker 1: the time that we get to January six, it's clear
Speaker 1: that the way Trump talks about things has consequences in
Speaker 1: terms of violence and threats of violence. And I think
Speaker 1: it's pretty clear that Trump knew or should have known
Speaker 1: by this point that his words and the words of
Speaker 1: his allies had these consequences. Now, for legal purposes, that
Speaker 1: may not be good enough, but there is something different
Speaker 1: between that and if there may have been more direct
Speaker 1: contact between Trump and some of these organized groups. We know,
Speaker 1: you know that Trump said to one of the organized
Speaker 1: groups in the national debate, you can't get a more
Speaker 1: public thing than a presidential debate that they should stand by,
Speaker 1: you know, when you has to condemn them, so you know,
Speaker 1: you can draw lines here, but how deeply the lines
Speaker 1: should be shaded. We still don't know if there's more
Speaker 1: to come well, and Bennie Thompson has said that there
Speaker 1: is footage from a documentary and Alex Holder who had
Speaker 1: access to the Trump family before and after January six,
Speaker 1: So we don't know what's going to come out of that.
Speaker 1: What would the Justice Department need more of in order
Speaker 1: to prosecute Donald Trump? Well, two things. One is do
Speaker 1: they feel like there's public pressure to move ahead on
Speaker 1: this without seeming partisan? And again I think that the
Speaker 1: Attorney General is very hesitant to move forward with anything
Speaker 1: they could look like a partisan prosecution of a former
Speaker 1: president and current presidential candidate, and rightly so, he should
Speaker 1: be very hesitant. It's an impossible conundrum for the Justice
Speaker 1: Department because it's terrible to move ahead with something that
Speaker 1: looks like a partisan prosecution, but it's also terrible to
Speaker 1: let the president get away with crimes. Um. That's yeah.
Speaker 1: Then there's the legal side of things, which is how
Speaker 1: open and shut a case do they have on some
Speaker 1: of these charges, and there's discussion within sort of Upella law,
Speaker 1: Twitter and bloggers and and columnists about what matters in
Speaker 1: terms of Trump's state of mind for some of these
Speaker 1: charges and what exactly is needed to make good these persecutions,
Speaker 1: because option one of convicting him, an option two of
Speaker 1: not charging him or bad but options three of bringing
Speaker 1: him to trial and having him declared not guilty, that's worse.
Speaker 1: Jonathan Bernstein. They're turning east now and specifically to China,
Speaker 1: where President she Jin things this week criticized the impact
Speaker 1: of sanctions for causing global economic pain. Also this week,
Speaker 1: President she warned of hunger and he ordered more pro
Speaker 1: growth policies to boost China's COVID mattered economy SHOOTI ran
Speaker 1: joins Now for some perspective on the Chinese consumer SHOOTI
Speaker 1: President she sounds concerned about his people. How badly is
Speaker 1: the Chinese consumer suffering right now? I mean, if you
Speaker 1: just look at the use unemployment rate at the Periodic
Speaker 1: Consumer Sentiment survey, it's done though it's on record. Use
Speaker 1: unemployment has already had eighteen percent. Yes, it's going to
Speaker 1: kick higher because college graduates are going to graduate in
Speaker 1: the month. Also, Yes, so we're going to see basically
Speaker 1: one thing, four or five young people aged between sixteen
Speaker 1: and twenty four unemployed. How do you think that happened, Julie.
Speaker 1: We know that inflation hasn't been a problem, but how
Speaker 1: is unemployment such a problem in China? Well, a lot
Speaker 1: of it was the big tech at the real estate
Speaker 1: developer crackdown. I mean, the tech sector employed a lot
Speaker 1: of people, especially young people, right So that's a big chunk.
Speaker 1: And also because of the COVID lockdowns, I mean, the
Speaker 1: big tech companies also hired a lot of gig economy workers,
Speaker 1: food delivery workers, drivers, And these people don't have any
Speaker 1: jobs right now. Do they have social security benefits or
Speaker 1: any kind of income coming in? So very little to
Speaker 1: be honest, And that's something very interesting about China. Even
Speaker 1: though it claims to be a communist country, there is
Speaker 1: very little social security net. And the president, Shimking is
Speaker 1: definitely not into this notion called the welfare state. He
Speaker 1: basically hears this ideology called production first and then living next.
