Speaker 1: Let's get to our guess now where yeah's head of
Speaker 1: research and chief Apack economist at Society General joining us
Speaker 1: from Hong Kong. So I should talk about including all
Speaker 1: these downgrades to China growth, but just want to start
Speaker 1: with the broader picture and certainly what we've seen from
Speaker 1: the FED at Jackson Hole. Do you think that we
Speaker 1: are going to see inflation get back down to two
Speaker 1: percent without causing some kind of global recession. Well, it's
Speaker 1: obviously very very challenging. Um, the it's very clear that
Speaker 1: inflation is driven boast by supply and demand. So the
Speaker 1: FED has said itself that demand has to be destroyed
Speaker 1: to some extent to achieve their goal. So inclicitly that means, uh,
Speaker 1: it's going to be very challenging to to avoid economic pains.
Speaker 1: All right, let's get to the China picture, because we're
Speaker 1: continuing to see these downgrades coming through from the Economy
Speaker 1: of Bloomberg survey now projecting China growth just three and
Speaker 1: a half percent this year. I mean, that's well down
Speaker 1: from other projections of three point nine. But even the
Speaker 1: five and a half percent growth target the authorities had said,
Speaker 1: what kind of challenges are we still saying in terms
Speaker 1: of your view of how we even get to three
Speaker 1: and a half percent growth. Okay, so there are two
Speaker 1: things here. One zero COVID policy, this is becoming a
Speaker 1: persistent drag on the economic activity and more importantly the
Speaker 1: confidence of households, and then the and the corporate and
Speaker 1: the second problem equally equally challenging is the housing situation.
Speaker 1: The housing was already in a very bad shape before
Speaker 1: the Sean high lockdown, but it has gotten worse um
Speaker 1: because of the developers cash flow problem and the project
Speaker 1: delays and all that. So the was these two big issues.
Speaker 1: The Chinese goverman, however, has not done much um. This
Speaker 1: is really the surprising part. And if they continue to
Speaker 1: be slow to respond, the three point five percent would
Speaker 1: be difficult to achieve. What more can be done in
Speaker 1: your view then, because I mean you do have some
Speaker 1: kind of policy action in terms of the cut to
Speaker 1: the MLF recently and that one forty six billion dollars
Speaker 1: of stimulus pledge. But but what is needed? Is it
Speaker 1: more targeted towards the property sector in your view? Yeah,
Speaker 1: certainly that that should be one very important past to
Speaker 1: take um. Because the key here right now is to
Speaker 1: restore the households confidence in the housing and this is
Speaker 1: about finishing these stored projects and deliver the presol departments
Speaker 1: to the households. Without that, nothing else can happen. So
Speaker 1: so the government. It's very clear the developers have no
Speaker 1: cash flow to do that, and not even the local governments.
Speaker 1: So here we actually really need the central government to
Speaker 1: step in. And here we got some news but no confirmation,
Speaker 1: so that the lingering uncertainty is not not good. Let's
Speaker 1: look at the currency moves as well. I mean, the
Speaker 1: fourth day yesterday of a stronger than expected fix gives
Speaker 1: you some kind of indication and authorities are not that
Speaker 1: happy with a near two year low with the one
Speaker 1: against the dollar, and you saw the on and off
Speaker 1: shore pushed past six point nine. How much further weakness
Speaker 1: for the one? You've got Goldman saying now seven? And uh,
Speaker 1: and I guess what kind of further implications are you
Speaker 1: expecting the weak currency to have on this economy. Yeah,
Speaker 1: we also think seven is quite possible in the new turn.
Speaker 1: The trouble here is indeed the hawkish FED we talked
Speaker 1: about and p BOC is in the pressure to to
Speaker 1: ease to support the economy, and of course the p
Speaker 1: BOC once in a while would come. You want to
Speaker 1: slow down the pace of the depreciation, but according to
Speaker 1: the past experience, they can only slow, but then they
Speaker 1: can never stop. So we think there's a more depreciationing
Speaker 1: in your turn. Okay, so more appreciation to that point
Speaker 1: of around seven. And just a quick word as well
Speaker 1: about the business survey that we've seen with American firms
Speaker 1: optimism about China fall into a record low. I mean,
Speaker 1: if you have expats leaving, this is going to cause
Speaker 1: even further I guess weakness to the economy. Yeah, so certainly,
Speaker 1: I think this is a reflection of what we just
Speaker 1: discussed about the confidence confidence shock from the zero COVID policy.
