WEBVTT - How Does The Chinese Economy Work? 0:00:11.160 --> 0:00:14.560 Hello, and welcome to another episode of the Odd Thoughts Podcast. 0:00:14.640 --> 0:00:19.320 I'm Tracy Alloway and I'm Joe Wisenthal. So, Joe, you 0:00:19.320 --> 0:00:22.760 know I'm over in Hong Kong, right, you've realized this? Yeah, 0:00:22.800 --> 0:00:27.320 that that much I didn't know yet. Excellent. Uh. So, 0:00:27.600 --> 0:00:30.560 now that I'm in the Asia region and I'm very 0:00:30.680 --> 0:00:33.839 very close to China, I've taken a great, great interest 0:00:34.080 --> 0:00:38.479 in Chinese monetary policy and economics. What is it like, Tracy, 0:00:38.680 --> 0:00:42.479 as someone like I've only ever worked, uh in New 0:00:42.560 --> 0:00:47.520 York basically, And you've worked in New York. You've probably 0:00:47.560 --> 0:00:51.080 worked in London. I'm not sure, but I suspect you have. Uh, 0:00:51.280 --> 0:00:55.640 you've worked in Abu Dhabi, You've worked now in Hong Kong, 0:00:55.800 --> 0:00:58.720 probably like a bunch of other places. You're very international, 0:00:59.200 --> 0:01:01.480 just a very international person. So do you go around 0:01:01.480 --> 0:01:04.880 the world just like acquiring new interests and having to 0:01:04.959 --> 0:01:08.240 learn get familiar with new things, and then you sort 0:01:08.280 --> 0:01:09.880 of dropped the old thing as you moved to the 0:01:09.880 --> 0:01:14.399 next city. Yes, absolutely, I developed short term expertise and 0:01:14.400 --> 0:01:19.160 then quickly forget it. But on the subject of expertise, uh, 0:01:19.240 --> 0:01:21.760 you know, clearly I sort of wanted to build up 0:01:21.800 --> 0:01:25.160 my knowledge base of how China's economy works and how 0:01:25.160 --> 0:01:30.360 it's monetary policy works, and specifically the People's Bank of China, 0:01:30.440 --> 0:01:33.319 the central bank over there. Uh, And it's very different 0:01:33.360 --> 0:01:35.400 to how the FED works. So even if you've been 0:01:35.760 --> 0:01:39.880 watching the FED for you know, decades and decades, it 0:01:40.000 --> 0:01:42.319 might not actually be that useful when it comes to 0:01:42.360 --> 0:01:46.679 applying your knowledge to the Chinese market. Yeah. I've always 0:01:46.680 --> 0:01:50.520 felt this way that I have some familiarity with how 0:01:50.560 --> 0:01:53.000 the FED works in the United States, and I have 0:01:53.120 --> 0:01:56.720 some familiarity with how the US economic system works and 0:01:56.760 --> 0:01:59.960 the data that we're supposed to look at two gay 0:02:00.040 --> 0:02:02.360 age the health of the U s economy. But when 0:02:02.400 --> 0:02:06.000 I think about China by every facet, I just feel 0:02:06.040 --> 0:02:07.920 like I must be such a tourist because I have 0:02:08.080 --> 0:02:11.200 some passing knowledge, but I never really think that I 0:02:11.280 --> 0:02:17.519 have any real understanding of what's actually going on. And so, yeah, 0:02:17.680 --> 0:02:20.560 it just feels like this very sort of closed off 0:02:20.600 --> 0:02:23.720 world to me that I can't really begin to grasp 0:02:24.200 --> 0:02:27.320 the mechanisms and the levers and all that. And if 0:02:27.320 --> 0:02:29.519 you think about it, there are some things that immediately 0:02:29.600 --> 0:02:32.200 spring to mind when you think about the p BOC. 0:02:32.639 --> 0:02:36.520 I mean notably, I guess the complexity of a lot 0:02:36.560 --> 0:02:40.360 of its monetary policy operations, like it has dozens and 0:02:40.440 --> 0:02:43.200 dozens of things that it does. And then another thing 0:02:43.240 --> 0:02:45.240 that people talk about a lot when it comes to 0:02:45.360 --> 0:02:49.240 China and economics is, of course the quality of the data. 0:02:49.400 --> 0:02:53.160 You know, people are always suspicious about the economic data 0:02:53.320 --> 0:02:57.000 being published by the Chinese authorities, so there are immediately 0:02:57.160 --> 0:03:01.480 some idiosyncrasy, some difference is uh to the U s 0:03:01.560 --> 0:03:04.320 that that come up straight away? Okay, So am I 0:03:04.400 --> 0:03:09.320 going to be a Chinese eco expert