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Speaker 1: Let's get to our guests. Helen Shaw is with a

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Speaker 1: APACK Economics head and chief Greater China Economists to be

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Speaker 1: a Vay Global Research. She joins from Hong Kong. Helen,

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Speaker 1: thanks for being with us that we're standing by for

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Speaker 1: the h the list of economic reports out of China

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Speaker 1: taken together, it's I guess the estimate that we're going

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Speaker 1: to see some kind of modest improvement in the month

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Speaker 1: of July. Is that your expectation. Yes, I'm afraid that

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Speaker 1: we're going to see some improvement, although the very big

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Speaker 1: ones uh so in probably I t uh success and investment,

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Speaker 1: as well as in retail sales, So that's going to

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Speaker 1: be good news. Uh Well, I we think that the

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Speaker 1: most important driver for such improvement is the very fact

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Speaker 1: that its reopening has continued. And also we're being helped

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Speaker 1: by a lower base from a year ago, so reopens continue.

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Speaker 1: But how long can we be sure that that will

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Speaker 1: remain the case. All it takes is another outbreak. How

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Speaker 1: sustainable are these gains in a COVID zero environment. Well,

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Speaker 1: we're not so sure yet. We're still in the hands

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Speaker 1: of the COVID virus outbreaks because at the moment um,

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Speaker 1: you know what we are Fortunately, what is unfortunately still

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Speaker 1: happening is that so those flare ups are actually taking

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Speaker 1: places in the more remote areas that are heavy on

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Speaker 1: in tourism but not necessarily important from a significant manufacturing perspective. UH. So,

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Speaker 1: for example, if you look at Hainan or you know,

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Speaker 1: shin Jiang, or a few places in uh In in

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Speaker 1: in other areas that were recently being uh you know,

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Speaker 1: implemented the the temporary control measures, I'm afraid that that

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Speaker 1: they are uh there are more important from a tourism perspective,

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Speaker 1: So potentially that will hit the summer vacation uh you know, transportation,

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Speaker 1: uh and accommodations, but not necessarily like Beijing or Shanghai

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Speaker 1: where we had to lockdown back in April or and May. Uh,

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Speaker 1: those are much more important from economic growth development perspective,

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Speaker 1: and therefore at the moment, I think that the impact

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Speaker 1: that should be smaller than before. But the problem is

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Speaker 1: going forward into September to October, are we going to

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Speaker 1: see a more widespread lockdown. We're not so sure yet.

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Speaker 1: I think we It still largely depends on how quickly

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Speaker 1: that that such cities would be responding to potential flare

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Speaker 1: ups and Helen, the latest China credit growth shockingly weak numbers.

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Speaker 1: I think the aggregate financing was about half of what

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Speaker 1: economists were expecting. So has confidence really collapsed to the

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Speaker 1: point where even if money is out there, no one

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Speaker 1: wants it well. Um. I would say that the numbers,

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Speaker 1: the money and credit numbers that came out on Friday,

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Speaker 1: were indeed a disappointment, but that was not completely a shocker. Um.

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Speaker 1: The problem is that I think many people had the

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Speaker 1: expectation raised after they saw the the June and also

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Speaker 1: the main numbers, thinking that the numbers would be very

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Speaker 1: good right away because China managed to do it in

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Speaker 1: the past the cycles. In previous cycles, whenever China, you know,

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Speaker 1: push the the the credit valve and then things would

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Speaker 1: actually come back pretty quickly. Um. And therefore I think

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Speaker 1: people were largely expecting the same would happen this time.

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Speaker 1: But this time is different. We have been arguing that

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Speaker 1: the especially the June rebound was caused by regulatory uh

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Speaker 1: you know, requirement more about a moral situation, but coming

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Speaker 1: into July, when that expires, it is gone because credit

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Speaker 1: demand is still very weak. And Helen, we've been discussing

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Speaker 1: our expectations around the data that we're going to get

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Speaker 1: out of China to day. But the political dimension to

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Speaker 1: all of this is waiting on jes and Pink getting

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Speaker 1: sworn him for a third term later this year. Once

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Speaker 1: that happens, do you anticipate any new reform, stimulus, new

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Speaker 1: policies around China's economy? Great question, Um. In fact that

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Speaker 1: we think this is probably the most important political event

