1
00:00:10,680 --> 00:00:14,280
Speaker 1: Hello, and welcome to another episode of the Odd Loots Podcast.

2
00:00:14,400 --> 00:00:19,319
Speaker 1: I'm Tracy Allaway and I'm Joe. Wasn't so Joe? You know,

3
00:00:19,360 --> 00:00:23,200
Speaker 1: I just came back from Beijing, yes, and uh, we

4
00:00:23,239 --> 00:00:25,440
Speaker 1: haven't even talked about it yet, but I saw all

5
00:00:25,520 --> 00:00:30,360
Speaker 1: of your pictures and I'm extremely jealous. Yeah, the food

6
00:00:30,480 --> 00:00:33,280
Speaker 1: was very good, and you should be jealous because you

7
00:00:33,320 --> 00:00:35,519
Speaker 1: missed out on quite a lot. But you know, I

8
00:00:35,600 --> 00:00:38,440
Speaker 1: thought you had some lamb thing, like a big, like

9
00:00:38,520 --> 00:00:41,239
Speaker 1: gigantic barbecued lamb that just looked like the best thing

10
00:00:41,280 --> 00:00:44,080
Speaker 1: I've ever seen? Is that? Right? It was so good,

11
00:00:44,280 --> 00:00:47,440
Speaker 1: it was amazing. It was like a Mongolian barbecued leg

12
00:00:47,600 --> 00:00:50,720
Speaker 1: of lamb that you grill at your own little table

13
00:00:50,760 --> 00:00:54,000
Speaker 1: and then you dip it into crushed peanuts and salt,

14
00:00:54,080 --> 00:00:57,800
Speaker 1: and it was good. I'm allergic to peanuts, but what

15
00:00:57,880 --> 00:01:02,000
Speaker 1: everything else sounded amazing? All right, Well, next time you come,

16
00:01:02,200 --> 00:01:04,920
Speaker 1: we will have that without the peanuts. But you know,

17
00:01:04,959 --> 00:01:08,160
Speaker 1: I hadn't been back to Beijing for like thirteen or

18
00:01:08,240 --> 00:01:12,800
Speaker 1: fourteen years, and there were so many changes to the city,

19
00:01:12,959 --> 00:01:15,520
Speaker 1: like really big ones. Whole areas of it are just

20
00:01:15,760 --> 00:01:18,880
Speaker 1: unrecognizable to what they look like in two thousand five,

21
00:01:18,920 --> 00:01:22,160
Speaker 1: two thousand and six. I feel like we should do

22
00:01:22,200 --> 00:01:25,160
Speaker 1: a whole episode at some point, just like you comparing

23
00:01:25,720 --> 00:01:28,280
Speaker 1: Beijing over thirteen years. I bet people would be interested

24
00:01:28,319 --> 00:01:31,680
Speaker 1: in that. I don't think I was as um financially

25
00:01:31,720 --> 00:01:34,600
Speaker 1: minded back in two thousand five and two thousand six,

26
00:01:34,640 --> 00:01:37,000
Speaker 1: but I was going to say, one of the biggest

27
00:01:37,080 --> 00:01:41,120
Speaker 1: changes in that time period has of course been to

28
00:01:41,480 --> 00:01:45,600
Speaker 1: China's capital markets. So thirteen years ago, China didn't really

29
00:01:45,640 --> 00:01:48,240
Speaker 1: have much of a corporate bond market, and now it

30
00:01:48,280 --> 00:01:52,120
Speaker 1: has a pretty big one, both domestically and dollar denominated

31
00:01:52,160 --> 00:01:56,480
Speaker 1: off to our bonds as well. But most importantly, China's

32
00:01:56,520 --> 00:02:00,160
Speaker 1: corporate bond market has had a number of defaults in

33
00:02:00,240 --> 00:02:04,640
Speaker 1: recent years, and that's a really big change because historically,

34
00:02:05,000 --> 00:02:07,960
Speaker 1: you know, it was kind of uncertain that the authorities

35
00:02:07,960 --> 00:02:11,840
Speaker 1: in China would allow companies to default. So you can imagine, Joe,

36
00:02:13,040 --> 00:02:15,480
Speaker 1: that makes for an interesting bond market, given that bonds

37
00:02:15,520 --> 00:02:20,560
Speaker 1: are of course supposed to reflect investors perception of default risk. Yeah.

38
00:02:20,600 --> 00:02:24,280
Speaker 1: I remember, like, I guess what was at or the

39
00:02:24,360 --> 00:02:29,120
Speaker 1: first ever Chinese bond default, And I remember thinking like,

40
00:02:29,200 --> 00:02:31,840
Speaker 1: how is this possible? Like how could you have the

41
00:02:31,960 --> 00:02:34,600
Speaker 1: first ever bond default. And I almost like thought I

42
00:02:34,680 --> 00:02:37,480
Speaker 1: was misreading the article, is this idea that there had

43
00:02:37,560 --> 00:02:41,080
Speaker 1: never been a defaulted bond before? But obviously, you know,

44
00:02:41,120 --> 00:02:43,840
Speaker 1: we sort of take for granted the maturity of the

45
00:02:43,960 --> 00:02:46,839
Speaker 1: US bond market, the US corporate bond market, and then

46
00:02:47,080 --> 00:02:49,919
Speaker 1: defaults even in good times, you know, they happened from

47
00:02:49,919 --> 00:02:53,480
Speaker 1: time to time with low rated companies. We sorry take

48
00:02:53,520 --> 00:02:57,120
Speaker 1: for granted that not all markets are as a mature

49
00:02:57,520 --> 00:03:02,480
Speaker 1: and sort of market regulated the way the US one is. Yeah, totally.

50
00:03:02,520 --> 00:03:04,760
Speaker 1: And I mean I remember in two thousand and fifteen,

51
00:03:05,320 --> 00:03:08,120
Speaker 1: analysts over at Bank of America Marylanch they published a

52
00:03:08,200 --> 00:03:12,560
Speaker 1: note that was basically a history of Chinese corporate bond defaults,

53
00:03:12,600 --> 00:03:15,160
Speaker 1: and there were like two things on there. It was.