after this episode? Um? 0:03:09.360 --> 0:03:12.280 I hope so. So in the same way that I 0:03:12.400 --> 0:03:17.040 sort of got chipped off to China. Matt Bosler, Bloomberg's 0:03:17.520 --> 0:03:22.600 longtime reporter on the Federal Reserve and US economics, got 0:03:22.639 --> 0:03:25.880 sent out there late last year for a job swap. 0:03:25.919 --> 0:03:28.560 I think he was there for about three months. And 0:03:28.600 --> 0:03:31.920 the really interesting thing about his experience is because he's 0:03:31.960 --> 0:03:35.320 followed the FED and US economic policy for a long time, 0:03:35.520 --> 0:03:38.440 he's the perfect person to sort of give us a 0:03:38.560 --> 0:03:42.760 great overview of exactly the differences between the US and 0:03:42.760 --> 0:03:45.640 the Chinese monetary policy system and what it's like to 0:03:45.680 --> 0:03:49.080 actually go out there as a FED reporter and suddenly 0:03:49.120 --> 0:03:52.040 start reporting on the PBOC. Well it's a cliche, but 0:03:52.040 --> 0:03:55.040 they always say that people should report on topics, kind 0:03:55.040 --> 0:03:57.600 of as if they were a foreign correspondent. And so 0:03:57.640 --> 0:04:01.120 I think what that means is if you get too familiar, 0:04:01.240 --> 0:04:03.680 too comfortable with the story, that you could sort of 0:04:04.440 --> 0:04:06.400 miss the forest for the trees, and you missed the 0:04:06.400 --> 0:04:09.440 things that other people might find really interesting and are 0:04:09.480 --> 0:04:12.520 actually really important. And I feel like Matt had the 0:04:12.560 --> 0:04:15.640 opportunity to sort of see this new world from the 0:04:15.680 --> 0:04:20.200 outside and maybe gives us some interesting perspective. Yeah, so 0:04:20.279 --> 0:04:23.040 let's bring him on. Matt Bosler of Bloomberg News. It's 0:04:23.080 --> 0:04:25.040 so good to have you. Hello, Hello, Thank you guys 0:04:25.080 --> 0:04:27.840 so much for having me on today. So, Matt, did 0:04:27.880 --> 0:04:31.920 I describe your your career path correctly? Uh, you know, 0:04:32.040 --> 0:04:34.520 writing about the FED and economic policy for a long 0:04:34.560 --> 0:04:38.320 time and then in Beijing late last year for a 0:04:38.360 --> 0:04:42.160 few months. Right, that's correct. Since I started in journalism 0:04:42.200 --> 0:04:44.840 about seven years ago, the vast majority of what I've 0:04:45.040 --> 0:04:47.839 done has been covering the Federal Reserve in the U. S. Economy. 0:04:47.960 --> 0:04:51.240 So this was a very interesting experience for me, as 0:04:51.480 --> 0:04:55.560 as I'm sure you're you're well aware. So just uh 0:04:55.720 --> 0:04:59.640 to describe what you work for Bloomberg or colleague and 0:05:00.160 --> 0:05:02.800 sort of brought to Beijing for three months? What was 0:05:02.880 --> 0:05:07.520 the what was the stated premise of your your time there. 0:05:07.920 --> 0:05:10.720 So we have a job swap program here at Bloomberg. 0:05:10.760 --> 0:05:15.040 It's a great opportunity to kind of get different reporters 0:05:15.080 --> 0:05:18.360 into different regions of the world and see how things work, 0:05:18.480 --> 0:05:21.200 you know, in different areas. Um So I am on 0:05:21.240 --> 0:05:24.480 the US Economy team here in New York and while 0:05:24.520 --> 0:05:27.040 I was in Beijing for three months, I was swapping 0:05:27.120 --> 0:05:30.960 on the China Economy team there. So, um, you know, 0:05:31.040 --> 0:05:33.320 it ends up being a little bit similar, especially because 0:05:33.360 --> 0:05:36.200 the big story on both beats for that three month 0:05:36.240 --> 0:05:38.640 period was the trade war between the U S And China, 0:05:38.720 --> 0:05:40.719 so that at least made it a little bit easier 0:05:40.760 --> 0:05:43.919 to to kind of adjust at first. So I'm curious 0:05:43.960 --> 0:05:47.840 when you landed in Beijing, and well maybe even before that, 0:05:47.920 --> 0:05:50.400 you know, when people said you're going to go over 0:05:50.440 --> 0:05:54.240 to China to you know, the capital to cover the PBOC, 0:05:54.720 --> 0:05:57.960 what did you think about that prospect and