1 00:00:11,160 --> 00:00:14,560 Speaker 1: Hello, and welcome to another episode of the Odd Thoughts Podcast. 2 00:00:14,640 --> 00:00:19,320 Speaker 1: I'm Tracy Alloway and I'm Joe Wisenthal. So, Joe, you 3 00:00:19,320 --> 00:00:22,760 Speaker 1: know I'm over in Hong Kong, right, you've realized this? Yeah, 4 00:00:22,800 --> 00:00:27,320 Speaker 1: that that much I didn't know yet. Excellent. Uh. So, 5 00:00:27,600 --> 00:00:30,560 Speaker 1: now that I'm in the Asia region and I'm very 6 00:00:30,680 --> 00:00:33,839 Speaker 1: very close to China, I've taken a great, great interest 7 00:00:34,080 --> 00:00:38,479 Speaker 1: in Chinese monetary policy and economics. What is it like, Tracy, 8 00:00:38,680 --> 00:00:42,479 Speaker 1: as someone like I've only ever worked, uh in New 9 00:00:42,560 --> 00:00:47,520 Speaker 1: York basically, And you've worked in New York. You've probably 10 00:00:47,560 --> 00:00:51,080 Speaker 1: worked in London. I'm not sure, but I suspect you have. Uh, 11 00:00:51,280 --> 00:00:55,640 Speaker 1: you've worked in Abu Dhabi, You've worked now in Hong Kong, 12 00:00:55,800 --> 00:00:58,720 Speaker 1: probably like a bunch of other places. You're very international, 13 00:00:59,200 --> 00:01:01,480 Speaker 1: just a very international person. So do you go around 14 00:01:01,480 --> 00:01:04,880 Speaker 1: the world just like acquiring new interests and having to 15 00:01:04,959 --> 00:01:08,240 Speaker 1: learn get familiar with new things, and then you sort 16 00:01:08,280 --> 00:01:09,880 Speaker 1: of dropped the old thing as you moved to the 17 00:01:09,880 --> 00:01:14,399 Speaker 1: next city. Yes, absolutely, I developed short term expertise and 18 00:01:14,400 --> 00:01:19,160 Speaker 1: then quickly forget it. But on the subject of expertise, uh, 19 00:01:19,240 --> 00:01:21,760 Speaker 1: you know, clearly I sort of wanted to build up 20 00:01:21,800 --> 00:01:25,160 Speaker 1: my knowledge base of how China's economy works and how 21 00:01:25,160 --> 00:01:30,360 Speaker 1: it's monetary policy works, and specifically the People's Bank of China, 22 00:01:30,440 --> 00:01:33,319 Speaker 1: the central bank over there. Uh, And it's very different 23 00:01:33,360 --> 00:01:35,400 Speaker 1: to how the FED works. So even if you've been 24 00:01:35,760 --> 00:01:39,880 Speaker 1: watching the FED for you know, decades and decades, it 25 00:01:40,000 --> 00:01:42,319 Speaker 1: might not actually be that useful when it comes to 26 00:01:42,360 --> 00:01:46,679 Speaker 1: applying your knowledge to the Chinese market. Yeah. I've always 27 00:01:46,680 --> 00:01:50,520 Speaker 1: felt this way that I have some familiarity with how 28 00:01:50,560 --> 00:01:53,000 Speaker 1: the FED works in the United States, and I have 29 00:01:53,120 --> 00:01:56,720 Speaker 1: some familiarity with how the US economic system works and 30 00:01:56,760 --> 00:01:59,960 Speaker 1: the data that we're supposed to look at two gay 31 00:02:00,040 --> 00:02:02,360 Speaker 1: age the health of the U s economy. But when 32 00:02:02,400 --> 00:02:06,000 Speaker 1: I think about China by every facet, I just feel 33 00:02:06,040 --> 00:02:07,920 Speaker 1: like I must be such a tourist because I have 34 00:02:08,080 --> 00:02:11,200 Speaker 1: some passing knowledge, but I never really think that I 35 00:02:11,280 --> 00:02:17,519 Speaker 1: have any real understanding of what's actually going on. And so, yeah, 36 00:02:17,680 --> 00:02:20,560 Speaker 1: it just feels like this very sort of closed off 37 00:02:20,600 --> 00:02:23,720 Speaker 1: world to me that I can't really begin to grasp 38 00:02:24,200 --> 00:02:27,320 Speaker 1: the mechanisms and the levers and all that. And if 39 00:02:27,320 --> 00:02:29,519 Speaker 1: you think about it, there are some things that immediately 40 00:02:29,600 --> 00:02:32,200 Speaker 1: spring to mind when you think about the p BOC. 41 00:02:32,639 --> 00:02:36,520 Speaker 1: I mean notably, I guess the complexity of a lot 42 00:02:36,560 --> 00:02:40,360 Speaker 1: of its monetary policy operations, like it has dozens and 43 00:02:40,440 --> 00:02:43,200 Speaker 1: dozens of things that it does. And then another thing 44 00:02:43,240 --> 00:02:45,240 Speaker 1: that people talk about a lot when it comes to 45 00:02:45,360 --> 00:02:49,240 Speaker 1: China and economics is, of course the quality of the data. 46 00:02:49,400 --> 00:02:53,160 Speaker 1: You know, people are always suspicious about the economic data 47 00:02:53,320 --> 00:02:57,000 Speaker 1: being published by the Chinese authorities, so there are immediately 48 00:02:57,160 --> 00:03:01,480 Speaker 1: some idiosyncrasy, some difference is uh to the U s 49 00:03:01,560 --> 00:03:04,320 Speaker 1: that that come up straight away? Okay, So am I 50 00:03:04,400 --> 00:03:09,320 Speaker 1: going to be a Chinese eco expert after this episode? Um? 51 00:03:09,360 --> 00:03:12,280 Speaker 1: I hope so. So in the same way that I 52 00:03:12,400 --> 00:03:17,040 Speaker 1: sort of got chipped off to China. Matt Bosler, Bloomberg's 53 00:03:17,520 --> 00:03:22,600 Speaker 1: longtime reporter on the Federal Reserve and US economics, got 54 00:03:22,639 --> 00:03:25,880 Speaker 1: sent out there late last year for a job swap. 55 00:03:25,919 --> 00:03:28,560 Speaker 1: I think he was there for about three months. And 56 00:03:28,600 --> 00:03:31,920 Speaker 1: the really interesting thing about his experience is because he's 57 00:03:31,960 --> 00:03:35,320 Speaker 1: followed the FED and US economic policy for a long time, 58 00:03:35,520 --> 00:03:38,440 Speaker 1: he's the perfect person to sort of give us a 59 00:03:38,560 --> 00:03:42,760 Speaker 1: great overview of exactly the differences between the US and 60 00:03:42,760 --> 00:03:45,640 Speaker 1: the Chinese monetary policy system and what it's like to 61 00:03:45,680 --> 00:03:49,080 Speaker 1: actually go out there as a FED reporter and suddenly 62 00:03:49,120 --> 00:03:52,040 Speaker 1: start reporting on the PBOC. Well it's a cliche, but 63 00:03:52,040 --> 00:03:55,040 Speaker 1: they always say that people should report on topics, kind 64 00:03:55,040 --> 00:03:57,600 Speaker 1: of as if they were a foreign correspondent. And so 65 00:03:57,640 --> 00:04:01,120 Speaker 1: I think what that means is if you get too familiar, 66 00:04:01,240 --> 00:04:03,680 Speaker 1: too comfortable with the story, that you could sort of 67 00:04:04,440 --> 00:04:06,400 Speaker 1: miss the forest for the trees, and you missed the 68 00:04:06,400 --> 00:04:09,440 Speaker 1: things that other people might find really interesting and are 69 00:04:09,480 --> 00:04:12,520 Speaker 1: actually really important. And I feel like Matt had the 70 00:04:12,560 --> 00:04:15,640 Speaker 1: opportunity to sort of see this new world from the 71 00:04:15,680 --> 00:04:20,200 Speaker 1: outside and maybe gives us some interesting perspective. Yeah, so 72 00:04:20,279 --> 00:04:23,040 Speaker 1: let's bring him on. Matt Bosler of Bloomberg News. It's 73 00:04:23,080 --> 00:04:25,040 Speaker 1: so good to have you. Hello, Hello, Thank you guys 74 00:04:25,080 --> 00:04:27,840 Speaker 1: so much for having me on today. So, Matt, did 75 00:04:27,880 --> 00:04:31,920 Speaker 1: I describe your your career path correctly? Uh, you know, 76 00:04:32,040 --> 00:04:34,520 Speaker 1: writing about the FED and economic policy for a long 77 00:04:34,560 --> 00:04:38,320 Speaker 1: time and then in Beijing late last year for a 78 00:04:38,360 --> 00:04:42,160 Speaker 1: few months. Right, that's correct. Since I started in journalism 79 00:04:42,200 --> 00:04:44,840 Speaker 1: about seven years ago, the vast majority of what I've 80 00:04:45,040 --> 00:04:47,839 Speaker 1: done has been covering the Federal Reserve in the U. S. Economy. 