WEBVTT - BYD Earnings, Alibaba Pulls IPO 0:00:02.480 --> 0:00:07.720 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.640 --> 0:00:12.840 This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 0:00:12.920 --> 0:00:15.400 You can join Brian Curtis and myself for the stories, 0:00:15.440 --> 0:00:18.520 making news and moving markets in the APEC region. You 0:00:18.600 --> 0:00:21.439 can subscribe to the show anywhere you get your podcast 0:00:21.520 --> 0:00:24.919 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:00:24.920 --> 0:00:26.840 Bloomberg Business app. Well. 0:00:26.920 --> 0:00:31.240 China's BYD has reported annual profit that missed analyst estimates. 0:00:31.240 --> 0:00:33.800 Bloomberg's Juan Wong has the story from Hong Kong. 0:00:33.960 --> 0:00:37.200 Nettagum for twenty twenty three was four point one six 0:00:37.240 --> 0:00:40.720 billion dollars. That compares to an estimate of four point 0:00:40.760 --> 0:00:44.920 two nine billion dollars. BYD's old just over three million 0:00:44.960 --> 0:00:49.040 electric and hybrid vehicles last year. It overtook Tesla in 0:00:49.080 --> 0:00:52.080 the final quarter of twenty twenty three as the world's 0:00:52.080 --> 0:00:55.360 biggest seller of evs, but it may struggle to hold 0:00:55.400 --> 0:00:58.760 the title early this year. That's due to seasonal factors 0:00:58.800 --> 0:01:02.040 tied to the Lunar New Year holiday. In addition, BYD 0:01:02.240 --> 0:01:05.120 has kicked off a second round of price cuts. It 0:01:05.120 --> 0:01:07.960 has discounted most of its product range as it seeks 0:01:08.000 --> 0:01:11.280 to convince drivers to switch from gas guzzling cars to 0:01:11.400 --> 0:01:12.680 evs in Hong Kong. 0:01:12.800 --> 0:01:14.240 Joined one Bloomberg Radio. 0:01:15.360 --> 0:01:17.360 All right, it's eight minutes past the hour for a 0:01:17.440 --> 0:01:20.759 little further discussion on BYD. Were joined by Linda lu 0:01:20.920 --> 0:01:25.360 who is Bloomberg's China cars reporter. So these earnings, you know, 0:01:25.400 --> 0:01:29.280 weren't great, but they weren't too bad. BYD reporting net 0:01:29.319 --> 0:01:32.080 income for the full year that came in in the 0:01:32.080 --> 0:01:36.240 middle of the forecast range. As you look at these numbers, 0:01:36.480 --> 0:01:38.480 what stands out the most? I mean, the price war 0:01:38.520 --> 0:01:40.080 I guess is dominating, right. 0:01:40.680 --> 0:01:45.240 Yeah, I guess to take things into perspectives, BYD's profits 0:01:45.680 --> 0:01:49.680 the break record for the company you know, managed to 0:01:49.720 --> 0:01:54.200 sell also another record breaking three million vehicles last year. 0:01:54.720 --> 0:01:57.240 So overall is. 0:01:57.240 --> 0:02:01.320 Doing well, but obviously anothers have higher expectations for the company, 0:02:01.840 --> 0:02:06.400 and the bottom line has been impacted by the price 0:02:06.480 --> 0:02:11.520 war which BYD is intensifying, discounting many of its popular 0:02:11.560 --> 0:02:15.959 models since late last year and continuing well into this year. 0:02:16.520 --> 0:02:18.960 So when you look at a company like Tesla, to 0:02:19.000 --> 0:02:21.920 what extent is Tesla being impacted by the way in 0:02:21.960 --> 0:02:24.520 which BYD is doing business in China? 0:02:25.880 --> 0:02:29.800 Tesla even though you know, they're quite a special brand 0:02:30.160 --> 0:02:33.560 and a lot of the electric vehicle buyers in China, 0:02:33.639 --> 0:02:36.040 they've not been able to escape the impact from the 0:02:36.080 --> 0:02:41.680 price war. Our Bloomberg colleagues have reported that Tesla actually 0:02:41.720 --> 0:02:46.120 started to trim its production output in its Shanghai plants, 0:02:46.400 --> 0:02:50.760 so it shows that they are also experiencing a weakening 0:02:50.800 --> 0:02:54.280 demand from this really fierce evy market in China. 0:02:55.360 --> 0:02:57.840 What a lot of investors might be curious about is 0:02:57.880 --> 0:03:00.279 whether or not they get too far out over theirs 0:03:00.440 --> 0:03:00.960 with some of. 0:03:00.919 --> 0:03:03.000 These global expansion plans. 