what were 0:05:58.000 --> 0:06:03.080 your initial impressions or I guess preconceived notions of how 0:06:03.120 --> 0:06:06.719 the PBOC works. It was a really exciting prospect because 0:06:06.920 --> 0:06:10.360 obviously I have all of my experiences in developed markets, right, 0:06:10.360 --> 0:06:13.159 and we know there's kind of this dichotomy and financial 0:06:13.240 --> 0:06:17.000 markets where developed markets in general work very differently than 0:06:17.120 --> 0:06:19.440 emerging markets, and so I was really looking forward to 0:06:19.440 --> 0:06:22.760 getting some of that experience, seeing how things work in 0:06:23.200 --> 0:06:26.080 more of an emerging market setting. And of course there's 0:06:26.120 --> 0:06:29.520 no better place to do that than China because it's 0:06:29.560 --> 0:06:32.720 simply the most important, not only emerging market, but one 0:06:32.720 --> 0:06:35.360 of the most important markets in the entire world. And 0:06:35.400 --> 0:06:39.520 so that was extremely exciting in terms of initial impressions. 0:06:40.320 --> 0:06:42.680 One thing that really struck me was just how many 0:06:42.720 --> 0:06:46.280 more people we have sort of covering the U S economy. 0:06:46.320 --> 0:06:49.400 You know, these are two economies that are basically more 0:06:49.520 --> 0:06:52.720 or less the same size, and just in general, not 0:06:52.800 --> 0:06:56.760 just Bloomberg, but at large, there are much more resources 0:06:56.800 --> 0:07:00.800 devoted to covering and sort of explicating the US economy 0:07:00.839 --> 0:07:04.440 than than China. And that probably is for all of 0:07:04.480 --> 0:07:06.359 the reasons that I think we're going to get into 0:07:06.400 --> 0:07:09.000 in this discussion, some of which you teased at the 0:07:09.040 --> 0:07:14.120 top about you know, data quality, relative paucity of data, uh, 0:07:14.160 --> 0:07:16.440 and just general interests. I think there are sort of 0:07:16.520 --> 0:07:20.560 waves where people can be very focused on the US 0:07:20.680 --> 0:07:23.320 and get away with being very focused on the US 0:07:23.360 --> 0:07:25.920 for long periods of time, and then you have sort 0:07:25.960 --> 0:07:29.440 of uh, not crisis, but you know, sort of rare 0:07:29.520 --> 0:07:32.680 situation that arises in China like we did in with 0:07:32.720 --> 0:07:36.320 the devaluation, uh and certainly like we've seen over last year, 0:07:36.400 --> 0:07:38.280 so where everybody all of a sudden is like, oh, 0:07:38.320 --> 0:07:40.600 I need to understand China. We need to start devoting 0:07:40.600 --> 0:07:44.680 more resources to understanding China. Yeah. On the last point, 0:07:44.840 --> 0:07:47.240 so obviously there's the trade story and no one really 0:07:47.240 --> 0:07:50.200 knows how that's going to end. But the other big 0:07:50.240 --> 0:07:53.320 thing that sort of independent of trade that you hear 0:07:53.360 --> 0:07:57.600 a lot from people is well, what if China is 0:07:57.680 --> 0:08:01.720 just experiencing some sort of to its growth model or 0:08:01.800 --> 0:08:04.120 it can't stimulate it to an economy the way it 0:08:04.280 --> 0:08:09.360 used to, or that it's undergoing some sort of excluding trade, 0:08:09.480 --> 0:08:12.000 some deeper structural change that's going to bring it to 0:08:12.040 --> 0:08:16.840 a slowdown. And everyone is concerned about that, including investors. Here, 0:08:17.200 --> 0:08:20.960 what is going on in China right now that has 0:08:20.960 --> 0:08:23.840 people so concerned? Yeah, so you nailed it. I mean 0:08:23.840 --> 0:08:25.880 that's a very important part of the story. It's not 0:08:25.960 --> 0:08:28.680 just the trade war, it's everything that China has been 0:08:28.720 --> 0:08:32.680 doing to sort of de leverage its economy, try to 0:08:32.720 --> 0:08:36.520 rebalance that growth model toward a more sustainable consumption based 0:08:36.559 --> 0:08:40.200 model and move away from investment and sort of export 0:08:40.240 --> 0:08:44.280 oriented growth. And so what the analysts are kind of 0:08:44.320 --> 0:08:46.640 saying right now is all of this growth slowdown