54
00:03:15,320 --> 00:03:17,520
Speaker 1: It was a pretty short note, as you might imagine,

55
00:03:17,760 --> 00:03:21,440
Speaker 1: but it raises all these interesting questions about how do

56
00:03:21,440 --> 00:03:25,480
Speaker 1: you actually develop a corporate bond market almost from scratch,

57
00:03:25,840 --> 00:03:31,880
Speaker 1: and what sort of distortions or unique characteristics are introduced

58
00:03:31,960 --> 00:03:34,760
Speaker 1: when you have a big question mark over whether or

59
00:03:34,760 --> 00:03:37,160
Speaker 1: not defaults will be allowed. And I should just say

60
00:03:37,760 --> 00:03:42,000
Speaker 1: one of the defining features of China's sort of business

61
00:03:42,120 --> 00:03:46,720
Speaker 1: system as a whole is the division between private companies

62
00:03:47,120 --> 00:03:50,920
Speaker 1: and state owned enterprises. So s O es uh, these

63
00:03:50,960 --> 00:03:54,680
Speaker 1: big state run conglomerates that are often thought to be

64
00:03:55,040 --> 00:04:00,400
Speaker 1: government backed or even government guaranteed. Right, Well, I'm interested

65
00:04:00,440 --> 00:04:03,680
Speaker 1: in learning more about this topic alright. So we actually

66
00:04:03,720 --> 00:04:06,400
Speaker 1: have the perfect guest to talk about all of this.

67
00:04:06,760 --> 00:04:09,600
Speaker 1: It's someone who's done a lot of academic work on

68
00:04:09,680 --> 00:04:12,600
Speaker 1: exactly this topic, as well as a lot of other stuff.

69
00:04:13,040 --> 00:04:16,360
Speaker 1: It's Juin Pan. She is a professor at the Shanghai

70
00:04:16,440 --> 00:04:21,400
Speaker 1: Advanced Institute of Finance at Shanghai Jiaotong University. So, June,

71
00:04:21,480 --> 00:04:24,080
Speaker 1: thank you so much for coming on. Well, thank you

72
00:04:24,120 --> 00:04:28,200
Speaker 1: so much for the invitation. It's exciting to hear what

73
00:04:28,200 --> 00:04:31,280
Speaker 1: what do you and Joe just talked about it. It's

74
00:04:31,320 --> 00:04:35,640
Speaker 1: really an interesting topic for me at the moment. Right. So,

75
00:04:35,720 --> 00:04:39,000
Speaker 1: you actually just published a paper where you were looking

76
00:04:39,160 --> 00:04:42,880
Speaker 1: at this exact topic, and specifically you were looking at

77
00:04:42,920 --> 00:04:46,960
Speaker 1: whether or not spreads or risk premiums on China's corporate

78
00:04:47,000 --> 00:04:51,400
Speaker 1: bonds actually reflect the health the financial health of its companies.

79
00:04:51,440 --> 00:04:54,520
Speaker 1: But before we dive into that, um, I wanted to

80
00:04:54,560 --> 00:04:59,320
Speaker 1: sort of ask you a broader question about how China's

81
00:04:59,360 --> 00:05:03,200
Speaker 1: financial mark as are currently structured, So corporate bonds are

82
00:05:03,360 --> 00:05:08,560
Speaker 1: supposed to be market based versus the sort of traditional

83
00:05:08,760 --> 00:05:12,760
Speaker 1: bank based system of lending in China. And what I

84
00:05:12,760 --> 00:05:16,320
Speaker 1: mean by market based is investors are setting or influencing

85
00:05:16,360 --> 00:05:20,000
Speaker 1: funding costs by demanding a certain level of compensation for

86
00:05:20,080 --> 00:05:24,080
Speaker 1: perceived risk. So how big of a leap was it

87
00:05:24,200 --> 00:05:26,880
Speaker 1: or is it for China to move from that bank

88
00:05:26,920 --> 00:05:30,680
Speaker 1: based system of lending to something that incorporates more market

89
00:05:30,760 --> 00:05:34,599
Speaker 1: based types of lending. I would say it's a it's

90
00:05:34,600 --> 00:05:37,800
Speaker 1: a big leap for people like myself who works in

91
00:05:37,839 --> 00:05:41,520
Speaker 1: a in a financial research area, in a financial market.

92
00:05:41,680 --> 00:05:46,680
Speaker 1: This is a very encouraging development to see that China's

93
00:05:46,720 --> 00:05:51,479
Speaker 1: credit market overall, the credit market to be improving. Actually,

94
00:05:51,520 --> 00:05:56,479
Speaker 1: the speed of the market development was pretty impressive over

95
00:05:56,520 --> 00:06:00,200
Speaker 1: the past ten years. It grew into a roughly a

96
00:06:00,279 --> 00:06:03,720
Speaker 1: street trailing US dollar market, So it has been a

97
00:06:03,760 --> 00:06:08,960
Speaker 1: pretty impressive development just to the credit market alone. So

98
00:06:09,160 --> 00:06:13,120
Speaker 1: sorry break it down. What is the split between how

99
00:06:13,240 --> 00:06:17,600
Speaker 1: much private credit is funded via something we'd recognize as

100
00:06:17,600 --> 00:06:22,520
Speaker 1: the bond market versus traditional bank lending. So if you

101
00:06:22,600 --> 00:06:25,560
Speaker 1: think about the ratio for non financial firms in China,

102
00:06:25,839 --> 00:06:28,919
Speaker 1: so we have a ratio of for market based debt,

103
00:06:29,360 --> 00:06:34,600
Speaker 1: so including copper bounds and also other type of basically

104
00:06:35,000 --> 00:06:39,599
Speaker 1: market traded versus bank loans. In two thousand eight it

105
00:06:39,760 --> 00:06:43,800
Speaker 1: was about four point six percent, so only a tiny

106
00:06:43,880 --> 00:06:48,080
Speaker 1: fraction as a racial too to the bank loads. You know,

107
00:06:48,240 --> 00:06:53,320
Speaker 1: China's financial system is still a bank dominated uh system,

108
00:06:53,520 --> 00:06:56,800
Speaker 1: not not like in the US. So that number grew

109
00:06:56,920 --> 00:07:01,039
Speaker 1: from four point six in two thousand and eight a

110
00:07:01,080 --> 00:07:06,480
Speaker 1: little bit under to be more precise, in two thousand eighteen,

111
00:07:06,920 --> 00:07:11,640
Speaker 1: and much of that improvement is driven by the corporate

112
00:07:12,120 --> 00:07:17,960
Speaker 1: the credit market. So walk us through your most recent paper.

