1 00:00:05,519 --> 00:00:08,400 Speaker 1: Hello, and welcome back to Stephanomics, the podcast that brings 2 00:00:08,440 --> 00:00:11,440 Speaker 1: a tumultuous global economy to you. When we were last 3 00:00:11,480 --> 00:00:15,320 Speaker 1: on air a whole two months ago, Russia hadn't invaded Ukraine, 4 00:00:15,680 --> 00:00:18,479 Speaker 1: we weren't seeing food riots in Peru and Sri Lanka, 5 00:00:18,880 --> 00:00:23,040 Speaker 1: shortages in European supermarkets due to soaring fuel costs, and 6 00:00:23,120 --> 00:00:27,720 Speaker 1: cities in China weren't in lockdown again. So we have 7 00:00:27,800 --> 00:00:30,480 Speaker 1: quite a lot to catch up on. But what's striking 8 00:00:30,520 --> 00:00:33,199 Speaker 1: to me is not so much the scale of the shocks. 9 00:00:33,479 --> 00:00:35,880 Speaker 1: We've got rather used to the world being turned upside down. 10 00:00:36,400 --> 00:00:39,760 Speaker 1: What's different is the variation. We may still live in 11 00:00:39,800 --> 00:00:42,440 Speaker 1: a global economy, but if you ask what's front of 12 00:00:42,479 --> 00:00:46,839 Speaker 1: mind for economic policy makers in America, Europe, and China today, 13 00:00:47,440 --> 00:00:50,440 Speaker 1: the answer in each case would be quite different. For 14 00:00:50,560 --> 00:00:55,680 Speaker 1: China it's COVID again. For Europe it's Ukraine, the price 15 00:00:55,720 --> 00:00:59,040 Speaker 1: of energy and how to cushion the blow for European 16 00:00:59,120 --> 00:01:02,200 Speaker 1: citizens of that cost of living squeeze coming down the track. 17 00:01:02,840 --> 00:01:05,880 Speaker 1: And for the roaring US economy, the problem is how 18 00:01:05,920 --> 00:01:09,480 Speaker 1: to stop an inflationary spiral of prices and wages without 19 00:01:09,520 --> 00:01:13,360 Speaker 1: causing a global recession. We've got a window on all 20 00:01:13,360 --> 00:01:15,479 Speaker 1: three of those in this first episode of the new 21 00:01:15,560 --> 00:01:18,520 Speaker 1: series thanks to our reporters on the ground. But first 22 00:01:18,840 --> 00:01:30,000 Speaker 1: our chief economist Tom Morlick with his take. Tom, I 23 00:01:30,040 --> 00:01:34,399 Speaker 1: know you've been pulling together your new global forecasts with 24 00:01:34,480 --> 00:01:37,960 Speaker 1: the team. What's the biggest shift that you've been grappling 25 00:01:38,000 --> 00:01:43,160 Speaker 1: with relative to just the start of the year. Two 26 00:01:43,440 --> 00:01:47,720 Speaker 1: really big things have happened since the start of the year, Stephanie. First, 27 00:01:47,760 --> 00:01:52,240 Speaker 1: we have Russia's invasion of Ukraine and that is a 28 00:01:52,320 --> 00:01:57,080 Speaker 1: significant negative for global growth. We've taken our global GDP 29 00:01:57,240 --> 00:02:01,240 Speaker 1: forecast down from four point seven per growth to three 30 00:02:01,240 --> 00:02:04,520 Speaker 1: point five percent growth for the year. And because energy 31 00:02:04,600 --> 00:02:10,359 Speaker 1: prices have rocketed up, it also adds to inflationary pressure. 32 00:02:11,120 --> 00:02:16,120 Speaker 1: Less growth, more inflation, very challenging environment for central banks. 33 00:02:17,240 --> 00:02:19,840 Speaker 1: The second big thing which has happened is the a 34 00:02:20,000 --> 00:02:24,800 Speaker 1: Macron outbreak in China. We've had shen Jen locking down, 35 00:02:25,320 --> 00:02:27,840 Speaker 1: j Lynn, a province in the north of the country 36 00:02:28,000 --> 00:02:34,200 Speaker 1: locking down, and now Shanghai, China's financial center, China's big 37 00:02:34,320 --> 00:02:39,639 Speaker 1: port also locking down. Now that already means China will 38 00:02:39,680 --> 00:02:42,440 Speaker 1: have a weak start to the year. But the question 39 00:02:42,520 --> 00:02:45,800 Speaker 1: is what happens next. If Shanghai isn't the end of 40 00:02:45,800 --> 00:02:50,239 Speaker 1: the story. If we see Beijing, chung Do, Dali and 41 00:02:50,600 --> 00:02:53,919 Speaker 1: other big cities locking down as well, that's going to 42 00:02:54,040 --> 00:02:57,959 Speaker 1: take another chunk out of Chinese growth, another chunk out 43 00:02:57,960 --> 00:03:01,560 Speaker 1: of global growth, and it's going to add more uncertainty 44 00:03:01,639 --> 00:03:04,840 Speaker 1: to the inflation outlook. We're used to the world's major 45 00:03:04,919 --> 00:03:10,840 Speaker 1: regions broadly or often moving together in response to similar forces. 46 00:03:10,880 --> 00:03:13,160 Speaker 1: But with everything that's going on right now, it feels 47 00:03:13,160 --> 00:03:16,000 Speaker 1: like that six months from now, those three regions could 48 00:03:16,000 --> 00:03:18,640 Speaker 1: be on very different paths. How do you deal with 49 00:03:18,639 --> 00:03:21,640 Speaker 1: that when you're thinking about what's going to happen to 50 00:03:21,720 --> 00:03:25,800 Speaker 1: the to the world and the world's growth. Yeah. So, 51 00:03:26,639 --> 00:03:31,040 Speaker 1: with apologies to Francis for Kayama, it seems like history 52 00:03:31,120 --> 00:03:35,400 Speaker 1: has restarted right um, and it's not just the last 53 00:03:35,440 --> 00:03:38,960 Speaker 1: few months. Go back to twenties sixteen. The election of 54 00:03:39,000 --> 00:03:43,000 Speaker 1: Donald Trump was the beginning of a fissure between China 55 00:03:43,280 --> 00:03:48,600 Speaker 1: and the United States. COVID accelerated the sort of forces 56 00:03:48,640 --> 00:03:53,880 Speaker 1: for deglobalization UM, and now Russia's invasion of Ukraine has 57 00:03:53,920 --> 00:03:59,080 Speaker 1: added more pressure in the same direction. So that integration 58 00:03:59,320 --> 00:04:05,160 Speaker 1: force globalization force, which moved the US, Europe, Japan, China 59 00:04:05,640 --> 00:04:11,120 Speaker 1: onto one integrated global economic cycle, and that's now moving 60 00:04:11,120 --> 00:04:16,400 Speaker 1: in the other direction. Globalization is unraveling, and that means 61 00:04:16,440 --> 00:04:21,039 Speaker 1: you're going to have the US, Europe, Asia on different trajectories, 62 00:04:21,400 --> 00:04:25,960 Speaker 1: central banks moving in different directions, a much more challenging 63 00:04:26,080 --> 00:04:30,360 Speaker 1: environment for policymakers, for businesses, for investors to navigate. Let's 64 00:04:30,400 --> 00:04:33,320 Speaker 1: just touch it briefly. On Europe, we're going to hear 65 00:04:33,360 --> 00:04:35,560 Speaker 1: in a little bit about the policy shifts that we've 66 00:04:35,600 --> 00:04:40,640 Speaker 1: seen in Germany in direct response to Russia's invasion of Ukraine. 