Speaker 1: Hello, and welcome to another episode of the Odd Thoughts Podcast.
Speaker 1: I'm Tracy Alloway and I'm Joe Wisenthal. So, Joe, you
Speaker 1: know I'm over in Hong Kong, right, you've realized this? Yeah,
Speaker 1: that that much I didn't know yet. Excellent. Uh. So,
Speaker 1: now that I'm in the Asia region and I'm very
Speaker 1: very close to China, I've taken a great, great interest
Speaker 1: in Chinese monetary policy and economics. What is it like, Tracy,
Speaker 1: as someone like I've only ever worked, uh in New
Speaker 1: York basically, And you've worked in New York. You've probably
Speaker 1: worked in London. I'm not sure, but I suspect you have. Uh,
Speaker 1: you've worked in Abu Dhabi, You've worked now in Hong Kong,
Speaker 1: probably like a bunch of other places. You're very international,
Speaker 1: just a very international person. So do you go around
Speaker 1: the world just like acquiring new interests and having to
Speaker 1: learn get familiar with new things, and then you sort
Speaker 1: of dropped the old thing as you moved to the
Speaker 1: next city. Yes, absolutely, I developed short term expertise and
Speaker 1: then quickly forget it. But on the subject of expertise, uh,
Speaker 1: you know, clearly I sort of wanted to build up
Speaker 1: my knowledge base of how China's economy works and how
Speaker 1: it's monetary policy works, and specifically the People's Bank of China,
Speaker 1: the central bank over there. Uh, And it's very different
Speaker 1: to how the FED works. So even if you've been
Speaker 1: watching the FED for you know, decades and decades, it
Speaker 1: might not actually be that useful when it comes to
Speaker 1: applying your knowledge to the Chinese market. Yeah. I've always
Speaker 1: felt this way that I have some familiarity with how
Speaker 1: the FED works in the United States, and I have
Speaker 1: some familiarity with how the US economic system works and
Speaker 1: the data that we're supposed to look at two gay
Speaker 1: age the health of the U s economy. But when
Speaker 1: I think about China by every facet, I just feel
Speaker 1: like I must be such a tourist because I have
Speaker 1: some passing knowledge, but I never really think that I
Speaker 1: have any real understanding of what's actually going on. And so, yeah,
Speaker 1: it just feels like this very sort of closed off
Speaker 1: world to me that I can't really begin to grasp
Speaker 1: the mechanisms and the levers and all that. And if
Speaker 1: you think about it, there are some things that immediately
Speaker 1: spring to mind when you think about the p BOC.
Speaker 1: I mean notably, I guess the complexity of a lot
Speaker 1: of its monetary policy operations, like it has dozens and
Speaker 1: dozens of things that it does. And then another thing
Speaker 1: that people talk about a lot when it comes to
Speaker 1: China and economics is, of course the quality of the data.
Speaker 1: You know, people are always suspicious about the economic data
Speaker 1: being published by the Chinese authorities, so there are immediately
Speaker 1: some idiosyncrasy, some difference is uh to the U s
Speaker 1: that that come up straight away? Okay, So am I
Speaker 1: going to be a Chinese eco expert after this episode? Um?
Speaker 1: I hope so. So in the same way that I
Speaker 1: sort of got chipped off to China. Matt Bosler, Bloomberg's
Speaker 1: longtime reporter on the Federal Reserve and US economics, got
Speaker 1: sent out there late last year for a job swap.
Speaker 1: I think he was there for about three months. And
Speaker 1: the really interesting thing about his experience is because he's
Speaker 1: followed the FED and US economic policy for a long time,
Speaker 1: he's the perfect person to sort of give us a
Speaker 1: great overview of exactly the differences between the US and
Speaker 1: the Chinese monetary policy system and what it's like to
Speaker 1: actually go out there as a FED reporter and suddenly
Speaker 1: start reporting on the PBOC. Well it's a cliche, but
Speaker 1: they always say that people should report on topics, kind
Speaker 1: of as if they were a foreign correspondent. And so
Speaker 1: I think what that means is if you get too familiar,
Speaker 1: too comfortable with the story, that you could sort of
Speaker 1: miss the forest for the trees, and you missed the
Speaker 1: things that other people might find really interesting and are
Speaker 1: actually really important. And I feel like Matt had the
Speaker 1: opportunity to sort of see this new world from the
Speaker 1: outside and maybe gives us some interesting perspective. Yeah, so
Speaker 1: let's bring him on. Matt Bosler of Bloomberg News. It's
Speaker 1: so good to have you. Hello, Hello, Thank you guys
Speaker 1: so much for having me on today. So, Matt, did
Speaker 1: I describe your your career path correctly? Uh, you know,
Speaker 1: writing about the FED and economic policy for a long
Speaker 1: time and then in Beijing late last year for a
Speaker 1: few months. Right, that's correct. Since I started in journalism
Speaker 1: about seven years ago, the vast majority of what I've
Speaker 1: done has been covering the Federal Reserve in the U. S. Economy.