113
00:07:18,160 --> 00:07:22,200
Speaker 1: So you're you're taking a deep dive into Chinese corporate

114
00:07:22,200 --> 00:07:25,400
Speaker 1: bonds and you're trying to ascertain whether or not the

115
00:07:25,480 --> 00:07:31,840
Speaker 1: actual spreads, the risk premiums reflect something fundamental about the

116
00:07:31,880 --> 00:07:36,280
Speaker 1: financial health of Chinese companies, as they sort of are

117
00:07:36,320 --> 00:07:39,360
Speaker 1: meant to do in more developed markets. So you know,

118
00:07:39,400 --> 00:07:42,000
Speaker 1: if a company is perceived to be at a higher

119
00:07:42,080 --> 00:07:46,520
Speaker 1: risk of defaults, it'll have a higher spread because investors

120
00:07:46,520 --> 00:07:49,240
Speaker 1: want to be compensated for that risk. Why did you

121
00:07:49,280 --> 00:07:52,559
Speaker 1: decide to look into this particular topic in the US

122
00:07:52,640 --> 00:07:57,000
Speaker 1: pocket this this question has been well researched, So you

123
00:07:57,080 --> 00:08:01,880
Speaker 1: look at companies of different let's the different fundamental risk

124
00:08:02,080 --> 00:08:05,960
Speaker 1: in terms of the faults. In academic we have standard

125
00:08:06,080 --> 00:08:09,920
Speaker 1: models named after the professional button as we called the

126
00:08:10,000 --> 00:08:13,640
Speaker 1: murder models. So in a mortor model, we take the

127
00:08:13,680 --> 00:08:18,200
Speaker 1: firm's baton sheeting information including its leverage, and also we

128
00:08:18,320 --> 00:08:22,360
Speaker 1: take the firms if the firm is traded with public

129
00:08:22,360 --> 00:08:26,440
Speaker 1: playlisted equity, we take the equity market information and one

130
00:08:26,480 --> 00:08:30,680
Speaker 1: of the key information will be the equity volatility. So

131
00:08:30,840 --> 00:08:34,760
Speaker 1: the murder model will take those fundamental plus equity market

132
00:08:34,800 --> 00:08:39,120
Speaker 1: information as input and give you an assessment of what's

133
00:08:39,120 --> 00:08:43,040
Speaker 1: the probability of the fault for the bond issued by

134
00:08:43,080 --> 00:08:47,200
Speaker 1: this company. And you can get a sense that there

135
00:08:47,240 --> 00:08:52,280
Speaker 1: will be a connection between model predicted the faults and

136
00:08:52,720 --> 00:08:58,840
Speaker 1: the market observed credit spreads. So in the US, if

137
00:08:58,880 --> 00:09:02,360
Speaker 1: you take an approach of that, you will see that

138
00:09:02,960 --> 00:09:08,640
Speaker 1: about of the variation in credit spread can be explained

139
00:09:08,679 --> 00:09:12,839
Speaker 1: by fundamental So we take this as a starting point

140
00:09:12,920 --> 00:09:16,760
Speaker 1: and we want to see whether in China we see

141
00:09:16,960 --> 00:09:21,880
Speaker 1: a smiller direction in terms of fundamental house of the

142
00:09:21,960 --> 00:09:28,400
Speaker 1: firm and the credit market pricing of the issuer. And

143
00:09:28,400 --> 00:09:31,880
Speaker 1: and this is our studying point before we get to

144
00:09:32,040 --> 00:09:35,800
Speaker 1: how well, the model works with the Chinese. Uh, with

145
00:09:35,880 --> 00:09:39,480
Speaker 1: the Chinese bond market. I'm curious in the US, maybe

146
00:09:39,520 --> 00:09:42,640
Speaker 1: just talk a little bit about you know, the US

147
00:09:42,720 --> 00:09:46,439
Speaker 1: is probably close to the sort of ideal free market

148
00:09:46,960 --> 00:09:51,120
Speaker 1: or free bond market. Is the Merten model robust enough

149
00:09:51,400 --> 00:09:55,400
Speaker 1: such that one can use it to identify miss pricings

150
00:09:55,559 --> 00:09:59,720
Speaker 1: or identify arbitrage opportunities between the price of a bond

151
00:10:00,000 --> 00:10:02,839
Speaker 1: and the price of an equity. Because you said so,

152
00:10:02,880 --> 00:10:06,160
Speaker 1: I'm sort of curious whether it's something that's mostly useful

153
00:10:06,320 --> 00:10:09,280
Speaker 1: from just a pure theoretical perspective, or whether it can

154
00:10:09,360 --> 00:10:12,960
Speaker 1: sort of form the basis for at least initially attempting

155
00:10:13,000 --> 00:10:17,720
Speaker 1: to identify overvalued or undervalued bonds. Well, this is a

156
00:10:17,720 --> 00:10:21,720
Speaker 1: good question. I mean, our financial models are always approxi

157
00:10:21,760 --> 00:10:26,640
Speaker 1: mentions of the much much richer reality. But this model

158
00:10:26,679 --> 00:10:30,920
Speaker 1: actually has been used by practitioners. There is uh you

159
00:10:31,000 --> 00:10:34,520
Speaker 1: probably have heard of. It's called km V. Yeah, so

160
00:10:34,760 --> 00:10:38,000
Speaker 1: km V was a it was a company that they

161
00:10:38,559 --> 00:10:43,560
Speaker 1: exactly the mode model and see the model with the

162
00:10:43,559 --> 00:10:46,920
Speaker 1: real data and the outcome is the problem. The km

163
00:10:47,000 --> 00:10:50,679
Speaker 1: these distance to default measure, which is similar to the

164
00:10:50,760 --> 00:10:54,439
Speaker 1: probability of default measure. I think for those listening who

165
00:10:54,440 --> 00:10:57,520
Speaker 1: have terminals at home, we have a very good function

166
00:10:57,559 --> 00:11:02,600
Speaker 1: on the terminal where you can and see your company's KMB. Yeah,

167
00:11:02,600 --> 00:11:04,920
Speaker 1: I thought I had to uplug the terminal here, but

168
00:11:05,000 --> 00:11:07,040
Speaker 1: you can. Actually it has the Merton model and you

169
00:11:07,040 --> 00:11:09,640
Speaker 1: can change some of the assumptions and so it's very fun.

170
00:11:09,679 --> 00:11:12,480
Speaker 1: You can sort of measure uh, you know, the gaps

171
00:11:12,520 --> 00:11:15,080
Speaker 1: between the price of the CDs and distance to default.

172
00:11:15,080 --> 00:11:16,600
Speaker 1: You can play around with that. It's very fun. And

173
00:11:16,800 --> 00:11:19,280
Speaker 1: I didn't mean to interrupt your apologize for that. I

174
00:11:19,280 --> 00:11:23,120
Speaker 1: would say this model it's not perfect. It's even the

175
00:11:23,120 --> 00:11:25,559
Speaker 1: Black Show's option pricing for the lives a lot of

176
00:11:26,080 --> 00:11:29,840
Speaker 1: you know, limitations, but it's a good starting point, a

177
00:11:29,880 --> 00:11:34,160
Speaker 1: good reference point was to start with, and it's encouraging it.