67 00:04:41,120 --> 00:04:44,160 Speaker 1: If Europe is headed in a path where Germany is 68 00:04:44,200 --> 00:04:48,400 Speaker 1: spending a lot more and on defense and other things, 69 00:04:48,560 --> 00:04:53,440 Speaker 1: and on weaning itself off Russian oil, and to some extent, 70 00:04:53,600 --> 00:04:56,120 Speaker 1: the rest of Europe is also going to be spending 71 00:04:56,200 --> 00:05:00,320 Speaker 1: and potentially borrowing more for a prolonged period. Does that 72 00:05:00,440 --> 00:05:03,560 Speaker 1: change the way you think about Europe's contribution to the 73 00:05:03,560 --> 00:05:08,480 Speaker 1: global economy or does it not really figure I think 74 00:05:08,480 --> 00:05:11,719 Speaker 1: it's a really interesting question. I mean, in some senses, 75 00:05:11,760 --> 00:05:15,680 Speaker 1: the European project has been in a huge success right um, 76 00:05:15,720 --> 00:05:19,680 Speaker 1: But in another sense it's kind of underdelivered. UM. On 77 00:05:19,800 --> 00:05:23,600 Speaker 1: economic policy, the crises that we've seen over the last 78 00:05:23,680 --> 00:05:28,359 Speaker 1: decade the European sovereign debt crisis, which affected Greece and 79 00:05:28,480 --> 00:05:31,880 Speaker 1: Italy and Spain were a kind of a failure of 80 00:05:32,000 --> 00:05:35,920 Speaker 1: coordination at the European level, right, it was a sort 81 00:05:35,960 --> 00:05:41,240 Speaker 1: of failure of Berlin and Rome to agree on the 82 00:05:41,320 --> 00:05:45,720 Speaker 1: right strategy to lift Europe out of that slump. And 83 00:05:45,800 --> 00:05:49,840 Speaker 1: on foreign policy and defense policy, well, the failure of 84 00:05:49,880 --> 00:05:53,960 Speaker 1: coordination has been sort of even more manifest. So the 85 00:05:54,080 --> 00:05:58,520 Speaker 1: question is, is Russia's invasion of Ukraine kind of a 86 00:05:58,600 --> 00:06:02,359 Speaker 1: spot k movement for Europe? If you will? Is this 87 00:06:02,440 --> 00:06:07,479 Speaker 1: a movement where the reappearance of a common enemy on 88 00:06:07,560 --> 00:06:11,920 Speaker 1: the eastern border provides the catalyst to do more in 89 00:06:12,040 --> 00:06:16,000 Speaker 1: terms of having a unified defense and foreign policy, and 90 00:06:16,040 --> 00:06:21,479 Speaker 1: also to do more to ensure that European prosperity is 91 00:06:21,520 --> 00:06:26,200 Speaker 1: spread more widely than the border of Germany. We might 92 00:06:26,240 --> 00:06:29,400 Speaker 1: come back to you a little bit later for a 93 00:06:29,480 --> 00:06:32,000 Speaker 1: for a little bit more on on China, but for now, 94 00:06:32,040 --> 00:06:42,440 Speaker 1: thanks very much. Now, I promised you three windows on 95 00:06:42,480 --> 00:06:45,520 Speaker 1: the world, and we're starting with the American Midwest. If 96 00:06:45,520 --> 00:06:48,520 Speaker 1: you think the US is entering into a wage price spiral, 97 00:06:48,880 --> 00:06:51,000 Speaker 1: chances are you're a bit worried by the red hot 98 00:06:51,160 --> 00:06:56,040 Speaker 1: US labor market, and there's no harder jobs market than Indiana. 99 00:06:56,520 --> 00:06:59,839 Speaker 1: Our senior global economy reporter Sean Donnan went to check 100 00:06:59,839 --> 00:07:06,840 Speaker 1: it out, because you've got all this extra stuff. I'm 101 00:07:06,880 --> 00:07:09,120 Speaker 1: looking for the names now, Vera, this is Doc Holidays. 102 00:07:10,880 --> 00:07:16,400 Speaker 1: That's fine. Step onto the factory floor at metro Plastics, 103 00:07:16,800 --> 00:07:21,480 Speaker 1: family owned forty five year old injection molding company in Noblesville, Indiana, 104 00:07:21,880 --> 00:07:25,120 Speaker 1: and you quickly confront the present and the future of 105 00:07:25,120 --> 00:07:28,920 Speaker 1: the US economy. Inflation maybe at forty year highs in 106 00:07:28,920 --> 00:07:32,480 Speaker 1: the US right now, but business is buzzing. According to 107 00:07:32,560 --> 00:07:36,520 Speaker 1: owner and executive director Carol Croll, whose parents started the 108 00:07:36,600 --> 00:07:39,480 Speaker 1: company and who on this day is leading us on 109 00:07:39,560 --> 00:07:42,960 Speaker 1: a tour of the factory floor, it just kind of 110 00:07:43,000 --> 00:07:46,080 Speaker 1: depends on the job set up. Okay, this is where 111 00:07:46,200 --> 00:07:49,480 Speaker 1: kind of automation comes into play. They're not having to 112 00:07:49,560 --> 00:07:51,680 Speaker 1: get the parts out of the bin. It's all coming 113 00:07:51,720 --> 00:07:55,000 Speaker 1: up to, you know, at the level station where they're 114 00:07:55,040 --> 00:08:01,760 Speaker 1: just swarming the parts. And yeah, like many in manufacturing, 115 00:08:01,880 --> 00:08:06,480 Speaker 1: Metroplastics has a problem. It can't find the workers it 116 00:08:06,520 --> 00:08:09,600 Speaker 1: needs to keep up, which is not just an issue 117 00:08:09,840 --> 00:08:13,320 Speaker 1: about recovering from the pandemic, or about the present state 118 00:08:13,440 --> 00:08:18,000 Speaker 1: of a tight labor market. It's also about long term demographics, 119 00:08:18,080 --> 00:08:22,440 Speaker 1: retiring baby boomers, and the structural issues America's factories are 120 00:08:22,480 --> 00:08:26,320 Speaker 1: being forced to confront as they compete in the global economy. 121 00:08:28,000 --> 00:08:31,800 Speaker 1: Even as a pandemic, trade wars and supply chain snarls 122 00:08:31,840 --> 00:08:34,840 Speaker 1: of prompted conversations about the end of an era of 123 00:08:34,880 --> 00:08:39,200 Speaker 1: globalization and the need to reshore production. There's some awkward 124 00:08:39,320 --> 00:08:43,840 Speaker 1: economic realities that don't always get talked about, including just 125 00:08:43,920 --> 00:08:48,720 Speaker 1: who is going to work in those factories. Metroplastics has 126 00:08:48,800 --> 00:08:51,640 Speaker 1: a hundred and thirty employees. It's a twenty four hour 127 00:08:51,760 --> 00:08:56,720 Speaker 1: day operation that is increasingly being automated. On this day, 128 00:08:56,960 --> 00:09:01,000 Speaker 1: a machine nicknamed Doc Holiday is melting plastic chips, shooting 129 00:09:01,080 --> 00:09:04,600 Speaker 1: molten plastic into a mold, and turning out caps for 130 00:09:04,720 --> 00:09:07,720 Speaker 1: a suspension assembly that will eventually go into a tesla. 