0:03:03.400 --> 0:03:05.520 I'm not sure whether or not they added much, and 0:03:05.560 --> 0:03:07.880 I know that there's a call this morning from which 0:03:07.919 --> 0:03:10.760 we'll probably get a lot more questions answered. But anything 0:03:10.760 --> 0:03:14.120 in these earnings that stand out with the thinking about 0:03:14.680 --> 0:03:18.120 setting up a plant in Mexico and expanding in Europe 0:03:18.200 --> 0:03:20.840 and ultimately trying to get into the US. 0:03:20.560 --> 0:03:25.359 Market, Yeah, BYD is definitely going to continue as international 0:03:25.400 --> 0:03:29.400 expansion because you know, although China is the world's largest 0:03:29.600 --> 0:03:34.240 ev market, given this fares priceword that's happening, the margins 0:03:34.360 --> 0:03:39.280 are from cast sold in China actually isn't as high 0:03:39.480 --> 0:03:42.520 as BID would like to hope, So by exporting to 0:03:42.680 --> 0:03:47.080 overseas markets like Europe, they can actually command higher pricing 0:03:47.480 --> 0:03:50.920 and that in turn can help lift their bottom line. 0:03:51.080 --> 0:03:54.560 And it was noted by analysts that their margins wasn't 0:03:54.600 --> 0:03:58.920 actually as bad as expected, maybe from some of this 0:03:59.080 --> 0:04:04.640 effect of exporting overseas and having higher pricing for those cars. 0:04:05.360 --> 0:04:07.440 I was looking at the FT. They had an article 0:04:07.640 --> 0:04:10.880 in the most recent edition, the digital edition, talking about 0:04:10.880 --> 0:04:13.360 how about a quarter twenty five percent of the EV 0:04:13.640 --> 0:04:17.360 sold in the European Union this year will be manufactured 0:04:17.400 --> 0:04:20.599 in China. This is creating a bit of tension with 0:04:20.760 --> 0:04:25.680 the companies in particularly in Germany that manufacturer vehicles. Is 0:04:25.720 --> 0:04:27.760 there a way out? Is there a way to kind 0:04:27.760 --> 0:04:32.039 of dial down the tension and perhaps a lot more 0:04:32.080 --> 0:04:32.360 of it. 0:04:33.839 --> 0:04:35.320 That's a really good question. 0:04:36.520 --> 0:04:39.840 It's not very clear how this tension can be kind 0:04:39.880 --> 0:04:46.480 of alleviated because China right now is experiencing this problem 0:04:46.720 --> 0:04:51.320 of weakening demand and over capacity, so a lot of 0:04:51.360 --> 0:04:54.320 these automakers kind of have nowhere to go but to 0:04:54.600 --> 0:04:57.839 export their vehicles. But on the other hand, you see 0:04:57.839 --> 0:05:02.640 it in Europe of these new probably cheaper vehicles coming 0:05:02.680 --> 0:05:06.800 into their market as going to hit the local automakers so, 0:05:06.960 --> 0:05:11.000 like you said, the firms in Germany, he probably aren't 0:05:11.080 --> 0:05:13.400 very happy with this, and we know the French have 0:05:13.520 --> 0:05:17.680 also lobbied the EU two kind of launched this anti 0:05:17.720 --> 0:05:23.280 subsidy investigation. So it remains to be seen how China 0:05:23.839 --> 0:05:26.719 is going to have to manage the geopolitics. And I 0:05:26.760 --> 0:05:29.960 think with this coming year, when the results of the 0:05:30.040 --> 0:05:32.960 anti subsidy investigation comes out, we're going to have a 0:05:33.000 --> 0:05:33.920 clearer picture. 0:05:34.440 --> 0:05:35.440 I think we have to say. 0:05:35.480 --> 0:05:39.719 With BID now offering its most inexpensive car at less 0:05:39.720 --> 0:05:43.120 than ten thousand US dollars, and with this price war 0:05:43.200 --> 0:05:47.040 that we've seen, they're going for volume here and this 0:05:47.600 --> 0:05:51.960 must really spook some of the other automakers in China, 0:05:52.040 --> 0:05:54.320 particularly as Doug mentioned at the beginning. 