Speaker 1: So what China has done is that they are giving
Speaker 1: subsidies to factories and say, oh, you know, like if
Speaker 1: you just keep those workers, we're going to give you
Speaker 1: some tax rebates, and they're not very many, to be honest.
Speaker 1: So there's no talk of stimulus check, and there's very
Speaker 1: little unemployment check, to be honest. I think in twenty
Speaker 1: twenty about sixty million people lost their jobs, only two
Speaker 1: million managed to claim unemployment. Wow, that is a serious,
Speaker 1: serious black mark on the Chinese economy. Now, President season thing,
Speaker 1: he has an ego, he wants to hold himself upright
Speaker 1: in the world. How does he allow this unemployment rate
Speaker 1: continue to be the case? If it's for use, what
Speaker 1: is it overall? Well, we all urban unemployment is a
Speaker 1: little bit shy of seventh perment. A lot of it
Speaker 1: is because if you're like forty fifty year old, chances
Speaker 1: are your work force their own enterprises and they don't
Speaker 1: lay off workers, right, So a lot of the tension
Speaker 1: is into generational young people are struggling, whereas you're forty
Speaker 1: fifty year old that you're doing a little bit better,
Speaker 1: but still you will have children for young right, So
Speaker 1: use unemployment is the biggest problem right now. Presidency has
Speaker 1: been talking about going easier on the tax sector and
Speaker 1: also fintech reforms and reforms in other areas, and that
Speaker 1: the economy is almost ready to incorporate those reforms and
Speaker 1: allow these companies operate again. Would that be a bright
Speaker 1: sign for employment. Yes, that would be that's the early
Speaker 1: stage of perhaps unemployment recovery. We don't have the complete statistics,
Speaker 1: but just according to surveys, the tutoring sector it used
Speaker 1: to hire about seventeen percent of fresh college graduates and
Speaker 1: that actor was completely wiped out because of the tax crackeder. Right,
Speaker 1: so the government is trying, but it's not going to
Speaker 1: be like what it used to be. No. You point
Speaker 1: out that a record ten point eight million college graduates
Speaker 1: will be fresh out this summer and there are no
Speaker 1: jobs for them right now. I mean that will lead
Speaker 1: to social unrest if it continues. Correct. I think that
Speaker 1: the government is truly very worried. The thing is the
Speaker 1: way China sees unemployment. For micro workers, they always feel like, okay,
Speaker 1: you can always go back to your country side, then
Speaker 1: go far. They would never be worried about micro workers unemployment.
Speaker 1: They feel like, you know, the land is their employment ultimately.
Speaker 1: But for young fresh college graduate it's a problem because
Speaker 1: they're quite educated and they're frustrated, and we have seen
Speaker 1: what happened in the Middle East and other parts of
Speaker 1: the world. China is very worried right now. And China
Speaker 1: has a great reputation in the tech sector in semi
Speaker 1: conductors in all sorts of areas, and you would have
Speaker 1: imagined that China would be able to put them to work.
Speaker 1: Tell us about what you call gold, silver, and copper babies.
Speaker 1: So Chinese schools can be very harsh. I mean I
Speaker 1: went through the Chinese from the earlier the Rancors by
Speaker 1: our great and then divide into gold, silver and copper.
Speaker 1: So the gold babies they are the ones who can
Speaker 1: go to Chincha and Baking University and they're the next
Speaker 1: generation engineers that can design China's world class chips or
Speaker 1: e D autopaths. And then the copper babies they tend
Speaker 1: to be micro workers children, so they will do more
Speaker 1: gig economy work and perhaps lower manufacturing construction work. The
Speaker 1: big chunk basically we're talking about two thirds now because
Speaker 1: China's middle class is getting bigger. Are they so called
Speaker 1: sumer babies? They're okay, students, not stella. But now most
Speaker 1: of those super babies they are getting college education as well.
Speaker 1: China's college attendance rate is close to sixty in the US.
Speaker 1: It's only and these tuber babies, yeah, they don't want
Speaker 1: to go working factories anymore their parents did. And then
Speaker 1: they are not good enough to design the next generation
Speaker 1: the chips, so China didn't know what to do with them.
Speaker 1: And the all these super babies, they want to go
Speaker 1: work for their own enterprises or work for the government,
Speaker 1: but the government is purring back its own employment as well.