131 00:09:08,480 --> 00:09:12,439 Speaker 1: It's doing so without any visible human involvement. A camera 132 00:09:12,720 --> 00:09:26,199 Speaker 1: and a robot are doing quality checks rejected Pasty Wow. 133 00:09:30,320 --> 00:09:33,680 Speaker 1: Every so often, a human operator will come over to 134 00:09:33,920 --> 00:09:36,640 Speaker 1: box some parts and carry them the few steps to 135 00:09:36,720 --> 00:09:40,439 Speaker 1: a station where an autonomous robot nicknamed uber will pick 136 00:09:40,559 --> 00:09:43,000 Speaker 1: up the open box to carry it across the factory 137 00:09:43,000 --> 00:09:50,000 Speaker 1: floor to shipping. But this is the future, right. The 138 00:09:50,040 --> 00:09:53,000 Speaker 1: search for workers is on nationally, but it's a particularly 139 00:09:53,040 --> 00:09:56,880 Speaker 1: acute one in Hamilton's County, Indiana, which is home to 140 00:09:56,920 --> 00:10:00,120 Speaker 1: Metroplastics and has one of the lowest unemployment rate it's 141 00:10:00,160 --> 00:10:03,800 Speaker 1: in the country. It bottomed out at zero point eight 142 00:10:03,800 --> 00:10:06,520 Speaker 1: percent in December last year, and though it has crept 143 00:10:06,640 --> 00:10:09,560 Speaker 1: up since, the most recent numbers still have it lying 144 00:10:09,679 --> 00:10:13,960 Speaker 1: at half the three point six percent national unemployment rate 145 00:10:14,080 --> 00:10:19,480 Speaker 1: recorded in March. Jim Brainerd is the Republican mayor of Carmel, 146 00:10:19,600 --> 00:10:23,880 Speaker 1: the largest city in Hamilton's County. It is a decidedly 147 00:10:24,040 --> 00:10:27,800 Speaker 1: red county in a deeply read state that voted overwhelmingly 148 00:10:27,920 --> 00:10:32,360 Speaker 1: for Donald Trump. In Hamilton's County, in fact, hasn't voted 149 00:10:32,400 --> 00:10:37,520 Speaker 1: for a Democratic presidential candidate since. But ask Brainard what 150 00:10:37,600 --> 00:10:40,920 Speaker 1: he thinks the top economic priorities are in America today, 151 00:10:41,400 --> 00:10:43,760 Speaker 1: and he will tell you two things that are definitely 152 00:10:44,000 --> 00:10:48,959 Speaker 1: not from the Trump playbook. One loosening immigration rules to 153 00:10:49,040 --> 00:10:54,000 Speaker 1: attract more workers, and two increasing wages for low income workers, 154 00:10:54,160 --> 00:10:57,640 Speaker 1: particularly in the service sector. America is the only country 155 00:10:57,679 --> 00:10:59,559 Speaker 1: in the world that really had immigration like we have 156 00:10:59,679 --> 00:11:07,200 Speaker 1: had uh and we need to embrace it and don't 157 00:11:07,200 --> 00:11:11,040 Speaker 1: even have people to fill our jobs. Metro Plastics isn't 158 00:11:11,080 --> 00:11:14,920 Speaker 1: the only manufacturer in Hamilton's County that is desperate for help. 159 00:11:15,520 --> 00:11:18,480 Speaker 1: Companies have been turning to inmates on work release from 160 00:11:18,480 --> 00:11:21,720 Speaker 1: the local jail, even as local officials complained they can't 161 00:11:21,760 --> 00:11:25,640 Speaker 1: find enough guards to work at the jail. At SMC, 162 00:11:26,000 --> 00:11:29,720 Speaker 1: which makes pneumatic equipment, the struggle is on to recruit 163 00:11:29,720 --> 00:11:32,480 Speaker 1: people to work in a two point six million square 164 00:11:32,520 --> 00:11:35,240 Speaker 1: feed facility that, if it was a shopping mall, would 165 00:11:35,240 --> 00:11:37,760 Speaker 1: be one of the ten biggest in America. It has 166 00:11:37,800 --> 00:11:40,720 Speaker 1: been built with a business expansion in mind, so in 167 00:11:40,760 --> 00:11:44,840 Speaker 1: April one, the company started offering unlimited leave and vacation 168 00:11:44,880 --> 00:11:48,760 Speaker 1: time to employees, on top of the free healthcare and 169 00:11:48,840 --> 00:11:53,800 Speaker 1: other benefits. Sometimes even that isn't enough in today's labor market. 170 00:11:54,400 --> 00:11:57,199 Speaker 1: Kelly Stacy is the president and CEO of s m 171 00:11:57,280 --> 00:12:00,240 Speaker 1: c s North American unit, which has some sick seen 172 00:12:00,240 --> 00:12:04,679 Speaker 1: a hundred employees. You'll hire people, um and then they 173 00:12:04,720 --> 00:12:06,640 Speaker 1: just don't show up. They don't even show up for 174 00:12:06,679 --> 00:12:09,760 Speaker 1: their first day. Yeah, they because they've got another offer. 175 00:12:09,920 --> 00:12:12,400 Speaker 1: We have no idea. You've got them all on board 176 00:12:12,440 --> 00:12:15,200 Speaker 1: and everything, and in the first day they just don't 177 00:12:15,200 --> 00:12:18,400 Speaker 1: show up. We don't know what happens soon. In a 178 00:12:18,480 --> 00:12:22,880 Speaker 1: recent report, experts at the Economic Innovation Group, a nonpartisan 179 00:12:23,040 --> 00:12:26,120 Speaker 1: Washington think tank, made the case that despite all the 180 00:12:26,200 --> 00:12:29,400 Speaker 1: claims of a rapid economic change in America in the 181 00:12:29,440 --> 00:12:33,400 Speaker 1: twenty one century, the reality is actually the opposite. In 182 00:12:33,440 --> 00:12:37,240 Speaker 1: their words, America has so far this century been quote 183 00:12:37,600 --> 00:12:42,959 Speaker 1: mired in a period of unprecedented complacency unquote that has 184 00:12:43,080 --> 00:12:46,000 Speaker 1: undermined what has been one of the US's key advantages 185 00:12:46,040 --> 00:12:50,080 Speaker 1: through history, it's economic dynamism, or it's embrace of change 186 00:12:50,200 --> 00:12:53,840 Speaker 1: and new immigrants. Here's Canon Fikrey, one of the authors 187 00:12:53,840 --> 00:12:57,240 Speaker 1: of that e i G. Report. These issues that you 188 00:12:57,320 --> 00:13:00,640 Speaker 1: know we could have taken in stride back when we 189 00:13:00,720 --> 00:13:04,600 Speaker 1: had healthy, supergent populations both annually, are now going to 190 00:13:04,840 --> 00:13:08,679 Speaker 1: just be felt much more acutely because we don't have 191 00:13:09,360 --> 00:13:11,640 Speaker 1: as much positive forces on the other side of the 192 00:13:11,760 --> 00:13:16,240 Speaker 1: ledger counteracting a kind of negative drag. The metrics that 193 00:13:16,320 --> 00:13:19,600 Speaker 1: e i G. Points to include things like the slowdown 194 00:13:19,600 --> 00:13:24,280 Speaker 1: and not just immigration but interstate migration within the US, 195 00:13:24,280 --> 00:13:28,400 Speaker 1: and a diminishing share of workers at startups. Any plea 196 00:13:28,520 --> 00:13:31,920 Speaker 1: for more workers may seem counterintuitive given that we've just 197 00:13:32,000 --> 00:13:34,960 Speaker 1: gone through an economic crisis that's some millions lose their 198 00:13:35,040 --> 00:13:38,840 Speaker 1: jobs in America or amid a conversation we're having about 199 00:13:38,840 --> 00:13:41,960 Speaker 1: the future of work. But another way to think about 200 00:13:42,000 --> 00:13:44,800 Speaker 1: it is that in the long term, America may not 201 00:13:44,960 --> 00:13:47,600 Speaker 1: have the workers it needs to live up to its 202 00:13:47,640 --> 00:13:52,559 Speaker 1: current rhetorical ambitions. According to census data released in March, 203 00:13:52,920 --> 00:13:55,440 Speaker 1: more than two thirds of counties in the U saw 204 00:13:55,520 --> 00:13:59,839 Speaker 1: more deaths than births in and therefore a natural d 205 00:14:00,000 --> 00:14:04,959 Speaker 1: increase in population. Hamilton's County, Indiana, is a vision of 206 00:14:05,000 --> 00:14:08,400 Speaker 1: what many communities in America aspire to be. It's still 207 00:14:08,440 --> 00:14:12,120 Speaker 1: growing fast. It has advanced manufacturing and growing tech in 208 00:14:12,240 --> 00:14:17,079 Speaker 1: biotech sectors. Its cities