81 00:04:47,960 --> 00:04:51,240 Speaker 1: So this was a very interesting experience for me, as 82 00:04:51,480 --> 00:04:55,560 Speaker 1: as I'm sure you're you're well aware. So just uh 83 00:04:55,720 --> 00:04:59,640 Speaker 1: to describe what you work for Bloomberg or colleague and 84 00:05:00,160 --> 00:05:02,800 Speaker 1: sort of brought to Beijing for three months? What was 85 00:05:02,880 --> 00:05:07,520 Speaker 1: the what was the stated premise of your your time there. 86 00:05:07,920 --> 00:05:10,720 Speaker 1: So we have a job swap program here at Bloomberg. 87 00:05:10,760 --> 00:05:15,040 Speaker 1: It's a great opportunity to kind of get different reporters 88 00:05:15,080 --> 00:05:18,360 Speaker 1: into different regions of the world and see how things work, 89 00:05:18,480 --> 00:05:21,200 Speaker 1: you know, in different areas. Um So I am on 90 00:05:21,240 --> 00:05:24,480 Speaker 1: the US Economy team here in New York and while 91 00:05:24,520 --> 00:05:27,040 Speaker 1: I was in Beijing for three months, I was swapping 92 00:05:27,120 --> 00:05:30,960 Speaker 1: on the China Economy team there. So, um, you know, 93 00:05:31,040 --> 00:05:33,320 Speaker 1: it ends up being a little bit similar, especially because 94 00:05:33,360 --> 00:05:36,200 Speaker 1: the big story on both beats for that three month 95 00:05:36,240 --> 00:05:38,640 Speaker 1: period was the trade war between the U S And China, 96 00:05:38,720 --> 00:05:40,719 Speaker 1: so that at least made it a little bit easier 97 00:05:40,760 --> 00:05:43,919 Speaker 1: to to kind of adjust at first. So I'm curious 98 00:05:43,960 --> 00:05:47,840 Speaker 1: when you landed in Beijing, and well maybe even before that, 99 00:05:47,920 --> 00:05:50,400 Speaker 1: you know, when people said you're going to go over 100 00:05:50,440 --> 00:05:54,240 Speaker 1: to China to you know, the capital to cover the PBOC, 101 00:05:54,720 --> 00:05:57,960 Speaker 1: what did you think about that prospect and what were 102 00:05:58,000 --> 00:06:03,080 Speaker 1: your initial impressions or I guess preconceived notions of how 103 00:06:03,120 --> 00:06:06,719 Speaker 1: the PBOC works. It was a really exciting prospect because 104 00:06:06,920 --> 00:06:10,360 Speaker 1: obviously I have all of my experiences in developed markets, right, 105 00:06:10,360 --> 00:06:13,159 Speaker 1: and we know there's kind of this dichotomy and financial 106 00:06:13,240 --> 00:06:17,000 Speaker 1: markets where developed markets in general work very differently than 107 00:06:17,120 --> 00:06:19,440 Speaker 1: emerging markets, and so I was really looking forward to 108 00:06:19,440 --> 00:06:22,760 Speaker 1: getting some of that experience, seeing how things work in 109 00:06:23,200 --> 00:06:26,080 Speaker 1: more of an emerging market setting. And of course there's 110 00:06:26,120 --> 00:06:29,520 Speaker 1: no better place to do that than China because it's 111 00:06:29,560 --> 00:06:32,720 Speaker 1: simply the most important, not only emerging market, but one 112 00:06:32,720 --> 00:06:35,360 Speaker 1: of the most important markets in the entire world. And 113 00:06:35,400 --> 00:06:39,520 Speaker 1: so that was extremely exciting in terms of initial impressions. 114 00:06:40,320 --> 00:06:42,680 Speaker 1: One thing that really struck me was just how many 115 00:06:42,720 --> 00:06:46,280 Speaker 1: more people we have sort of covering the U S economy. 116 00:06:46,320 --> 00:06:49,400 Speaker 1: You know, these are two economies that are basically more 117 00:06:49,520 --> 00:06:52,720 Speaker 1: or less the same size, and just in general, not 118 00:06:52,800 --> 00:06:56,760 Speaker 1: just Bloomberg, but at large, there are much more resources 119 00:06:56,800 --> 00:07:00,800 Speaker 1: devoted to covering and sort of explicating the US economy 120 00:07:00,839 --> 00:07:04,440 Speaker 1: than than China. And that probably is for all of 121 00:07:04,480 --> 00:07:06,359 Speaker 1: the reasons that I think we're going to get into 122 00:07:06,400 --> 00:07:09,000 Speaker 1: in this discussion, some of which you teased at the 123 00:07:09,040 --> 00:07:14,120 Speaker 1: top about you know, data quality, relative paucity of data, uh, 124 00:07:14,160 --> 00:07:16,440 Speaker 1: and just general interests. I think there are sort of 125 00:07:16,520 --> 00:07:20,560 Speaker 1: waves where people can be very focused on the US 126 00:07:20,680 --> 00:07:23,320 Speaker 1: and get away with being very focused on the US 127 00:07:23,360 --> 00:07:25,920 Speaker 1: for long periods of time, and then you have sort 128 00:07:25,960 --> 00:07:29,440 Speaker 1: of uh, not crisis, but you know, sort of rare 129 00:07:29,520 --> 00:07:32,680 Speaker 1: situation that arises in China like we did in with 130 00:07:32,720 --> 00:07:36,320 Speaker 1: the devaluation, uh and certainly like we've seen over last year, 131 00:07:36,400 --> 00:07:38,280 Speaker 1: so where everybody all of a sudden is like, oh, 132 00:07:38,320 --> 00:07:40,600 Speaker 1: I need to understand China. We need to start devoting 133 00:07:40,600 --> 00:07:44,680 Speaker 1: more resources to understanding China. Yeah. On the last point, 134 00:07:44,840 --> 00:07:47,240 Speaker 1: so obviously there's the trade story and no one really 135 00:07:47,240 --> 00:07:50,200 Speaker 1: knows how that's going to end. But the other big 136 00:07:50,240 --> 00:07:53,320 Speaker 1: thing that sort of independent of trade that you hear 137 00:07:53,360 --> 00:07:57,600 Speaker 1: a lot from people is well, what if China is 138 00:07:57,680 --> 00:08:01,720 Speaker 1: just experiencing some sort of to its growth model or 139 00:08:01,800 --> 00:08:04,120 Speaker 1: it can't stimulate it to an economy the way it 140 00:08:04,280 --> 00:08:09,360 Speaker 1: used to, or that it's undergoing some sort of excluding trade, 141 00:08:09,480 --> 00:08:12,000 Speaker 1: some deeper structural change that's going to bring it to 142 00:08:12,040 --> 00:08:16,840 Speaker 1: a slowdown. And everyone is