WEBVTT - Examining China's Stimulus Measures 0:00:02.480 --> 0:00:06.840 Bloomberg Audio Studios, podcasts, radio news. 0:00:09.680 --> 0:00:12.840 This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 0:00:12.920 --> 0:00:15.440 You can join Brian Curtis and myself for the stories, 0:00:15.480 --> 0:00:18.560 making news and moving markets in the APAC region. You 0:00:18.640 --> 0:00:21.480 can subscribe to the show anywhere you get your podcast 0:00:21.560 --> 0:00:24.919 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:00:24.960 --> 0:00:26.120 Bloomberg Business app. 0:00:27.360 --> 0:00:29.720 China has announced that it will be holding a briefing 0:00:29.880 --> 0:00:34.120 on Saturday morning on fiscal policy. The State Council says 0:00:34.159 --> 0:00:37.680 that the Finance Minister will be introducing moves to strengthen 0:00:37.760 --> 0:00:41.640 fiscal policy, so industrials will be expecting some tangible news. 0:00:41.720 --> 0:00:44.040 Joining us now in our studios as Dan ten Kate 0:00:44.320 --> 0:00:48.440 Bloomberg Asia Eco goov Executive editor. So we know there's 0:00:48.479 --> 0:00:52.400 the potential for some disappointment, Dan, but this is actually 0:00:52.479 --> 0:00:56.160 the Finance Ministry and along with the State Council, this 0:00:56.240 --> 0:00:59.200 is where you would get this kind of information. Are 0:00:59.280 --> 0:01:02.120 we expecting money which from the minister and if so, 0:01:02.400 --> 0:01:04.440 what will some of the details likely be. 0:01:05.480 --> 0:01:10.600 Yeah, well, certainly the markets are anticipating real stimulus, some 0:01:10.680 --> 0:01:14.400 concrete measures, some actual money. We didn't get that earlier 0:01:14.480 --> 0:01:16.959 this week with the NDARC, And as you mentioned, the 0:01:17.040 --> 0:01:21.840 NDRC wouldn't be the body the Chinese agency that would 0:01:22.600 --> 0:01:26.240 necessarily give you those hard details. So the Finance Minister 0:01:26.520 --> 0:01:29.920 is the one in the Chinese system who can deliver 0:01:30.000 --> 0:01:34.040 on that. And you know, the market swings that we've 0:01:34.080 --> 0:01:37.600 seen indicate that there's a real urge to see something 0:01:37.680 --> 0:01:40.280 concrete to keep this rally going. 0:01:40.600 --> 0:01:43.160 Right now, the way we understand things is that the 0:01:43.200 --> 0:01:46.360 growth targets remain intact. Could that change? Do you think 0:01:46.400 --> 0:01:47.560 in any meaningful way? 0:01:48.920 --> 0:01:53.240 Well, pretty much they are. You know, the NDRC, which 0:01:53.240 --> 0:01:56.400 is China's economic planner, they did indicate that they were 0:01:56.440 --> 0:02:00.280 on target to hit that GDP target of about four 0:02:00.320 --> 0:02:03.880 point eight percent. The real problem with Chin China's economy 0:02:03.960 --> 0:02:07.280 right now is these deflationary pressures. So even if you 0:02:07.400 --> 0:02:11.040 hit five percent real growth, if you have deflation of 0:02:11.080 --> 0:02:14.360 one percent, your nominal growth is not growing and so 0:02:14.600 --> 0:02:18.480 overall your economy isn't really moving. In fact, prices are 0:02:18.560 --> 0:02:22.160 just declining and people are getting poorer essentially, So that 0:02:22.280 --> 0:02:25.840 number needs to be put into context in that sense, 0:02:25.880 --> 0:02:29.120 and what economists are looking for is something to get 0:02:29.480 --> 0:02:31.880 the private sector moving again and to get a bit 0:02:31.960 --> 0:02:35.640 of inflation to get investment going and to kind of 0:02:35.680 --> 0:02:39.440 reverse this decline that we've seen, to prevent this sort 0:02:39.440 --> 0:02:44.760 of Japan style deflation that could really eat gains in 0:02:44.840 --> 0:02:45.799 wealth over time. 0:02:46.960 --> 0:02:49.400 It seems urgent from a market point of view, and 0:02:49.440 --> 0:02:53.600 it may seem urgent from consumers who are disappointed, and 0:02:53.639 --> 0:02:56.400 of course the authorities don't want people out in the streets. 