that 0:08:46.679 --> 0:08:49.200 we've seen in China. You know, we just got fourth 0:08:49.280 --> 0:08:52.520 quarter GDP numbers the other day, all of that so 0:08:52.559 --> 0:08:56.240 far just reflects sort of the leftover effects of the 0:08:56.320 --> 0:08:59.319 de leveraging campaign that was really underway in earnest in 0:08:59.360 --> 0:09:02.040 twenty seven team, and we're not going to really start 0:09:02.120 --> 0:09:04.400 to see the effects of the trade war in the 0:09:04.440 --> 0:09:08.320 official Chinese economic data until the first quarter. And part 0:09:08.320 --> 0:09:11.880 of the reason for that is that with these tariffs 0:09:11.880 --> 0:09:15.400 that the US has put in place on China and 0:09:15.559 --> 0:09:18.920 vice versa, there's been a lot of front running of 0:09:18.960 --> 0:09:22.200 those tariffs because they don't go in effect until while 0:09:22.200 --> 0:09:24.160 they were supposed to go and effect January one, and 0:09:24.200 --> 0:09:26.679 then they got pushed back another three months. And so 0:09:26.840 --> 0:09:29.720 the export the trade numbers have actually looked pretty good 0:09:29.760 --> 0:09:32.520 in the fourth quarter because of that effect. And so 0:09:32.840 --> 0:09:34.839 now all the economists are saying, of course, we're going 0:09:34.880 --> 0:09:37.120 to see that payback in the first quarter. It's it's 0:09:37.120 --> 0:09:39.960 gonna look pretty bad. And so we haven't really yet 0:09:40.000 --> 0:09:43.959 to see that effect of this conflict in the official 0:09:44.040 --> 0:09:46.280 data yet. It's much more that other story that you 0:09:46.400 --> 0:09:49.280 referenced some of the stuff that China has already been 0:09:49.320 --> 0:09:51.600 doing to to try to get on a more sustainable 0:09:52.080 --> 0:09:56.520 economic model, right the de leveraging campaign. And of course 0:09:56.520 --> 0:09:59.560 this kind of relates to a little bit what I 0:09:59.600 --> 0:10:02.960 alluded too in the intro, which is that China has 0:10:03.000 --> 0:10:07.080 a sort of unique and vast toolkit of monetary policies 0:10:07.120 --> 0:10:10.200 and some of those are you know, credit channels that 0:10:10.440 --> 0:10:14.040 arguably lead to a build up of debt in the 0:10:14.080 --> 0:10:17.440 economy which the authorities are now trying to reduce. Can 0:10:17.480 --> 0:10:21.360 you walk us through the differences between what the FED 0:10:21.480 --> 0:10:25.000 does in terms of its monetary policy toolkit and what 0:10:25.200 --> 0:10:30.320 the PBOC does. Sure, so, as you alluded to, there 0:10:30.360 --> 0:10:33.679 are a lot of different sort of money market tools 0:10:33.760 --> 0:10:39.520 that the p BOC uses to implement monetary policy, and 0:10:39.800 --> 0:10:42.840 the FED has a lot of those tools too, and 0:10:43.000 --> 0:10:46.839 the differences that's always sort of the background in the 0:10:46.880 --> 0:10:51.559 FED monetary policy conversation. The FED monetary policy conversation is 0:10:51.600 --> 0:10:53.800 always much more about what are they going to do 0:10:53.880 --> 0:10:56.680 with interest rates, or, of course, since the crisis, what 0:10:56.720 --> 0:10:58.640 are they going to do with their balance sheet, which 0:10:58.679 --> 0:11:01.160 gets you into the money market aspect a little bit more. 0:11:02.240 --> 0:11:05.520 But for the most part, you don't really talk about 0:11:05.640 --> 0:11:09.079 money market stuff unless something crazy is happening in markets 0:11:09.120 --> 0:11:11.560 and all of a sudden again people are kind of like, well, 0:11:11.600 --> 0:11:13.679 we need to figure out what's going on in money 0:11:13.679 --> 0:11:15.480 markets now. It's this thing that we haven't really paid 0:11:15.520 --> 0:11:17.760 attention to because we're mostly just interested in what the 0:11:17.800 --> 0:11:20.600 FED is going to do with interest rates, and so 0:11:20.720 --> 0:11:25.880 in China, the banking system is very much an extension 0:11:26.120 --> 0:11:28.880 of the state in a way that it's just not 0:11:28.960 --> 0:11:32.200 in the US, right, and so that's sort of gives 0:11:32.320 --> 