concerned about that, including investors. Here, 143 00:08:17,200 --> 00:08:20,960 Speaker 1: what is going on in China right now that has 144 00:08:20,960 --> 00:08:23,840 Speaker 1: people so concerned? Yeah, so you nailed it. I mean 145 00:08:23,840 --> 00:08:25,880 Speaker 1: that's a very important part of the story. It's not 146 00:08:25,960 --> 00:08:28,680 Speaker 1: just the trade war, it's everything that China has been 147 00:08:28,720 --> 00:08:32,680 Speaker 1: doing to sort of de leverage its economy, try to 148 00:08:32,720 --> 00:08:36,520 Speaker 1: rebalance that growth model toward a more sustainable consumption based 149 00:08:36,559 --> 00:08:40,200 Speaker 1: model and move away from investment and sort of export 150 00:08:40,240 --> 00:08:44,280 Speaker 1: oriented growth. And so what the analysts are kind of 151 00:08:44,320 --> 00:08:46,640 Speaker 1: saying right now is all of this growth slowdown that 152 00:08:46,679 --> 00:08:49,200 Speaker 1: we've seen in China. You know, we just got fourth 153 00:08:49,280 --> 00:08:52,520 Speaker 1: quarter GDP numbers the other day, all of that so 154 00:08:52,559 --> 00:08:56,240 Speaker 1: far just reflects sort of the leftover effects of the 155 00:08:56,320 --> 00:08:59,319 Speaker 1: de leveraging campaign that was really underway in earnest in 156 00:08:59,360 --> 00:09:02,040 Speaker 1: twenty seven team, and we're not going to really start 157 00:09:02,120 --> 00:09:04,400 Speaker 1: to see the effects of the trade war in the 158 00:09:04,440 --> 00:09:08,320 Speaker 1: official Chinese economic data until the first quarter. And part 159 00:09:08,320 --> 00:09:11,880 Speaker 1: of the reason for that is that with these tariffs 160 00:09:11,880 --> 00:09:15,400 Speaker 1: that the US has put in place on China and 161 00:09:15,559 --> 00:09:18,920 Speaker 1: vice versa, there's been a lot of front running of 162 00:09:18,960 --> 00:09:22,200 Speaker 1: those tariffs because they don't go in effect until while 163 00:09:22,200 --> 00:09:24,160 Speaker 1: they were supposed to go and effect January one, and 164 00:09:24,200 --> 00:09:26,679 Speaker 1: then they got pushed back another three months. And so 165 00:09:26,840 --> 00:09:29,720 Speaker 1: the export the trade numbers have actually looked pretty good 166 00:09:29,760 --> 00:09:32,520 Speaker 1: in the fourth quarter because of that effect. And so 167 00:09:32,840 --> 00:09:34,839 Speaker 1: now all the economists are saying, of course, we're going 168 00:09:34,880 --> 00:09:37,120 Speaker 1: to see that payback in the first quarter. It's it's 169 00:09:37,120 --> 00:09:39,960 Speaker 1: gonna look pretty bad. And so we haven't really yet 170 00:09:40,000 --> 00:09:43,959 Speaker 1: to see that effect of this conflict in the official 171 00:09:44,040 --> 00:09:46,280 Speaker 1: data yet. It's much more that other story that you 172 00:09:46,400 --> 00:09:49,280 Speaker 1: referenced some of the stuff that China has already been 173 00:09:49,320 --> 00:09:51,600 Speaker 1: doing to to try to get on a more sustainable 174 00:09:52,080 --> 00:09:56,520 Speaker 1: economic model, right the de leveraging campaign. And of course 175 00:09:56,520 --> 00:09:59,560 Speaker 1: this kind of relates to a little bit what I 176 00:09:59,600 --> 00:10:02,960 Speaker 1: alluded too in the intro, which is that China has 177 00:10:03,000 --> 00:10:07,080 Speaker 1: a sort of unique and vast toolkit of monetary policies 178 00:10:07,120 --> 00:10:10,200 Speaker 1: and some of those are you know, credit channels that 179 00:10:10,440 --> 00:10:14,040 Speaker 1: arguably lead to a build up of debt in the 180 00:10:14,080 --> 00:10:17,440 Speaker 1: economy which the authorities are now trying to reduce. Can 181 00:10:17,480 --> 00:10:21,360 Speaker 1: you walk us through the differences between what the FED 182 00:10:21,480 --> 00:10:25,000 Speaker 1: does in terms of its monetary policy toolkit and what 183 00:10:25,200 --> 00:10:30,320 Speaker 1: the PBOC does. Sure, so, as you alluded to, there 184 00:10:30,360 --> 00:10:33,679 Speaker 1: are a lot of different sort of money market tools 185 00:10:33,760 --> 00:10:39,520 Speaker 1: that the p BOC uses to implement monetary policy, and 186 00:10:39,800 --> 00:10:42,840 Speaker 1: the FED has a lot of those tools too, and 187 00:10:43,000 --> 00:10:46,839 Speaker 1: the differences that's always sort of the background in the 188 00:10:46,880 --> 00:10:51,559 Speaker 1: FED monetary policy conversation. The FED monetary policy conversation is 189 00:10:51,600 --> 00:10:53,800 Speaker 1: always much more about what are they going to do 190 00:10:53,880 --> 00:10:56,680 Speaker 1: with interest rates, or, of course, since the crisis, what 191 00:10:56,720 --> 00:10:58,640 Speaker 1: are they going to do with their balance sheet, which 192 00:10:58,679 --> 00:11:01,160 Speaker 1: gets you into the money market aspect a little bit more. 193 00:11:02,240 --> 00:11:05,520 Speaker 1: But for the most part, you don't really talk about 194 00:11:05,640 --> 00:11:09,079 Speaker 1: money market stuff unless something crazy is happening in markets 195 00:11:09,120 --> 00:11:11,560 Speaker 1: and all of a sudden again people are kind of like, well, 196 00:11:11,600 --> 00:11:13,679 Speaker 1: we need to figure out what's going on in money 197 00:11:13,679 --> 00:11:15,480 Speaker 1: markets now. It's this thing that we haven't really paid 198 00:11:15,520 --> 00:11:17,760 Speaker 1: attention to because we're mostly just interested in what the 199 00:11:17,800 --> 00:11:20,600 Speaker 1: FED is going to do with interest rates, and so 200 00:11:20,720 --> 00:11:25,880 Speaker 1: in China, the banking system is very much an extension 201 00:11:26,120 --> 00:11:28,880 Speaker 1: of the state in a way that it's just not 202 00:11:28,960 --> 00:11:32,200 Speaker 1: in the US, right, and so that's sort of gives 203 00:11:32,320 --> 00:11:35,120 Speaker 1: rise to the necessity for all of these different types 204 00:11:35,120 --> 00:11:38,880 Speaker 1: of tools to implement monetary policy, because you have a 205 00:11:38,920 --> 00:11:42,559 Speaker 1: situation where essentially the banks are taking marching orders from 206 00:11:42,559 --> 00:11:46,920 Speaker 1: the government, and then that has various effects on the economy, 207 00:11:46,920 --> 00:11:49,200 Speaker 1: and then the government might decide, well, that's not the 208 00:11:49,240 --> 00:11:51,680 Speaker 1: effect we intended, or we want to reverse that, say 209 00:11:51,720 --> 00:11:54,240 Speaker 1: we want to do a big deleveraging campaign, and then 210 00:11:54,280 --> 00:11:56,880 Speaker 1: you might need all of these new new monetary policy 211 00:11:56,920 --> 00:11:59,400 Speaker 1: tools to kind of implement that to kind of take 212 00:11:59,440 --> 00:12:01,520 Speaker 1: care of the So it's a little bit more ad 213 00:12:01,520 --> 00:12:04,080 Speaker 1: hoc because