Speaker 1: The government knows it's so easy uploaded to bloaded. Everyone's
Speaker 1: just sitting around doing nothing. Way, and then the sewer babies.
Speaker 1: They used to go to the tech sector a lot,
Speaker 1: and now the tech sector is not hiring because of
Speaker 1: the crecktown. These are the big problem. Julie ran there
Speaker 1: By the way you do get in touch, comments and
Speaker 1: opinions always welcome. I'm at Vonney Quinn on Twitter or
Speaker 1: email v Quinn at Bloomberg dot net. China's COVID zero
Speaker 1: approach has been controversial. Communist Party slogans of oak maximum
Speaker 1: results achieved with minimum cost, but some of that cost
Speaker 1: is in the form of economic growth. Economists and a
Speaker 1: Bloomberg Survey forecast GDP will expand at a four and
Speaker 1: a half percent rate this year, a full percentage point
Speaker 1: below the official target. There's a wide range of forecasts,
Speaker 1: though Bank America says in the worst case scenario, were
Speaker 1: there to be, for example, citywide lockdowns beyond Beijing, growth
Speaker 1: would weaken to two and a half percent. I chatted
Speaker 1: with Tim Colpen, who lives in Taipeidi on to weigh
Speaker 1: the pluses and minuses. So, Tim, the Chinese government has
Speaker 1: come under a lot of fire for its COVID zero policy,
Speaker 1: and clearly there's a lot of suffering in China because
Speaker 1: of it. At the same time, as far as we know,
Speaker 1: there are far fewer deaths than there have been around
Speaker 1: the world. How do we measure how good or bad
Speaker 1: the policy is? You know what one of the toughest
Speaker 1: things for any national leader, whether it's in in China
Speaker 1: or the US, or in Australia, in England or Taiwan,
Speaker 1: is that nobody's really appreciated for the efforts they've done.
Speaker 1: And you also, now in kind of mid two, you
Speaker 1: have to look at COVID very differently to early We
Speaker 1: have amcron which spreads a lot more quickly, and there's
Speaker 1: debated about whether it's less or more severe, but certainly
Speaker 1: medical practitioners know how to handle it better, and we've
Speaker 1: got vaccinations, which makes the impact of it much more mild.
Speaker 1: And I think the struggle for China is they're still
Speaker 1: in the early mindset, but we're in a mid healthcare situation,
Speaker 1: and they believe in COVID zero, whereas other places have
Speaker 1: lightened up. In a fact of just across the waters
Speaker 1: in Taiwan, where I'm based, Taiwan is basically given up
Speaker 1: on COVID zero. They're not too worried about it, whereas
Speaker 1: they stuck to COVID zero until earlier this year, and
Speaker 1: healthcare authorities in Taiwan basically felt, well, you know, we're
Speaker 1: mostly vacts, more than vacts, and quite a little high
Speaker 1: booster rate, and so we're willing to ease up and
Speaker 1: accept the trade off of more freedom to move around
Speaker 1: and so forth, while still keeping masking policies. For example,
Speaker 1: in Taiwan. China is not willing to do that, and
Speaker 1: that's the decision they've made, and it's impacted the way
Speaker 1: Chinese people view the government. Well, that's just the thing.
Speaker 1: Will it backfire on season ping? It does seem that
Speaker 1: people have got a little more vocal than you might
Speaker 1: have expected Chinese people to get. And yeah, yeah, I
Speaker 1: think there's a misunderstanding that, you know, Chinese people are
Speaker 1: all very compliant and do whatever the government tells them.
Speaker 1: It's it's really not the case. You know, in private
Speaker 1: discussions and even on social media, people have very strong
Speaker 1: opinions about the government, but they're also very aware of
Speaker 1: kind of how far they can push it, and they're
Speaker 1: aware of the consequences if if they see something that's
Speaker 1: too outlandish, and unfortunately for for Chinese people, those goalposts
Speaker 1: do move quite a lot. But there is a big
Speaker 1: difference to the way people felt about the government's handling
Speaker 1: of Uhan two years ago, when Uhan was locked down
Speaker 1: in in January, and we saw what happened there, and
Speaker 1: at that time the government even denied that there was
Speaker 1: a problem, and we had the doctor who died, who
Speaker 1: was martyr unfortunately to the cause, who raised the alarm
Speaker 1: bells and was even criticized by the government for doing so.