0:02:56.760 --> 0:02:58.959 But we just had a guest on that said, you know, 0:02:59.160 --> 0:03:02.000 maybe expect a little little bit more patience here. The 0:03:02.040 --> 0:03:04.760 authorities don't want these kind of rapid gains that we've 0:03:04.800 --> 0:03:07.360 seen in markets, So I wonder if investors are getting 0:03:07.400 --> 0:03:09.680 themselves a little bit too far out over their skis. 0:03:10.560 --> 0:03:14.519 Yeah, there's definitely a mismatch between official thinking in Beijing 0:03:14.880 --> 0:03:18.600 and investors at the moment. And you know, volatility is 0:03:18.600 --> 0:03:21.080 something that Chinese authorities never really like that. What they 0:03:21.120 --> 0:03:23.960 would prefer is just kind of a slow and steady 0:03:24.320 --> 0:03:26.720 climb up to the top. But you know, with the 0:03:28.000 --> 0:03:31.320 big headlines flying on the Bloomberg terminal, et cetera, the 0:03:31.360 --> 0:03:33.840 big market swings that we're used to in the world today, 0:03:34.600 --> 0:03:36.760 that's just not the case. And we've seen you know, 0:03:36.800 --> 0:03:39.400 a thirty percent jump over the past couple of Weeks's 0:03:39.600 --> 0:03:42.120 that's getting way ahead of your skis in some sense 0:03:42.160 --> 0:03:43.960 for what the authorities can deliver. 0:03:44.200 --> 0:03:46.440 So we're just coming back from the Golden Week holiday. 0:03:46.480 --> 0:03:48.920 Have we been able to look at any high frequency 0:03:49.000 --> 0:03:53.040 data to see how consumers were behaving in that period. 0:03:54.360 --> 0:03:57.640 Yeah, there, you know the consumers, it's not as much 0:03:57.680 --> 0:03:59.520 as you would want. And I think that that's kind 0:03:59.520 --> 0:04:03.400 of the problem here, is that the Chinese consumer is 0:04:03.480 --> 0:04:07.400 not delivering in a way that is really going to 0:04:07.760 --> 0:04:11.280 make people of confidence in China's growth at the moment. 0:04:11.680 --> 0:04:15.400 And that's you know, we're seeing people just tighten their 0:04:15.400 --> 0:04:19.640 belts across the board. We've seen, you know, bankers having 0:04:19.680 --> 0:04:22.479 to give up bonuses, we've seen salary cuts, We've seen 0:04:23.240 --> 0:04:30.560 prices following, restaurants giving details or deals on food and basics. So, 0:04:32.040 --> 0:04:36.160 you know, Chinese people right now, they are very cautious 0:04:36.200 --> 0:04:40.000 on spending. You know, the hope from the government was 0:04:40.080 --> 0:04:43.520 in part that the stock market gains would make people 0:04:43.560 --> 0:04:47.000 feel a bit richer and help this elusive concept of 0:04:47.400 --> 0:04:51.160 confidence in the consumer. But you know that is fleeting. 0:04:51.200 --> 0:04:54.320 As we've seen, markets can rise and they can fall 0:04:54.440 --> 0:04:55.640 very quickly as well. 0:04:55.640 --> 0:04:57.919 Dan, it's a little tricky because it seemed like, you know, 0:04:57.960 --> 0:05:01.200 this has been such a long period of declient since 0:05:01.400 --> 0:05:04.000 twenty twenty one, that you needed sort of a shock 0:05:04.040 --> 0:05:08.000 in all moment, and then when you get it, then 0:05:08.360 --> 0:05:10.839 you know when the response is so dramatic that you 0:05:10.839 --> 0:05:12.840 feel that authorities want to go a little bit slower. 0:05:13.080 --> 0:05:14.960 You can kind of feel their pain a little bit. 0:05:15.800 --> 0:05:20.000 You would think that just incremental announcements of positive moves 0:05:20.000 --> 0:05:22.919 on the market would be what the doctor ordered. And 0:05:22.960 --> 0:05:25.520 we did get a little bit more this morning, in 0:05:25.560 --> 0:05:29.560 addition to the announcement about the fiscal stimulus coming via 0:05:29.680 --> 0:05:33.800 the Finance Minister, about the PBOC and its swamp facility 0:05:33.880 --> 0:05:39.040 to start app accepting applications today from funds and insurance 0:05:39.080 --> 0:05:44.800 companies and securities where these institutions can borrow against their 0:05:44.800 --> 0:05:47.360 holdings and can buy backstock and that sort of thing. 