I guess what I'm trying to say overall, 214 00:12:04,480 --> 00:12:07,760 Speaker 1: um and that makes for an interesting sort of landscape 215 00:12:08,240 --> 00:12:12,120 Speaker 1: for for Chinese money market analysts. I just want to 216 00:12:12,440 --> 00:12:16,240 Speaker 1: real quickly connect what you just said about the nature 217 00:12:16,280 --> 00:12:18,720 Speaker 1: of the banking system as an extension of the state 218 00:12:19,040 --> 00:12:24,440 Speaker 1: to the overall Chinese export investment driven growth model that 219 00:12:24,559 --> 00:12:26,720 Speaker 1: some people think maybe coming to an end, or that 220 00:12:26,840 --> 00:12:29,760 Speaker 1: China itself wants to start to curb. So is the 221 00:12:29,880 --> 00:12:34,719 Speaker 1: idea that the current model is essentially you have all 222 00:12:34,800 --> 00:12:40,559 Speaker 1: these industrial players, maybe some make carpets and some make semiconductors, 223 00:12:40,760 --> 00:12:45,959 Speaker 1: and some make various industrial goods, and then the state 224 00:12:46,040 --> 00:12:49,640 Speaker 1: promotes them via the channel of encouraging banks to lend 225 00:12:49,960 --> 00:12:53,960 Speaker 1: two companies that export all of this stuff. That's exactly right, 226 00:12:54,000 --> 00:12:58,040 Speaker 1: and it's very interconnected in terms of the state owned 227 00:12:58,160 --> 00:13:02,320 Speaker 1: enterprises and the state run banks, right, So at the 228 00:13:02,360 --> 00:13:06,800 Speaker 1: administrative level, you certainly have a lot easier time kind 229 00:13:06,840 --> 00:13:09,760 Speaker 1: of controlling all of that, directing those flows, directing that 230 00:13:09,840 --> 00:13:12,360 Speaker 1: investment than you would have in the U S which 231 00:13:12,400 --> 00:13:15,319 Speaker 1: is kind of this wild West free market economy. In comparison, 232 00:13:15,400 --> 00:13:19,440 Speaker 1: the state owned corrugated cardboard box company would get a 233 00:13:19,480 --> 00:13:23,080 Speaker 1: loan from a state owned bank which is directed by 234 00:13:23,160 --> 00:13:26,760 Speaker 1: the PBOC to you know, induce a certain amount of 235 00:13:26,840 --> 00:13:29,320 Speaker 1: lending to hit some target. And that's sort of been 236 00:13:29,679 --> 00:13:32,920 Speaker 1: the classical that's the classical model of how the economy 237 00:13:32,960 --> 00:13:34,920 Speaker 1: is wrong. Yeah, that's more or less it. In the nutshell, 238 00:13:35,000 --> 00:13:36,920 Speaker 1: that's kind of the way they've been doing things for 239 00:13:36,920 --> 00:13:41,800 Speaker 1: several decades. Uh, Matt. So you get to Beijing and 240 00:13:42,040 --> 00:13:44,880 Speaker 1: you know you're meant to be covering the PBOC, Chinese 241 00:13:44,880 --> 00:13:48,720 Speaker 1: monetary policy, the economy. How do you get started? Because 242 00:13:48,800 --> 00:13:54,120 Speaker 1: I imagine it's kind of daunting when you first get there, right, Yeah, absolutely, 243 00:13:54,160 --> 00:13:58,600 Speaker 1: And so one of my major responsibilities was focusing on 244 00:13:58,640 --> 00:14:01,440 Speaker 1: the economic data side of things. So in terms of 245 00:14:01,480 --> 00:14:04,520 Speaker 1: the economy beat, there are kind of three major areas. 246 00:14:04,920 --> 00:14:08,360 Speaker 1: One of course is the central bank and monetary policy. Uh. 247 00:14:08,400 --> 00:14:11,040 Speaker 1: The other is the trade wars and sort of all 248 00:14:11,040 --> 00:14:14,560 Speaker 1: of the fiscal policy uh surrounding that. And then the third, 249 00:14:14,600 --> 00:14:17,400 Speaker 1: of course is the economic data. Um. And so much 250 00:14:17,400 --> 00:14:19,640 Speaker 1: of the work we do here at Bloomberg is covering 251 00:14:19,640 --> 00:14:22,960 Speaker 1: that economic data, analyzing the economic data, and so on 252 00:14:23,000 --> 00:14:25,600 Speaker 1: and so forth. And so one of the first things 253 00:14:25,640 --> 00:14:27,840 Speaker 1: I did when I got there is I just spent 254 00:14:27,880 --> 00:14:30,520 Speaker 1: a lot of time on the Bloomberg terminal on some 255 00:14:30,600 --> 00:14:34,840 Speaker 1: of our um ECO functions like ECST for example, just 256 00:14:34,920 --> 00:14:38,080 Speaker 1: really going through all of the sort of data sources 257 00:14:38,120 --> 00:14:42,479 Speaker 1: that we have available in terms of the Chinese economy. 258 00:14:42,600 --> 00:14:46,240 Speaker 1: And that ended up being really important and fruitful because 259 00:14:47,000 --> 00:14:49,800 Speaker 1: it gives you a sense of sort of the array 260 00:14:49,920 --> 00:14:53,680 Speaker 1: of the official government data. Um In the US, we 261 00:14:53,800 --> 00:14:57,720 Speaker 1: have so much official government data. We have releases almost 262 00:14:57,800 --> 00:15:01,080 Speaker 1: every morning, and all of the data sets have very 263 00:15:01,080 --> 00:15:04,640 Speaker 1: long time series that go way back. They're generally very 264 00:15:04,760 --> 00:15:10,160 Speaker 1: highly regarded trusted in terms of, you know, the output 265 00:15:10,240 --> 00:15:13,520 Speaker 1: that is being produced by these statistical agencies. There's just 266 00:15:13,560 --> 00:15:17,080 Speaker 1: a really long tradition there, whereas in China, obviously that's 267 00:15:17,120 --> 00:15:19,200 Speaker 1: not the case on a number of levels, and so 268 00:15:19,280 --> 00:15:22,920 Speaker 1: it really puts a premium on being able to draw 269 00:15:23,040 --> 00:15:27,280 Speaker 1: in these alternative sources of data, uh that don't have 270 00:15:27,360 --> 00:15:30,080 Speaker 1: all of those same concerns. And it turns out we 271 00:15:30,120 --> 00:15:32,720 Speaker 1: actually have a lot of stuff on the Bloomberg terminal 272 00:15:32,800 --> 00:15:35,080 Speaker 1: that a lot of people don't know about when it 273 00:15:35,160 --> 00:15:39,000 Speaker 1: comes to Chinese economic data. So one great example is 274 00:15:39,600 --> 00:15:42,800 Speaker 1: UM satellite imagery. So we have a index that is 275 00:15:42,880 --> 00:15:48,440 Speaker 1: based on satellite imagery that tracks lighting across you know, 276 00:15:48,520 --> 00:15:53,560 Speaker 1: the Chinese manufacturing industry, and so it kind of generates 277 00:15:53,600 --> 00:15:57,280 Speaker 1: a an index on the state of Chinese manufacturing based on, 278 00:15:57,560 --> 00:16:00,000 Speaker 1: you know, the lighting readings that the satellites are picking up. 279 00:16:00,080 --> 00:16:01,960 Speaker 1: So UM that was kind of one of the first 280 00:16:01,960 --> 00:16:03,840 Speaker 1: things I did, was just trying to really go through 281 00:16:03,920 --> 00:16:06,200 Speaker 1: inventory all of that stuff, pull it out, put it 282 00:16:06,240 --> 00:16:08,360 Speaker 1: into you know, sort of a release schedules, so that 283 00:16:08,400 --> 00:16:10,640 Speaker 