0:05:54.080 --> 0:05:59.600 Tesla precisely after Bid kind of kicked off this latest 0:05:59.640 --> 0:06:03.360 round of price cuts in the beginning of this year, 0:06:03.600 --> 0:06:08.279 we've seen other carmakers followed and close brands like Jelly 0:06:09.240 --> 0:06:12.479 Leap Motor, a lot of EV makers kind of have 0:06:12.640 --> 0:06:15.960 no choice but to follow. And the interesting thing is 0:06:16.720 --> 0:06:22.240 these price cuts have also impacted gasoline vehicles, which can 0:06:22.680 --> 0:06:26.640 usually are cheaper than EV's, But now byd has his 0:06:26.720 --> 0:06:31.560 goal of making EV's cheaper than gasoline carts. So that's 0:06:31.640 --> 0:06:35.560 forced companies like Toyota and Volkswagen to kind of have 0:06:35.680 --> 0:06:39.400 to join in and try to counter this offensive. 0:06:40.320 --> 0:06:42.680 Yeah, we were talking earlier in the program about this 0:06:42.760 --> 0:06:45.440 move on the part of China to file a complaint 0:06:45.520 --> 0:06:48.760 essentially with the World Trade Organization over some of the 0:06:48.800 --> 0:06:51.919 EV subsidies that exist here in the States as the 0:06:51.960 --> 0:06:56.320 result of the Inflation Reduction Act, one of the President's 0:06:56.360 --> 0:07:00.120 signature pieces of legislation, and his Trade rep cat and 0:07:00.240 --> 0:07:04.000 sizing basically holding up the mirror to Beijing and saying 0:07:04.000 --> 0:07:07.359 that China continues to use unfair policies and practices to 0:07:07.480 --> 0:07:11.640 undermine fair competition and dominate global markets. It doesn't sound 0:07:11.840 --> 0:07:18.120 like free trade without protectionism is going to continue to 0:07:18.200 --> 0:07:21.400 exist when you look at the electric vehicle industry. 0:07:22.680 --> 0:07:27.000 No, it's definitely NOTTS. I think this follows this greater 0:07:27.160 --> 0:07:32.680 trend of the globalization, basically countries kind of erecting these 0:07:32.720 --> 0:07:36.200 barriers up again to protect domestic industries that may have 0:07:36.240 --> 0:07:41.720 been dismantled decades ago, especially since China joined the WTO. 0:07:42.360 --> 0:07:45.240 And I think the US has a fair points in 0:07:45.280 --> 0:07:49.160 that China did install quite a lot of rules to 0:07:49.280 --> 0:07:55.080 protect its auto industry, especially in its kind of growing 0:07:55.200 --> 0:08:00.680 up phase. When foreign automakers entered the Chinese market, they 0:08:00.720 --> 0:08:04.720 weren't able to do so without forming a joint venture 0:08:04.800 --> 0:08:08.520 where they cannot own more than fifty percent of that business, 0:08:09.000 --> 0:08:12.240 so essentially having to kind of share profits and technology 0:08:12.280 --> 0:08:15.680 with a local Chinese partner. And in that process, the 0:08:15.800 --> 0:08:19.000 Chinese domestic car makers, you know, got to benefit from 0:08:19.080 --> 0:08:23.960 these know how of the foreign car makers. So now 0:08:24.000 --> 0:08:28.200 the table kind of has turned, and so yeah, I 0:08:28.200 --> 0:08:30.560 think it would be really interesting to watch how these 0:08:30.640 --> 0:08:33.400 kind of trade tensions will continue to unfold. 0:08:33.880 --> 0:08:36.400 Yeah, I was struck by the irony and the answers 0:08:36.440 --> 0:08:39.400 to one of the earlier questions where you said, BYD, 0:08:39.520 --> 0:08:42.240 you know, it's not making as much money in China 0:08:42.280 --> 0:08:44.520 as you would like because it has to sell the 0:08:44.559 --> 0:08:47.240 cars too cheap, and it can sell them at higher 0:08:47.280 --> 0:08:50.280 prices in Europe. But then the European car makers are 0:08:50.280 --> 0:08:54.000 worried that those prices are too low for Europe. 0:08:54.040 --> 0:08:55.520 So it's quite ironic. 0:08:55.800 --> 0:08:57.679 And then it raises the question, you know, why is 0:08:57.760 --> 0:09:00.720 BYD expanding in Japan? I mean, this would seem to 0:09:00.760 --> 0:09:04.479 be almost like a bottomless pit, but they are very ambitious, 0:09:04.520 --> 0:09:08.720 and they are expanding in Japan. What's the ultimate strategy. 