Speaker 1: So this was a very interesting experience for me, as
Speaker 1: as I'm sure you're you're well aware. So just uh
Speaker 1: to describe what you work for Bloomberg or colleague and
Speaker 1: sort of brought to Beijing for three months? What was
Speaker 1: the what was the stated premise of your your time there.
Speaker 1: So we have a job swap program here at Bloomberg.
Speaker 1: It's a great opportunity to kind of get different reporters
Speaker 1: into different regions of the world and see how things work,
Speaker 1: you know, in different areas. Um So I am on
Speaker 1: the US Economy team here in New York and while
Speaker 1: I was in Beijing for three months, I was swapping
Speaker 1: on the China Economy team there. So, um, you know,
Speaker 1: it ends up being a little bit similar, especially because
Speaker 1: the big story on both beats for that three month
Speaker 1: period was the trade war between the U S And China,
Speaker 1: so that at least made it a little bit easier
Speaker 1: to to kind of adjust at first. So I'm curious
Speaker 1: when you landed in Beijing, and well maybe even before that,
Speaker 1: you know, when people said you're going to go over
Speaker 1: to China to you know, the capital to cover the PBOC,
Speaker 1: what did you think about that prospect and what were
Speaker 1: your initial impressions or I guess preconceived notions of how
Speaker 1: the PBOC works. It was a really exciting prospect because
Speaker 1: obviously I have all of my experiences in developed markets, right,
Speaker 1: and we know there's kind of this dichotomy and financial
Speaker 1: markets where developed markets in general work very differently than
Speaker 1: emerging markets, and so I was really looking forward to
Speaker 1: getting some of that experience, seeing how things work in
Speaker 1: more of an emerging market setting. And of course there's
Speaker 1: no better place to do that than China because it's
Speaker 1: simply the most important, not only emerging market, but one
Speaker 1: of the most important markets in the entire world. And
Speaker 1: so that was extremely exciting in terms of initial impressions.
Speaker 1: One thing that really struck me was just how many
Speaker 1: more people we have sort of covering the U S economy.
Speaker 1: You know, these are two economies that are basically more
Speaker 1: or less the same size, and just in general, not
Speaker 1: just Bloomberg, but at large, there are much more resources
Speaker 1: devoted to covering and sort of explicating the US economy
Speaker 1: than than China. And that probably is for all of
Speaker 1: the reasons that I think we're going to get into
Speaker 1: in this discussion, some of which you teased at the
Speaker 1: top about you know, data quality, relative paucity of data, uh,
Speaker 1: and just general interests. I think there are sort of
Speaker 1: waves where people can be very focused on the US
Speaker 1: and get away with being very focused on the US
Speaker 1: for long periods of time, and then you have sort
Speaker 1: of uh, not crisis, but you know, sort of rare
Speaker 1: situation that arises in China like we did in with
Speaker 1: the devaluation, uh and certainly like we've seen over last year,
Speaker 1: so where everybody all of a sudden is like, oh,
Speaker 1: I need to understand China. We need to start devoting
Speaker 1: more resources to understanding China. Yeah. On the last point,
Speaker 1: so obviously there's the trade story and no one really
Speaker 1: knows how that's going to end. But the other big
Speaker 1: thing that sort of independent of trade that you hear