0:05:47.839 --> 0:05:52.440 Is this something that you're getting positive vibes from from investors? 0:05:52.760 --> 0:05:56.279 Well, definitely, the moves on from the Chinese authorities, particularly 0:05:56.320 --> 0:05:59.479 the PBOC to cut rates and that monetary stimulus and 0:05:59.560 --> 0:06:04.800 to signal like support for stocks in general have have 0:06:05.000 --> 0:06:07.760 been seen as positive signals. But I think what people 0:06:07.800 --> 0:06:11.679 are waiting for is this fiscal firepower from the government, 0:06:11.720 --> 0:06:13.760 and that has yet to come, and that's why there 0:06:13.800 --> 0:06:16.920 was some disappointment earlier this week, and that's why there's 0:06:17.040 --> 0:06:20.279 high hopes for this weekend that the Finance minister will deliver. 0:06:20.560 --> 0:06:24.560 You mentioned earlier the possibility of China kind of mirroring 0:06:24.640 --> 0:06:27.800 what happened in Japan over three decades beginning in the 0:06:27.839 --> 0:06:30.960 late nineteen eighties early nineteen nineties. Do you think that's 0:06:31.160 --> 0:06:33.640 underneath I mean, the fear of that kind of outcome 0:06:33.720 --> 0:06:38.520 really underneath the motivation for a lot of the stimulus 0:06:38.520 --> 0:06:39.080 that we have seen. 0:06:40.360 --> 0:06:43.920 Yeah, the Chinese authorities have definitely studied the case in Japan, 0:06:44.000 --> 0:06:46.400 and there's a lot of different views about whether China 0:06:46.480 --> 0:06:49.560 is actually heading there or not. There's some key differences 0:06:49.600 --> 0:06:53.200 among them. The fact that China is not as wealthy 0:06:53.240 --> 0:06:55.880 as Japan was back in the day. Some acconas will 0:06:55.880 --> 0:07:01.040 tell you that makes China's situation even potentially worse. But 0:07:01.279 --> 0:07:03.560 what we're seeing more broadly from China is that they're 0:07:03.560 --> 0:07:09.120 trying to deflate the property bubble while also maintaining some 0:07:09.320 --> 0:07:13.640 growth in these bigger sectors like evs and solar panels 0:07:13.840 --> 0:07:17.160 and kind of new energy type of stuff. And that's 0:07:17.160 --> 0:07:20.400 why you see these dueling narratives about how China's domestic 0:07:20.440 --> 0:07:23.160 economy is falling off a cliff. But at the same time, 0:07:23.280 --> 0:07:25.440 China is taking over the world on all these major 0:07:26.240 --> 0:07:30.600 manufacturing things and increasing trade tensions all around the globe. 0:07:30.640 --> 0:07:33.960 And so that's really the conundrum is here, is how 0:07:34.000 --> 0:07:37.080 do they successfully land the plane there and get back 0:07:37.080 --> 0:07:38.000 to stable growth. 0:07:38.360 --> 0:07:42.080 The Polar Bureau has pledged to stop housing market declines. 0:07:42.640 --> 0:07:44.840 How would you assess the progress on that front? 0:07:46.000 --> 0:07:48.360 They still have more to do. I mean, the measures 0:07:48.360 --> 0:07:51.520 that they've released to buy unsold housing in particular have 0:07:51.680 --> 0:07:54.440 not really caught fire yet, so there's a lot of 0:07:54.520 --> 0:07:56.760 room to expand that we might hear more about that 0:07:57.360 --> 0:08:00.840 on Saturday. What we're very clear on is that the 0:08:00.840 --> 0:08:06.720 authorities view the drag on property sector as really too much. 0:08:06.760 --> 0:08:09.560 It's kind of they do want to deflate the property sector, 0:08:09.600 --> 0:08:12.040 but they don't want it dragging on GDP so much. 0:08:12.080 --> 0:08:14.240 So all the gains that you're seeing in these other 0:08:14.320 --> 0:08:17.320 