0:11:35.120 rise to the necessity for all of these different types 0:11:35.120 --> 0:11:38.880 of tools to implement monetary policy, because you have a 0:11:38.920 --> 0:11:42.559 situation where essentially the banks are taking marching orders from 0:11:42.559 --> 0:11:46.920 the government, and then that has various effects on the economy, 0:11:46.920 --> 0:11:49.200 and then the government might decide, well, that's not the 0:11:49.240 --> 0:11:51.680 effect we intended, or we want to reverse that, say 0:11:51.720 --> 0:11:54.240 we want to do a big deleveraging campaign, and then 0:11:54.280 --> 0:11:56.880 you might need all of these new new monetary policy 0:11:56.920 --> 0:11:59.400 tools to kind of implement that to kind of take 0:11:59.440 --> 0:12:01.520 care of the So it's a little bit more ad 0:12:01.520 --> 0:12:04.080 hoc because I guess what I'm trying to say overall, 0:12:04.480 --> 0:12:07.760 um and that makes for an interesting sort of landscape 0:12:08.240 --> 0:12:12.120 for for Chinese money market analysts. I just want to 0:12:12.440 --> 0:12:16.240 real quickly connect what you just said about the nature 0:12:16.280 --> 0:12:18.720 of the banking system as an extension of the state 0:12:19.040 --> 0:12:24.440 to the overall Chinese export investment driven growth model that 0:12:24.559 --> 0:12:26.720 some people think maybe coming to an end, or that 0:12:26.840 --> 0:12:29.760 China itself wants to start to curb. So is the 0:12:29.880 --> 0:12:34.719 idea that the current model is essentially you have all 0:12:34.800 --> 0:12:40.559 these industrial players, maybe some make carpets and some make semiconductors, 0:12:40.760 --> 0:12:45.959 and some make various industrial goods, and then the state 0:12:46.040 --> 0:12:49.640 promotes them via the channel of encouraging banks to lend 0:12:49.960 --> 0:12:53.960 two companies that export all of this stuff. That's exactly right, 0:12:54.000 --> 0:12:58.040 and it's very interconnected in terms of the state owned 0:12:58.160 --> 0:13:02.320 enterprises and the state run banks, right, So at the 0:13:02.360 --> 0:13:06.800 administrative level, you certainly have a lot easier time kind 0:13:06.840 --> 0:13:09.760 of controlling all of that, directing those flows, directing that 0:13:09.840 --> 0:13:12.360 investment than you would have in the U S which 0:13:12.400 --> 0:13:15.319 is kind of this wild West free market economy. In comparison, 0:13:15.400 --> 0:13:19.440 the state owned corrugated cardboard box company would get a 0:13:19.480 --> 0:13:23.080 loan from a state owned bank which is directed by 0:13:23.160 --> 0:13:26.760 the PBOC to you know, induce a certain amount of 0:13:26.840 --> 0:13:29.320 lending to hit some target. And that's sort of been 0:13:29.679 --> 0:13:32.920 the classical that's the classical model of how the economy 0:13:32.960 --> 0:13:34.920 is wrong. Yeah, that's more or less it. In the nutshell, 0:13:35.000 --> 0:13:36.920 that's kind of the way they've been doing things for 0:13:36.920 --> 0:13:41.800 several decades. Uh, Matt. So you get to Beijing and 0:13:42.040 --> 0:13:44.880 you know you're meant to be covering the PBOC, Chinese 0:13:44.880 --> 0:13:48.720 monetary policy, the economy. How do you get started? Because 0:13:48.800 --> 0:13:54.120 I imagine it's kind of daunting when you first get there, right, Yeah, absolutely, 0:13:54.160 --> 0:13:58.600 And so one of my major responsibilities was focusing on 0:13:58.640 --> 0:14:01.440 the economic data side of things. So in terms of 0:14:01.480 --> 0:14:04.520 the economy beat, there are kind of three major areas. 0:14:04.920 --> 0:14:08.360 One of course is the central bank and monetary policy. Uh. 0:14:08.400 --> 0:14:11.040 The other is the trade wars and sort of all 0:14:11.040 --> 0:14:14.560 of the fiscal policy uh surrounding that. And then the third, 0:14:14.600 --> 0:14:17.400 of course is the economic data. Um. And so much 0:14:17.400 --> 0:14:19.640 of the work we do here at Bloomberg is covering 0:14:19.640 --> 0:14:22.960 that economic data, analyzing the economic data, and so on 0:14:23.000 --> 0:14:25.600 and so forth. And so one of the first things 0:14:25.640 --> 0:14:27.840 I did when I got there is I just spent 0:14:27.880 --> 0:14:30.520 a lot of time on the Bloomberg terminal on some 0:14:30.600 --> 0:14:34.840 of our um ECO functions like ECST for example, just 0:14:34.920 --> 0:14:38.080 really going through all of the sort of data sources 0:14:38.120 --> 0:14:42.479 that we have available in terms of the Chinese economy. 