are building new downtowns and walkable neighborhoods, 209 00:14:17,320 --> 00:14:22,360 Speaker 1: has great schools. Still, Carol Croll and Metroplastics need workers. Now, 210 00:14:22,960 --> 00:14:24,960 Speaker 1: this is how she lays it out from the company 211 00:14:25,000 --> 00:14:31,400 Speaker 1: conference room. We do some automation automatically, other automation. It's 212 00:14:31,400 --> 00:14:34,760 Speaker 1: just kind of being forced upon us because we don't 213 00:14:34,760 --> 00:14:36,760 Speaker 1: have any other choice, because we can't find people to 214 00:14:36,800 --> 00:14:40,360 Speaker 1: do the jobs. Over the years, the company has taken 215 00:14:40,360 --> 00:14:44,080 Speaker 1: other measures to attract people. They introduced six hour shifts 216 00:14:44,080 --> 00:14:46,280 Speaker 1: to try and draw stay at home mothers who wanted 217 00:14:46,320 --> 00:14:48,840 Speaker 1: to be home with their kids in the afternoon. There's 218 00:14:48,880 --> 00:14:53,720 Speaker 1: also a tuition reimbursement program for students. The temp agencies 219 00:14:53,720 --> 00:14:56,560 Speaker 1: she and her brother, who runs the company's operations side, 220 00:14:56,880 --> 00:14:59,360 Speaker 1: are relying on to fill the empty slots on the 221 00:14:59,400 --> 00:15:03,320 Speaker 1: overnight ift regularly struggled to find people, Karl says, and 222 00:15:03,400 --> 00:15:06,160 Speaker 1: even when they do, the attempts don't always show up 223 00:15:06,280 --> 00:15:09,560 Speaker 1: or last long. In what are now seventeen dollar in 224 00:15:09,640 --> 00:15:14,080 Speaker 1: our jobs. That's not just about the weird economy. The 225 00:15:14,120 --> 00:15:18,160 Speaker 1: pandemic is leaving behind, and that's not going to go away. 226 00:15:19,160 --> 00:15:21,760 Speaker 1: That's a long term issue. It is very much a 227 00:15:21,800 --> 00:15:25,360 Speaker 1: long term issue in email. Some of it's the economy 228 00:15:25,360 --> 00:15:27,920 Speaker 1: and what's going on, but I think a good portion 229 00:15:28,000 --> 00:15:30,000 Speaker 1: of it that we've known has been coming for a 230 00:15:30,000 --> 00:15:33,720 Speaker 1: while is the baby books are leaving the marketing period. 231 00:15:33,920 --> 00:15:37,360 Speaker 1: You know that there's not a whole lot to replace them. 232 00:15:37,400 --> 00:15:53,960 Speaker 1: For Bloomberg News, I'm Sean do and now to Berlin 233 00:15:54,440 --> 00:15:58,640 Speaker 1: and an unlikely Revolution. I interviewed the German Chance let 234 00:15:58,640 --> 00:16:00,840 Speaker 1: O left Schultz last summer in the run up to 235 00:16:00,880 --> 00:16:04,960 Speaker 1: the German election. As Finance Minister, he'd been particularly emphatic 236 00:16:05,280 --> 00:16:09,000 Speaker 1: in his support for that controversial Nord's Dream to pipeline 237 00:16:09,280 --> 00:16:11,600 Speaker 1: that would have taken Russian gas direct from Russia to 238 00:16:11,640 --> 00:16:16,840 Speaker 1: Germany below the Baltic Sea. Germany had pressed ahead despite 239 00:16:16,880 --> 00:16:20,320 Speaker 1: Russia's occupation of Crimea and despite the poisoning and detention 240 00:16:20,360 --> 00:16:23,840 Speaker 1: of Alexey Navalny. So I asked him what President Putin 241 00:16:23,880 --> 00:16:27,080 Speaker 1: would have to do to make Germany change its mind. 242 00:16:27,680 --> 00:16:30,560 Speaker 1: He dodged the question back then, but I guess now 243 00:16:30,800 --> 00:16:34,800 Speaker 1: we have our answer. Chancellor Schultz finally did cancel the 244 00:16:34,800 --> 00:16:37,400 Speaker 1: program last month in the wake of the Russian invasion 245 00:16:37,440 --> 00:16:40,160 Speaker 1: of Ukraine, and this week he admitted the whole thing 246 00:16:40,200 --> 00:16:43,960 Speaker 1: had been a mistake. But that's not the only longstanding 247 00:16:44,040 --> 00:16:47,640 Speaker 1: pillar of German policy that's been sent tumbling in the 248 00:16:47,720 --> 00:16:51,360 Speaker 1: last few weeks. Our German economy reporters, Caroline Look and 249 00:16:51,480 --> 00:16:55,160 Speaker 1: Yana randall have this story. And if you would have 250 00:16:55,760 --> 00:16:58,200 Speaker 1: told me what to do with in the first one 251 00:16:58,240 --> 00:17:02,000 Speaker 1: hundred days since my appoint and I am, I wouldn't 252 00:17:02,080 --> 00:17:07,919 Speaker 1: believe what we have to to face a warm, sweet 253 00:17:07,960 --> 00:17:12,080 Speaker 1: budgets that Germany's finance chief, Christian and Lindener, speaking in 254 00:17:12,119 --> 00:17:15,800 Speaker 1: Berlin last week. He's from the country's business friendly Free 255 00:17:15,800 --> 00:17:19,320 Speaker 1: Democratic Party, and he's a key player in Germany's new 256 00:17:19,359 --> 00:17:23,080 Speaker 1: government that took shape late last year. He's an unlikely 257 00:17:23,119 --> 00:17:27,360 Speaker 1: candidate to introduce massive new spending bills, and yet he's 258 00:17:27,359 --> 00:17:30,600 Speaker 1: had to do just that. Capabilities always in the first 259 00:17:30,920 --> 00:17:36,560 Speaker 1: one hundred days, a complete change of the the policy 260 00:17:36,600 --> 00:17:40,360 Speaker 1: agenda of the new coalition, Ladies and gentlemen. So it's 261 00:17:40,359 --> 00:17:46,160 Speaker 1: a great pleasure for me to Since Russia's invasion of Ukraine, 262 00:17:46,560 --> 00:17:50,000 Speaker 1: Lindner and the three party alliance ruling Germany planned to 263 00:17:50,080 --> 00:17:53,600 Speaker 1: issue hundreds of billions of euros in debt to finance 264 00:17:53,720 --> 00:17:57,560 Speaker 1: large scale investments in defense and climate protection. It might 265 00:17:57,640 --> 00:18:00,439 Speaker 1: well end up being the highest borrowing the country has 266 00:18:00,480 --> 00:18:03,359 Speaker 1: seen in any year since World War Two. For a 267 00:18:03,440 --> 00:18:07,359 Speaker 1: country obsessed with fiscal discipline that's underspent on its military 268 00:18:07,440 --> 00:18:11,160 Speaker 1: for the past thirty years, it's been a remarkable shift. 269 00:18:12,440 --> 00:18:14,239 Speaker 1: I thought it was necessary, but I didn't think they 270 00:18:14,280 --> 00:18:17,520 Speaker 1: turned around so quickly. This is tiny carebo from Frankford. 271 00:18:18,200 --> 00:18:21,160 Speaker 1: But necessity gives birth to new virtues and being part 272 00:18:21,160 --> 00:18:24,880 Speaker 1: of the government comes with different responsibilities and being in oppositions. 273 00:18:25,040 --> 00:18:27,639 Speaker 1: The Greens also had to learn this. It's good they 274 00:18:27,720 --> 00:18:30,280 Speaker 1: changed their mind so quickly. It's exactly what we need 275 00:18:30,400 --> 00:18:34,439 Speaker 1: right now. She's retired after a long career as a 276 00:18:34,480 --> 00:18:37,760 Speaker 1: pilot and we met in a neighborhood cafe to talk 277 00:18:37,800 --> 00:18:41,280 Speaker 1: about the many challenges for Germany ahead. She wants to 278 00:18:41,320 --> 00:18:45,680 Speaker 1: see fiscal policy returning to balanced budgets eventually. She wants 279 00:18:45,720 --> 00:18:49,280 Speaker 1: to see the country reducing its reliance on Russian gas, 280 00:18:49,359 --> 00:18:53,160 Speaker 1: and she wants to see Germany taking more responsibilities in defense. 