sectors are being way offset. So the view is, okay, 0:08:17.400 --> 0:08:19.920 if you could put a if you could stop the 0:08:19.920 --> 0:08:23.320 bleeding on the property sector, not necessarily even boosted that much, 0:08:23.360 --> 0:08:28.240 but just stop the downward spiral, then you could stabilize 0:08:28.280 --> 0:08:30.960 the economy and the GDP number will look. 0:08:30.920 --> 0:08:34.439 Better very quickly. Dan, do you think there's the possibility 0:08:34.480 --> 0:08:36.959 that China could scale back a little bit on its 0:08:37.000 --> 0:08:40.920 defense spending to have more ammunition u pun intended to 0:08:41.040 --> 0:08:43.760 apply on the overall economy. 0:08:44.720 --> 0:08:49.720 It's unlikely they would. I mean, they haven't really significantly 0:08:49.760 --> 0:08:53.240 boosted defense spending as a proportion of GDP over the years, 0:08:53.240 --> 0:08:56.719 and China's expenditures on defense are very opeque anyway, so 0:08:56.720 --> 0:08:59.920 it would be very difficult to tell whether if they're 0:09:00.040 --> 0:09:02.160 in fact doing that speakin. 0:09:01.960 --> 0:09:05.920 With yeah, Dan, Thanks very much, Dan ten K, Bloomberg 0:09:06.000 --> 0:09:15.640 Asia Eco Gov Executive Editor. Let's get to our guest, 0:09:15.679 --> 0:09:19.520 you Ting Shao, macro strategists at State Street Global Markets. 0:09:20.559 --> 0:09:23.280 You think there are a lot of headwinds or rather 0:09:23.360 --> 0:09:26.480 tailwinds for US equities At the moment. It seems to 0:09:26.520 --> 0:09:30.920 be telling a pretty positive story, but the valuations are high. 0:09:31.000 --> 0:09:33.640 That seems to be one of the biggest blocks. If 0:09:33.679 --> 0:09:37.280 history is your guide, you might not feel very comfortable 0:09:37.400 --> 0:09:41.199 at these levels. So how do we justify these these 0:09:41.280 --> 0:09:44.280 levels of valuation? Right? 0:09:44.840 --> 0:09:47.800 So, I think given where we are in the US 0:09:47.800 --> 0:09:51.240 equity space, there's still a lot of i think positivity 0:09:51.440 --> 0:09:56.720 from the investor sentiment perspective, given that we are still 0:09:56.760 --> 0:09:59.360 in this world where you know, earnings might quite a 0:09:59.400 --> 0:10:02.199 bit and or the US said, you know, earning still 0:10:02.280 --> 0:10:04.880 look to be quite resilient, and now that you are 0:10:05.320 --> 0:10:10.680 entering this support of recounting cycle that overall is a 0:10:10.800 --> 0:10:13.719 very friendly environment for equity. So even though you know, 0:10:13.800 --> 0:10:16.960 valuation looks a bit a bit stressed, you don't really 0:10:16.960 --> 0:10:20.240 see signs of things start to crack. So there's really not, 0:10:20.760 --> 0:10:23.040 in our views, a lot of reasons to pull back 0:10:23.040 --> 0:10:23.920 from this point. 0:10:24.320 --> 0:10:26.679 Let's talk a little bit about China. It's hard to 0:10:26.880 --> 0:10:30.280 ignore the amountain of stimulus measures that the government has 0:10:30.360 --> 0:10:34.400 unveiled recently and the enthusiasm short lived as it may 0:10:34.440 --> 0:10:38.080 have been in the equity space long term. Now are 0:10:38.360 --> 0:10:42.240 you positive on China? Do you believe that this stimulus 0:10:42.320 --> 0:10:44.600 is represents a pivot point. 0:10:46.080 --> 0:10:49.240 Yeah. I think what we've seen so far is definitely 0:10:49.360 --> 0:10:54.000 showing there is a sense of urgency from authorities, and 0:10:54.120 --> 0:10:56.600 it is a bit of a pivot point when it 0:10:56.600 --> 0:10:59.640 comes to you know, the last year and a half 0:10:59.720 --> 0:11:02.959 of these meal measures we've seen versus what we've seen 0:11:03.600 --> 0:11:08.840 this time around of more coordinated, more comprehensive combination policies 0:11:09.240 --> 0:11:13.240 to really at least, you know, stabilize the sentiment, arrest 0:11:13.520 --> 0:11:16.560 