1: we had a way to to kind of track that, 284 00:16:11,440 --> 00:16:13,880 Speaker 1: especially you know, during this whole trade war thing, where 285 00:16:13,920 --> 00:16:16,760 Speaker 1: we really need those alternative sources of data because it's 286 00:16:16,800 --> 00:16:19,320 Speaker 1: not even, like we said, showing up in the official 287 00:16:19,400 --> 00:16:22,040 Speaker 1: data yet. Could it be that I mean, you would 288 00:16:22,040 --> 00:16:24,920 Speaker 1: think that as trying to continues to develop, that the 289 00:16:24,960 --> 00:16:30,600 Speaker 1: government would create more highly respected data series. But could 290 00:16:30,600 --> 00:16:33,840 Speaker 1: we just have sort of mostly privately collected data like 291 00:16:33,920 --> 00:16:39,120 Speaker 1: satellites and other surveys. Do we need as much official 292 00:16:39,200 --> 00:16:41,720 Speaker 1: government data as we have in the United States? It 293 00:16:41,800 --> 00:16:43,800 Speaker 1: depends on what you're using it for. So I think 294 00:16:43,840 --> 00:16:47,760 Speaker 1: certainly for US as journalists, um and just you know, society. 295 00:16:47,760 --> 00:16:49,840 Speaker 1: More broadly, I think it's really important to have these 296 00:16:49,880 --> 00:16:53,080 Speaker 1: official government statistics that we can refer back to. But 297 00:16:53,400 --> 00:16:57,960 Speaker 1: an interesting example like here in the US is the 298 00:16:58,000 --> 00:17:02,840 Speaker 1: Institute for Supply Management Manufacturing Purchasing Managers Index that they 299 00:17:02,880 --> 00:17:05,560 Speaker 1: put together. So this is a private company, it's a 300 00:17:05,600 --> 00:17:09,280 Speaker 1: private survey of private sector individuals. The government has nothing 301 00:17:09,320 --> 00:17:10,840 Speaker 1: to do with it. Yet this is one of the 302 00:17:10,880 --> 00:17:15,160 Speaker 1: biggest movers in the bond market every month, right when 303 00:17:15,200 --> 00:17:18,639 Speaker 1: that comes out at ten am, uh, you know, whatever 304 00:17:18,720 --> 00:17:20,679 Speaker 1: day it comes out. That's one of the most important 305 00:17:20,720 --> 00:17:23,800 Speaker 1: economic releases we have here outside of the official jobs 306 00:17:23,840 --> 00:17:26,919 Speaker 1: report and the official inflation report and the official GDP numbers. 307 00:17:26,920 --> 00:17:29,520 Speaker 1: And so I think the answer to your question is 308 00:17:29,600 --> 00:17:32,119 Speaker 1: yes and no. There are definitely room for both of 309 00:17:32,160 --> 00:17:52,160 Speaker 1: those things, both in the US and in China. So anecdotally, 310 00:17:52,160 --> 00:17:56,080 Speaker 1: I've heard some economists complaining that the data situation in 311 00:17:56,240 --> 00:17:59,600 Speaker 1: China is sort of getting even worse as the economy 312 00:17:59,640 --> 00:18:03,679 Speaker 1: slow And we have had some stories like um Guangdong 313 00:18:03,720 --> 00:18:07,119 Speaker 1: Province stopped publishing It's p M I supposedly because they 314 00:18:07,160 --> 00:18:10,080 Speaker 1: didn't file the paperwork in time or something like that. 315 00:18:10,359 --> 00:18:12,800 Speaker 1: But you also have stories that you know, the Chinese 316 00:18:12,800 --> 00:18:17,720 Speaker 1: authorities have started pushing their own alternative indicators like uh I. 317 00:18:17,760 --> 00:18:21,560 Speaker 1: Guess the funniest example was an underwear index that showed 318 00:18:21,600 --> 00:18:24,560 Speaker 1: that everyone was buying more underwear and therefore the economy 319 00:18:24,640 --> 00:18:28,639 Speaker 1: must be doing really, really well. What was your experience 320 00:18:28,720 --> 00:18:30,560 Speaker 1: like in the three months you were there. Did you 321 00:18:30,600 --> 00:18:34,280 Speaker 1: hear people talking about a lack of economic data that 322 00:18:34,359 --> 00:18:37,440 Speaker 1: had previously been published or is there a sense that 323 00:18:37,640 --> 00:18:41,080 Speaker 1: as the economy slows, China is going to become more 324 00:18:41,119 --> 00:18:44,520 Speaker 1: selective in what it's publishing. There were a few examples 325 00:18:44,560 --> 00:18:47,520 Speaker 1: like that, like the Guangdong p m I that you mentioned. 326 00:18:49,040 --> 00:18:52,320 Speaker 1: One of the really interesting things to watch out for 327 00:18:52,440 --> 00:18:56,240 Speaker 1: this year in twenty nineteen is it seems to be 328 00:18:56,320 --> 00:19:00,760 Speaker 1: the case that analysts believe that the official GDP statistics 329 00:19:00,840 --> 00:19:04,920 Speaker 1: are doctored or unreliable in some way. But the really 330 00:19:04,960 --> 00:19:09,320 Speaker 1: interesting thing was that they thought that the official statistics 331 00:19:09,359 --> 00:19:12,600 Speaker 1: that were being published by the Chinese government in ten 332 00:19:12,720 --> 00:19:15,960 Speaker 1: actually lined up pretty well with the underlying economy. And 333 00:19:16,040 --> 00:19:19,880 Speaker 1: so there's kind of this view that um the Chinese 334 00:19:19,880 --> 00:19:22,439 Speaker 1: government smoothed the data both on the upside and on 335 00:19:22,480 --> 00:19:26,320 Speaker 1: the downside. So when in seventeen they were trying to 336 00:19:26,400 --> 00:19:30,720 Speaker 1: de leverage growth, was had some other tail winds from 337 00:19:31,040 --> 00:19:34,159 Speaker 1: global growth, was maybe doing a little bit better than 338 00:19:34,200 --> 00:19:38,560 Speaker 1: the officially reported numbers suggested, and then in eighteen apparently 339 00:19:38,600 --> 00:19:40,879 Speaker 1: they happened to line up very nicely in both The 340 00:19:40,920 --> 00:19:43,560 Speaker 1: economy was actually growing six and a half percent, and 341 00:19:43,600 --> 00:19:46,359 Speaker 1: that's also what the Chinese government reported. But now the 342 00:19:46,359 --> 00:19:49,639 Speaker 1: analysts are saying, well, our trackers are pointing to a 343 00:19:49,720 --> 00:19:53,600 Speaker 1: much sharper slowdown in twenty nineteen, and we don't think 344 00:19:53,920 --> 00:19:56,480 Speaker 1: the Chinese government is going to be willing to own 345 00:19:56,560 --> 00:19:58,520 Speaker 1: up to that in the official statistics, and so it 346 00:19:58,560 --> 00:20:03,280 Speaker 1: seems like we're kind of perhaps crossing below those official 347 00:20:03,280 --> 00:20:05,760 Speaker 1: statistics to the downside again. So that will definitely be 348 00:20:05,800 --> 00:20:09,680 Speaker 1: a very interesting thing to watch as it develops. So 349 00:20:09,920 --> 00:20:13,400 Speaker 1: you mentioned that in the US there's a few sort 350 00:20:13,400 --> 00:20:18,160 Speaker 1: of top shelf indicators. The I s M privately collected 351 00:20:18,280 --> 00:20:22,240 Speaker 1: is one of them. But then also the jobs report, GDP, inflation. 