0:14:42.600 --> 0:14:46.240 And that ended up being really important and fruitful because 0:14:47.000 --> 0:14:49.800 it gives you a sense of sort of the array 0:14:49.920 --> 0:14:53.680 of the official government data. Um In the US, we 0:14:53.800 --> 0:14:57.720 have so much official government data. We have releases almost 0:14:57.800 --> 0:15:01.080 every morning, and all of the data sets have very 0:15:01.080 --> 0:15:04.640 long time series that go way back. They're generally very 0:15:04.760 --> 0:15:10.160 highly regarded trusted in terms of, you know, the output 0:15:10.240 --> 0:15:13.520 that is being produced by these statistical agencies. There's just 0:15:13.560 --> 0:15:17.080 a really long tradition there, whereas in China, obviously that's 0:15:17.120 --> 0:15:19.200 not the case on a number of levels, and so 0:15:19.280 --> 0:15:22.920 it really puts a premium on being able to draw 0:15:23.040 --> 0:15:27.280 in these alternative sources of data, uh that don't have 0:15:27.360 --> 0:15:30.080 all of those same concerns. And it turns out we 0:15:30.120 --> 0:15:32.720 actually have a lot of stuff on the Bloomberg terminal 0:15:32.800 --> 0:15:35.080 that a lot of people don't know about when it 0:15:35.160 --> 0:15:39.000 comes to Chinese economic data. So one great example is 0:15:39.600 --> 0:15:42.800 UM satellite imagery. So we have a index that is 0:15:42.880 --> 0:15:48.440 based on satellite imagery that tracks lighting across you know, 0:15:48.520 --> 0:15:53.560 the Chinese manufacturing industry, and so it kind of generates 0:15:53.600 --> 0:15:57.280 a an index on the state of Chinese manufacturing based on, 0:15:57.560 --> 0:16:00.000 you know, the lighting readings that the satellites are picking up. 0:16:00.080 --> 0:16:01.960 So UM that was kind of one of the first 0:16:01.960 --> 0:16:03.840 things I did, was just trying to really go through 0:16:03.920 --> 0:16:06.200 inventory all of that stuff, pull it out, put it 0:16:06.240 --> 0:16:08.360 into you know, sort of a release schedules, so that 0:16:08.400 --> 0:16:10.640 we had a way to to kind of track that, 0:16:11.440 --> 0:16:13.880 especially you know, during this whole trade war thing, where 0:16:13.920 --> 0:16:16.760 we really need those alternative sources of data because it's 0:16:16.800 --> 0:16:19.320 not even, like we said, showing up in the official 0:16:19.400 --> 0:16:22.040 data yet. Could it be that I mean, you would 0:16:22.040 --> 0:16:24.920 think that as trying to continues to develop, that the 0:16:24.960 --> 0:16:30.600 government would create more highly respected data series. But could 0:16:30.600 --> 0:16:33.840 we just have sort of mostly privately collected data like 0:16:33.920 --> 0:16:39.120 satellites and other surveys. Do we need as much official 0:16:39.200 --> 0:16:41.720 government data as we have in the United States? It 0:16:41.800 --> 0:16:43.800 depends on what you're using it for. So I think 0:16:43.840 --> 0:16:47.760 certainly for US as journalists, um and just you know, society. 0:16:47.760 --> 0:16:49.840 More broadly, I think it's really important to have these 0:16:49.880 --> 0:16:53.080 official government statistics that we can refer back to. But 0:16:53.400 --> 0:16:57.960 an interesting example like here in the US is the 0:16:58.000 --> 0:17:02.840 Institute for Supply Management Manufacturing Purchasing Managers Index that they 0:17:02.880 --> 0:17:05.560 put together. So this is a private company, it's a 0:17:05.600 --> 0:17:09.280 private survey of private sector individuals. The government has nothing 0:17:09.320 --> 0:17:10.840 to do with it. Yet this is one of the 0:17:10.880 --> 0:17:15.160 biggest movers in the bond market every month, right when 0:17:15.200 --> 0:17:18.639 that comes out at ten am, uh, you know, whatever 0:17:18.720 --> 0:17:20.679 day it comes out. That's one of the most important 0:17:20.720 --> 0:17:23.800 economic releases we have here outside of the official jobs 0:17:23.840 --> 0:17:26.919 report and the official inflation report and the official GDP numbers. 