0:09:08.240 --> 0:09:13.480 There BYD does seem to have a very global kind 0:09:13.559 --> 0:09:16.280 of expansion in mind right now, you know, kind of 0:09:16.760 --> 0:09:20.319 no market would be off limits. I would say it 0:09:20.360 --> 0:09:23.960 depends on, you know, how they plan to continue to 0:09:24.360 --> 0:09:29.320 go into new markets. So Japan definitely is an interesting 0:09:29.400 --> 0:09:33.839 case given that it has such an established auto market already. 0:09:34.360 --> 0:09:37.800 It already has you know, some of the world's biggest 0:09:37.800 --> 0:09:42.800 automakers like Toyota, and the Japanese consumers actually don't take 0:09:42.880 --> 0:09:46.720 to evs, haven't taken to evs yet. Hybrids are still 0:09:46.760 --> 0:09:50.360 selling really well over there, and that's something that BYD 0:09:50.480 --> 0:09:53.920 doesn't have a strong offering of. BYD probably has a 0:09:55.000 --> 0:09:57.760 lot of tough time ahead of it trying to educate 0:09:57.800 --> 0:10:00.680 the local consumers about EV's and get the to kind 0:10:00.720 --> 0:10:05.120 of take on as products. But I think if BYD 0:10:05.320 --> 0:10:09.000 can crack the Japanese market, then that's all the more 0:10:09.080 --> 0:10:12.320 beneficial for BYD as it continues to expand. 0:10:12.760 --> 0:10:15.640 Last question, I'll give you twenty seconds to answer at Linda. 0:10:15.640 --> 0:10:17.440 I mean, are you expecting a lot in the way 0:10:17.440 --> 0:10:19.880 of failures Here are some of these smaller ev makers 0:10:19.880 --> 0:10:22.480 in China. Just given the macro that we've just laid out, 0:10:22.559 --> 0:10:25.520 you've done a beautiful job of helping us understand what's 0:10:25.559 --> 0:10:28.600 it work here? Are we going to expect bankruptcies and 0:10:28.640 --> 0:10:30.880 failures now some of these smaller ev makers? 0:10:31.760 --> 0:10:33.040 Sure answer is yes. 0:10:33.440 --> 0:10:37.319 We're already seeing quite a few players are pushed to 0:10:37.440 --> 0:10:40.320 the brink by such a fierce compeition, and I think 0:10:40.360 --> 0:10:42.800 we're going to continue to see more of that. 0:10:43.840 --> 0:10:47.000 You know, Doug, we often hear a great question from 0:10:47.040 --> 0:10:49.520 our guests, but we don't often say great answer, but 0:10:49.559 --> 0:10:52.319 we should say to to Linda, great answers there. You 0:10:52.400 --> 0:10:55.480 really filled out the scene quite nicely for us. Linda, 0:10:55.520 --> 0:10:58.840 Thank you for joining us. Linda lu Bloomberg China Cars. 0:10:58.600 --> 0:11:00.959 Reporter with US Live. This is Bloomber. 0:11:08.360 --> 0:11:10.319 Well. Let's pick up on a story that Doug mentioned 0:11:10.320 --> 0:11:13.240 a few moments ago. Ali Baba has called off its 0:11:13.320 --> 0:11:17.559 IPO for its logistics arm Siginiow and joining us now 0:11:17.559 --> 0:11:20.560 in our studios is Sarah Jung, who is Bloomberg China 0:11:20.679 --> 0:11:25.200 Technology Reporter. Sarah, this speaks to many issues, but two 0:11:25.320 --> 0:11:27.839 really come to the four one. It's not a very 0:11:27.880 --> 0:11:30.480 good environment, I guess for selling assets. So we heard 0:11:30.480 --> 0:11:33.960 that from Joseph Sai that the market is pretty depressed, 0:11:34.480 --> 0:11:37.520 and secondly that this kind of brings into question the 0:11:37.559 --> 0:11:39.880 whole restructuring of Ali Baba. 0:11:40.559 --> 0:11:41.520 What else stands out. 0:11:42.080 --> 0:11:45.120 I think that's exactly right. So Joseph Thai last night 0:11:45.160 --> 0:11:48.840 in a call with analysts, was trying to explain their move. 0:11:48.920 --> 0:11:51.680 He was saying that one, it's the pretty depressed market. 0:11:51.679 --> 0:11:53.959 They can't get the kind of valuation that they believed 0:11:54.000 --> 0:11:57.160 he now should be strategically valued at. And the other 0:11:57.400 --> 0:11:59.640 is that they're trying to say that they because of 0:11:59.640 --> 0:12:02.440 their phone on their core businesses, which is e commerce 0:12:02.480 --> 0:12:07.360 and cloud computing, they wanted better expand Tinel internationally to 0:12:07.400 --> 0:12:11.000 be able to service their core e commerce business so 0:12:11.040 --> 0:12:13.680 that they can compete better in what's a very intensive 0:12:13.880 --> 0:12:15.760 and highly competitive market. 