Speaker 1: a lot from people is well, what if China is
Speaker 1: just experiencing some sort of to its growth model or
Speaker 1: it can't stimulate it to an economy the way it
Speaker 1: used to, or that it's undergoing some sort of excluding trade,
Speaker 1: some deeper structural change that's going to bring it to
Speaker 1: a slowdown. And everyone is concerned about that, including investors. Here,
Speaker 1: what is going on in China right now that has
Speaker 1: people so concerned? Yeah, so you nailed it. I mean
Speaker 1: that's a very important part of the story. It's not
Speaker 1: just the trade war, it's everything that China has been
Speaker 1: doing to sort of de leverage its economy, try to
Speaker 1: rebalance that growth model toward a more sustainable consumption based
Speaker 1: model and move away from investment and sort of export
Speaker 1: oriented growth. And so what the analysts are kind of
Speaker 1: saying right now is all of this growth slowdown that
Speaker 1: we've seen in China. You know, we just got fourth
Speaker 1: quarter GDP numbers the other day, all of that so
Speaker 1: far just reflects sort of the leftover effects of the
Speaker 1: de leveraging campaign that was really underway in earnest in
Speaker 1: twenty seven team, and we're not going to really start
Speaker 1: to see the effects of the trade war in the
Speaker 1: official Chinese economic data until the first quarter. And part
Speaker 1: of the reason for that is that with these tariffs
Speaker 1: that the US has put in place on China and
Speaker 1: vice versa, there's been a lot of front running of
Speaker 1: those tariffs because they don't go in effect until while
Speaker 1: they were supposed to go and effect January one, and
Speaker 1: then they got pushed back another three months. And so
Speaker 1: the export the trade numbers have actually looked pretty good
Speaker 1: in the fourth quarter because of that effect. And so
Speaker 1: now all the economists are saying, of course, we're going
Speaker 1: to see that payback in the first quarter. It's it's
Speaker 1: gonna look pretty bad. And so we haven't really yet
Speaker 1: to see that effect of this conflict in the official
Speaker 1: data yet. It's much more that other story that you
Speaker 1: referenced some of the stuff that China has already been
Speaker 1: doing to to try to get on a more sustainable
Speaker 1: economic model, right the de leveraging campaign. And of course
Speaker 1: this kind of relates to a little bit what I
Speaker 1: alluded too in the intro, which is that China has
Speaker 1: a sort of unique and vast toolkit of monetary policies
Speaker 1: and some of those are you know, credit channels that
Speaker 1: arguably lead to a build up of debt in the
Speaker 1: economy which the authorities are now trying to reduce. Can
Speaker 1: you walk us through the differences between what the FED
Speaker 1: does in terms of its monetary policy toolkit and what
Speaker 1: the PBOC does. Sure, so, as you alluded to, there
Speaker 1: are a lot of different sort of money market tools
Speaker 1: that the p BOC uses to implement monetary policy, and
Speaker 1: the FED has a lot of those tools too, and
Speaker 1: the differences that's always sort of the background in the
Speaker 1: FED monetary policy conversation. The FED monetary policy conversation is
Speaker 1: always much more about what are they going to do
Speaker 1: with interest rates, or, of course, since the crisis, what
Speaker 1: are they going to do with their balance sheet, which
Speaker 1: gets you into the money market aspect a little bit more.