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Speaker 1: in five years, and therefore we are expecting a big change,

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Speaker 1: but not necessarily on economic um policy stimulus. UM. Many

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Speaker 1: people are saying maybe there is going to be the

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Speaker 1: infantry or you know, credit expansion acceleration or issuance of

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Speaker 1: special purpose bonds, But in our view, the most important

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Speaker 1: change will be the relaxation of COVID measures within China

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Speaker 1: and the border control. We think that the key reason

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Speaker 1: for keeping all of these is to safeguard this particular

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Speaker 1: particular events, and once this event is out of the way,

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Speaker 1: we think that the relaxation that reopening will come back.

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Speaker 1: So last Friday we had five state owned firms saying

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Speaker 1: that they intend to delist here from the New York

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Speaker 1: Stock Exchange. There's a lot that we've been talking about

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Speaker 1: with respect to US China tensions. Is it going to

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Speaker 1: get much worse? And and are we looking at a

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Speaker 1: decoupling scenario that the market really hasn't effectively discounted. Well,

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Speaker 1: we think that the decoupling is probably still taking place

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Speaker 1: slowly if you look at the delu sting actions and

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Speaker 1: also the the the software UM you know, UH news

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Speaker 1: for bands on the on chip development, et cetera. UM.

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Speaker 1: But we don't necessarily think that we are going through um,

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Speaker 1: you know, an L shaped UH kind of plummeting action

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Speaker 1: from here most likely will see something deterioration and then

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Speaker 1: some followed by some improvement and then maybe you know,

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Speaker 1: two steps forward, one step back. UM. In the good

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Speaker 1: news is that actually the media in the US is

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Speaker 1: reporting she and also President Biden are going to meet

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Speaker 1: in UH in Indonesia during the G twenty So don't

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Speaker 1: by the time of November. UM. We think that this

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Speaker 1: will create the conditions for a face to face meeting

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Speaker 1: and possibly some improvement between the two countries. And in

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Speaker 1: terms of that improvement, do you see an improvement of

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Speaker 1: the trading relationship not just with the US, but with

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Speaker 1: some of the other trading patterners that China has that

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Speaker 1: it's been budding heads with recently. Yes, we think US

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Speaker 1: also likely UM, but you know, I think a lot

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Speaker 1: of the potential improvement are now also hinged on China's

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Speaker 1: decision to reintegrate with the rest of the world. UM.

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Speaker 1: So they need to get their business done first, and

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Speaker 1: the conclude that the CPC. Once the succession and all

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Speaker 1: these uh you know, uh important changes are confirmed, we

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Speaker 1: think that China would move on and UH and you know,

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Speaker 1: gradually come back. And by that time, for example, during

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Speaker 1: the November A pack and also hytings, we probably will

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Speaker 1: see China's commitment also to regional partners uh and including

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Speaker 1: for example, the reopening of its border and allowing Chinese

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Speaker 1: tourists to come back again. We're getting indications of the

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Speaker 1: Biden administration will soon on veil details for trade talks

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Speaker 1: with Taiwan. Does this have the potential to further inflame

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Speaker 1: tension with Beijing? Uh? Potentially, But I I think the problem,

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Speaker 1: however it is with Taiwan is more of the political

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Speaker 1: instigation rather than the UM the rather than the trade relationship. UM.

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Speaker 1: What it may potentially um, you know, become a negative

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Speaker 1: catalyst for US China relationship would be you know, for example,

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Speaker 1: US imposing bands on you know, technology related to products

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Speaker 1: exports from Taiwan to mainland China. Uh. If that is

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Speaker 1: the case, yes, that could potentially make this um you know,

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Speaker 1: already predistressed relationship even worse. But if it is more

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Speaker 1: about you know, the reducing tariffs or improving the relate

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Speaker 1: the trade relationship between US and Taiwan, I think that's

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Speaker 1: probably not going to change much. Helen very quickly changed

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Speaker 1: takings loan prime right later in the week, anticipating any change.

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Speaker 1: Uh No, we don't necessarily think so. All right, thank

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Speaker 1: you very much. Helen's APEC economics head and chief Greater

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Speaker 1: China economist the Bank of America Global rist arch there

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Speaker 1: speaking to us on Bloomberg Debrae occasion