0:12:16.760 --> 0:12:19.000 So this is the second time that Baba has next 0:12:19.000 --> 0:12:22.760 to high profile debut. Take me back to win the 0:12:22.840 --> 0:12:27.240 plan to split into six separate units was unveiled. I'm 0:12:27.960 --> 0:12:31.720 trying to remember that this really was to try to 0:12:31.760 --> 0:12:35.320 appease the government in some ways so that Boba's assets 0:12:35.360 --> 0:12:38.240 were not so concentrated and they wanted to try to 0:12:38.280 --> 0:12:40.440 diversify that am I remembering that correctly? 0:12:41.120 --> 0:12:44.600 Well, that the company itself would probably dispute that, but yes, 0:12:44.720 --> 0:12:48.680 they were. They did announce this restructuring spinoff plan earlier 0:12:48.760 --> 0:12:52.199 last year, and part of that, people analysts were saying, 0:12:52.600 --> 0:12:55.480 was to allow the business, which had gotten a little 0:12:55.480 --> 0:12:58.719 bit too big for its bridges in terms of from 0:12:58.760 --> 0:13:02.280 the government's personerspective, to lay a little bit more low 0:13:02.320 --> 0:13:05.319 profile and to be able to spin off independently. Of course, 0:13:05.360 --> 0:13:07.840 since then, in the past few months, we've seen a 0:13:07.840 --> 0:13:12.440 lot of hiccups in the restructuring process. Last November Ali 0:13:12.480 --> 0:13:15.680 Baba also mixing the a debut for their cloud arm 0:13:16.520 --> 0:13:19.440 we saw a lot of leadership reshuffling and shake ups, 0:13:19.559 --> 0:13:21.120 their longtime. 0:13:20.679 --> 0:13:23.040 CEO Daniel Jeong being. 0:13:22.800 --> 0:13:27.440 Sort of stepping down quite abruptly and having new leadership 0:13:27.480 --> 0:13:30.280 come on and including Joe's High and also the new 0:13:30.320 --> 0:13:33.040 CEO Eddie Wu and then now Eddie Woo taking the 0:13:33.080 --> 0:13:37.360 helme directly of cloud and commerce and really restructuring and 0:13:37.400 --> 0:13:39.040 mixing things up in those units. 0:13:39.400 --> 0:13:42.360 It looks on the surface a little bit like disarray 0:13:42.960 --> 0:13:46.480 and investors obviously you know they're they're selling down the 0:13:46.480 --> 0:13:49.199 stock a little bit today, but there could be some 0:13:49.240 --> 0:13:51.720 positives to it, and we still don't know. I mean, 0:13:51.760 --> 0:13:53.640 they so they pull fresh ship ball when they pull 0:13:53.720 --> 0:13:56.920 now sign you out. But do we know much about 0:13:57.559 --> 0:14:00.480 what's ahead for Ali Baba Cloud, because that's one that 0:14:00.760 --> 0:14:03.080 a lot of investors would have been very interested in. 0:14:03.559 --> 0:14:04.000 Exactly. 0:14:04.000 --> 0:14:07.079 I think Ali Baba Cloud was the big, high profile 0:14:07.160 --> 0:14:10.559 IPO spin off that everyone was excited for. It seems 0:14:10.600 --> 0:14:14.439 like now, given you know, market conditions and the rationale 0:14:14.480 --> 0:14:16.960 into their decision to pull back on tight now and 0:14:17.040 --> 0:14:19.280 also Fresh Hippo, it seems like that's not going to 0:14:19.280 --> 0:14:22.640 happen now or in the foreseeable future. And and so 0:14:22.720 --> 0:14:26.160 definitely that's something that investors would would it would give 0:14:26.240 --> 0:14:29.120 it would give pause to them. And Joe actually last 0:14:29.160 --> 0:14:33.120 night was quite explicit and saying that their original conception 0:14:33.440 --> 0:14:36.160 of this avenue where they could unlock shareholder value through 0:14:36.200 --> 0:14:39.920 the capital markets, that's no longer viable, at least in 0:14:39.960 --> 0:14:42.200 the short term, and now they're going to focus on 0:14:42.880 --> 0:14:45.840 just trying to drive value through things like buybacks and 0:14:45.920 --> 0:14:49.240 selling off their noncore business assets and just focusing in 0:14:49.280 --> 0:14:50.480 on commerce and cloud. 