178
00:11:34,200 --> 00:11:38,000
Speaker 1: There is a link between the fundamental of the firm

179
00:11:38,160 --> 00:11:42,360
Speaker 1: and how it's a bonus priced. And as you move

180
00:11:42,400 --> 00:11:45,320
Speaker 1: on from the US market to the to the Chinese market,

181
00:11:45,320 --> 00:11:48,600
Speaker 1: you know will be surprised or maybe not surprised to

182
00:11:48,720 --> 00:11:52,680
Speaker 1: see that this meant actually should not be taken for granted,

183
00:11:53,400 --> 00:11:57,599
Speaker 1: as we see in a in a data so imperfections

184
00:11:57,640 --> 00:12:01,720
Speaker 1: in the Merton model aside, What did your research actually

185
00:12:01,800 --> 00:12:05,880
Speaker 1: show for the Chinese credit market. Did spreads on China's

186
00:12:05,920 --> 00:12:09,480
Speaker 1: corporate bonds actually show some sort of link to the

187
00:12:10,080 --> 00:12:14,000
Speaker 1: fundamental health of companies or issuers? I mean, I guess

188
00:12:14,000 --> 00:12:16,800
Speaker 1: another way of asking that question is is the market

189
00:12:16,840 --> 00:12:21,520
Speaker 1: based system actually working in China? So this question has

190
00:12:22,400 --> 00:12:25,120
Speaker 1: a know and then a yes. So the note is

191
00:12:25,200 --> 00:12:28,520
Speaker 1: that the four two zousand fourteen, as as you and

192
00:12:28,559 --> 00:12:32,880
Speaker 1: the Georges discussed, the four Tusan and fourteen bonds were

193
00:12:32,920 --> 00:12:36,559
Speaker 1: not allowed to default, so they were zero deforet the

194
00:12:36,800 --> 00:12:39,520
Speaker 1: prior two thousand and fourteen, so our data was from

195
00:12:39,920 --> 00:12:42,520
Speaker 1: two thousand ten to two thousand fourteen, would call this

196
00:12:42,679 --> 00:12:46,719
Speaker 1: the phase one period. During that period, there is no

197
00:12:46,880 --> 00:12:51,080
Speaker 1: link fundamental and the credit spread. There is no link

198
00:12:51,600 --> 00:12:55,480
Speaker 1: between those two. Why wasn't there this idea that they

199
00:12:55,520 --> 00:12:58,280
Speaker 1: go there were like there was questions about whether default

200
00:12:58,320 --> 00:13:01,040
Speaker 1: would ever be allowed to happen. What was the fear

201
00:13:01,080 --> 00:13:03,600
Speaker 1: of there and what was sort of then driving the market?

202
00:13:03,679 --> 00:13:07,200
Speaker 1: If there was this perception that defaults just weren't going

203
00:13:07,240 --> 00:13:10,320
Speaker 1: to be a thing. Well, first, let me actually rephrase

204
00:13:10,440 --> 00:13:15,280
Speaker 1: my previous statement. I should say conditioning on information in ratings,

205
00:13:15,440 --> 00:13:19,200
Speaker 1: because China doesn't have rating agencies, so they do rate

206
00:13:19,640 --> 00:13:24,880
Speaker 1: these different bonds, so conditioning on the ratings from fundamentals

207
00:13:24,920 --> 00:13:28,640
Speaker 1: that have no uh, additional information, so there is no link.

208
00:13:29,320 --> 00:13:34,000
Speaker 1: Is I do want to qualify my previous statement um

209
00:13:34,160 --> 00:13:37,240
Speaker 1: in terms of why defaults was not allowed to happen.

210
00:13:37,520 --> 00:13:41,480
Speaker 1: I guess this is not something it's difficult for me

211
00:13:41,640 --> 00:13:47,239
Speaker 1: to speculate on the regulation regulators, right, But the observation

212
00:13:47,360 --> 00:13:52,840
Speaker 1: from the market up participants is that these bonds never deflored.

213
00:13:53,400 --> 00:13:57,319
Speaker 1: So there is the Chanese saying of bound market pricing

214
00:13:57,880 --> 00:14:02,920
Speaker 1: face based do you down to this phase that bonds

215
00:14:02,960 --> 00:14:07,439
Speaker 1: don't defer, So it doesn't really matter about risk compensation

216
00:14:07,679 --> 00:14:10,320
Speaker 1: because the death's going to get bailed out anyway if

217
00:14:10,400 --> 00:14:13,319
Speaker 1: it ever ran into trouble, and hence there's actually no

218
00:14:14,000 --> 00:14:19,080
Speaker 1: differentiation shown in the risk premiums that is actually connected

219
00:14:19,200 --> 00:14:22,120
Speaker 1: to the fundamental health of the company. But you said

220
00:14:22,520 --> 00:14:27,320
Speaker 1: that was phase one, So what happened in phase two? Okay?

221
00:14:27,400 --> 00:14:31,120
Speaker 1: So we start our phase two from from two thousand

222
00:14:31,240 --> 00:14:36,160
Speaker 1: fourteen after the first default the front phase two to

223
00:14:37,360 --> 00:14:40,880
Speaker 1: the first quarter of two thousand eighteen. So over that

224
00:14:41,040 --> 00:14:45,440
Speaker 1: period you started to see a connection between the film

225
00:14:45,520 --> 00:14:51,440
Speaker 1: fundamentals and equity marketing information and the what do you

226
00:14:51,520 --> 00:14:54,880
Speaker 1: call the risk premium of the bonds all credit spreads

227
00:14:54,960 --> 00:14:57,880
Speaker 1: of this spot the start to develop a link. The

228
00:14:58,000 --> 00:15:00,360
Speaker 1: link is much weaker than what we've see in the

229
00:15:00,520 --> 00:15:04,000
Speaker 1: US market, but this is from our aunt. It looks

230
00:15:04,040 --> 00:15:07,480
Speaker 1: like a very promising beginning for the Chinese cap credit

231
00:15:07,640 --> 00:15:29,000
Speaker 1: market in your recent paper, and Tracy mentioned this in

232
00:15:29,080 --> 00:15:32,520
Speaker 1: the very beginning in the intro. Of course, the Chinese

233
00:15:32,840 --> 00:15:36,720
Speaker 1: private sector, of the Chinese corporate market is still segmented

234
00:15:37,280 --> 00:15:42,720
Speaker 1: massively between regular enterprises and state owned enterprises which are

235
00:15:42,800 --> 00:15:46,720
Speaker 1: state controlled and state back to varying degrees. You also

236
00:15:46,920 --> 00:15:50,240
Speaker 1: look at what the bond market says about the state

237
00:15:50,320 --> 00:15:53,360
Speaker 1: owned s o E sector. What do you see are

238
00:15:53,440 --> 00:15:56,440
Speaker 1: the differences in terms of how the bond market works

239
00:15:56,520 --> 00:16:00,640
Speaker 1: for those s O s SO doing place one which

240
00:16:00,760 --> 00:16:03,800
Speaker 1: is prior to the default. There is not too much

241
00:16:03,920 --> 00:16:08,840
Speaker 1: differentiation between these two groups. Overall. We do see that

242
00:16:09,200 --> 00:16:14,120
Speaker 1: a s A HE this government sponsored enterprise, the s

243
00:16:14,160 --> 00:16:18,480
Speaker 1: as our states on the enterprise, you know, depending on

244
00:16:18,560 --> 00:16:21,520
Speaker 1: how you call them, let's just call them as as SO.