the weakening momentum. So I think to really achieve the 0:11:16.600 --> 0:11:19.640 growth target at this point for the year, it's really 0:11:20.240 --> 0:11:22.640 we are well in line to achieve that, but you know, 0:11:22.720 --> 0:11:26.920 looking beyond that, we still need to see more, uh, 0:11:26.960 --> 0:11:29.880 you know, data to really confirm on the macro side, 0:11:30.320 --> 0:11:33.760 things that are recovering, especially from consumers and on real 0:11:33.840 --> 0:11:36.600 estate side as well. So I think fiscal policy is 0:11:36.600 --> 0:11:39.360 going to help, uh, you know, to really make this 0:11:40.000 --> 0:11:44.319 rally more sustainable and really translate more into recovery on 0:11:44.360 --> 0:11:47.120 the macro side. Of course, we will have the Ministry 0:11:47.160 --> 0:11:50.600 of Finance briefing. It's upcoming this Saturday, so you know, 0:11:50.720 --> 0:11:53.040 more details to be revealed by then. 0:11:53.559 --> 0:11:55.560 Do you think that that's kind of a make or 0:11:55.600 --> 0:12:00.240 break moment in that there was some disappointment after the NDRs. See, 0:12:00.280 --> 0:12:02.480 you know, we know that that that's not the the 0:12:02.640 --> 0:12:05.640 uh uh the source perhaps of new stimulus and the 0:12:05.640 --> 0:12:09.840 Ministry of Finance actually is, but it seems like investors, 0:12:09.960 --> 0:12:12.320 you know, they may be if if this, if they don't, 0:12:12.559 --> 0:12:15.360 if he doesn't deliver on Saturday, you wonder what might. 0:12:15.240 --> 0:12:20.080 Happen right right, There is definitely quite a bit of 0:12:20.120 --> 0:12:23.079 disappointment out of the d r C briefing, where you know, 0:12:23.200 --> 0:12:26.440 market was very excited going into it, hoping there's more 0:12:26.880 --> 0:12:29.600 you know, to come after the Golden wik Holiday. Of course, 0:12:30.160 --> 0:12:33.080 so I think to understand, you know, you do need 0:12:33.240 --> 0:12:35.880 more as the people have it arguing on the physical side, 0:12:35.920 --> 0:12:39.319 there needs, you know, to be done on the measures. 0:12:39.760 --> 0:12:41.880 But I think whether it will be to make it 0:12:42.000 --> 0:12:44.400 or break in a moment, we probably wouldn't be that 0:12:44.400 --> 0:12:48.000 extreme because I think one thing that when need to 0:12:48.080 --> 0:12:51.320 keep in mind is from the authority's perspective, they don't 0:12:51.360 --> 0:12:54.439 necessarily want to think to see things moving too quickly 0:12:54.480 --> 0:12:57.960 in one direction or the other. The very massive rally 0:12:58.000 --> 0:13:01.880 we've seen, you know, does show that, you know, there 0:13:02.000 --> 0:13:05.800 is this very entrenched parish underweight in the Chinese space, 0:13:05.840 --> 0:13:07.719 which is why you see a lot of the shortcovering 0:13:08.400 --> 0:13:10.760 you know, the rally into it. But they don't necessarily 0:13:10.840 --> 0:13:13.360 want to see things going up twenty thirty percent in 0:13:13.440 --> 0:13:15.839 the you know, in a span of one week and 0:13:15.960 --> 0:13:18.920 that's not really sustainable, not very healthy either. 0:13:19.440 --> 0:13:21.720 What is the house view, it's stayed straight on Chinese 0:13:21.800 --> 0:13:22.680 equities right now. 0:13:24.080 --> 0:13:27.520 We are neutral at this point. We were underweight going 0:13:27.559 --> 0:13:30.000 into the simials measure, and I think for a lot 0:13:30.040 --> 0:13:32.200 of people that's similar views as well. I think that 0:13:32.240 --> 0:13:34.800 they've definitely surprised to the upside when it comes to 0:13:35.320 --> 0:13:38.200 the overall combination of measures. But in our views, you know, 0:13:38.360 --> 0:13:41.400 we think at the moment, you know, to chase the rally, 0:13:41.480 --> 0:13:44.800 you need to see more. But you know, they have 0:13:44.960 --> 0:13:47.680 done quite a bit and that is warranted adopt great 0:13:47.800 --> 0:13:49.320 from underway to neutral. 