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Speaker 1: All right, let's get to our next guests were joined

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Speaker 1: by Leland Miller. See you of a China beige book,

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Speaker 1: having a look at that latest survey. Leland, you're looking

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Speaker 1: at China. Give us a sense of where we are

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Speaker 1: with the economy and what your findings were with the respondents. Well,

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Speaker 1: look at the beginning of the year. Look look what

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Speaker 1: what everyone was predicting for the year, and then look

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Speaker 1: how far we are from meeting those expectations. I think

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Speaker 1: there was generally the idea that this is gonna be

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Speaker 1: a big party congress here, the stock market rally, the

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Speaker 1: economy would rally. Either be big stimulus, second half would

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Speaker 1: be a particularly nice rally. None of this is happening.

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Speaker 1: And when we look at our third quarter data, you

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Speaker 1: had a second quarter filled with COVID lockdown, and yet

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Speaker 1: the third quarter doesn't look much better than the second.

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Speaker 1: And you know, some some of the sectors have improved

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Speaker 1: a little bit underneath the hood, maybe the situation is

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Speaker 1: a little bit better, but you're not seeing borrowing, you're

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Speaker 1: not seeing activity, and firms continue to tell us that

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Speaker 1: they don't want to borrow or invest or higher until

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Speaker 1: they see some sort of end to COVID zero, and

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Speaker 1: that still remains out of their hands. So it's interesting

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Speaker 1: because we know that there hasn't really been all that

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Speaker 1: much monetary stimulus. They've they've had some targeted measures, but

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Speaker 1: it's it's a bit of an issue, I suppose if

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Speaker 1: the demand isn't actually there, So you've got to get

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Speaker 1: to confidence and and the direction that the economy is

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Speaker 1: moving in. Does it bring deflation into the picture. Well,

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Speaker 1: that's that's what's interesting about some of our new data. Look,

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Speaker 1: we're not in deflation yet, but while the entire world

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Speaker 1: is worried about surging inflation and what you can do

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Speaker 1: about it, there's been so much of effect from the

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Speaker 1: COVID zero locked outsh and so much of a suppression

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Speaker 1: of consumption because of it. It is just wiped out

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Speaker 1: demand and caused this deflationary effect. Now you're not in

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Speaker 1: deflation yet, but when you look at some of the numbers,

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Speaker 1: everything's down on year. You're not seeing much improvement from

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Speaker 1: from again from last quarter where part of the nation

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Speaker 1: was locked down for most of the quarter. So you're

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Speaker 1: not in deflation yet, but you know, we're heading into

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Speaker 1: the winter and a lot of people say, oh, this

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Speaker 1: will bring economic stimulus after the Party Congress, it will

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Speaker 1: bring an end to COVID zero lockdowns. I don't think

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Speaker 1: that's the case. And moreover, if you have more COVID

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Speaker 1: and more COVID zero lockdowns, you're really going to have

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Speaker 1: a problem with with the threat of deflation looming. Okay,

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Speaker 1: I mean COVID nineteen lockdowns. We've got clunky governmental led

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Speaker 1: attempts to push up the value change, We've got a

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Speaker 1: property market to put it diplomatically in the dulled rooms.

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Speaker 1: A plus on top of that, random regulatory changes, all

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Speaker 1: contriving together. To ask you this question, is authorities that

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Speaker 1: collectively trying to commit economic suicide? Well, I mean you

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Speaker 1: look at the way that COVID zero has been applied,

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Speaker 1: and you know you tend to tend to think so

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Speaker 1: now this is not without a rationale. Obviously, try to

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Speaker 1: decided not to accept the large scale you know, the

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Speaker 1: Western vaccines and have a large scale vaccine rollout, and

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Speaker 1: so there's a lot of worries about their elderly population,

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Speaker 1: a lot of worries about under capacity in the rural area,

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Speaker 1: hospital under capacity and roy areas. Uh, there's worries about

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Speaker 1: having a health crisis Uh, in a party congress here