245
00:16:22,120 --> 00:16:24,920
Speaker 1: During phase one as HE does have a little bit

246
00:16:25,040 --> 00:16:28,480
Speaker 1: of a premium, meaning that their credit spreads a narrower

247
00:16:29,040 --> 00:16:33,720
Speaker 1: compared to the non ass aly counterparts. Was similar ratings

248
00:16:34,360 --> 00:16:37,520
Speaker 1: during phase two. If you remember face towards the time

249
00:16:38,400 --> 00:16:42,280
Speaker 1: from two southern fourteen to eighteen where we started to

250
00:16:42,360 --> 00:16:45,520
Speaker 1: see the faults, but the defaults happened during that time

251
00:16:45,680 --> 00:16:49,800
Speaker 1: was mostly too to the non listed firms. So if

252
00:16:49,880 --> 00:16:54,480
Speaker 1: you focus on the listed firms, meaning that these firms

253
00:16:54,600 --> 00:16:58,280
Speaker 1: usually are larger firms in the economy, then the difference

254
00:16:58,400 --> 00:17:01,960
Speaker 1: between s and now as so as do a pretty

255
00:17:02,680 --> 00:17:05,960
Speaker 1: mild mild in the sense that during phase three later

256
00:17:06,040 --> 00:17:10,000
Speaker 1: on they become explosive, but during phase two there was

257
00:17:10,119 --> 00:17:14,040
Speaker 1: two about twenty basis point in terms of difference in

258
00:17:14,119 --> 00:17:18,520
Speaker 1: the credit spread. Let me repherence the the s AY

259
00:17:19,119 --> 00:17:25,000
Speaker 1: issues enjoy about a twenty basis point narrower credit spread

260
00:17:25,400 --> 00:17:30,639
Speaker 1: compared to that they are not necessarily counterpart. So the

261
00:17:30,760 --> 00:17:35,240
Speaker 1: implicit guarantee seems uh to be very much alive for

262
00:17:35,440 --> 00:17:38,760
Speaker 1: these state owned enterprises, and so they have these lower

263
00:17:38,840 --> 00:17:42,639
Speaker 1: risk premiums, which means they can attract financing at a

264
00:17:42,760 --> 00:17:47,840
Speaker 1: lower cost than private companies. I'm wondering do you have

265
00:17:47,960 --> 00:17:53,680
Speaker 1: any thoughts or insights into how the Chinese authorities might

266
00:17:53,760 --> 00:17:58,520
Speaker 1: be viewing that discrepancy or that segmentation in the market, Like,

267
00:17:59,200 --> 00:18:02,680
Speaker 1: is there a desire to put private companies on a

268
00:18:02,760 --> 00:18:08,040
Speaker 1: more even funding footing? So to speak with s O

269
00:18:08,119 --> 00:18:12,000
Speaker 1: E S is that something that China wants? If it

270
00:18:12,119 --> 00:18:15,679
Speaker 1: may I complete the whole picture before I talk about

271
00:18:15,840 --> 00:18:21,480
Speaker 1: what UH policies implications. So prior to two thousand eighteen,

272
00:18:21,800 --> 00:18:24,600
Speaker 1: So so so far we have two phases. One is

273
00:18:24,720 --> 00:18:27,640
Speaker 1: pretty fault, one is posted fought. But up to two

274
00:18:27,640 --> 00:18:30,560
Speaker 1: thousand and eighteen, if you look at the data, the

275
00:18:30,720 --> 00:18:34,879
Speaker 1: difference between SZE and ANE is mild. It's about twenty

276
00:18:34,960 --> 00:18:38,560
Speaker 1: basis point of a premium for the s E. But

277
00:18:38,840 --> 00:18:43,959
Speaker 1: going into two thousand eighteen, this is when the credit

278
00:18:44,080 --> 00:18:48,640
Speaker 1: market went crazy. This is so there are different regulations.

279
00:18:49,119 --> 00:18:52,920
Speaker 1: Even prior to to thousand eighteen. There was a de

280
00:18:53,160 --> 00:18:57,639
Speaker 1: leveraging campaign that started in two thousand and seventeen. So

281
00:18:58,160 --> 00:19:03,639
Speaker 1: gradually the credit market is was affected by by the regulations.

282
00:19:04,400 --> 00:19:07,840
Speaker 1: Especially in two thousand and eighteen, there was a what

283
00:19:08,000 --> 00:19:11,840
Speaker 1: they called the st management New regulations are as a

284
00:19:11,960 --> 00:19:17,160
Speaker 1: management which kind of cut the funding or the from

285
00:19:17,200 --> 00:19:22,120
Speaker 1: the st manager site cut their holdings of the credits bounds.

286
00:19:22,680 --> 00:19:27,119
Speaker 1: UH put it another way and makes them more discriminating

287
00:19:27,240 --> 00:19:31,200
Speaker 1: against the USA. That makes them more aware of the

288
00:19:31,320 --> 00:19:35,440
Speaker 1: credit rest even more so than before. So this is

289
00:19:35,520 --> 00:19:40,800
Speaker 1: the time when the segmentation becomes very severe. So the

290
00:19:40,920 --> 00:19:45,760
Speaker 1: Twente basis point premium enjoyed by the stories exploded to

291
00:19:45,840 --> 00:19:50,160
Speaker 1: about hundred basis points. Prior, the segmentation between these two

292
00:19:50,240 --> 00:19:54,600
Speaker 1: markets were was not so severe. Then post two thousand

293
00:19:54,600 --> 00:19:58,480
Speaker 1: and eighteen it became a really big deal. And along

294
00:19:58,560 --> 00:20:01,480
Speaker 1: the same time do you see starting to see a

295
00:20:01,560 --> 00:20:05,680
Speaker 1: lot more efforts for the bias or eu frons. So

296
00:20:05,920 --> 00:20:08,760
Speaker 1: it sounds like just listening to you so far as

297
00:20:08,840 --> 00:20:12,920
Speaker 1: you identify these three phases. So there was the pre

298
00:20:13,080 --> 00:20:18,360
Speaker 1: default phase going up to everyone enjoyed pretty tight spreads.