Speaker 1: But for the most part, you don't really talk about
Speaker 1: money market stuff unless something crazy is happening in markets
Speaker 1: and all of a sudden again people are kind of like, well,
Speaker 1: we need to figure out what's going on in money
Speaker 1: markets now. It's this thing that we haven't really paid
Speaker 1: attention to because we're mostly just interested in what the
Speaker 1: FED is going to do with interest rates, and so
Speaker 1: in China, the banking system is very much an extension
Speaker 1: of the state in a way that it's just not
Speaker 1: in the US, right, and so that's sort of gives
Speaker 1: rise to the necessity for all of these different types
Speaker 1: of tools to implement monetary policy, because you have a
Speaker 1: situation where essentially the banks are taking marching orders from
Speaker 1: the government, and then that has various effects on the economy,
Speaker 1: and then the government might decide, well, that's not the
Speaker 1: effect we intended, or we want to reverse that, say
Speaker 1: we want to do a big deleveraging campaign, and then
Speaker 1: you might need all of these new new monetary policy
Speaker 1: tools to kind of implement that to kind of take
Speaker 1: care of the So it's a little bit more ad
Speaker 1: hoc because I guess what I'm trying to say overall,
Speaker 1: um and that makes for an interesting sort of landscape
Speaker 1: for for Chinese money market analysts. I just want to
Speaker 1: real quickly connect what you just said about the nature
Speaker 1: of the banking system as an extension of the state
Speaker 1: to the overall Chinese export investment driven growth model that
Speaker 1: some people think maybe coming to an end, or that
Speaker 1: China itself wants to start to curb. So is the
Speaker 1: idea that the current model is essentially you have all
Speaker 1: these industrial players, maybe some make carpets and some make semiconductors,
Speaker 1: and some make various industrial goods, and then the state
Speaker 1: promotes them via the channel of encouraging banks to lend
Speaker 1: two companies that export all of this stuff. That's exactly right,
Speaker 1: and it's very interconnected in terms of the state owned
Speaker 1: enterprises and the state run banks, right, So at the
Speaker 1: administrative level, you certainly have a lot easier time kind
Speaker 1: of controlling all of that, directing those flows, directing that
Speaker 1: investment than you would have in the U S which
Speaker 1: is kind of this wild West free market economy. In comparison,
Speaker 1: the state owned corrugated cardboard box company would get a
Speaker 1: loan from a state owned bank which is directed by
Speaker 1: the PBOC to you know, induce a certain amount of
Speaker 1: lending to hit some target. And that's sort of been
Speaker 1: the classical that's the classical model of how the economy
Speaker 1: is wrong. Yeah, that's more or less it. In the nutshell,
Speaker 1: that's kind of the way they've been doing things for
Speaker 1: several decades. Uh, Matt. So you get to Beijing and
Speaker 1: you know you're meant to be covering the PBOC, Chinese
Speaker 1: monetary policy, the economy. How do you get started? Because
Speaker 1: I imagine it's kind of daunting when you first get there, right, Yeah, absolutely,
Speaker 1: And so one of my major responsibilities was focusing on
Speaker 1: the economic data side of things. So in terms of
Speaker 1: the economy beat, there are kind of three major areas.
Speaker 1: One of course is the central bank and monetary policy. Uh.
Speaker 1: The other is the trade wars and sort of all
Speaker 1: of the fiscal policy uh surrounding that. And then the third,
Speaker 1: of course is the economic data. Um. And so much
Speaker 1: of the work we do here at Bloomberg is covering
Speaker 1: that economic data, analyzing the economic data, and so on
Speaker 1: and so forth. And so one of the first things
Speaker 1: I did when I got there is I just spent
Speaker 1: a lot of time on the Bloomberg terminal on some
Speaker 1: of our um ECO functions like ECST for example, just
Speaker 1: really going through all of the sort of data sources
Speaker 1: that we have available in terms of the Chinese economy.
Speaker 1: And that ended up being really important and fruitful because
Speaker 1: it gives you a sense of sort of the array
Speaker 1: of the official government data. Um In the US, we
Speaker 1: have so much official government data. We have releases almost
Speaker 1: every morning, and all of the data sets have very
Speaker 1: long time series that go way back. They're generally very
Speaker 1: highly regarded trusted in terms of, you know, the output
Speaker 1: that is being produced by these statistical agencies. There's just
Speaker 1: a really long tradition there, whereas in China, obviously that's
Speaker 1: not the case on a number of levels, and so
Speaker 1: it really puts a premium on being able to draw
Speaker 1: in these alternative sources of data, uh that don't have
Speaker 1: all of those same concerns. And it turns out we
Speaker 1: actually have a lot of stuff on the Bloomberg terminal
Speaker 1: that a lot of people don't know about when it
Speaker 1: comes to Chinese economic data. So one great example is
Speaker 1: UM satellite imagery. So we have a index that is
Speaker 1: based on satellite imagery that tracks lighting across you know,
Speaker 1: the Chinese manufacturing industry, and so it kind of generates
Speaker 1: a an index on the state of Chinese manufacturing based on,
Speaker 1: you know, the lighting readings that the satellites are picking up.