Speaker 1: That is a very different thing to today. Recently in Shanghai,
Speaker 1: we've seen this lockdown happen. We've seen a large kind
Speaker 1: of groundswell of backlash, and I think the difference is
Speaker 1: people believe that the lockdown is not necessary, that COVID
Speaker 1: zero is not necessary today, whereas they kind of accepted
Speaker 1: that it might have been necessary in all two years ago.
Speaker 1: And so what is happening now in China is more
Speaker 1: and more Chinese people are thinking that this was not
Speaker 1: necessarily good decision making by the Communist Party in Shanghai,
Speaker 1: and they feel that maybe there's poor judgment by the
Speaker 1: central leadership this time, whereas last time they didn't like it,
Speaker 1: but they kind of understood why it was needed. And
Speaker 1: that's the real difference. Well, some of the final judgment
Speaker 1: will depend on the growth figure is a far cry
Speaker 1: from the five point five percent that the Chinese government
Speaker 1: had set out as its school. Is that effectively the
Speaker 1: rest of the world's recession. Yeah, but you know it's
Speaker 1: it's not a small economy, right, It's the world second
Speaker 1: largest economy. And so at some point China and the
Speaker 1: world has to accept that it's not emerging market economy
Speaker 1: but developed market economy, and you have to really re
Speaker 1: orient the way you think of the country. But at
Speaker 1: the end of the day, we love GDP, we large unemployment, inflation,
Speaker 1: they're the kind of the big three statistics that we
Speaker 1: look at, but not all GDP growth is created equal, right,
Speaker 1: So what the Chinese government has to think about is
Speaker 1: is this going to the right people? And to the
Speaker 1: Chinese government's credit, they have this new concept of common prosperity.
Speaker 1: We haven't heard about it as recently in the last
Speaker 1: few months, it was a big talking point in one
Speaker 1: But the idea is that all of this growth of
Speaker 1: China's experienced and all this wealth that's been created in
Speaker 1: China hasn't been distributed fairly across society, from city to
Speaker 1: city as well as within the various echelons of society.
Speaker 1: So if the Chinese government is willing to accept a
Speaker 1: slower growth rate but it's better distributed, costs are still
Speaker 1: kept under control, and people still feel they've got a
Speaker 1: roof over their head, they've got food on their table,
Speaker 1: they've got stability, then it won't be a problem. However,
Speaker 1: if that slower growth rate and there is inflation that
Speaker 1: goes with it, or other issues such as unemployment or
Speaker 1: housing collapse, things like that, then definitely people are going
Speaker 1: to be more and more annoyed. And you can't eat statistics,
Speaker 1: As says my colleagues, Shuly wrote recently, and that's something
Speaker 1: that I think she jimping will need to remember, and
Speaker 1: we know that as far back as six months ago.
Speaker 1: She's only found out about it recently. She's something was
Speaker 1: warning about the dangers of mass joerlessness. We didn't know
Speaker 1: that at the time, but it was clearly high up
Speaker 1: on his priority list that that should not happen. Yes, exactly,
Speaker 1: and in fact, we've seen an incredible about face in
Speaker 1: the last six months when they started to realize I
Speaker 1: guess that, you know, a slowdown was a very real possibility.
Speaker 1: In remembering we've got, you know, Russia's invasion of Ukraine,
Speaker 1: which is is definitely a headwind. We've got a rising
Speaker 1: interest rates and all the other things that are happening
Speaker 1: around the world, and those will either indirectly or directly
Speaker 1: impact the Chinese economy. And unemployment is definitely something that's
Speaker 1: no government wants to see, but certainly in China, if
Speaker 1: you've got more and more people out of work, they're
Speaker 1: not going to be happy. So we're seeing these efforts
Speaker 1: by the government to reduce the economy, and one of
Speaker 1: those is to implore companies not to know layoff workers
Speaker 1: to to keep unemployment under control because that definitely has
Speaker 1: an impact on first order and second order effects on
Speaker 1: the economy. But then there's the danger of the Japan model,
Speaker 1: where you have people employee just for employment's sake, and
Speaker 1: that's not good long term for an economy either. That
Speaker 1: is you know what you're right, There is definitely concern
Speaker 1: that there could be kind of a lost decade like
Speaker 1: Japan has faced, and that's something the government needs to
Speaker 1: focus on. Is surely aware of. We've gone through this
Speaker 1: incredible cycle of innovation in China over the last ten
Speaker 1: twenty years and they want more of that innovation now.