352 00:20:22,760 --> 00:20:27,679 Speaker 1: What are the indicators that China watchers pay most attention to. 353 00:20:28,200 --> 00:20:34,160 Speaker 1: There's a monthly data dump that has retail sales numbers, 354 00:20:34,800 --> 00:20:40,120 Speaker 1: industrial production, numbers and business investment numbers, and those are 355 00:20:40,160 --> 00:20:43,399 Speaker 1: pretty important. Those come out around mid month, UM, and 356 00:20:43,440 --> 00:20:45,600 Speaker 1: those kind of give you your your sort of monthly 357 00:20:45,640 --> 00:20:48,600 Speaker 1: reading on what the heart official statistics are saying. And 358 00:20:48,640 --> 00:20:52,280 Speaker 1: there are a number of interesting storylines going on UM 359 00:20:52,320 --> 00:20:56,000 Speaker 1: in those official statistics right now, for example, retail sales. 360 00:20:56,119 --> 00:20:59,760 Speaker 1: Retail sales growth has been slowing a lot, and part 361 00:20:59,760 --> 00:21:04,560 Speaker 1: of has been this collapse in auto sales in which 362 00:21:04,600 --> 00:21:07,320 Speaker 1: is a terrible year for auto sales. And you really 363 00:21:07,320 --> 00:21:10,920 Speaker 1: start to see this reflected around the world now, UM, 364 00:21:11,080 --> 00:21:14,320 Speaker 1: you look at Germany, for example, it's really been slowing 365 00:21:14,359 --> 00:21:16,879 Speaker 1: a lot, and a lot of that has been attributed 366 00:21:16,880 --> 00:21:19,640 Speaker 1: to the fact that auto sales in China have declined 367 00:21:19,680 --> 00:21:22,640 Speaker 1: so much. Germany has sort of become this manufacturer of 368 00:21:22,760 --> 00:21:26,200 Speaker 1: cars for Chinese consumers in a sense. So you can 369 00:21:26,240 --> 00:21:29,679 Speaker 1: see that rippling around the world in other areas. Another 370 00:21:29,760 --> 00:21:34,120 Speaker 1: interesting storyline in that monthly data dump that's happening right 371 00:21:34,160 --> 00:21:37,359 Speaker 1: now is that so you get the industrial production numbers 372 00:21:37,400 --> 00:21:41,639 Speaker 1: and the business investment numbers side by side, Manufacturing industrial 373 00:21:41,680 --> 00:21:44,679 Speaker 1: production growth has been slowing a lot because of the 374 00:21:44,760 --> 00:21:49,080 Speaker 1: deleveraging UM, the environmental crackdown. Now the trade war, but 375 00:21:49,240 --> 00:21:53,080 Speaker 1: manufacturing investment growth has actually been accelerating a lot, and 376 00:21:53,160 --> 00:21:56,240 Speaker 1: so normally those two things move up and down together, 377 00:21:56,320 --> 00:21:58,719 Speaker 1: but it seems to hint at, you know, there's something 378 00:21:58,800 --> 00:22:03,560 Speaker 1: coming here. Perhaps it's uh, you know, more fervent industrial 379 00:22:03,640 --> 00:22:07,440 Speaker 1: upgrading policy underway in Beijing, that sort of thing. It's 380 00:22:07,480 --> 00:22:10,040 Speaker 1: not really clear from the data exactly what's going on, 381 00:22:10,880 --> 00:22:13,480 Speaker 1: but that's another interesting thing to watch. And then the 382 00:22:13,560 --> 00:22:17,200 Speaker 1: other big marquee release, I would say, are the p 383 00:22:17,400 --> 00:22:21,960 Speaker 1: m I numbers that come out there. So the the 384 00:22:22,080 --> 00:22:26,000 Speaker 1: Chinese government has an official Purchasing Managers Index, and this 385 00:22:26,080 --> 00:22:28,520 Speaker 1: is the kind of the main difference between the Chinese 386 00:22:28,840 --> 00:22:31,080 Speaker 1: economy and the U S economy in terms of these 387 00:22:31,160 --> 00:22:34,560 Speaker 1: data sets is the Chinese government publishes its own whereas 388 00:22:34,560 --> 00:22:35,919 Speaker 1: we don't do that in the U S. They're all 389 00:22:35,920 --> 00:22:38,639 Speaker 1: private sector surveys. But there is also a private sector 390 00:22:38,720 --> 00:22:42,080 Speaker 1: p m I uh that market puts together, which they 391 00:22:42,119 --> 00:22:44,040 Speaker 1: do the ones for the rest of the world, and 392 00:22:44,080 --> 00:22:46,879 Speaker 1: those tend to you know, move together as well. And 393 00:22:46,920 --> 00:22:50,920 Speaker 1: so that's one interesting question that arises to is, well, 394 00:22:51,520 --> 00:22:55,320 Speaker 1: there are all these concerns about the reliability the accuracy 395 00:22:55,400 --> 00:22:57,760 Speaker 1: of data published by the Chinese government. But if you 396 00:22:57,800 --> 00:23:00,200 Speaker 1: look at the official manufacturing p m I that they've 397 00:23:00,200 --> 00:23:02,760 Speaker 1: been putting out, it's been slowing a lot over the 398 00:23:02,880 --> 00:23:05,960 Speaker 1: last several months. Uh, kind of in line with these 399 00:23:05,960 --> 00:23:09,640 Speaker 1: other private sector indicators like the satellite imagery for example, 400 00:23:09,760 --> 00:23:12,480 Speaker 1: and so you know, it's not clear how much that, 401 00:23:12,520 --> 00:23:14,399 Speaker 1: for example, is being doctored. That tends to be a 402 00:23:14,400 --> 00:23:16,440 Speaker 1: big market mover. That's one of those things that can 403 00:23:16,480 --> 00:23:19,520 Speaker 1: really set the tone for for the entire following month, 404 00:23:19,520 --> 00:23:23,040 Speaker 1: the way like a job support in the US can so, Matt, 405 00:23:23,119 --> 00:23:27,080 Speaker 1: you mentioned retail demand there, and of course there are 406 00:23:27,160 --> 00:23:32,119 Speaker 1: concerns around what people are calling a consumption downgrade in China, 407 00:23:32,440 --> 00:23:35,560 Speaker 1: this notion that we were seeing a big boom in 408 00:23:35,680 --> 00:23:41,000 Speaker 1: consumption as China's sort of reorients its economy away from industry, 409 00:23:41,280 --> 00:23:44,600 Speaker 1: and now that's slowing down for various reasons. What was 410 00:23:44,640 --> 00:23:47,959 Speaker 1: your take on that issue and could you maybe frame 411 00:23:48,040 --> 00:23:53,040 Speaker 1: how important consumption is for the overall Chinese economy and 412 00:23:53,359 --> 00:23:57,320 Speaker 1: for the government, the authorities, the ruling CCP party, because 413 00:23:57,320 --> 00:24:01,800 Speaker 1: of course there's this notion of a social contract in China, 414 00:24:01,920 --> 00:24:05,120 Speaker 1: an idea that the authorities can stay in power as 415 00:24:05,160 --> 00:24:08,600 Speaker 1: long as the domestic population is happy, and they feel 416 00:24:08,640 --> 00:24:12,240 Speaker 1: like they're wealthy and their lives are improving. Absolutely, so 417 00:24:12,359 --> 00:24:15,640 Speaker 1: consumption is vitally important to not only the Chinese economy, 418 00:24:15,680 --> 00:24:17,920 Speaker 1: but really the world economy. And it really goes back 419 00:24:17,960 --> 00:24:20,919 Speaker 1: to this thing they have to do, which is rebalanced 420 00:24:20,920 --> 00:24:24,160 Speaker 1: their