Speaker 1: So UM that was kind of one of the first
Speaker 1: things I did, was just trying to really go through
Speaker 1: inventory all of that stuff, pull it out, put it
Speaker 1: into you know, sort of a release schedules, so that
Speaker 1: we had a way to to kind of track that,
Speaker 1: especially you know, during this whole trade war thing, where
Speaker 1: we really need those alternative sources of data because it's
Speaker 1: not even, like we said, showing up in the official
Speaker 1: data yet. Could it be that I mean, you would
Speaker 1: think that as trying to continues to develop, that the
Speaker 1: government would create more highly respected data series. But could
Speaker 1: we just have sort of mostly privately collected data like
Speaker 1: satellites and other surveys. Do we need as much official
Speaker 1: government data as we have in the United States? It
Speaker 1: depends on what you're using it for. So I think
Speaker 1: certainly for US as journalists, um and just you know, society.
Speaker 1: More broadly, I think it's really important to have these
Speaker 1: official government statistics that we can refer back to. But
Speaker 1: an interesting example like here in the US is the
Speaker 1: Institute for Supply Management Manufacturing Purchasing Managers Index that they
Speaker 1: put together. So this is a private company, it's a
Speaker 1: private survey of private sector individuals. The government has nothing
Speaker 1: to do with it. Yet this is one of the
Speaker 1: biggest movers in the bond market every month, right when
Speaker 1: that comes out at ten am, uh, you know, whatever
Speaker 1: day it comes out. That's one of the most important
Speaker 1: economic releases we have here outside of the official jobs
Speaker 1: report and the official inflation report and the official GDP numbers.
Speaker 1: And so I think the answer to your question is
Speaker 1: yes and no. There are definitely room for both of
Speaker 1: those things, both in the US and in China. So anecdotally,
Speaker 1: I've heard some economists complaining that the data situation in
Speaker 1: China is sort of getting even worse as the economy
Speaker 1: slow And we have had some stories like um Guangdong
Speaker 1: Province stopped publishing It's p M I supposedly because they
Speaker 1: didn't file the paperwork in time or something like that.
Speaker 1: But you also have stories that you know, the Chinese
Speaker 1: authorities have started pushing their own alternative indicators like uh I.
Speaker 1: Guess the funniest example was an underwear index that showed
Speaker 1: that everyone was buying more underwear and therefore the economy
Speaker 1: must be doing really, really well. What was your experience
Speaker 1: like in the three months you were there. Did you
Speaker 1: hear people talking about a lack of economic data that
Speaker 1: had previously been published or is there a sense that
Speaker 1: as the economy slows, China is going to become more
Speaker 1: selective in what it's publishing. There were a few examples
Speaker 1: like that, like the Guangdong p m I that you mentioned.
Speaker 1: One of the really interesting things to watch out for
Speaker 1: this year in twenty nineteen is it seems to be
Speaker 1: the case that analysts believe that the official GDP statistics
Speaker 1: are doctored or unreliable in some way. But the really
Speaker 1: interesting thing was that they thought that the official statistics
Speaker 1: that were being published by the Chinese government in ten
Speaker 1: actually lined up pretty well with the underlying economy. And
Speaker 1: so there's kind of this view that um the Chinese
Speaker 1: government smoothed the data both on the upside and on
Speaker 1: the downside. So when in seventeen they were trying to
Speaker 1: de leverage growth, was had some other tail winds from
Speaker 1: global growth, was maybe doing a little bit better than
Speaker 1: the officially reported numbers suggested, and then in eighteen apparently
Speaker 1: they happened to line up very nicely in both The
Speaker 1: economy was actually growing six and a half percent, and
Speaker 1: that's also what the Chinese government reported. But now the
Speaker 1: analysts are saying, well, our trackers are pointing to a
Speaker 1: much sharper slowdown in twenty nineteen, and we don't think
Speaker 1: the Chinese government is going to be willing to own
Speaker 1: up to that in the official statistics, and so it
Speaker 1: seems like we're kind of perhaps crossing below those official
Speaker 1: statistics to the downside again. So that will definitely be
Speaker 1: a very interesting thing to watch as it develops. So
Speaker 1: you mentioned that in the US there's a few sort
Speaker 1: of top shelf indicators. The I s M privately collected
Speaker 1: is one of them. But then also the jobs report, GDP, inflation.
Speaker 1: What are the indicators that China watchers pay most attention to.