Speaker 1: The last ten or fifteen years of that has been
Speaker 1: very much the internet economy, Ali Barber ten cent by
Speaker 1: Do is not where it used to be, but JD
Speaker 1: dot Com, Matwin, all these companies that are coming forward.
Speaker 1: The platform economy is really what it's called. Has brought
Speaker 1: a lot of innovation employers, a lot of people not
Speaker 1: just as coders and programmers, but it's allowed people to
Speaker 1: be you know, delivery drivers and all sorts of other things.
Speaker 1: People can be merchants from their own home selling stuff online,
Speaker 1: and so that's been a very very innovative part of
Speaker 1: the economy. It's been very important to the Chinese growth
Speaker 1: over the last decade. But China decided they want to
Speaker 1: crack down on that. They didn't want these platforms to
Speaker 1: have as much power, and they started cracking down and
Speaker 1: limiting the way these companies could use their power, their data,
Speaker 1: their user base kind of further themselves. So I think
Speaker 1: the real challenge there is for China to balance these
Speaker 1: issues of allowing these companies to still grow and innovate,
Speaker 1: but also kind of holding them back, reining them in
Speaker 1: so they don't have too much power. And by raining
Speaker 1: them in too much, they could really risk the possibility
Speaker 1: that economic growth will suffer as a result. And these
Speaker 1: are the companies that are hiring and hiring well paid workers,
Speaker 1: and we do seem to be seeing a small burbon
Speaker 1: about face. So the clampdown is just easing, very very slightly.
Speaker 1: I do want to ask you though, about the supply
Speaker 1: chain issue, because more and more countries are deciding that
Speaker 1: they need supply chains domestically, they need to not depend
Speaker 1: on China solely for their own materials. You're right, You're right,
Speaker 1: that's a big issue, and you don't have to be
Speaker 1: in anti China cam to realize it's not smart to
Speaker 1: have all of your product coming from one place, right,
Speaker 1: whether it's semiconductors which is mostly based in Taiwan the
Speaker 1: high end level, or electronics manufacturing which is mostly in China,
Speaker 1: especially southern China, but also around the Shanghai area, and
Speaker 1: so many other things. You know, textiles are concentrated in
Speaker 1: some parts of the world. All sorts of things are
Speaker 1: concentrated in China. And I think because of the Cold War,
Speaker 1: the tech Cold War, or the neo Cold War, which
Speaker 1: kind of came to the fore under President Trump, but
Speaker 1: we're already brewing. People have realized that, wow, we depend
Speaker 1: on China for a lot of our stuff. And then
Speaker 1: with COVID and the lockdowns and the problems of getting
Speaker 1: you know, workers into factories, and now the bigger problem
Speaker 1: is not so much factories, but the logistics trucks being
Speaker 1: able to go from city to city ports, being able
Speaker 1: to load and unload their cargo. We now realize what
Speaker 1: we really are stuck with China, and governments and corporations
Speaker 1: are wisely waking up to that idea and realizing that
Speaker 1: maybe we need to onshore again of course that then
Speaker 1: allows those who have a nationalistic meant to say, hey,
Speaker 1: we have to have it made in made in America,
Speaker 1: or made in England, made in Europe, made in Japan,
Speaker 1: made in Australia, as if somehow that is a solution
Speaker 1: to the problem. So we'll probably see a whiplash where
Speaker 1: it will go too far and we'll have probably overexpansion
Speaker 1: and over investment in production capacity in say the US
Speaker 1: or in Europe, and then maybe, you know, fifteen years
Speaker 1: after that it might balance again. But certainly were in
Speaker 1: this reshoring or on shoring phase and it's definitely got
Speaker 1: a lot of political backing behind Tim Culpan there. We're
Speaker 1: now choosing to end all conversations not with you, though
Speaker 1: as always we love to hear from you. I'm at
Speaker 1: Bonny Quinn on Twitter or send your assaults to ve
Speaker 1: Quinn at Bloomberg dot net. We're produced by Eric mollow
Speaker 1: Till next time on Bloomberg Opinion.