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Speaker 1: in particular. So there are worries on this, but yeah,

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Speaker 1: you look at it. They're going to be continuing to

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Speaker 1: to to push the boulder uphill as you try to

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Speaker 1: contain a highly transmissible virus in a in a population

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Speaker 1: of over a billion people. And in the meantime, you're

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Speaker 1: just crushing businesses left and right for for months and

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Speaker 1: months on end. You probably heard me do that line

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Speaker 1: from Gautamadonnium, the richest man in Asia, that China is

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Speaker 1: risking isolating itself from the world. It seems like the

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Speaker 1: West now is I'm not sure where on the spectrum

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Speaker 1: we would be, but it seems like the West is

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Speaker 1: intent on decoupling with China to a certain degree. From

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Speaker 1: your surveys and from talking to people Leland, are you

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Speaker 1: seeing companies even foregoing profit now to maybe pull back

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Speaker 1: from China? Yeah, I think I think companies have finally

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Speaker 1: gotten the memo. You know, and back in the early

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Speaker 1: Trump years, when you were starting to look at at

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Speaker 1: a trade war, uh, companies were still of the mind. Look,

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Speaker 1: you know, there's this is this, this two will pass. Uh.

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Speaker 1: You know, then you've got into more of a geopolitical competition,

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Speaker 1: and and and and uh and and higher tensions in

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Speaker 1: the relationship, and a lot of companies said, no, no,

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Speaker 1: this is this, this too shall pass. By the time

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Speaker 1: you got to COVID and then your two of COVID

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Speaker 1: and then your past year two of COVID, a lot

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Speaker 1: of companies have finally come to conclusion and look, for

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Speaker 1: a lot of reasons, we have got to have a

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Speaker 1: plan B. Part of that is going to be because

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Speaker 1: they think that, you know, the government might step in

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Speaker 1: and force the relationship to change. And some some of

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Speaker 1: it's because companies are looking at their own bottom line

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Speaker 1: saying this is important, but you know, we're going to

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Speaker 1: have a catastrophic event if we're relying on China and

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Speaker 1: this flow stops. So I think that there's there's really

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Speaker 1: light bulbs going off all over the West about over

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Speaker 1: reliance on China. And we're seeing movement right now that

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Speaker 1: we didn't, you know, two years ago. Are you seeing

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Speaker 1: any light of the end of the tunnel for the

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Speaker 1: property side of things. I mean it's a huge part

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Speaker 1: of the economy. Well, yes and no. So you know

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Speaker 1: that this is this is something that is not going

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Speaker 1: to stop at the Party Congress is is not gonna

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Speaker 1: stop next to or UH the party. You know, the

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Speaker 1: property sector is going to be a smaller and smaller

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Speaker 1: part of of growth because they are intentionally stepping in

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Speaker 1: UH to diminish it's it's importance because they're worried about

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Speaker 1: the you know, these models of recklessly sending credit to

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Speaker 1: build infrastructure UH and and and and having a problem

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Speaker 1: on the other side of that. So look, this is

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Speaker 1: a long term slowdown. Now, what you are going to

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Speaker 1: see is along the way you will see ebbs and flows.

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Speaker 1: You will see a culling of the herd where bad

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Speaker 1: property companies get a lot of trouble, will go bankrupt,

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Speaker 1: and then maybe there's a little bit of a policy relief.

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Speaker 1: So make sure that the supply chains they'll break down

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Speaker 1: and you don't have contagion. Then maybe they call the

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Speaker 1: hurd a little bit more. And then it's not the

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Speaker 1: most the property is not the most productive use of

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Speaker 1: the capital, I suppose. I'm sure they would like to

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Speaker 1: see that investment directed into high tech and and getting

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Speaker 1: a leg up on the rest of the world. But

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Speaker 1: you know that's a discussion for another day, no time now, Leland.

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Speaker 1: But great to have you on the program as ever.

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Speaker 1: Leland Miller, CEO of China Beige Book