299
00:20:18,400 --> 00:20:22,040
Speaker 1: The bond market didn't tell you very much. Post fourteen

300
00:20:22,280 --> 00:20:26,080
Speaker 1: you start to get slightly more wider spreads for the

301
00:20:26,359 --> 00:20:31,119
Speaker 1: private non s O companies and more information from the

302
00:20:31,720 --> 00:20:35,399
Speaker 1: UM bond market period. They the prices start being more informative.

303
00:20:35,880 --> 00:20:40,399
Speaker 1: Post eighteen, the spreads get even wider. And in this

304
00:20:40,640 --> 00:20:45,359
Speaker 1: phase this is due to asset managers being forced to

305
00:20:45,400 --> 00:20:48,520
Speaker 1: be more cognizant about credit risk. It sounds like a

306
00:20:48,680 --> 00:20:53,639
Speaker 1: sort of just an ongoing maturation process. There was a story,

307
00:20:53,880 --> 00:20:57,840
Speaker 1: and Tracy alerted it to me this morning that actually

308
00:20:57,960 --> 00:21:01,240
Speaker 1: there is there is an s OE now that it's

309
00:21:01,520 --> 00:21:04,560
Speaker 1: very close, if not near in default or some sort

310
00:21:04,600 --> 00:21:07,000
Speaker 1: of bond holders are going to have to take a haircut.

311
00:21:07,359 --> 00:21:11,040
Speaker 1: Are we on the verge of a new stage four

312
00:21:11,160 --> 00:21:14,600
Speaker 1: or phase four whereby the bond market will start to

313
00:21:14,800 --> 00:21:18,920
Speaker 1: be more meaningful for also the s O sector, the

314
00:21:19,040 --> 00:21:24,200
Speaker 1: private sees you see them, you actually see private listed.

315
00:21:24,560 --> 00:21:28,399
Speaker 1: When I say private, I mean s O E issuers

316
00:21:29,119 --> 00:21:33,800
Speaker 1: who do not have a publicly listed So for this group,

317
00:21:34,720 --> 00:21:38,119
Speaker 1: we we actually have sent the faults amount this group.

318
00:21:39,320 --> 00:21:42,679
Speaker 1: I want to go back to uh my, my earlier question,

319
00:21:42,760 --> 00:21:46,240
Speaker 1: which was about whether or not it's desirable for the

320
00:21:46,400 --> 00:21:51,159
Speaker 1: private companies to be on a similar funding um playing

321
00:21:51,320 --> 00:21:55,440
Speaker 1: field as the s O s because of course, in

322
00:21:55,680 --> 00:21:58,040
Speaker 1: order for that to happen, I guess you you do

323
00:21:58,280 --> 00:22:02,639
Speaker 1: need to introduce some sort of default risk into the

324
00:22:02,840 --> 00:22:06,240
Speaker 1: state owned enterprise sector or you have to eliminate it

325
00:22:06,359 --> 00:22:09,880
Speaker 1: in the private market, which doesn't seem to be um

326
00:22:10,080 --> 00:22:14,040
Speaker 1: what China wants at the moment. So is leveling the

327
00:22:14,119 --> 00:22:17,639
Speaker 1: playing field between those two sectors when it comes to financing,

328
00:22:17,680 --> 00:22:20,040
Speaker 1: when it comes to moral hazard, in the bond market.

329
00:22:20,440 --> 00:22:27,920
Speaker 1: Is that something that's desirable for China. It's it's something desirable,

330
00:22:28,000 --> 00:22:30,359
Speaker 1: But I just don't see how that would work in

331
00:22:30,520 --> 00:22:34,040
Speaker 1: this uh corporate bond market. If you put them together,

332
00:22:34,600 --> 00:22:40,080
Speaker 1: the ally has explicit or implicit government guarantee, while the

333
00:22:40,200 --> 00:22:47,840
Speaker 1: Nassois have duly compuri Its investors are not discriminating against

334
00:22:48,000 --> 00:22:53,600
Speaker 1: the Nassois. But studying at phase three, when you see

335
00:22:53,680 --> 00:22:57,320
Speaker 1: massive defaults, not massive, but you see increasing amount of

336
00:22:57,440 --> 00:23:02,919
Speaker 1: defaults happening in the market, the investors are nervous. When

337
00:23:02,960 --> 00:23:08,360
Speaker 1: they are nervous, they shown away from the nias we issuers.

338
00:23:08,880 --> 00:23:16,200
Speaker 1: Most of them take only bob and they just block

339
00:23:16,359 --> 00:23:19,840
Speaker 1: up block that nice wee bots out. But they don't

340
00:23:19,920 --> 00:23:24,520
Speaker 1: even look at nicely bound. That's the that's the problem,

341
00:23:24,600 --> 00:23:28,560
Speaker 1: and I just don't At the policy level, it would

342
00:23:28,600 --> 00:23:33,000
Speaker 1: be difficult to find a way to level the plane

343
00:23:33,640 --> 00:23:38,640
Speaker 1: field for for these two groups, especially during crisis. Speaking

344
00:23:38,920 --> 00:23:41,280
Speaker 1: at the policy level, I want to sort of ask

345
00:23:41,440 --> 00:23:44,800
Speaker 1: a big picture question. So you mentioned that for for

346
00:23:44,960 --> 00:23:49,679
Speaker 1: most of history up until very recently, the Chinese economy,

347
00:23:50,280 --> 00:23:53,400
Speaker 1: most credit was bank credit, and it wasn't There wasn't

348
00:23:53,400 --> 00:23:56,399
Speaker 1: even really much of a bond market. Uh, if you

349
00:23:56,480 --> 00:23:59,720
Speaker 1: go back a little bit over a decade, how much

350
00:23:59,800 --> 00:24:04,160
Speaker 1: of that bank led market is especially by design, whereby

351
00:24:04,240 --> 00:24:07,520
Speaker 1: authorities who have sort of priorities in terms of investment

352
00:24:08,040 --> 00:24:13,360
Speaker 1: can more easily u direct bank lending. And I'm curious

353
00:24:13,640 --> 00:24:17,399
Speaker 1: if the ongoing growth of the credit market as a

354
00:24:17,560 --> 00:24:21,639
Speaker 1: meat is a vehicle for financing changes at all the

355
00:24:21,760 --> 00:24:26,639
Speaker 1: ability of decision makers of political leaders to direct money

356
00:24:26,800 --> 00:24:31,080
Speaker 1: towards key favored industries, or whether that hasn't really changed much,

357
00:24:31,160 --> 00:24:34,000
Speaker 1: whether they can still do it except just through a

358
00:24:34,040 --> 00:24:39,040
Speaker 1: different avenue. I think having the market based bound uh

359
00:24:39,480 --> 00:24:45,320
Speaker 1: poper bound market is very important to direct especially direct

360
00:24:45,480 --> 00:24:51,639
Speaker 1: funding financing sources for the disse because prior to that

361
00:24:51,920 --> 00:24:58,800
Speaker 1: bank funding was mostly directed at banks leading to firms.