0:14:51.040 --> 0:14:53.160 Well, that was part of my next question. When I 0:14:53.160 --> 0:14:55.640 think of this company, I think of e commerce obviously 0:14:55.920 --> 0:15:00.800 the major player in China. How is that business doing well? 0:15:00.800 --> 0:15:04.320 They're under a lot of pressure domestically from other rivals, 0:15:04.360 --> 0:15:08.160 including upstarts like ByteDance with their Doing, which is the 0:15:08.240 --> 0:15:11.760 Chinese equivalent of TikTok, and also other short video platforms 0:15:11.800 --> 0:15:15.400 like Kwaisho really getting into live streaming e commerce, which 0:15:15.440 --> 0:15:18.760 is eating into Alibaba's market share, and also of course 0:15:18.800 --> 0:15:22.440 from their traditional rivals like JD dot Com and also Pingodo, 0:15:22.480 --> 0:15:25.600 which is more of like a budget type of e 0:15:25.600 --> 0:15:28.920 commerce platform. And then internationally we're also seeing their under 0:15:28.920 --> 0:15:35.360 pressure from Pingodo's Timu Shean also TikTok shop abroad. So 0:15:35.400 --> 0:15:38.040 it's really you know, putting a lot of pressure on 0:15:38.200 --> 0:15:41.400 the commerce side to perform better. And that's part of 0:15:41.400 --> 0:15:43.760 why they're saying they want to double down their investment 0:15:43.800 --> 0:15:46.600 on site now so that they can better service the 0:15:46.680 --> 0:15:48.560 logistics part of this commerce business. 0:15:49.000 --> 0:15:51.440 We know that the chairman and Joseph Sai is a 0:15:51.560 --> 0:15:54.560 very good operator, very sensible and strong operator. 0:15:54.600 --> 0:15:57.239 And Jackmaw obviously is a legend. 0:15:57.840 --> 0:15:59.800 They always, you know, in all the conferences that I 0:15:59.840 --> 0:16:01.960 went too over the thirty odd years. Here, I mean 0:16:02.280 --> 0:16:05.600 the Ali Baba people were always among the smartest in 0:16:05.640 --> 0:16:09.760 the room. So it's hard to imagine what's happened to 0:16:09.800 --> 0:16:13.240 this company, and it's also hard to bet against in 0:16:13.280 --> 0:16:15.560 a big way. But it seems like they're in trouble. 0:16:16.440 --> 0:16:19.600 I think that's the confusing part or difficult part for 0:16:19.640 --> 0:16:23.160 a lot of investors to understand. When they initially announced 0:16:23.200 --> 0:16:25.960 the spinoff plan last year and the restructuring, there was 0:16:26.080 --> 0:16:29.200 a lot of promise from the investors side. They did 0:16:29.200 --> 0:16:31.400 feel like, Okay, maybe this is a way where this 0:16:31.560 --> 0:16:35.320 sort of struggling e commerce empire, coming off of the 0:16:36.000 --> 0:16:40.160 regulatory crackdown from the government, that would be a way 0:16:40.160 --> 0:16:42.680 that they can reinvigorate growth and unlock that kind of 0:16:42.680 --> 0:16:46.480 shareholder value. Unfortunately, we haven't really seen that play out 0:16:46.480 --> 0:16:49.640 in the same way. Part of that is from external factors, 0:16:49.800 --> 0:16:53.120 like just the increasing competition in the market and also 0:16:53.280 --> 0:16:56.280 just the depressed IPO market, which makes capital markets not 0:16:56.360 --> 0:16:58.880 a very good path for the company. But at the 0:16:58.920 --> 0:17:01.560 same time, it does start to raise questions about like 0:17:01.640 --> 0:17:04.960 what is the management thinking exactly, Were there certain missteps 0:17:05.119 --> 0:17:07.760 or things that could have done differently in the rollout 0:17:07.800 --> 0:17:09.439 of this restructuring. 