Speaker 1: Of course, there are also other factors making people more
Speaker 1: borrows to these days, but this is really the biggest issue.
Speaker 1: If you can't have the certainty of business continuity, operation continuity, understandably,
Speaker 1: you know, companies were not want to invest. Let's talk
Speaker 1: about the situation in Korea. We had our Kathleen Hayes
Speaker 1: speaking to the bank of a career governor re at
Speaker 1: Jackson Hole and the city saying that his comments could
Speaker 1: raise some hawkish risks in the central banks monetary policy
Speaker 1: re basically saying that the Bank of Korea won't stop
Speaker 1: tightening before the FED. What's your kind of outlook here
Speaker 1: on the Korean one economy? Excuse me, I should say,
Speaker 1: and also the complications of this one at a thirteen
Speaker 1: year low. Yeah, sure, So the current economy obviously is
Speaker 1: going to slow because of the the the external demand
Speaker 1: is on the path of deceleration. It's actually already started.
Speaker 1: And given how important it is for the current economy,
Speaker 1: it's hard to see how how can how Korean girls
Speaker 1: can can remain resilient in this environment. But meanwhile they
Speaker 1: also have an inflation problem. The headline has peaked, it's
Speaker 1: likely to decline here. But Korea has a little bit
Speaker 1: of the same dynamics as in the in the West,
Speaker 1: which is, you know, the labor market is tightening, so
Speaker 1: there is demand pool inflation. So that really means yes,
Speaker 1: the bok has to continue to to hiking trust rates
Speaker 1: as well. You talk there about inflation. I think the
Speaker 1: governor said himself that he expects inflation too slow below
Speaker 1: three by the end of next year. Are you're saying
Speaker 1: more broadly inflation picking across Asia? Well, it is coming.
Speaker 1: Right in some countries, it's already here. Um. The for example,
Speaker 1: in in As we can see you know, the there
Speaker 1: are both demand pool and supply inflation. In countries like Sinkle, Singapore, Korea, Australia,
Speaker 1: they have a titan labor market as well. So in
Speaker 1: these places inflation is definitely broading beyond the food and
Speaker 1: energy it would be harder to contain. Well, speaking of
Speaker 1: beyond food and energy, we've got a Bloomberg intelligence pace
Speaker 1: saying that the surging Singapore rents us something that's going
Speaker 1: to keep inflationary pressures high too. Does that kind of
Speaker 1: I guess, spur more investment demand for residential properties and
Speaker 1: and I guess the housing market in Singapore or does
Speaker 1: it call that demand? Uh? That will come um for sure,
Speaker 1: but in the short term it's probably is still going
Speaker 1: to take the policy titaning to cool some of the demand, um,
Speaker 1: usually the housing projects. That's gonna take time. Um. And
Speaker 1: in this case, you know we're talking about you know,
Speaker 1: the idea that inflation in Asia is actually also a
Speaker 1: problem for a lot of the central banks if they
Speaker 1: have to hike not because of fair is hiking, but
Speaker 1: because they also have to come in their own inflation. Well, yeah,
Speaker 1: let's talk about where you are in Hong Kong, because
Speaker 1: that has its own challenges to as it follows the
Speaker 1: dynamic COVID policy. And we've talked here about businesses in China,
Speaker 1: you know, not being very optimistic and and of course
Speaker 1: the exodus too of the brain drain in Hong Kong.
Speaker 1: What's your what's your outlook for Hong Kong? Does does
Speaker 1: the city sort of come back when we get these
Speaker 1: tough restrictions eased or as Hong Kong change forever? Well, um,
Speaker 1: it's hard to say at this stage, but apparently it's
Speaker 1: going to have a couple of difficult years ahead. One
Speaker 1: is because Hong Kong still have a pretty a restrictive
Speaker 1: entry policy well compared to the rest of the world,
Speaker 1: so that's not going to help. And once people are leaving,
Speaker 1: it's going to take time for time to come back.
Speaker 1: And the other thing is Hong Kong economy is very
Speaker 1: much connected to related integrating into into China Milan, and
Speaker 1: China is not going to do well in the coming
Speaker 1: few years probably in terms of growth. It's there is
Speaker 1: a recovered there is also a structural their problem. They
Speaker 1: need to resolve that's got to take time, all right.
Speaker 1: Thank you for your insights. Where y'ao is Head of
Speaker 1: Research in chief apack economist at Society General, joining us
Speaker 1: from Hong Kong,