281 00:18:56,119 --> 00:18:58,800 Speaker 1: Were capable of achieving a lot, We just have to 282 00:18:58,840 --> 00:19:08,080 Speaker 1: step on the gas Italy. Among the new measures is 283 00:19:08,080 --> 00:19:11,399 Speaker 1: a one billion euro defense fund Germany announced just two 284 00:19:11,480 --> 00:19:15,800 Speaker 1: days after Russia's invasion. Philippa Zeluna, who was a former 285 00:19:15,880 --> 00:19:19,960 Speaker 1: finance ministry official herself and now leads the Ditsons think 286 00:19:20,000 --> 00:19:22,600 Speaker 1: tank in Berlin, says it must have been a hard 287 00:19:22,600 --> 00:19:25,320 Speaker 1: decision for the finance chief and his party to agree to. 288 00:19:26,240 --> 00:19:29,320 Speaker 1: They had campaigned on a platform of bringing debt down again, 289 00:19:29,960 --> 00:19:33,000 Speaker 1: and that was really surprising. I mean, first of all, 290 00:19:33,440 --> 00:19:36,320 Speaker 1: military spending, that's not something that we normally go into 291 00:19:36,359 --> 00:19:39,560 Speaker 1: debt for and secondly, a hundred billion is just a 292 00:19:39,680 --> 00:19:42,560 Speaker 1: huge number, and they came out of nowhere um and 293 00:19:42,600 --> 00:19:46,480 Speaker 1: I don't think that many analysts saw it coming. That's 294 00:19:46,600 --> 00:19:50,200 Speaker 1: especially true for Germany, with its checkered past. The country 295 00:19:50,240 --> 00:19:53,600 Speaker 1: was completely demilitarized for several years after World War Two. 296 00:19:54,240 --> 00:19:56,640 Speaker 1: It built up forces again during the Cold War era, 297 00:19:57,000 --> 00:20:01,960 Speaker 1: but slashed spending after Eastern West Germany REUNI. Fight expenditures 298 00:20:01,960 --> 00:20:04,800 Speaker 1: haven't exceeded one point five percent of GDP since at 299 00:20:04,840 --> 00:20:08,399 Speaker 1: least the mid nineties, and the country's army, the Bundeswea, 300 00:20:08,800 --> 00:20:13,440 Speaker 1: has long been ridiculed for its broken equipment. Helicopters won't fly, 301 00:20:13,760 --> 00:20:16,639 Speaker 1: submarines won't swim, and there have even been reports that 302 00:20:16,720 --> 00:20:21,040 Speaker 1: guns won't shoot, at least not properly. Last month, the 303 00:20:21,119 --> 00:20:24,639 Speaker 1: Parliamentary on bods Women for the Armed Forces warned that 304 00:20:24,720 --> 00:20:29,800 Speaker 1: conditions are utterly unacceptable. That will now change, says Chancellor 305 00:20:29,880 --> 00:20:32,680 Speaker 1: or Left Shots, who promises to raise spending to what 306 00:20:32,880 --> 00:20:37,240 Speaker 1: NATO has long said it wants to see here. Shots 307 00:20:37,359 --> 00:20:39,760 Speaker 1: is on one of the country's most popular politics talk 308 00:20:39,760 --> 00:20:46,400 Speaker 1: shows recently. In Germany is the country with the highest 309 00:20:46,440 --> 00:20:49,440 Speaker 1: military spending in the European Union, and if we now 310 00:20:49,520 --> 00:20:52,200 Speaker 1: meet the two percent target, we will be the country 311 00:20:52,200 --> 00:20:55,560 Speaker 1: in the European NATO Alliance with the highest military spending 312 00:20:55,880 --> 00:21:03,040 Speaker 1: in the strongest defense infrastructure. Another change in calls that's significant, 313 00:21:03,119 --> 00:21:06,600 Speaker 1: though somewhat less of a surprise, is Germany's position on 314 00:21:06,680 --> 00:21:10,959 Speaker 1: Russian energy. In the past, Germany's leaders have sought close 315 00:21:11,040 --> 00:21:15,159 Speaker 1: ties to the Kremlin, sometimes overlooking Vladimir Putin's annexation of 316 00:21:15,240 --> 00:21:19,600 Speaker 1: Crimea and his support of separatists in Eastern Ukraine. Before 317 00:21:19,640 --> 00:21:23,080 Speaker 1: the war, Germany imported more than half of its natural 318 00:21:23,119 --> 00:21:26,440 Speaker 1: gas from Russia, but now it wants to be almost 319 00:21:26,480 --> 00:21:30,159 Speaker 1: independent from such flows in just over two years. That 320 00:21:30,320 --> 00:21:33,800 Speaker 1: means North Stream to the pipeline that's taken a decade 321 00:21:33,840 --> 00:21:37,160 Speaker 1: and eleven billion dollars to build, is unlikely to ever 322 00:21:37,200 --> 00:21:40,280 Speaker 1: be switched on, although right now Germany is one of 323 00:21:40,320 --> 00:21:43,360 Speaker 1: the key countries in Europe blocking a regional energy embargo 324 00:21:43,440 --> 00:21:49,440 Speaker 1: and Russia here's tiny Kaba again. Up until now, we've 325 00:21:49,440 --> 00:21:52,639 Speaker 1: pretty much financed Russia's annual defense budget with what we 326 00:21:52,760 --> 00:21:55,640 Speaker 1: paid for the gas we imported from there. That can't 327 00:21:55,640 --> 00:21:57,399 Speaker 1: be the goal, and I think we're learning that the 328 00:21:57,440 --> 00:22:03,639 Speaker 1: hard way. Right now, Germany is urgently searching for alternatives. 329 00:22:04,080 --> 00:22:08,160 Speaker 1: Plans to shut down coal plants by could be delayed, 330 00:22:08,440 --> 00:22:11,959 Speaker 1: and even keeping the country's three remaining nuclear plans online 331 00:22:11,960 --> 00:22:15,080 Speaker 1: for longer is an option being looked at. The plans 332 00:22:15,080 --> 00:22:17,639 Speaker 1: were slated to shut down this year, and just a 333 00:22:17,680 --> 00:22:20,399 Speaker 1: few months ago keeping them on the grid would have 334 00:22:20,440 --> 00:22:23,480 Speaker 1: been a huge blow to the German public. A November 335 00:22:23,560 --> 00:22:27,040 Speaker 1: survey showed just one in five people thought nuclear power 336 00:22:27,080 --> 00:22:29,760 Speaker 1: should play a major role in the future energy makes 337 00:22:30,240 --> 00:22:33,439 Speaker 1: Last month, some seventy percent of Germans were willing to 338 00:22:33,440 --> 00:22:41,320 Speaker 1: rely on nuclear energy beyond this year. I have the 339 00:22:41,400 --> 00:22:44,920 Speaker 1: feeling that the general public has one step ahead of politicians. 