0:17:09.880 --> 0:17:12.840 Or is the political pressure just that great, and we 0:17:12.880 --> 0:17:16.120 don't know, you know, it's almost impossible to say everything 0:17:16.880 --> 0:17:20.439 on that level is kind of black box stuff in China, 0:17:21.200 --> 0:17:23.000 but we have seen Jack Mawk come a little bit 0:17:23.000 --> 0:17:26.480 more into the spotlight. So it's a story that continues 0:17:26.520 --> 0:17:29.480 to unfold. Sarah, thanks for helping us understand it. Sarah Cheng, 0:17:29.880 --> 0:17:39.760 Bloomberg China Technology Reporter. We thought it was a good 0:17:39.760 --> 0:17:41.920 time to take a closer look at the banks as 0:17:42.000 --> 0:17:46.920 earnings are nigh in China. Bloomberg Intelligence says that icbc's 0:17:46.960 --> 0:17:49.720 margin and loan quality in twenty twenty three in the 0:17:49.760 --> 0:17:53.879 results could set the tone for the industry's fundamental prospects. 0:17:53.920 --> 0:17:56.880 And joining us now in our studios is Shoo Jin Chen, 0:17:57.320 --> 0:18:01.439 who's head of China Financial and Property research over at Jeffries. 0:18:02.080 --> 0:18:05.120 So is that right, Hu Jin, that we could see 0:18:05.119 --> 0:18:09.280 some margin pressures here for the leading banks in these 0:18:09.359 --> 0:18:10.120 latest numbers. 0:18:10.600 --> 0:18:14.520 Definitely, So for almost all SOOE banks we would probably 0:18:14.600 --> 0:18:18.280 see around like a ten base point decline in year 0:18:18.480 --> 0:18:22.600 for last year's margin, and also for like going forward, 0:18:22.720 --> 0:18:26.159 we do see netting just margin pressure mainly due to 0:18:26.359 --> 0:18:29.520 the AIRPR cut as well as the very weak demand. 0:18:30.440 --> 0:18:33.879 So it reflects the interest rate environment. I understand that 0:18:34.080 --> 0:18:36.600 maybe you could make the argument that if loan demand 0:18:36.960 --> 0:18:41.320 or stronger, it may be okay to sacrifice a little 0:18:41.320 --> 0:18:44.280 bit of margin. But when I look at the data, 0:18:44.359 --> 0:18:46.760 at least the numbers for China in the month of February, 0:18:46.880 --> 0:18:49.760 a loan growth was probably the slowest on record, as 0:18:49.800 --> 0:18:53.040 I recall, So what can the government do? What can 0:18:53.119 --> 0:18:55.680 anyone do to kind of revive the demand part of 0:18:55.720 --> 0:18:56.199 the story. 0:18:57.720 --> 0:19:00.480 So first, if we only look at February long growth, 0:19:00.560 --> 0:19:03.800 it was largely affected by the seasonal issue. You know 0:19:04.040 --> 0:19:07.000 that last year the Chinese New Year was in January 0:19:07.320 --> 0:19:10.280 and there's not no no long issues during the new 0:19:10.600 --> 0:19:13.919 during the festival. What this year is in February, So 0:19:14.000 --> 0:19:17.000 that results like very slow long growth for the overall 0:19:17.119 --> 0:19:20.560 long growth this year we expected to slow slow down 0:19:20.560 --> 0:19:22.960 a little bit, but the new loan could be like 0:19:23.080 --> 0:19:28.360 similar amount of last year. On the second is that well, 0:19:28.440 --> 0:19:30.840 although the new one could be like similar to last 0:19:30.880 --> 0:19:34.480 year's scale, but we think the individual the household demand 0:19:34.760 --> 0:19:35.400 was quite a weak. 0:19:35.640 --> 0:19:35.840 Well. 0:19:35.880 --> 0:19:38.600 Banks may like because they're trying to reach the growth 0:19:38.680 --> 0:19:41.760 long growth target, they may lend to those like central 0:19:41.880 --> 0:19:45.760 s e with very low long yield, so that also 0:19:46.040 --> 0:19:49.680 I mean sacrifice. They are sacrificed, they are not just margin. 0:19:50.200 --> 0:19:53.920 So regarding to like boosting credit demand, I would say 0:19:53.960 --> 0:19:56.960 that the key focus today is still on the policy side. 0:19:57.400 --> 0:19:59.960 But because in our base case scenario we don't exp 0:20:00.320 --> 0:20:04.639 China to conduct like Basuga stimulus, Therefore it could be 0:20:04.680 --> 0:20:08.720 a long time for this especially household to recover demands 0:20:09.119 --> 0:20:11.920 for infrastructure and the property secual We probably will see 0:20:12.000 --> 0:20:17.600 like more investment following the special government issuance. And also 0:20:18.520 --> 0:20:23.240 as you know that China is conducting the white list 0:20:23.560 --> 0:20:26.040 for projects for projects and that helps. 