362
00:24:59,119 --> 00:25:02,200
Speaker 1: So for the NIA slow he's this credit market is

363
00:25:02,240 --> 00:25:08,400
Speaker 1: actually very important. And up to two thousand eighteen they enjoyed,

364
00:25:08,800 --> 00:25:14,280
Speaker 1: uh increased the issuance, they enjoyed the financing. But posted

365
00:25:14,320 --> 00:25:17,840
Speaker 1: to eighteen, as the market was going through a very

366
00:25:17,920 --> 00:25:23,520
Speaker 1: stressful period, they have something process actually dried I shouldn't

367
00:25:23,520 --> 00:25:27,640
Speaker 1: say dried up, but they were increasing steadily. But new

368
00:25:27,720 --> 00:25:31,520
Speaker 1: issuances by nyas yes, as a fraction of the overall

369
00:25:31,560 --> 00:25:36,399
Speaker 1: market decreased the first quarter of two thousand eighteen. So

370
00:25:36,720 --> 00:25:40,000
Speaker 1: we've talked a lot about I guess the sort of

371
00:25:40,160 --> 00:25:44,399
Speaker 1: uniqueness of China's corporate bond market at at this current

372
00:25:44,600 --> 00:25:48,600
Speaker 1: moment in time, and in many ways, it's still developing

373
00:25:48,760 --> 00:25:51,800
Speaker 1: and maybe it'll get to a similar level to where

374
00:25:51,840 --> 00:25:53,680
Speaker 1: the US is at the moment, but it's not quite

375
00:25:53,760 --> 00:25:58,680
Speaker 1: there yet. What do you think this means for international investors?

376
00:25:58,800 --> 00:26:03,240
Speaker 1: Because of course, China's corporate bonds are becoming more integrated

377
00:26:03,560 --> 00:26:10,840
Speaker 1: into international investors portfolios via inclusion in benchmark indusicries, including

378
00:26:10,960 --> 00:26:14,160
Speaker 1: some that are owned by Bloomberg LP. I should just mention,

379
00:26:14,520 --> 00:26:18,560
Speaker 1: So what does all of this mean for international investors?

380
00:26:18,680 --> 00:26:21,719
Speaker 1: How should they be viewing China's corporate ball market At

381
00:26:21,760 --> 00:26:26,439
Speaker 1: the moment, China's fixed incour market overall is being opening up.

382
00:26:26,720 --> 00:26:31,000
Speaker 1: You see a lot of relaxing of restrictions that very

383
00:26:31,080 --> 00:26:36,159
Speaker 1: much welcome the international investors. Copper body in particular, I

384
00:26:36,280 --> 00:26:41,200
Speaker 1: think most of the foreign investment right now is focused

385
00:26:41,280 --> 00:26:45,199
Speaker 1: on the on the yield space, not the spread space,

386
00:26:45,680 --> 00:26:50,440
Speaker 1: meaning that it's focusing most of the government bomb. But

387
00:26:50,560 --> 00:26:54,080
Speaker 1: the you always say, the default free bonds, not the

388
00:26:54,200 --> 00:26:59,880
Speaker 1: credit bouk. Overall, I think this market would would benefit

389
00:27:00,200 --> 00:27:04,520
Speaker 1: from more international investors, or conversely, maybe there will be

390
00:27:04,600 --> 00:27:10,720
Speaker 1: opportunities for international investors to pick the right bond to

391
00:27:10,840 --> 00:27:14,600
Speaker 1: put a different play. I think if for international investors

392
00:27:14,800 --> 00:27:19,800
Speaker 1: these companies that issue couple of bonds, these are especially

393
00:27:19,840 --> 00:27:22,600
Speaker 1: for the sample we started, these are large companies with

394
00:27:23,000 --> 00:27:26,080
Speaker 1: listed equities, but this could be another way for them

395
00:27:26,160 --> 00:27:29,640
Speaker 1: to be exposed to the real China in a sense

396
00:27:29,760 --> 00:27:35,760
Speaker 1: that these are companies doing business in China. John, that

397
00:27:35,960 --> 00:27:39,240
Speaker 1: was a fascinating conversation and a really good time to

398
00:27:39,440 --> 00:27:43,760
Speaker 1: have that conversation given what we've just seen in China's

399
00:27:43,800 --> 00:27:45,720
Speaker 1: credit markets. So thank you so much for coming on.

400
00:27:45,920 --> 00:27:48,760
Speaker 1: We really appreciate it. Thank you. That was great, sure,

401
00:27:49,040 --> 00:28:03,320
Speaker 1: thank you. So. I found that conversation so so interesting.

402
00:28:03,560 --> 00:28:06,560
Speaker 1: And one of the things I always like about, you know,

403
00:28:06,840 --> 00:28:11,080
Speaker 1: markets and financial regulation and the development of capital markets

404
00:28:11,200 --> 00:28:14,760
Speaker 1: is the idea that there can be all these unintended consequences.

405
00:28:15,119 --> 00:28:18,280
Speaker 1: So I'm really fascinated by the idea that by introducing

406
00:28:18,400 --> 00:28:22,479
Speaker 1: the possibility of default into the private market, China has

407
00:28:22,560 --> 00:28:28,480
Speaker 1: basically inadvertently created this big funding cost segmentation, but also

408
00:28:28,680 --> 00:28:33,879
Speaker 1: kind of created a potential financial stress point, like the

409
00:28:34,080 --> 00:28:36,960
Speaker 1: notion that when things get really bad, everyone flees the

410
00:28:37,040 --> 00:28:40,560
Speaker 1: private companies and heads into the s OE sector. I

411
00:28:40,640 --> 00:28:44,600
Speaker 1: find that really interesting, right, I mean, I guess the

412
00:28:44,880 --> 00:28:47,720
Speaker 1: thing is, it's at some level there's going to be

413
00:28:48,440 --> 00:28:52,040
Speaker 1: it's hard to imagine the existence of s O s

414
00:28:52,320 --> 00:28:56,960
Speaker 1: and they're not being a major, uh slanted playing field

415
00:28:57,080 --> 00:28:59,760
Speaker 1: or tilted playing field on some level, like whether there's

416
00:28:59,760 --> 00:29:01,840
Speaker 1: a on market or a stock market or whatever. The

417
00:29:01,880 --> 00:29:04,120
Speaker 1: fact that a bunch of companies are a state backed

418
00:29:04,160 --> 00:29:07,000
Speaker 1: that a bunch of aren't. You had imagined that that's

419
00:29:07,040 --> 00:29:09,360
Speaker 1: going to create an advantage for the state backed ones.