340 00:22:46,000 --> 00:22:48,919 Speaker 1: That's another Ronica vin Land, who was both a nuclear 341 00:22:49,000 --> 00:22:53,280 Speaker 1: energy expert and a historian on Eastern Europe. In her youth, 342 00:22:53,400 --> 00:22:56,720 Speaker 1: she used to be staunchly against nuclear but her position 343 00:22:56,800 --> 00:22:59,879 Speaker 1: started to shift after spending a significant amount of time 344 00:23:00,040 --> 00:23:04,159 Speaker 1: in Ukraine as a student. There, she learned how people 345 00:23:04,160 --> 00:23:06,960 Speaker 1: on the ground dealt with the catastrophe of Chernobyl and 346 00:23:07,000 --> 00:23:10,639 Speaker 1: that they don't reject the technology. As such, she's now 347 00:23:10,680 --> 00:23:14,760 Speaker 1: a prominent German voice in favor of nuclear energy. A 348 00:23:14,880 --> 00:23:17,639 Speaker 1: key dilemma, she says, is that the country's Green Party 349 00:23:17,720 --> 00:23:21,600 Speaker 1: has long associated itself with being anti nuclear energy, which 350 00:23:21,640 --> 00:23:25,159 Speaker 1: is also true for certain social democrats. For the German 351 00:23:25,200 --> 00:23:29,520 Speaker 1: public and politicians alike, the debates over embracing nuclear energy 352 00:23:29,600 --> 00:23:32,560 Speaker 1: and reinforcing the military are forcing a rethink of what 353 00:23:32,640 --> 00:23:37,879 Speaker 1: they stand for. You believe hanged the political identity of 354 00:23:37,880 --> 00:23:41,080 Speaker 1: the Greens hangs on the fight against nuclear energy in 355 00:23:41,160 --> 00:23:44,560 Speaker 1: parts of the SPD. That's not different. To tell people 356 00:23:44,680 --> 00:23:47,800 Speaker 1: now that we do need these nuclear reactors would be 357 00:23:47,840 --> 00:23:50,760 Speaker 1: a break from many of these party members with their 358 00:23:50,800 --> 00:23:57,000 Speaker 1: own political identity. It's taken just a few days to 359 00:23:57,119 --> 00:24:00,960 Speaker 1: transform the man long marked in German as chasm play 360 00:24:01,040 --> 00:24:04,520 Speaker 1: on his bland robotic tone, into the chancellor who has 361 00:24:04,560 --> 00:24:08,480 Speaker 1: turned German politics on its head. For Bloomberg News, this 362 00:24:08,600 --> 00:24:19,960 Speaker 1: is Callen Look and Yana Vanor And our last stop 363 00:24:20,119 --> 00:24:23,240 Speaker 1: is Hong Kong, which has not been invaded by Russia 364 00:24:23,480 --> 00:24:26,520 Speaker 1: and is not facing much of an inflation problem, but 365 00:24:26,640 --> 00:24:28,639 Speaker 1: it has been on the sharp end of most of 366 00:24:28,640 --> 00:24:30,880 Speaker 1: the other big shocks that have hit the global economy 367 00:24:30,880 --> 00:24:33,360 Speaker 1: in the past few years, all while having to get 368 00:24:33,440 --> 00:24:36,439 Speaker 1: used to increasingly aggressive interventions in the life of Hong 369 00:24:36,520 --> 00:24:40,639 Speaker 1: Kong's citizens by the Communist government in Beijing. So is 370 00:24:40,680 --> 00:24:43,720 Speaker 1: this the end of Asia's world city as it likes 371 00:24:43,760 --> 00:24:47,200 Speaker 1: to call itself. We asked our chief Asian Economics correspondent 372 00:24:47,280 --> 00:24:50,760 Speaker 1: and longtime Hong Kong resident and occurrent to take the 373 00:24:50,800 --> 00:25:01,000 Speaker 1: temperature I'm living in here so many this is the 374 00:25:01,160 --> 00:25:03,879 Speaker 1: first time, the worst time. I can say the worst 375 00:25:03,920 --> 00:25:06,800 Speaker 1: time in Hong Kong. Because I'm doing the business for 376 00:25:06,920 --> 00:25:10,159 Speaker 1: twenty years. We see many of the things like um 377 00:25:10,440 --> 00:25:14,840 Speaker 1: sas we have experienced nine one one, and we have 378 00:25:15,040 --> 00:25:19,800 Speaker 1: experienced the financial crisis. But this time is not only 379 00:25:19,920 --> 00:25:23,480 Speaker 1: the academic but also there with so many other things. 380 00:25:25,760 --> 00:25:28,639 Speaker 1: Hong Kong has long been described as a borrowed place 381 00:25:28,960 --> 00:25:33,280 Speaker 1: on borrowed time summer, warning that prophecy is finally coming true. 382 00:25:34,119 --> 00:25:37,440 Speaker 1: On the streets, people like Elizabeth Chan, whom you just heard, 383 00:25:37,480 --> 00:25:41,000 Speaker 1: are worried about the city's future. The beauty saloon business 384 00:25:41,040 --> 00:25:44,359 Speaker 1: she runs has cut staff and closed premises, and has 385 00:25:44,440 --> 00:25:47,600 Speaker 1: even seen around twenty percent of her customers leave the 386 00:25:47,640 --> 00:25:51,640 Speaker 1: city altogether. In the past two to three years, global 387 00:25:51,720 --> 00:25:55,719 Speaker 1: sentiment towards Hong Kong has soured due to Jaconian controls 388 00:25:55,720 --> 00:25:59,000 Speaker 1: to curb COVID nineteen and a political track down by 389 00:25:59,040 --> 00:26:01,879 Speaker 1: the government. We're hearing from the Chinese pros and shooting 390 00:26:02,320 --> 00:26:05,040 Speaker 1: is he is urging the Hong Kong government to stabilize 391 00:26:05,119 --> 00:26:09,000 Speaker 1: and control the COVID nineteen situation. Shorter Flights Repatch are 392 00:26:09,040 --> 00:26:13,160 Speaker 1: a booming COVID pandemic business in Hong Kong, and international 393 00:26:13,200 --> 00:26:17,359 Speaker 1: financial hub that's increasingly cut itself off from the outside world. Really, 394 00:26:17,480 --> 00:26:21,840 Speaker 1: Hong Kong's last pro democracy newspaper has officially closed up shop. 395 00:26:21,920 --> 00:26:25,040 Speaker 1: The first person convicted under Hong Kong's National Security Law 396 00:26:25,080 --> 00:26:27,639 Speaker 1: has been sentenced to nine years in prison for incitement 397 00:26:27,680 --> 00:26:31,119 Speaker 1: to secession and terrorist activities. The law come into force 398 00:26:31,160 --> 00:26:34,280 Speaker 1: after a series of mass pro democracy process in twenty 399 00:26:35,240 --> 00:26:38,680 Speaker 1: This bastion of West meeting East has become isolated from 400 00:26:38,680 --> 00:26:42,080 Speaker 1: the rest of the world. It's democracy movement crushed and 401 00:26:42,119 --> 00:26:46,600 Speaker 1: its civil liberties eroded. That combination of politics and pandemic 402 00:26:46,680 --> 00:26:50,200 Speaker 1: has raised questions about whether Hong Kong can ever regain 403 00:26:50,280 --> 00:26:53,800 Speaker 1: the freewheeling status it had as a gateway between Asia, 404 00:26:54,160 --> 00:26:57,520 Speaker 1: especially China, and the rest of the world. To get 405 00:26:57,520 --> 00:26:59,760 Speaker 1: a sense as to how Hong Kong has changed, a 406 00:27:00,000 --> 00:27:04,320 Speaker 1: boke to David Webb, who first arrived in Barclays and 407 00:27:04,400 --> 00:27:06,920 Speaker 1: in the years since has become the city's best known 408 00:27:07,000 --> 00:27:11,040 Speaker 1: activist investor. He's also known for recording the exodus of 409 00:27:11,080 --> 00:27:14,400 Speaker 1: those leaving Hong Kong on his website. There has been 410 00:27:15,800 --> 00:27:19,520 Speaker 1: apart from the political change which which has driven a 411 00:27:19,560 --> 00:27:22,359 Speaker 1: lot of people, young people and talent away from Hong 412 00:27:22,480 --> 00:27:29,000 Speaker 1: Kong and threatening the future talent pool through their children there, 413 00:27:29,080 --> 00:27:34,560 Speaker 1: there's also been a an ongoing drain of people who 414 00:27:34,640 --> 00:27:37,480 