0:20:25.800 --> 0:20:28.520 That's the big thing is with this white list, you 0:20:28.520 --> 0:20:31.359 would expect, I suppose the banks to be directing a 0:20:31.359 --> 0:20:34.880 lot more funding in that direction. What does that mean 0:20:34.960 --> 0:20:37.640 for the others who aren't on the white list? 0:20:38.640 --> 0:20:43.320 Very good question first is that actually if we look 0:20:43.400 --> 0:20:46.240 at the rule for the white list, one of the 0:20:46.320 --> 0:20:50.240 key role is that the project need to have sufficient collateral. 0:20:50.720 --> 0:20:54.159 But for China banks, if the project has sufficient collateral, 0:20:54.520 --> 0:20:58.320 then banks probably are very happy to lend to it, 0:20:58.440 --> 0:21:01.399 whether it's not it's our or not on a white list. 0:21:02.119 --> 0:21:06.119 So I think for like for for the projects like 0:21:06.200 --> 0:21:09.800 outside the white list, banks use I mean bank where 0:21:09.960 --> 0:21:14.199 used there like screening those projects and see whether they 0:21:14.240 --> 0:21:17.560 have sufficient projects, sufficient cultural But for those on a 0:21:17.600 --> 0:21:20.280 whire list that I doubt that they may have some 0:21:20.480 --> 0:21:25.160 issue regarding to either the like collateral or other issue. Otherwise, 0:21:25.400 --> 0:21:29.040 I mean, if they have sufficient colateral, I don't think 0:21:29.080 --> 0:21:31.600 that local government need to like push them so hard 0:21:31.600 --> 0:21:32.080 to banks. 0:21:32.160 --> 0:21:35.359 Right, we know the real estate story. We know the 0:21:35.440 --> 0:21:38.560 property prices have been slumping and how that is kind 0:21:38.560 --> 0:21:41.320 of rippled through the entire economy. The question is how 0:21:41.359 --> 0:21:43.600 long will it take to recover in your view, and 0:21:44.280 --> 0:21:47.800 in the interim, is it possible for the government to 0:21:47.960 --> 0:21:52.160 make up that lack of a powerful driver a growth driver. 0:21:52.320 --> 0:21:54.919 Could it be made up for an industrial policy? Do 0:21:54.960 --> 0:21:57.320 you think? Very good question. 0:21:57.800 --> 0:21:59.840 So if we look at the property sector, I'm so 0:22:00.080 --> 0:22:03.920 of On one hand is that the transaction volume, including 0:22:04.000 --> 0:22:09.320 both the primary market and the secondary market, may recover earlier. 0:22:10.080 --> 0:22:14.200 Currently we see actually the secondary market account for around 0:22:14.359 --> 0:22:18.320 almost close to like fifty percent of total transaction in China, 0:22:18.760 --> 0:22:23.160 which is significantly increased from like twenty percent several years ago. 0:22:24.040 --> 0:22:26.560 And the second is seid. But the key issue is 0:22:26.600 --> 0:22:32.080 that mainly the I mean the primary market sales is 0:22:32.119 --> 0:22:35.920 the mainly it's the main contribution to create a main 0:22:35.960 --> 0:22:40.359 contribution to the GDP growth. So regarding to the primary 0:22:40.400 --> 0:22:43.439 market sales, we still see a very long way to go, 0:22:44.280 --> 0:22:47.399 especially the pricing the primary market. We still see some 0:22:47.560 --> 0:22:50.840 like downward pressure both in this year and going forward. 0:22:51.119 --> 0:22:54.520 It's a little surprising to see the stock prices of 0:22:54.600 --> 0:22:57.480 some of the banks have actually not been too bad. ICBC, 0:22:57.600 --> 0:23:02.080 for instance, over the last six seven months has trended higher. 0:23:02.560 --> 0:23:05.240 I'm wondering whether our investors were hoping for an increase 0:23:05.280 --> 0:23:08.960 in dividend, but given the climate, is it not very 0:23:09.000 --> 0:23:11.199 reasonable to expect an increase in dividends? 0:23:11.600 --> 0:23:15.640 Very good question. So actually we do expect a dividend 0:23:15.720 --> 0:23:19.879 increase for some joint stock banks whose dividend payout was 0:23:19.960 --> 0:23:23.800