economy, which is not only important for the sustainability 421 00:24:24,160 --> 00:24:27,480 Speaker 1: of Chinese growth going forward, but also global growth, because 422 00:24:27,680 --> 00:24:30,600 Speaker 1: when we talk about these big global imbalances that build up, 423 00:24:30,680 --> 00:24:34,280 Speaker 1: a lot of that has been a result of Chinese 424 00:24:34,320 --> 00:24:37,200 Speaker 1: industrial and trade policy and so and of course the 425 00:24:37,280 --> 00:24:40,600 Speaker 1: US policy, um, you know, interacting with that in terms 426 00:24:40,680 --> 00:24:44,399 Speaker 1: of the consumption downgrade. That's uh, definitely something that you 427 00:24:44,440 --> 00:24:46,840 Speaker 1: were hearing more reports of towards the end of my 428 00:24:47,040 --> 00:24:50,280 Speaker 1: stay there. It's not something that is necessarily really easy 429 00:24:50,359 --> 00:24:53,080 Speaker 1: to just go out and walk around Beijing and observe 430 00:24:53,160 --> 00:24:56,520 Speaker 1: with your own eyes. But one related issue that I 431 00:24:56,560 --> 00:24:59,879 Speaker 1: think kind of gets to this is it did seem 432 00:25:00,040 --> 00:25:04,199 Speaker 1: like the people I talked to, especially uh, you know, 433 00:25:04,280 --> 00:25:09,560 Speaker 1: college students, you know, early career age type people were 434 00:25:09,640 --> 00:25:13,119 Speaker 1: really souring on the job market, which I thought was 435 00:25:13,160 --> 00:25:16,600 Speaker 1: really interesting because when you look at the Chinese economy, 436 00:25:16,600 --> 00:25:19,480 Speaker 1: it's still growing five or six percent whatever. The number maybe, 437 00:25:19,800 --> 00:25:21,919 Speaker 1: And for us in the West, we just think of 438 00:25:21,960 --> 00:25:24,680 Speaker 1: that as this insanely high rate of growth, and it's 439 00:25:24,680 --> 00:25:27,679 Speaker 1: hard to imagine that at that level of growth you 440 00:25:27,720 --> 00:25:30,600 Speaker 1: could really have a slow down in the job market 441 00:25:30,720 --> 00:25:33,280 Speaker 1: kick in in the way it seems to be kicking 442 00:25:33,320 --> 00:25:37,239 Speaker 1: in there, and so it definitely seems like that is 443 00:25:37,600 --> 00:25:41,600 Speaker 1: underway at the moment, and that's definitely a risky situation 444 00:25:41,720 --> 00:25:44,680 Speaker 1: for the Chinese government for all of the reasons you outlined, 445 00:25:44,720 --> 00:25:47,640 Speaker 1: and I think that's why we're going to see more 446 00:25:47,800 --> 00:25:51,160 Speaker 1: fiscal support in the form of tax relief. That's kind 447 00:25:51,160 --> 00:25:53,840 Speaker 1: of the main tool they've been leaning on over the 448 00:25:53,920 --> 00:25:57,840 Speaker 1: last couple of months to kind of backstop the Chinese economy. 449 00:25:57,920 --> 00:26:01,560 Speaker 1: Could it be that if things keeps lowing, the Chinese 450 00:26:01,560 --> 00:26:05,280 Speaker 1: government would ever do another sort of two thousand nine 451 00:26:05,400 --> 00:26:09,040 Speaker 1: type mega stimulus and build tons of more bridges and 452 00:26:09,160 --> 00:26:12,800 Speaker 1: royal and ghost cities and just everything to pull out 453 00:26:12,840 --> 00:26:16,639 Speaker 1: all the stops to increase demand in the economy. What 454 00:26:16,760 --> 00:26:20,800 Speaker 1: the Chinese government says is that development across China has 455 00:26:20,800 --> 00:26:24,080 Speaker 1: been really uneven, so there are areas to do that 456 00:26:24,200 --> 00:26:27,479 Speaker 1: sort of infrastructure investment where it wasn't done before. So 457 00:26:27,560 --> 00:26:31,280 Speaker 1: outside of the major areas, right, like Beijing and Shanghai 458 00:26:31,359 --> 00:26:35,520 Speaker 1: and guang Jo. But to your point, I mean, this 459 00:26:35,600 --> 00:26:37,920 Speaker 1: is the reason why people are a little bit worried 460 00:26:37,960 --> 00:26:40,440 Speaker 1: now about this episode as opposed to sort of the 461 00:26:41,840 --> 00:26:44,320 Speaker 1: sixteen global growth slowdown or the two thousand and eight 462 00:26:44,359 --> 00:26:46,920 Speaker 1: two thousand nine slowdown, because in both of those episodes, 463 00:26:47,000 --> 00:26:50,399 Speaker 1: the Chinese government came in really strong with stimulus and 464 00:26:50,520 --> 00:26:53,679 Speaker 1: kind of really kept the world economy afloat, not just 465 00:26:53,720 --> 00:26:56,400 Speaker 1: the Chinese economy. And now the fear is that they 466 00:26:56,400 --> 00:26:58,680 Speaker 1: don't really have the capacity to do that aim or 467 00:26:59,200 --> 00:27:01,920 Speaker 1: a because they're already trying to deleverage and they recognize 468 00:27:01,960 --> 00:27:04,960 Speaker 1: that they need to change the growth model, but also 469 00:27:05,080 --> 00:27:08,080 Speaker 1: be because their current account surplus, which used to be 470 00:27:08,200 --> 00:27:11,800 Speaker 1: very large, has uh diminished dramatically and is on the 471 00:27:11,880 --> 00:27:15,600 Speaker 1: verge of deficit. And so the Chinese currency is very 472 00:27:15,640 --> 00:27:18,879 Speaker 1: important for the government and the economy, and there's a 473 00:27:18,880 --> 00:27:21,840 Speaker 1: feeling that if they were to just go for another 474 00:27:21,880 --> 00:27:25,639 Speaker 1: blowout stimulus kind of running these big twin fiscal and 475 00:27:25,680 --> 00:27:28,760 Speaker 1: current account deficits, then there wouldn't be a lot of 476 00:27:28,800 --> 00:27:30,800 Speaker 1: support for the currency and you could get into kind 477 00:27:30,840 --> 00:27:33,080 Speaker 1: of a dangerous situation there and that's why people are 478 00:27:33,119 --> 00:27:35,480 Speaker 1: kind of bracing for what is this going to look 479 00:27:35,520 --> 00:27:37,119 Speaker 1: like this time? Are they going to be able to 480 00:27:37,160 --> 00:27:41,160 Speaker 1: manage it or not? So, Matt, you did great work 481 00:27:41,280 --> 00:27:43,520 Speaker 1: in the three months you were in Beijing, But I 482 00:27:43,560 --> 00:27:46,560 Speaker 1: feel kind of bad saying this, you know, the most 483 00:27:46,600 --> 00:27:51,520 Speaker 1: memorable works, but that's always a very good, very good start. 484 00:27:51,800 --> 00:27:55,280 Speaker 1: You really did, you really did. But the most memorable 485 00:27:55,840 --> 00:27:58,440 Speaker 1: thing for me of your state has to be this 486 00:27:58,560 --> 00:28:02,720 Speaker 1: photo that started circulating of you at some sort of 487 00:28:02,800 --> 00:28:05,879 Speaker 1: it was either a PBOC or an economics press conference. 