Speaker 1: There's a monthly data dump that has retail sales numbers,
Speaker 1: industrial production, numbers and business investment numbers, and those are
Speaker 1: pretty important. Those come out around mid month, UM, and
Speaker 1: those kind of give you your your sort of monthly
Speaker 1: reading on what the heart official statistics are saying. And
Speaker 1: there are a number of interesting storylines going on UM
Speaker 1: in those official statistics right now, for example, retail sales.
Speaker 1: Retail sales growth has been slowing a lot, and part
Speaker 1: of has been this collapse in auto sales in which
Speaker 1: is a terrible year for auto sales. And you really
Speaker 1: start to see this reflected around the world now, UM,
Speaker 1: you look at Germany, for example, it's really been slowing
Speaker 1: a lot, and a lot of that has been attributed
Speaker 1: to the fact that auto sales in China have declined
Speaker 1: so much. Germany has sort of become this manufacturer of
Speaker 1: cars for Chinese consumers in a sense. So you can
Speaker 1: see that rippling around the world in other areas. Another
Speaker 1: interesting storyline in that monthly data dump that's happening right
Speaker 1: now is that so you get the industrial production numbers
Speaker 1: and the business investment numbers side by side, Manufacturing industrial
Speaker 1: production growth has been slowing a lot because of the
Speaker 1: deleveraging UM, the environmental crackdown. Now the trade war, but
Speaker 1: manufacturing investment growth has actually been accelerating a lot, and
Speaker 1: so normally those two things move up and down together,
Speaker 1: but it seems to hint at, you know, there's something
Speaker 1: coming here. Perhaps it's uh, you know, more fervent industrial
Speaker 1: upgrading policy underway in Beijing, that sort of thing. It's
Speaker 1: not really clear from the data exactly what's going on,
Speaker 1: but that's another interesting thing to watch. And then the
Speaker 1: other big marquee release, I would say, are the p
Speaker 1: m I numbers that come out there. So the the
Speaker 1: Chinese government has an official Purchasing Managers Index, and this
Speaker 1: is the kind of the main difference between the Chinese
Speaker 1: economy and the U S economy in terms of these
Speaker 1: data sets is the Chinese government publishes its own whereas
Speaker 1: we don't do that in the U S. They're all
Speaker 1: private sector surveys. But there is also a private sector
Speaker 1: p m I uh that market puts together, which they
Speaker 1: do the ones for the rest of the world, and
Speaker 1: those tend to you know, move together as well. And
Speaker 1: so that's one interesting question that arises to is, well,
Speaker 1: there are all these concerns about the reliability the accuracy
Speaker 1: of data published by the Chinese government. But if you
Speaker 1: look at the official manufacturing p m I that they've
Speaker 1: been putting out, it's been slowing a lot over the
Speaker 1: last several months. Uh, kind of in line with these
Speaker 1: other private sector indicators like the satellite imagery for example,
Speaker 1: and so you know, it's not clear how much that,
Speaker 1: for example, is being doctored. That tends to be a
Speaker 1: big market mover. That's one of those things that can
Speaker 1: really set the tone for for the entire following month,
Speaker 1: the way like a job support in the US can so, Matt,
Speaker 1: you mentioned retail demand there, and of course there are
Speaker 1: concerns around what people are calling a consumption downgrade in China,
Speaker 1: this notion that we were seeing a big boom in
Speaker 1: consumption as China's sort of reorients its economy away from industry,
Speaker 1: and now that's slowing down for various reasons. What was
Speaker 1: your take on that issue and could you maybe frame
Speaker 1: how important consumption is for the overall Chinese economy and
Speaker 1: for the government, the authorities, the ruling CCP party, because
Speaker 1: of course there's this notion of a social contract in China,
Speaker 1: an idea that the authorities can stay in power as
Speaker 1: long as the domestic population is happy, and they feel
Speaker 1: like they're wealthy and their lives are improving. Absolutely, so
Speaker 1: consumption is vitally important to not only the Chinese economy,
Speaker 1: but really the world economy. And it really goes back
Speaker 1: to this thing they have to do, which is rebalanced
Speaker 1: their economy, which is not only important for the sustainability
Speaker 1: of Chinese growth going forward, but also global growth, because
Speaker 1: when we talk about these big global imbalances that build up,