0:13:50.000 --> 0:13:51.839 The other one that's a little tricky to figure out 0:13:52.080 --> 0:13:55.040 is the Japan market. The nick A is pushing forty 0:13:55.120 --> 0:13:59.360 thousand again. Now it seems like there's been a little 0:13:59.360 --> 0:14:01.400 bit of pressure on the BOJ and so the BOJ 0:14:01.559 --> 0:14:04.720 has pulled back on normalizing just yet. But do you 0:14:04.760 --> 0:14:06.920 have a positive view on Japan or not so much? 0:14:08.679 --> 0:14:12.240 I think on the BOJ MITRO policy side, you know, 0:14:12.280 --> 0:14:14.160 we think even though they're taking a bit of a 0:14:14.200 --> 0:14:18.680 pause on the monetary policy normalization, the crucial matter is 0:14:18.800 --> 0:14:21.680 we are still in this world where Japan is the 0:14:21.720 --> 0:14:24.800 outlier with energy tenk space which is still on the 0:14:24.880 --> 0:14:28.640 hiking paths when everyone else has started to cut, so 0:14:28.680 --> 0:14:32.360 that you know, looking ahead, we are likely to get 0:14:32.400 --> 0:14:34.920 more you know normalization, whether it's the end of this 0:14:35.000 --> 0:14:38.440 year or heading into next year, because inflation is coming back, 0:14:38.560 --> 0:14:40.800 you know, even though growth is not that strong at 0:14:40.800 --> 0:14:44.280 the moment, there's definitely signs of inflation start to come 0:14:44.320 --> 0:14:47.120 back to Japan and becoming more sustainable in the system. 0:14:47.200 --> 0:14:51.320 So that does warrant the further normalization of policy and 0:14:51.840 --> 0:14:53.720 a higher rate than that where we are at the 0:14:53.720 --> 0:14:57.120 moment as the terminal. So for the currency side, as 0:14:57.160 --> 0:14:59.800 a result of that, we are you know, in a 0:14:59.840 --> 0:15:02.080 case and that we think potentially there could be more 0:15:02.160 --> 0:15:04.280 strengths that coming into the end. So as a result 0:15:04.320 --> 0:15:07.120 of that, you know that is going to you know, 0:15:07.360 --> 0:15:10.960 both a little bit less well for the equity space, 0:15:11.000 --> 0:15:12.840 and also you know, keep in mind you also have 0:15:13.120 --> 0:15:16.920 quite a lot of this money that potentially can be 0:15:17.000 --> 0:15:20.280 repatriated back into the Japan market once you start to 0:15:20.280 --> 0:15:23.800 see JGB picking up and restart to go up, so 0:15:23.840 --> 0:15:26.320 that there can be some rotation in that aspect as well. 0:15:26.960 --> 0:15:28.920 All right, you think, thanks very much for joining us, 0:15:28.920 --> 0:15:32.680 You team Shao, macro strategist at State Street Global Markets, 0:15:38.920 --> 0:15:41.440 a closely look at markets. The next three days could 0:15:41.440 --> 0:15:44.600 be very very interesting in Hong Kong and China. Joining 0:15:44.680 --> 0:15:48.320 us now is Paul Dobson, Bloomberg Executive Editor for Asia 0:15:48.360 --> 0:15:52.600 Markets in our studios in Singapore. So we had this 0:15:52.640 --> 0:15:57.680 announcement yesterday that the Finance Ministry will address the public 0:15:57.760 --> 0:16:01.960 on Saturday morning and we'll talk about strengthening fiscal policy. 0:16:02.080 --> 0:16:05.480 So that's one very big thing. Also today, as of today, 0:16:05.520 --> 0:16:08.920 the PBOC has set up this swap facility to allow 0:16:09.360 --> 0:16:13.480 insurance companies and securities firms and funds to borrow to 0:16:13.520 --> 0:16:18.080 get liquidity against their holdings to buy back shares. And 0:16:18.320 --> 0:16:21.880 if you're looking for something that is tangible in the market, 0:16:21.960 --> 0:16:24.040 I mean a lot of stimulus will help the economy, 0:16:24.040 --> 0:16:26.840 but is it tangible in markets? This swap facility could 0:16:26.840 --> 0:16:29.560 be tangible in markets. Paul, So, I guess the question 0:16:29.680 --> 0:16:32.960 is are we at a turning point here in interpreting 0:16:33.000 --> 0:16:34.760 how serious they are about stimulus? 