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Speaker 1: Let's get to our guest. Raymond Young is with US

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Speaker 1: chief Greater China economist at a n Z joining from

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Speaker 1: Hong Kong. Thanks for being with us, Raymond. Let's begin

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Speaker 1: with the inflation data for China. This factory gate price

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Speaker 1: data remains in kind of deflationary territory, and I'm curious. Yeah,

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Speaker 1: it's maybe can be explained away with with a lot

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Speaker 1: of what's been happening in the overall economy on the mainline,

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Speaker 1: given the COVID restrictions. But we know now there has

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Speaker 1: been an abrupt shift. Would you think that this narrative

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Speaker 1: on factory gate prices begins to change pretty abruptly? Um?

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Speaker 1: I think that's the the pp I would continue to

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Speaker 1: have to deflation. Uh. Not only because of the domestic

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Speaker 1: situation China, even though that we know that COVID easing

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Speaker 1: will help some domestic travel or passing to travel to

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Speaker 1: some extent, but the globally, you know, the energy prices

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Speaker 1: as it seems to be um um picking up. So

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Speaker 1: I think on the head line perspective is just an

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Speaker 1: active one on three percent year on year about a

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Speaker 1: month on month basis pre stable at the moment. At

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Speaker 1: the later state that we know is just point one

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Speaker 1: percent Pasiti. I believe that if the global recession really

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Speaker 1: come in play, then probably the pp I will stay

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Speaker 1: nective for a while before a food flages recovery of China,

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Speaker 1: specially for international travel from from China. And how about

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Speaker 1: the CPI as demands snaps back as restrictions get eased.

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Speaker 1: What's your outlook for inflation in China? And three well,

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Speaker 1: the easing um local easing my help a bit um

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Speaker 1: and supports surface sector recovery. But our broad view is

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Speaker 1: that China is still faced with a great inflation unless

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Speaker 1: there's a changing expectation, specially for the very poor party

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Speaker 1: outlook and probably priced in falling. You look at the

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Speaker 1: today's as one point six percent uh yeah, but actually

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Speaker 1: on a month on month basis, e crnchially has been

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Speaker 1: dropping point to percentage points, so he's still on the

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Speaker 1: deflationary vote. I don't see there's any significant uh up

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Speaker 1: take the next year unless there's a big change and

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Speaker 1: revival of the poppy sector as a poppy price um

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Speaker 1: has to be stabilized in order to prevent China from

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Speaker 1: falling into a Japanese laws TECTI. Raymond, there was a

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Speaker 1: very interesting piece in the Wall Street Journal today in

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Speaker 1: the US saying that Terry Guos, the founder of Fox Kahn, reportedly,

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Speaker 1: according to the Journal, played a major role in perseaiting

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Speaker 1: Beijing to accelerate the dismantling of COVID zero. He basically

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Speaker 1: indicated that if these controls were to continue, they would

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Speaker 1: threaten China's central position and global supply chains. And I'm

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Speaker 1: sure other companies in China were expressing the same sentiment.

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Speaker 1: And you know, from the lens on the outside, you

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Speaker 1: see the protests, You're thinking, maybe the protesters had an

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Speaker 1: impact on changing the narrative there, but maybe it was

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Speaker 1: China Inc. Helping to to get Beijing to wake up

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Speaker 1: and to say, look, unless things were to change or

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Speaker 1: do change pretty quickly, I mean, there could be dire

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Speaker 1: consequences for the economy. Absolutely. I just im back on

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Speaker 1: Taipei last week. UH spoke to UH. Many Taiwanese manufacturers

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Speaker 1: were significant production facilities in in China. Now, Jun Joe,

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Speaker 1: what's happened to Fox contactory? We all know, UH, that's

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Speaker 1: a turning point um to the whole easing and also

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Speaker 1: to some extent many of the manufacturers. I think about

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Speaker 1: you know, expanding at least diversifying their production site because

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Speaker 1: of the cope situation. UM and Vietnam and Indonesia, you know,

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Speaker 1: spun to benefit from this process. But I think that

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Speaker 1: because the supply chain it's been well established in China,

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Speaker 1: some of these global manufacturers and contract manufacturer or e

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Speaker 1: M players, they don't really want to you know, shift

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Speaker 1: to other countries immediately, so that they is not surprising

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Speaker 1: that if they lobby with the Chinese government to to

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Speaker 1: ease the COVID policy, that's helped. What is happening in

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Speaker 1: the past few days. Yeah, that's definitely going to help.

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Speaker 1: But then we have to remember, you know, the experience

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Speaker 1: and the rest of the world is reopening has happened.