0:17:26.920 --> 0:17:29.520 And so I think the answer to your question is 0:17:29.600 --> 0:17:32.119 yes and no. There are definitely room for both of 0:17:32.160 --> 0:17:52.160 those things, both in the US and in China. So anecdotally, 0:17:52.160 --> 0:17:56.080 I've heard some economists complaining that the data situation in 0:17:56.240 --> 0:17:59.600 China is sort of getting even worse as the economy 0:17:59.640 --> 0:18:03.679 slow And we have had some stories like um Guangdong 0:18:03.720 --> 0:18:07.119 Province stopped publishing It's p M I supposedly because they 0:18:07.160 --> 0:18:10.080 didn't file the paperwork in time or something like that. 0:18:10.359 --> 0:18:12.800 But you also have stories that you know, the Chinese 0:18:12.800 --> 0:18:17.720 authorities have started pushing their own alternative indicators like uh I. 0:18:17.760 --> 0:18:21.560 Guess the funniest example was an underwear index that showed 0:18:21.600 --> 0:18:24.560 that everyone was buying more underwear and therefore the economy 0:18:24.640 --> 0:18:28.639 must be doing really, really well. What was your experience 0:18:28.720 --> 0:18:30.560 like in the three months you were there. Did you 0:18:30.600 --> 0:18:34.280 hear people talking about a lack of economic data that 0:18:34.359 --> 0:18:37.440 had previously been published or is there a sense that 0:18:37.640 --> 0:18:41.080 as the economy slows, China is going to become more 0:18:41.119 --> 0:18:44.520 selective in what it's publishing. There were a few examples 0:18:44.560 --> 0:18:47.520 like that, like the Guangdong p m I that you mentioned. 0:18:49.040 --> 0:18:52.320 One of the really interesting things to watch out for 0:18:52.440 --> 0:18:56.240 this year in twenty nineteen is it seems to be 0:18:56.320 --> 0:19:00.760 the case that analysts believe that the official GDP statistics 0:19:00.840 --> 0:19:04.920 are doctored or unreliable in some way. But the really 0:19:04.960 --> 0:19:09.320 interesting thing was that they thought that the official statistics 0:19:09.359 --> 0:19:12.600 that were being published by the Chinese government in ten 0:19:12.720 --> 0:19:15.960 actually lined up pretty well with the underlying economy. And 0:19:16.040 --> 0:19:19.880 so there's kind of this view that um the Chinese 0:19:19.880 --> 0:19:22.439 government smoothed the data both on the upside and on 0:19:22.480 --> 0:19:26.320 the downside. So when in seventeen they were trying to 0:19:26.400 --> 0:19:30.720 de leverage growth, was had some other tail winds from 0:19:31.040 --> 0:19:34.159 global growth, was maybe doing a little bit better than 0:19:34.200 --> 0:19:38.560 the officially reported numbers suggested, and then in eighteen apparently 0:19:38.600 --> 0:19:40.879 they happened to line up very nicely in both The 0:19:40.920 --> 0:19:43.560 economy was actually growing six and a half percent, and 0:19:43.600 --> 0:19:46.359 that's also what the Chinese government reported. But now the 0:19:46.359 --> 0:19:49.639 analysts are saying, well, our trackers are pointing to a 0:19:49.720 --> 0:19:53.600 much sharper slowdown in twenty nineteen, and we don't think 0:19:53.920 --> 0:19:56.480 the Chinese government is going to be willing to own 0:19:56.560 --> 0:19:58.520 up to that in the official statistics, and so it 0:19:58.560 --> 0:20:03.280 seems like we're kind of perhaps crossing below those official 0:20:03.280 --> 0:20:05.760 statistics to the downside again. So that will definitely be 0:20:05.800 --> 0:20:09.680 a very interesting thing to watch as it develops. So 0:20:09.920 --> 0:20:13.400 you mentioned that in the US there's a few sort 0:20:13.400 --> 0:20:18.160 of top shelf indicators. The I s M privately collected 0:20:18.280 --> 0:20:22.240 is one of them. But then also the jobs report, GDP, inflation. 