Speaker 1: a lot of that has been a result of Chinese
Speaker 1: industrial and trade policy and so and of course the
Speaker 1: US policy, um, you know, interacting with that in terms
Speaker 1: of the consumption downgrade. That's uh, definitely something that you
Speaker 1: were hearing more reports of towards the end of my
Speaker 1: stay there. It's not something that is necessarily really easy
Speaker 1: to just go out and walk around Beijing and observe
Speaker 1: with your own eyes. But one related issue that I
Speaker 1: think kind of gets to this is it did seem
Speaker 1: like the people I talked to, especially uh, you know,
Speaker 1: college students, you know, early career age type people were
Speaker 1: really souring on the job market, which I thought was
Speaker 1: really interesting because when you look at the Chinese economy,
Speaker 1: it's still growing five or six percent whatever. The number maybe,
Speaker 1: And for us in the West, we just think of
Speaker 1: that as this insanely high rate of growth, and it's
Speaker 1: hard to imagine that at that level of growth you
Speaker 1: could really have a slow down in the job market
Speaker 1: kick in in the way it seems to be kicking
Speaker 1: in there, and so it definitely seems like that is
Speaker 1: underway at the moment, and that's definitely a risky situation
Speaker 1: for the Chinese government for all of the reasons you outlined,
Speaker 1: and I think that's why we're going to see more
Speaker 1: fiscal support in the form of tax relief. That's kind
Speaker 1: of the main tool they've been leaning on over the
Speaker 1: last couple of months to kind of backstop the Chinese economy.
Speaker 1: Could it be that if things keeps lowing, the Chinese
Speaker 1: government would ever do another sort of two thousand nine
Speaker 1: type mega stimulus and build tons of more bridges and
Speaker 1: royal and ghost cities and just everything to pull out
Speaker 1: all the stops to increase demand in the economy. What
Speaker 1: the Chinese government says is that development across China has
Speaker 1: been really uneven, so there are areas to do that
Speaker 1: sort of infrastructure investment where it wasn't done before. So
Speaker 1: outside of the major areas, right, like Beijing and Shanghai
Speaker 1: and guang Jo. But to your point, I mean, this
Speaker 1: is the reason why people are a little bit worried
Speaker 1: now about this episode as opposed to sort of the
Speaker 1: sixteen global growth slowdown or the two thousand and eight
Speaker 1: two thousand nine slowdown, because in both of those episodes,
Speaker 1: the Chinese government came in really strong with stimulus and
Speaker 1: kind of really kept the world economy afloat, not just
Speaker 1: the Chinese economy. And now the fear is that they
Speaker 1: don't really have the capacity to do that aim or
Speaker 1: a because they're already trying to deleverage and they recognize
Speaker 1: that they need to change the growth model, but also
Speaker 1: be because their current account surplus, which used to be
Speaker 1: very large, has uh diminished dramatically and is on the
Speaker 1: verge of deficit. And so the Chinese currency is very
Speaker 1: important for the government and the economy, and there's a
Speaker 1: feeling that if they were to just go for another
Speaker 1: blowout stimulus kind of running these big twin fiscal and
Speaker 1: current account deficits, then there wouldn't be a lot of
Speaker 1: support for the currency and you could get into kind
Speaker 1: of a dangerous situation there and that's why people are
Speaker 1: kind of bracing for what is this going to look
Speaker 1: like this time? Are they going to be able to
Speaker 1: manage it or not? So, Matt, you did great work
Speaker 1: in the three months you were in Beijing, But I
Speaker 1: feel kind of bad saying this, you know, the most
Speaker 1: memorable works, but that's always a very good, very good start.
Speaker 1: You really did, you really did. But the most memorable
Speaker 1: thing for me of your state has to be this
Speaker 1: photo that started circulating of you at some sort of
Speaker 1: it was either a PBOC or an economics press conference.
Speaker 1: And you know, you're blonde, You're probably like two ft
Speaker 1: taller than everyone else in the room. You know. It
Speaker 1: was all these mainland Chinese reporters and they all have
Speaker 1: their heads down, they're scribbling madly, and you were staring
Speaker 1: straight ahead. What was going on in that photo? So
Speaker 1: that was my turn to ask a question? And uh,
Speaker 1: you know, the a lot of the US media companies
Speaker 1: are blocked in China, so we can't access our own website.