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Speaker 1: There's been a lot of illness, a lot of absentee

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Speaker 1: is UM and a lot of disruption. So what sort

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Speaker 1: of supply chain upheaval do you anticipate in the in

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Speaker 1: the nearer term. It's correct, but I think it's uh,

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Speaker 1: the Chinese help of frauity suggest they released that you know,

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Speaker 1: ten measures actually on Wednesday, but then it's got published yesterday,

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Speaker 1: and um, they're they're the line of what now is

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Speaker 1: that they regard the latest mutation of virus is not

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Speaker 1: that deadly, and U the accept the fact that, well,

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Speaker 1: perhaps it sicktly for one or two days and get

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Speaker 1: back to normal, even though some the restrction is still

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Speaker 1: in place, for example the quarantine, but then now they

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Speaker 1: changes to the home isolation. UH still require but this

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Speaker 1: will be less distructive. Compare with the first half the

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Speaker 1: year Shanghai, and also the latest wave happened in jong Zo,

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Speaker 1: and I think that the policy easing even with the

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Speaker 1: rising case number that also may not become by the

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Speaker 1: official because people may not reported toe to the government

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Speaker 1: to may actually help this smooth and the supply chain

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Speaker 1: disruption and to send this type of risk and distort

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Speaker 1: the global manufacturing activities. Raymond I was talking earlier about

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Speaker 1: the report that we had yesterday. The Dutch officials are

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Speaker 1: planning new controls on exports of chip making equipment to China,

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Speaker 1: perhaps to align them in a way that would be

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Speaker 1: more similar to what we have between the U S

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Speaker 1: and China right now in terms of restracting Chinese access

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Speaker 1: to high end technology. And then today it looks like

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Speaker 1: Shi jing Ping, the president is wrapping up a trip

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Speaker 1: to Saudi Arabia. How do you view China's repositioning of

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Speaker 1: itself as a nation within the world now, I mean,

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Speaker 1: do you think we're going to see a fundamental shift

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Speaker 1: or are we seeing a fundamental change? Well, remember that

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Speaker 1: the Belt and Row has been written in the Constitution

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Speaker 1: a couple of years ago as already a the way

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Speaker 1: the line of thought of how Si Jing pinks position

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Speaker 1: in China in the world. Now, of course it's never

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Speaker 1: be exclusive. China does want to trade with the US.

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Speaker 1: China does want to trade if some of the country

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Speaker 1: that might not be that friendly to some extent. But

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Speaker 1: at the same time they for the trip to Saugia

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Speaker 1: Arabia is absolutely a for energy security and now the

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Speaker 1: open next few years, believe that the China would like

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Speaker 1: to get closer to many other countries so that they

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Speaker 1: can also diversify it the important portfolio that is critical

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Speaker 1: to the domestic economic development. Remember this headline pots of

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Speaker 1: jew circulations and um to prevent the external risks and China,

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Speaker 1: we ne need to boost the domestic activities as a

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Speaker 1: to offset the external weakness, not to only because of

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Speaker 1: your politics, but also because of global recessions. So I'm

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Speaker 1: not surprised as they signed a lot of US in

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Speaker 1: investment in Trader Saudi Arabia with this PRIP trying has

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Speaker 1: got a lot of deals and investment with other countries

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Speaker 1: as well, particularly in emerging markets and debts really starting

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Speaker 1: to pile up now. Leka Chang has promised to work

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Speaker 1: with the IMF and other countries on fair and equitable restructuring.

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Speaker 1: But do you see any risks from this growing dead pile? Um?

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Speaker 1: I think the substence that the it depends on how

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Speaker 1: other country need to deal with it, and also for

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Speaker 1: domestic that that situation of course is more to do

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Speaker 1: with whether China can be eleforation and also to engineer

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Speaker 1: some of the pasure to spend some systemic financial risks.

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Speaker 1: So what we're seeing that they have been having this

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Speaker 1: very tough measure to develop us locally and also in

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Speaker 1: terms of the offshore bonds that we've seen some default

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Speaker 1: you know, in the past few years. Um, I think

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Speaker 1: the prols it has to be very gradual, and we

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Speaker 1: look forward to this Central Economic Work Conference that we're

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Speaker 1: becoming next week. The focus is obviously will be on

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Speaker 1: the poppy of financing and uh, let's see how they're

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Speaker 1: going to um interest long term. The elefaging from this

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Speaker 1: work confress. Yeah alright, Raymond Young, Chief Greater China Economist

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Speaker 1: at a MS, thanks so much for joining us on

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Speaker 1: Bloomberg Daybreak Asia