488 00:28:06,359 --> 00:28:10,040 Speaker 1: And you know, you're blonde, You're probably like two ft 489 00:28:10,040 --> 00:28:12,199 Speaker 1: taller than everyone else in the room. You know. It 490 00:28:12,240 --> 00:28:14,800 Speaker 1: was all these mainland Chinese reporters and they all have 491 00:28:14,920 --> 00:28:18,159 Speaker 1: their heads down, they're scribbling madly, and you were staring 492 00:28:18,320 --> 00:28:22,080 Speaker 1: straight ahead. What was going on in that photo? So 493 00:28:22,160 --> 00:28:26,160 Speaker 1: that was my turn to ask a question? And uh, 494 00:28:26,200 --> 00:28:31,359 Speaker 1: you know, the a lot of the US media companies 495 00:28:31,440 --> 00:28:34,840 Speaker 1: are blocked in China, so we can't access our own website. 496 00:28:35,280 --> 00:28:37,560 Speaker 1: And that's the same for the Wall Street Journal and 497 00:28:37,640 --> 00:28:40,600 Speaker 1: the New York Times, most of the outlets there. Uh, 498 00:28:40,640 --> 00:28:43,320 Speaker 1: And so we tend to have slightly different questions that 499 00:28:43,400 --> 00:28:46,880 Speaker 1: we bring to these press conferences than the local Chinese media, 500 00:28:46,960 --> 00:28:50,000 Speaker 1: which tend to ask questions which are a little bit 501 00:28:50,080 --> 00:28:52,920 Speaker 1: more in line with perhaps what types of questions the 502 00:28:52,960 --> 00:28:55,680 Speaker 1: government would like to answer. And so um, I can't 503 00:28:55,720 --> 00:28:58,720 Speaker 1: remember off the top of my head what the exact 504 00:28:59,080 --> 00:29:02,040 Speaker 1: topic of that uh that question was, but that was 505 00:29:02,080 --> 00:29:05,360 Speaker 1: sort of the situation that was that was happening there. Well, 506 00:29:05,480 --> 00:29:07,040 Speaker 1: people are just going to have to go online and 507 00:29:07,080 --> 00:29:09,560 Speaker 1: search for that photo because it is pretty amazing. Matt 508 00:29:09,600 --> 00:29:12,640 Speaker 1: Bosler of Bloomberg News, thank you so much for that. 509 00:29:12,680 --> 00:29:31,440 Speaker 1: A really great conversation. Thank you guys, So Joe, you know, 510 00:29:31,560 --> 00:29:34,480 Speaker 1: I doubt any of us are going to become experts 511 00:29:34,520 --> 00:29:38,680 Speaker 1: in Chinese monetary policy and the economy after just thirty minutes, 512 00:29:38,720 --> 00:29:41,280 Speaker 1: but I thought that conversation was really really great and 513 00:29:41,360 --> 00:29:44,280 Speaker 1: it's a good first step. Right, Yeah, now, I think 514 00:29:44,320 --> 00:29:49,400 Speaker 1: that was very helpful sort of uh oh basic explanation 515 00:29:49,440 --> 00:29:53,360 Speaker 1: of the key difference between how monetary policies conceived of 516 00:29:53,880 --> 00:29:56,640 Speaker 1: UH in the US and other developed markets, first China. 517 00:29:56,720 --> 00:30:01,040 Speaker 1: So obviously here we mostly just think about the interest rate, 518 00:30:01,080 --> 00:30:03,520 Speaker 1: and the interest rate applies to everyone and applies to 519 00:30:03,520 --> 00:30:06,920 Speaker 1: all the banks, versus this idea of the central bank 520 00:30:07,080 --> 00:30:11,480 Speaker 1: and the banking system being the primary levers of a 521 00:30:11,600 --> 00:30:14,600 Speaker 1: sort of state run economy in which money can be 522 00:30:14,680 --> 00:30:21,680 Speaker 1: directed or directed backwards via different, more direct priorities. Sort 523 00:30:21,680 --> 00:30:25,640 Speaker 1: of very different conception of what monetary policy is for 524 00:30:25,800 --> 00:30:29,120 Speaker 1: than I think we think of here. Yeah, it's sort 525 00:30:29,120 --> 00:30:33,120 Speaker 1: of a weird amalgamation of a command economy but with 526 00:30:33,400 --> 00:30:37,720 Speaker 1: market based characteristics. I guess um. I thought one point 527 00:30:37,760 --> 00:30:41,160 Speaker 1: that Matt made really well was also the global importance 528 00:30:41,200 --> 00:30:44,600 Speaker 1: of China and just the idea of you know, there's 529 00:30:44,640 --> 00:30:46,760 Speaker 1: a reason why you sort of want to rein in 530 00:30:47,040 --> 00:30:50,360 Speaker 1: supply demand imbalances in China, right, because they end up 531 00:30:50,360 --> 00:30:54,160 Speaker 1: impacting the rest of the world. So everything we've just 532 00:30:54,240 --> 00:30:58,360 Speaker 1: discussed should be of interest to anyone who will watches 533 00:30:58,400 --> 00:31:02,680 Speaker 1: global markets and economies, it takes any interest in them whatsoever. Yeah, 534 00:31:02,720 --> 00:31:05,880 Speaker 1: and I hadn't thought about that last point before, about 535 00:31:05,960 --> 00:31:10,360 Speaker 1: the sort of limitations that China currently faces on engaging 536 00:31:10,520 --> 00:31:14,520 Speaker 1: in aggressive stimulus spending because because of course, if trying 537 00:31:14,560 --> 00:31:19,800 Speaker 1: to were to do another huge fiscal boom infrastructure, that 538 00:31:19,840 --> 00:31:23,560 Speaker 1: would require a lot of imports. Theoretically, and at a 539 00:31:23,640 --> 00:31:26,520 Speaker 1: time when the current account is already close to flipping 540 00:31:26,520 --> 00:31:30,440 Speaker 1: to deficit, and they're already concerns about capital flight and 541 00:31:30,480 --> 00:31:34,520 Speaker 1: the strength of the currency. Then you could see why 542 00:31:34,560 --> 00:31:38,040 Speaker 1: they're in a more constrained situation with respect to those 543 00:31:38,040 --> 00:31:41,320 Speaker 1: things then they might have been during previous slowdowns. So 544 00:31:41,360 --> 00:31:46,560 Speaker 1: you can understand why maybe the slowdown in China is 545 00:31:46,600 --> 00:31:51,240 Speaker 1: seen as slightly more intractable or difficult to solve than 546 00:31:51,480 --> 00:31:55,240 Speaker 1: previous slowdowns we've seen over the last decade. Yeah, but 547 00:31:55,320 --> 00:31:58,280 Speaker 1: at the same time, the Chinese authorities and the PBOC 548 00:31:58,440 --> 00:32:02,840 Speaker 1: especially have street let's say, being really really creative when 549 00:32:02,880 --> 00:32:06,520 Speaker 1: it comes to solving economic problems, so it'll be interesting 550 00:32:06,600 --> 00:32:09,200 Speaker 1: to see if they can come up with stuff this 551 00:32:09,280 --> 00:32:14,080 Speaker 1: time around. This has been another edition of the Odd 552 00:32:14,120 --> 00:32:16,800 Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on 553 00:32:16,840 --> 00:32:20,080 Speaker 1: Twitter at Tracy Alloway. And I'm Joe Wisntal. You can 554 00:32:20,160 --> 00:32:23,160 Speaker 1: follow me on Twitter at The Stalwart. And you should 555 00:32:23,200 --> 00:32:27,719 Speaker 1: follow Matt Bosler on Twitter. He's at Bows Underscore, and 556 00:32:27,840 --> 00:32:31,360 Speaker 1: you should follow our producer on Twitter. He's top for Foreheads, 557 00:32:31,360 --> 00:32:34,560 Speaker 1: but on Twitter he's at Foreheads t as well as 558 00:32:34,680 --> 00:32:39,040 Speaker 1: the Bloomberg head of podcast, Francesca Levy at Francesca Today. 559 00:32:39,040 --> 00:33:00,240 Speaker 1: Thanks for listening. M