Speaker 1: And that's the same for the Wall Street Journal and
Speaker 1: the New York Times, most of the outlets there. Uh,
Speaker 1: And so we tend to have slightly different questions that
Speaker 1: we bring to these press conferences than the local Chinese media,
Speaker 1: which tend to ask questions which are a little bit
Speaker 1: more in line with perhaps what types of questions the
Speaker 1: government would like to answer. And so um, I can't
Speaker 1: remember off the top of my head what the exact
Speaker 1: topic of that uh that question was, but that was
Speaker 1: sort of the situation that was that was happening there. Well,
Speaker 1: people are just going to have to go online and
Speaker 1: search for that photo because it is pretty amazing. Matt
Speaker 1: Bosler of Bloomberg News, thank you so much for that.
Speaker 1: A really great conversation. Thank you guys, So Joe, you know,
Speaker 1: I doubt any of us are going to become experts
Speaker 1: in Chinese monetary policy and the economy after just thirty minutes,
Speaker 1: but I thought that conversation was really really great and
Speaker 1: it's a good first step. Right, Yeah, now, I think
Speaker 1: that was very helpful sort of uh oh basic explanation
Speaker 1: of the key difference between how monetary policies conceived of
Speaker 1: UH in the US and other developed markets, first China.
Speaker 1: So obviously here we mostly just think about the interest rate,
Speaker 1: and the interest rate applies to everyone and applies to
Speaker 1: all the banks, versus this idea of the central bank
Speaker 1: and the banking system being the primary levers of a
Speaker 1: sort of state run economy in which money can be
Speaker 1: directed or directed backwards via different, more direct priorities. Sort
Speaker 1: of very different conception of what monetary policy is for
Speaker 1: than I think we think of here. Yeah, it's sort
Speaker 1: of a weird amalgamation of a command economy but with
Speaker 1: market based characteristics. I guess um. I thought one point
Speaker 1: that Matt made really well was also the global importance
Speaker 1: of China and just the idea of you know, there's
Speaker 1: a reason why you sort of want to rein in
Speaker 1: supply demand imbalances in China, right, because they end up
Speaker 1: impacting the rest of the world. So everything we've just
Speaker 1: discussed should be of interest to anyone who will watches
Speaker 1: global markets and economies, it takes any interest in them whatsoever. Yeah,
Speaker 1: and I hadn't thought about that last point before, about
Speaker 1: the sort of limitations that China currently faces on engaging
Speaker 1: in aggressive stimulus spending because because of course, if trying
Speaker 1: to were to do another huge fiscal boom infrastructure, that
Speaker 1: would require a lot of imports. Theoretically, and at a
Speaker 1: time when the current account is already close to flipping
Speaker 1: to deficit, and they're already concerns about capital flight and
Speaker 1: the strength of the currency. Then you could see why
Speaker 1: they're in a more constrained situation with respect to those
Speaker 1: things then they might have been during previous slowdowns. So
Speaker 1: you can understand why maybe the slowdown in China is
Speaker 1: seen as slightly more intractable or difficult to solve than
Speaker 1: previous slowdowns we've seen over the last decade. Yeah, but
Speaker 1: at the same time, the Chinese authorities and the PBOC
Speaker 1: especially have street let's say, being really really creative when
Speaker 1: it comes to solving economic problems, so it'll be interesting
Speaker 1: to see if they can come up with stuff this
Speaker 1: time around. This has been another edition of the Odd
Speaker 1: Thoughts podcast. I'm Tracy Alloway. You can follow me on
Speaker 1: Twitter at Tracy Alloway. And I'm Joe Wisntal. You can
Speaker 1: follow me on Twitter at The Stalwart. And you should
Speaker 1: follow Matt Bosler on Twitter. He's at Bows Underscore, and
Speaker 1: you should follow our producer on Twitter. He's top for Foreheads,
Speaker 1: but on Twitter he's at Foreheads t as well as
Speaker 1: the Bloomberg head of podcast, Francesca Levy at Francesca Today.
Speaker 1: Thanks for listening. M