Speaker 1: are just scared of the government's policymaking right now. The 415 00:27:38,840 --> 00:27:42,919 Speaker 1: young mothers with young children fearful of being separated from them. 416 00:27:44,280 --> 00:27:47,320 Speaker 1: That's led to an exodus in the immigration numbers. It's 417 00:27:47,320 --> 00:27:52,440 Speaker 1: almost a women and children first from the Titanic Web 418 00:27:52,520 --> 00:27:57,119 Speaker 1: warns the extent of government intervention unleashed during the pandemic 419 00:27:57,240 --> 00:28:01,040 Speaker 1: runs contrary to an economy fame for its handsover approach, 420 00:28:01,280 --> 00:28:03,520 Speaker 1: and it will be difficult to unwind. I think the 421 00:28:03,560 --> 00:28:06,920 Speaker 1: basic the basic issue is that that the balance has 422 00:28:06,960 --> 00:28:15,920 Speaker 1: been struck towards excessive intervention and conservatism, rather than evaluating 423 00:28:15,960 --> 00:28:20,800 Speaker 1: both the social and economic consequences of the actions. Hong 424 00:28:20,880 --> 00:28:23,840 Speaker 1: Kong's reputation has taken such a blow that it's not 425 00:28:23,960 --> 00:28:27,440 Speaker 1: certain it can recover from the current crisis, even if 426 00:28:27,440 --> 00:28:30,080 Speaker 1: the city's core business model as a channel for money 427 00:28:30,080 --> 00:28:33,720 Speaker 1: flows remains in place, said Angela Jiang of the University 428 00:28:33,760 --> 00:28:37,399 Speaker 1: of Hong Kong, an expert on China's legal system, that 429 00:28:37,480 --> 00:28:41,320 Speaker 1: the government cannot be too complacent just about the fact 430 00:28:41,360 --> 00:28:44,320 Speaker 1: that we are we still remain the global financial hub. 431 00:28:44,400 --> 00:28:46,720 Speaker 1: Does not guarantee for tomorrow, like I mean, we have 432 00:28:46,800 --> 00:28:51,560 Speaker 1: other competitors like Singapore and Shamghai and so um. I 433 00:28:51,680 --> 00:28:53,840 Speaker 1: just think that there's a lot the government need to do, 434 00:28:54,120 --> 00:28:57,480 Speaker 1: not just to reform the healthcare system, but also you know, 435 00:28:57,680 --> 00:29:01,040 Speaker 1: how do you build up Hong Kong's repertention station, how 436 00:29:01,080 --> 00:29:05,200 Speaker 1: do you improve Hong Kong image in the financial world. 437 00:29:05,520 --> 00:29:09,120 Speaker 1: There's a lot that the government we need to reflect 438 00:29:09,200 --> 00:29:12,600 Speaker 1: up how what's happening in Hong Kong reflects the broader 439 00:29:12,640 --> 00:29:15,680 Speaker 1: backdrop of what's happening in China, where the government is 440 00:29:15,680 --> 00:29:19,000 Speaker 1: struggling to contain the virus. After two years of COVID 441 00:29:19,120 --> 00:29:22,320 Speaker 1: zero has kept the world second biggest economy sealed off. 442 00:29:22,880 --> 00:29:25,440 Speaker 1: Hong Kong may serve as a patriotage for how China 443 00:29:25,520 --> 00:29:29,160 Speaker 1: eventually transitions to living with the virus and reconnecting with 444 00:29:29,240 --> 00:29:32,480 Speaker 1: the rest of the world. Jang says, China can probably 445 00:29:32,520 --> 00:29:34,960 Speaker 1: live without Hong Kong, but China would do much better 446 00:29:35,480 --> 00:29:38,600 Speaker 1: with Hong Kong. And Hong Kong remains a very important 447 00:29:38,720 --> 00:29:42,680 Speaker 1: strategic asset for the mainland. And you see that Beijing 448 00:29:42,760 --> 00:29:45,360 Speaker 1: has been pulling a lot of resources into Hong Kong. 449 00:29:45,760 --> 00:29:48,920 Speaker 1: And because Beijing want Hong Kong to succeed, right, I mean, 450 00:29:48,960 --> 00:29:52,400 Speaker 1: the People's Bank of China is now actively promoting Hong 451 00:29:52,440 --> 00:29:55,560 Speaker 1: Kong as an offshore trading hut through the u N 452 00:29:56,760 --> 00:30:02,800 Speaker 1: And for a sense as to how business people are 453 00:30:02,840 --> 00:30:06,480 Speaker 1: viewing the crisis, I spoke with Hing Choo, executive chairman 454 00:30:06,480 --> 00:30:09,760 Speaker 1: of Wagwang Shipping, one of Hong Kong's leading privately owned 455 00:30:09,800 --> 00:30:13,520 Speaker 1: ship owners. Chiao says that for confidence to be restored, 456 00:30:13,840 --> 00:30:16,920 Speaker 1: the authorities are going to have to deliver policies that 457 00:30:17,000 --> 00:30:21,760 Speaker 1: highlight Hong Kong's competitive strengths compared with rivals. I think 458 00:30:21,840 --> 00:30:25,840 Speaker 1: since particularly over last ten years, Hong Kong has been 459 00:30:26,960 --> 00:30:29,440 Speaker 1: heading towards a cross road. I think we are at 460 00:30:29,480 --> 00:30:31,760 Speaker 1: the cross road. So at this cross road, a lot 461 00:30:31,760 --> 00:30:34,800 Speaker 1: of decision making that's being taken today and in the 462 00:30:34,880 --> 00:30:38,520 Speaker 1: coming to the three years will determine where we end up, 463 00:30:38,720 --> 00:30:43,040 Speaker 1: will determine where that Hong Kong would make competitive. Chaos 464 00:30:43,080 --> 00:30:45,840 Speaker 1: family run company has been in Hong Kong since nineteen 465 00:30:45,880 --> 00:30:48,240 Speaker 1: fifty two, and the scene the city go through to 466 00:30:48,400 --> 00:30:52,080 Speaker 1: multi before. The city has reinvented itself multiple times. Hong 467 00:30:52,160 --> 00:30:54,360 Speaker 1: Kong was a center for light industry in the nineteen 468 00:30:54,400 --> 00:30:57,800 Speaker 1: sixties and seventies, and transformed into a vital shipping center 469 00:30:57,840 --> 00:31:00,600 Speaker 1: in the seventies and eighties, but in ninety nineties it 470 00:31:00,640 --> 00:31:03,680 Speaker 1: had developed into one of the world's leading financial centers. 471 00:31:03,760 --> 00:31:08,000 Speaker 1: Hong Kong will continue to adjust to the global situation 472 00:31:08,560 --> 00:31:11,400 Speaker 1: um and Hong Kong will continue to reinvent itself. But 473 00:31:11,560 --> 00:31:14,320 Speaker 1: we I think it's important for people not to get 474 00:31:14,360 --> 00:31:18,280 Speaker 1: stuck to an idea of Hong Kong that's fixing, because 475 00:31:18,480 --> 00:31:22,560 Speaker 1: as we can see glocally, things are changing very rapidly. 476 00:31:23,760 --> 00:31:26,600 Speaker 1: For the final word, here's David Webb again on whether 477 00:31:26,720 --> 00:31:30,840 Speaker 1: those fleeing residents will ever return. Some of them hopefully 478 00:31:30,880 --> 00:31:34,760 Speaker 1: will come back after the Titanic is either raised or 479 00:31:34,800 --> 00:31:41,360 Speaker 1: doesn't think, But right now the brain drain is being accelerated, 480 00:31:41,400 --> 00:31:59,000 Speaker 1: and that's very worrying. Tom. You live for eleven years 481 00:31:59,000 --> 00:32:01,120 Speaker 1: in Beijing. You probably more time in Hong Kong than 482 00:32:01,160 --> 00:32:04,760 Speaker 1: most of the people listening. Is it over? Is it 483 00:32:04,840 --> 00:32:07,840 Speaker 1: the end of Hong Kong? So? I think Hong Kong 484 00:32:07,880 --> 00:32:12,880 Speaker 1: has been hit by two really big challenges Stephanie. So. 485 00:32:12,920 --> 00:32:18,360 Speaker 1: The first is a governance challenge. Historically Hong Kong worked 486 00:32:18,640 --> 00:32:22,880 Speaker 1: because it provided a gateway to the Chinese market, but 487 00:32:23,560 --> 00:32:28,800 Speaker 1: Western standards of governance, a Western approach to the law, 488 00:32:28,960 --> 00:32:32,640 Speaker 1: a Western approach to regulation, and Western approach to markets. 