0:20:22.760 --> 0:20:27.679 What are the indicators that China watchers pay most attention to. 0:20:28.200 --> 0:20:34.160 There's a monthly data dump that has retail sales numbers, 0:20:34.800 --> 0:20:40.120 industrial production, numbers and business investment numbers, and those are 0:20:40.160 --> 0:20:43.399 pretty important. Those come out around mid month, UM, and 0:20:43.440 --> 0:20:45.600 those kind of give you your your sort of monthly 0:20:45.640 --> 0:20:48.600 reading on what the heart official statistics are saying. And 0:20:48.640 --> 0:20:52.280 there are a number of interesting storylines going on UM 0:20:52.320 --> 0:20:56.000 in those official statistics right now, for example, retail sales. 0:20:56.119 --> 0:20:59.760 Retail sales growth has been slowing a lot, and part 0:20:59.760 --> 0:21:04.560 of has been this collapse in auto sales in which 0:21:04.600 --> 0:21:07.320 is a terrible year for auto sales. And you really 0:21:07.320 --> 0:21:10.920 start to see this reflected around the world now, UM, 0:21:11.080 --> 0:21:14.320 you look at Germany, for example, it's really been slowing 0:21:14.359 --> 0:21:16.879 a lot, and a lot of that has been attributed 0:21:16.880 --> 0:21:19.640 to the fact that auto sales in China have declined 0:21:19.680 --> 0:21:22.640 so much. Germany has sort of become this manufacturer of 0:21:22.760 --> 0:21:26.200 cars for Chinese consumers in a sense. So you can 0:21:26.240 --> 0:21:29.679 see that rippling around the world in other areas. Another 0:21:29.760 --> 0:21:34.120 interesting storyline in that monthly data dump that's happening right 0:21:34.160 --> 0:21:37.359 now is that so you get the industrial production numbers 0:21:37.400 --> 0:21:41.639 and the business investment numbers side by side, Manufacturing industrial 0:21:41.680 --> 0:21:44.679 production growth has been slowing a lot because of the 0:21:44.760 --> 0:21:49.080 deleveraging UM, the environmental crackdown. Now the trade war, but 0:21:49.240 --> 0:21:53.080 manufacturing investment growth has actually been accelerating a lot, and 0:21:53.160 --> 0:21:56.240 so normally those two things move up and down together, 0:21:56.320 --> 0:21:58.719 but it seems to hint at, you know, there's something 0:21:58.800 --> 0:22:03.560 coming here. Perhaps it's uh, you know, more fervent industrial 0:22:03.640 --> 0:22:07.440 upgrading policy underway in Beijing, that sort of thing. It's 0:22:07.480 --> 0:22:10.040 not really clear from the data exactly what's going on, 0:22:10.880 --> 0:22:13.480 but that's another interesting thing to watch. And then the 0:22:13.560 --> 0:22:17.200 other big marquee release, I would say, are the p 0:22:17.400 --> 0:22:21.960 m I numbers that come out there. So the the 0:22:22.080 --> 0:22:26.000 Chinese government has an official Purchasing Managers Index, and this 0:22:26.080 --> 0:22:28.520 is the kind of the main difference between the Chinese 0:22:28.840 --> 0:22:31.080 economy and the U S economy in terms of these 0:22:31.160 --> 0:22:34.560 data sets is the Chinese government publishes its own whereas 0:22:34.560 --> 0:22:35.919 we don't do that in the U S. They're all 0:22:35.920 --> 0:22:38.639 private sector surveys. But there is also a private sector 0:22:38.720 --> 0:22:42.080 p m I uh that market puts together, which they 0:22:42.119 --> 0:22:44.040 do the ones for the rest of the world, and 0:22:44.080 --> 0:22:46.879 those tend to you know, move together as well. And 0:22:46.920 --> 0:22:50.920 so that's one interesting question that arises to is, well, 0:22:51.520 --> 0:22:55.320 there are all these concerns about the reliability the accuracy 0:22:55.400 --> 0:22:57.760 of data published by the Chinese government. But if you 0:22:57.800 --> 0:23:00.200 look at the official manufacturing p m I that they've 0:23:00.200 --> 0:23:02.760 been putting out, it's been slowing a lot over the 0:23:02.880 --> 0:23:05.960 last several months. Uh, kind of in line with these 0:23:05.960 --> 0:23:09.640 other private sector indicators like the satellite imagery for example, 0:23:09.760 --> 0:23:12.480 and so you know, it's not clear how much that, 0:23:12.520 --> 0:23:14.399