420
00:29:09,640 --> 00:29:12,400
Speaker 1: But to see how that sort of manifests itself, and

421
00:29:12,680 --> 00:29:15,320
Speaker 1: even like sort of wrap one's head around the idea

422
00:29:15,560 --> 00:29:19,680
Speaker 1: of market based pricing of state owned enterprises, it's just

423
00:29:19,840 --> 00:29:23,280
Speaker 1: extremely strange. It'll be interesting to see how that developed,

424
00:29:23,360 --> 00:29:26,600
Speaker 1: because if it stayed backed, why would they let it

425
00:29:26,640 --> 00:29:29,080
Speaker 1: default at all? And it's very it's kind of hard

426
00:29:29,160 --> 00:29:31,440
Speaker 1: to wrap one's head around from a sort of US

427
00:29:31,480 --> 00:29:35,480
Speaker 1: centric perspective, right, So you definitely have questions around this

428
00:29:35,680 --> 00:29:39,480
Speaker 1: and that company that you mentioned, the state owned enterprise,

429
00:29:39,640 --> 00:29:44,440
Speaker 1: it's called ta WU and UH it's potentially sort of

430
00:29:44,680 --> 00:29:48,160
Speaker 1: defaulting on its dollar bonds. UM. This is a big

431
00:29:48,320 --> 00:29:51,120
Speaker 1: s o E that's based in Tianjin, which is in

432
00:29:51,200 --> 00:29:55,080
Speaker 1: the Northern province and has been um experiencing a few

433
00:29:55,120 --> 00:29:58,200
Speaker 1: economic problems. So this is going to be a really

434
00:29:58,280 --> 00:30:00,920
Speaker 1: interesting one to watch, like whether not this becomes a

435
00:30:01,000 --> 00:30:04,280
Speaker 1: watershed moment for s o E s. And again, the

436
00:30:04,760 --> 00:30:09,320
Speaker 1: policy implications are absolutely fascinating. Is this something that China

437
00:30:09,520 --> 00:30:13,080
Speaker 1: is actively trying to encourage in order to introduce more

438
00:30:13,160 --> 00:30:16,920
Speaker 1: differentiation between its s o E s Or is this

439
00:30:17,120 --> 00:30:20,760
Speaker 1: something that it doesn't actually want to happen, but it's

440
00:30:20,920 --> 00:30:23,960
Speaker 1: starting to have to countenance the idea of haircuts or

441
00:30:24,080 --> 00:30:29,200
Speaker 1: defaults because of its massive debtload and fiscal position. That's

442
00:30:29,440 --> 00:30:33,680
Speaker 1: sort of the question that we are in. Yeah, and

443
00:30:33,800 --> 00:30:37,200
Speaker 1: just more generally, I really like the way she broke

444
00:30:37,280 --> 00:30:40,760
Speaker 1: it down through the different phases because again, I mean,

445
00:30:40,840 --> 00:30:44,200
Speaker 1: this is obviously just such an incredibly immature market. It's

446
00:30:44,400 --> 00:30:48,560
Speaker 1: basically existed for a little over a decade, so I'm

447
00:30:48,600 --> 00:30:51,160
Speaker 1: sure there will be more phases to come, but so far,

448
00:30:51,360 --> 00:30:54,120
Speaker 1: what we've seen looks like what you would expect, uh

449
00:30:55,040 --> 00:30:58,920
Speaker 1: from a sort of maturing, growing industry or part of

450
00:30:59,000 --> 00:31:01,719
Speaker 1: the capital markets and in the and if you think

451
00:31:01,760 --> 00:31:03,960
Speaker 1: about how young it is, it kind of makes sense

452
00:31:04,040 --> 00:31:06,200
Speaker 1: that they never had defaults in the beginning because you

453
00:31:06,280 --> 00:31:07,560
Speaker 1: sort of, you know, you want to build up an

454
00:31:07,600 --> 00:31:10,480
Speaker 1: investor base, you want to have people have confidence in

455
00:31:10,560 --> 00:31:13,400
Speaker 1: the market overall, so you sort of get the impression

456
00:31:13,480 --> 00:31:16,200
Speaker 1: the sort of liberalization of the market. It's slow, but

457
00:31:16,320 --> 00:31:19,920
Speaker 1: it's also kind of logical, right. I mean, there's definitely

458
00:31:20,040 --> 00:31:22,800
Speaker 1: teething problems that you would see in any new capital market,

459
00:31:22,880 --> 00:31:26,480
Speaker 1: but I do think the picture is complicated by the

460
00:31:26,520 --> 00:31:29,280
Speaker 1: structure of the Chinese economy and the existence of the

461
00:31:29,600 --> 00:31:32,640
Speaker 1: s O s and it's sort of, um, it's sort

462
00:31:32,680 --> 00:31:38,160
Speaker 1: of capital markets with Chinese characteristics, right, well put, thank

463
00:31:38,240 --> 00:31:42,480
Speaker 1: you all right, Well, this has been another episode of

464
00:31:42,640 --> 00:31:45,920
Speaker 1: the Odd Thoughts podcast. You can follow me on Twitter

465
00:31:46,440 --> 00:31:48,960
Speaker 1: at Tracy Alloway. And I'd like to just give a

466
00:31:49,000 --> 00:31:53,000
Speaker 1: shout out to uh Steve Hoe who's on Twitter and

467
00:31:53,120 --> 00:31:56,520
Speaker 1: he actually suggested John for an All Thoughts guest. So

468
00:31:56,560 --> 00:32:00,560
Speaker 1: you can follow Steve at Steve ho that's h o

469
00:32:01,080 --> 00:32:05,400
Speaker 1: U and then F Steve co F and I'm Joe

470
00:32:05,480 --> 00:32:08,760
Speaker 1: wisn't thal. You can follow me on Twitter at the Stalwart,

471
00:32:09,000 --> 00:32:12,600
Speaker 1: and be sure to follow our producer on Twitter, Laura Carlson.

472
00:32:12,920 --> 00:32:16,400
Speaker 1: She's at Laura M Carlson. And follow all of our

473
00:32:16,480 --> 00:32:20,480
Speaker 1: podcasts at Bloomberg at the handle at podcasts. Thanks for

474
00:32:20,600 --> 00:32:20,880
Speaker 1: listening