489 00:32:33,200 --> 00:32:37,800 Speaker 1: Now that is being taken away as Hong Kong moves 490 00:32:37,840 --> 00:32:42,080 Speaker 1: closer to the mainlands approach. And the second, of course, 491 00:32:42,400 --> 00:32:48,400 Speaker 1: is COVID. Two years of lockdowns, of intense testing and 492 00:32:48,440 --> 00:32:51,640 Speaker 1: then at the end a kind of failure and the 493 00:32:51,720 --> 00:32:58,200 Speaker 1: disease tragically sweeping across the island. So can can Hong 494 00:32:58,280 --> 00:33:04,320 Speaker 1: Kong come back from these two challenges? Well, COVID we 495 00:33:04,400 --> 00:33:08,280 Speaker 1: all hope will at some point be a memory. The 496 00:33:08,400 --> 00:33:11,800 Speaker 1: governance challenge, I'm not sure that's going to go away. 497 00:33:12,400 --> 00:33:14,120 Speaker 1: And just to go back to COVID, this is a 498 00:33:14,160 --> 00:33:19,440 Speaker 1: serious challenge for China. Having had the zero COVID strategy 499 00:33:19,480 --> 00:33:22,240 Speaker 1: that worked so well in the early stages of the pandemic. 500 00:33:23,080 --> 00:33:25,479 Speaker 1: How do you think it's going to extricate itself and 501 00:33:25,560 --> 00:33:30,360 Speaker 1: with with what potential cost of the economy. So in 502 00:33:30,400 --> 00:33:38,040 Speaker 1: trainers control of COVID at home was drastic but effective. 503 00:33:38,240 --> 00:33:40,600 Speaker 1: If you look at China and international comparison back in 504 00:33:42,400 --> 00:33:46,920 Speaker 1: on the economic dimension and on the healthcare dimensioned, they 505 00:33:46,960 --> 00:33:53,160 Speaker 1: look pretty impressive, though they've got a challenge. Their population 506 00:33:53,440 --> 00:33:56,800 Speaker 1: hasn't ever had COVID, so they don't have natural immunity, 507 00:33:56,880 --> 00:34:00,480 Speaker 1: and the vaccines they've developed at home they're not but 508 00:34:00,560 --> 00:34:02,960 Speaker 1: they're not best in class, so they don't have good 509 00:34:03,000 --> 00:34:08,520 Speaker 1: immunity from mRNA vaccines either. And what that means is 510 00:34:08,560 --> 00:34:13,080 Speaker 1: that even when you see a few cases, Chinese authorities 511 00:34:13,120 --> 00:34:16,759 Speaker 1: have to respond by locking down entire cities, and we've 512 00:34:16,760 --> 00:34:19,439 Speaker 1: seen that already this year with the lockdowns in shen Jen, 513 00:34:19,920 --> 00:34:24,680 Speaker 1: in Jelyn and now in Shanghai. The question is what's 514 00:34:24,680 --> 00:34:30,720 Speaker 1: the path forwards? Well, I think many epidemiologists, many health 515 00:34:30,800 --> 00:34:33,800 Speaker 1: experts would say that the right path forward for China 516 00:34:34,120 --> 00:34:39,040 Speaker 1: is a controlled opening. Acquire a bunch of the effective 517 00:34:39,239 --> 00:34:43,759 Speaker 1: mRNA vaccines, give those to the entire population of a 518 00:34:43,840 --> 00:34:47,920 Speaker 1: city or a province, bring healthcare resources into place, and 519 00:34:47,960 --> 00:34:51,640 Speaker 1: then open that province and allow the virus to move 520 00:34:51,680 --> 00:34:54,759 Speaker 1: across it um, and yes, there would be a cost 521 00:34:54,800 --> 00:34:58,279 Speaker 1: in public health, but ultimately the payoff would be that 522 00:34:58,360 --> 00:35:01,640 Speaker 1: the population has a met true of immunity, and if 523 00:35:01,640 --> 00:35:04,920 Speaker 1: that process continues across the rest of the country, ultimately 524 00:35:05,200 --> 00:35:07,920 Speaker 1: the entire population would have a measure of immunity and 525 00:35:08,000 --> 00:35:12,400 Speaker 1: China could reopen. Is China ultimately going to take that path? 526 00:35:12,840 --> 00:35:15,680 Speaker 1: I think the answer is yes. Are they going to 527 00:35:15,760 --> 00:35:18,880 Speaker 1: take that path in the immediate future, in the months ahead, 528 00:35:19,280 --> 00:35:23,399 Speaker 1: I think the answer is no. China does not have elections, 529 00:35:23,920 --> 00:35:26,520 Speaker 1: but it does have politics, and at the end of 530 00:35:26,560 --> 00:35:30,520 Speaker 1: this year there's a crucial political movement, President Hijin Ping 531 00:35:30,640 --> 00:35:34,120 Speaker 1: positioning for a third term as president, a third term 532 00:35:34,200 --> 00:35:37,160 Speaker 1: as general secretary of the Communist Party. I think that 533 00:35:37,360 --> 00:35:40,920 Speaker 1: the willingness to take risks ahead of that crucial meeting, 534 00:35:40,960 --> 00:35:43,080 Speaker 1: which we expect in the fall, is going to be 535 00:35:43,120 --> 00:35:46,319 Speaker 1: pretty low. So if China ultimately does move onto a 536 00:35:46,320 --> 00:35:48,680 Speaker 1: controlled opening path, I think that's going to be a 537 00:35:49,440 --> 00:35:53,479 Speaker 1: three story, not story. Tom Alick, thank you very much. 538 00:36:03,600 --> 00:36:06,399 Speaker 1: That's it for a frequent flyer episode of Stephanomics around 539 00:36:06,440 --> 00:36:09,359 Speaker 1: the Globe. In just over thirty minutes, we'll be back 540 00:36:09,400 --> 00:36:12,919 Speaker 1: next week with a special episode talking to the ubiquitous 541 00:36:13,200 --> 00:36:16,440 Speaker 1: Larry Summers. Last year, he was worried about inflation when 542 00:36:16,440 --> 00:36:18,960 Speaker 1: the rest of the world was not. What's he worried 543 00:36:18,960 --> 00:36:22,279 Speaker 1: about now? Find out next week. In the meantime, check 544 00:36:22,280 --> 00:36:24,759 Speaker 1: out the Bloomberg News website for more and all the 545 00:36:24,880 --> 00:36:29,040 Speaker 1: stories featured today, and follow at economics on Twitter. This 546 00:36:29,080 --> 00:36:33,360 Speaker 1: episode was produced by Magnus Hendrickson with support from Summer Sadie. 547 00:36:33,800 --> 00:36:37,040 Speaker 1: Special thanks to Tom Aulick, Sean Donnan, Karen and look 548 00:36:37,440 --> 00:36:42,160 Speaker 1: Yana Randall. Here's a Fine focal Aggie Cantrill, Yan, Patrick 549 00:36:42,239 --> 00:36:47,040 Speaker 1: Barnett and Ender. Current Mike Sasso is executive producer of Stephonomics, 550 00:36:47,120 --> 00:36:49,960 Speaker 1: though Lucy Meekin also helped out Today and the head 551 00:36:49,960 --> 00:37:02,760 Speaker 1: of Bloombow podcast is Francesco Leave two