0:16:35.760 --> 0:16:35.920 Hi? 0:16:36.040 --> 0:16:40.240 Hi that, Brian, I think it's the right question. I 0:16:40.240 --> 0:16:41.960 don't know if I have a good answer for you, 0:16:42.040 --> 0:16:44.240 because we still don't have enough details. And that's what 0:16:44.280 --> 0:16:47.760 the streets is really crying out for now. We heard 0:16:47.800 --> 0:16:51.400 from policymakers over the past few days saying they're willing 0:16:51.440 --> 0:16:54.680 to listen to the markets in the marketplace. What companies want, 0:16:55.520 --> 0:16:58.680 what people and traders and investors need, What they need 0:16:58.800 --> 0:17:03.560 is more finds. They're stimulus not just to support the market, 0:17:03.560 --> 0:17:06.119 but to support the underlying economy, to bring back that 0:17:06.160 --> 0:17:09.960 consumer confidence to revive the property market. And we have 0:17:10.119 --> 0:17:12.760 seen some signs and hints and clues as to it, 0:17:13.000 --> 0:17:15.200 but really what we want to know is how big 0:17:15.280 --> 0:17:18.199 is this package going to be, How extensive is it 0:17:18.280 --> 0:17:21.240 going to be in order for people to really be 0:17:21.359 --> 0:17:25.120 to convince and to carry on buying into this massive 0:17:25.680 --> 0:17:28.359 upswing that we've seen over the past few weeks of 0:17:28.440 --> 0:17:31.919 trading around the holiday. So that's where the market is 0:17:31.960 --> 0:17:35.560 so nervous right now. It's very interesting to see that 0:17:35.640 --> 0:17:37.760 this briefing is going to take place on a Saturday 0:17:38.080 --> 0:17:40.600 while markets are closed. Maybe that keeps things a little 0:17:40.640 --> 0:17:43.840 bit calmer for them to give those announcements and make 0:17:43.840 --> 0:17:47.159 sure that they're properly explained. But the market is still 0:17:47.400 --> 0:17:49.600 wondering whether we will actually get any figures from that, 0:17:49.680 --> 0:17:52.679 whether it's the Finance Ministry, that is the right place 0:17:52.720 --> 0:17:56.480 to to announce those numbers which are so crucial on 0:17:56.520 --> 0:17:57.800 which people are waiting to hear. 0:17:58.119 --> 0:18:01.040 Poll as you know, I mean, has been stuck in 0:18:01.080 --> 0:18:03.880 this deflationary trap for some time. But I'm wondering whether 0:18:04.000 --> 0:18:06.199 or not historically you can look at a period of 0:18:06.240 --> 0:18:10.080 time and maybe make an analogy. Is there a time 0:18:10.240 --> 0:18:15.800 when regulators' authorities in Beijing essentially through everything and the 0:18:15.880 --> 0:18:19.359 kitchen sink at the problem to try to pivot and 0:18:19.800 --> 0:18:23.760 turn a very bad sentiment into something that is a 0:18:23.760 --> 0:18:24.640 lot more positive. 0:18:25.720 --> 0:18:29.439 Yeah, I mean, yeah, there's a track record of it. 0:18:29.520 --> 0:18:32.679 And I think people are almost as worried about how 0:18:32.800 --> 0:18:35.560 that has led to a kind of overheating of the 0:18:35.600 --> 0:18:38.080 markets that then turned into a bubble that then burst 0:18:38.520 --> 0:18:42.520 as they are about the possibility of under delivery, which 0:18:42.560 --> 0:18:44.919 is what has been the theme over the last few years. 0:18:45.280 --> 0:18:48.680 So you know, think about some of those previous stimulus 0:18:48.680 --> 0:18:52.359 bursts that we've seen going way back into the early 0:18:52.400 --> 0:18:56.000 part of this millennium, and some of the booms and 0:18:56.040 --> 0:18:58.719 bus cycles that we've seen so throw in the kitchen 0:18:58.800 --> 0:19:02.840 sink at it will nearly are all going for you know, 0:19:03.160 --> 0:19:06.080 growth based on exports and that kind of thing, old 0:19:06.840 --> 0:19:10.359 old Willstonmias building white elephant projects. That's not really what 0:19:10.400 --> 0:19:13.320 people want to see. Yes, it will provide that temporary 0:19:13.359 --> 0:19:17.199 sugar rush, but it's not going to be sustainable. And okay, 0:19:17.240 --> 0:19:20.560 so speculators will rush in and jump onto the bandwagon 0:19:20.600 --> 0:19:23.960 and push those asset prices higher. But what the rest 0:19:23.960 --> 0:19:26.560 of the world. What you know, international investors, you've taken 0:19:26.600 --> 0:19:29.040 their money out of China over the past few years, 0:19:29.080 --> 0:19:31.840 want to see is more of a conviction to long 0:19:31.920 --> 0:19:36.520 term economic reform and growth, not just in terms of manufacturing, 0:19:36.520 --> 0:19:39.040 which has been extremely successful, but also in terms of 0:19:39.760 --> 0:19:42.720 consumer and pushing that narrative. 0:19:43.400 --> 0:19:46.000 Well, Paul, the market seems a little out of step 0:19:46.080 --> 0:19:49.000 with what the economy has produced over the past three 0:19:49.080 --> 0:19:52.119 or four years because we've seen such a huge dark 0:19:52.200 --> 0:19:55.919 cloud over over markets in China that you know, you 0:19:56.000 --> 0:19:58.919 have a situation where for Hong Kong, for instance, Hangsing 0:19:59.000 --> 0:20:02.720 Index down from more than thirty one thousand, creating down 0:20:02.760 --> 0:20:06.560 around the fifteen sixteen thousand level, the CSI three hundred, 0:20:06.600 --> 0:20:08.520 you know, down in the three thousands when it was 0:20:08.840 --> 0:20:12.040 well up over fifty five hundred at one point. So 0:20:12.720 --> 0:20:14.840 it does seem that, you know, a lot of this 0:20:14.920 --> 0:20:16.920 is self inflicted. I mean, they came out with some 0:20:17.119 --> 0:20:21.680 very very powerful anti private sector policies over the past 0:20:21.680 --> 0:20:23.880 three years, and maybe this is just a little bit 0:20:24.080 --> 0:20:25.680 kind of writing the ship a bit. 0:20:26.880 --> 0:20:29.920 Yes, yeah, writing the ship a little bit. The valuations 0:20:29.920 --> 0:20:32.880 are still relatively low, even after the rally that we've 0:20:32.920 --> 0:20:36.440 seen in the past few weeks. I think that that's 0:20:36.480 --> 0:20:42.880 really the key to their longer term trajectory. So much 0:20:42.880 --> 0:20:45.680 of our reporting over the last year year and a 0:20:45.720 --> 0:20:49.760 half has been about international investors, you know, US pension funds, 0:20:49.800 --> 0:20:54.240 index trackers, emerging market investors looking at ways of reducing 0:20:54.280 --> 0:20:58.359 their holdings of China, lowering the benchmark waiting that they're 0:20:58.480 --> 0:21:02.520 using to follow China in emerging market indexes, or just 0:21:02.720 --> 0:21:07.320 you know, kind of deciding that it's too risky and 0:21:07.359 --> 0:21:10.720 you know, taking holdings all the way to zero. If 0:21:10.880 --> 0:21:13.720 China wants to bring that international money back, it's got 0:21:13.720 --> 0:21:17.320 to create a much more stable regulatory framework, much more reliable, 0:21:17.600 --> 0:21:20.920 and much more long term for that sustainable investment flow 0:21:20.960 --> 0:21:21.520 to come back here. 0:21:21.680 --> 0:21:24.920 Yeah, and to get consumers feeling at least a little 0:21:24.960 --> 0:21:28.000 bit comfortable for spending their hard earned dollars. Paul, thanks 0:21:28.040 --> 0:21:30.680 so much for joining us. Paul Dobson, Bloomberg Executive Editor 0:21:30.720 --> 0:21:31.720 for Asia Markets. 0:21:34.680 --> 0:21:37.600 This has been the Bloomberg Daybreak Asia podcast, bringing you 0:21:37.680 --> 0:21:40.800 the stories making news and moving markets in the Asia Pacific. 0:21:41.280 --> 0:21:44.400 Visit the Bloomberg Podcast channel on YouTube to get more 0:21:44.440 --> 0:21:48.040 episodes of this and other shows from Bloomberg. 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