Speaker 1: Hello, and welcome back to Stephanomics, the podcast that brings
Speaker 1: a tumultuous global economy to you. When we were last
Speaker 1: on air a whole two months ago, Russia hadn't invaded Ukraine,
Speaker 1: we weren't seeing food riots in Peru and Sri Lanka,
Speaker 1: shortages in European supermarkets due to soaring fuel costs, and
Speaker 1: cities in China weren't in lockdown again. So we have
Speaker 1: quite a lot to catch up on. But what's striking
Speaker 1: to me is not so much the scale of the shocks.
Speaker 1: We've got rather used to the world being turned upside down.
Speaker 1: What's different is the variation. We may still live in
Speaker 1: a global economy, but if you ask what's front of
Speaker 1: mind for economic policy makers in America, Europe, and China today,
Speaker 1: the answer in each case would be quite different. For
Speaker 1: China it's COVID again. For Europe it's Ukraine, the price
Speaker 1: of energy and how to cushion the blow for European
Speaker 1: citizens of that cost of living squeeze coming down the track.
Speaker 1: And for the roaring US economy, the problem is how
Speaker 1: to stop an inflationary spiral of prices and wages without
Speaker 1: causing a global recession. We've got a window on all
Speaker 1: three of those in this first episode of the new
Speaker 1: series thanks to our reporters on the ground. But first
Speaker 1: our chief economist Tom Morlick with his take. Tom, I
Speaker 1: know you've been pulling together your new global forecasts with
Speaker 1: the team. What's the biggest shift that you've been grappling
Speaker 1: with relative to just the start of the year. Two
Speaker 1: really big things have happened since the start of the year, Stephanie. First,
Speaker 1: we have Russia's invasion of Ukraine and that is a
Speaker 1: significant negative for global growth. We've taken our global GDP
Speaker 1: forecast down from four point seven per growth to three
Speaker 1: point five percent growth for the year. And because energy
Speaker 1: prices have rocketed up, it also adds to inflationary pressure.
Speaker 1: Less growth, more inflation, very challenging environment for central banks.
Speaker 1: The second big thing which has happened is the a
Speaker 1: Macron outbreak in China. We've had shen Jen locking down,
Speaker 1: j Lynn, a province in the north of the country
Speaker 1: locking down, and now Shanghai, China's financial center, China's big
Speaker 1: port also locking down. Now that already means China will
Speaker 1: have a weak start to the year. But the question
Speaker 1: is what happens next. If Shanghai isn't the end of
Speaker 1: the story. If we see Beijing, chung Do, Dali and
Speaker 1: other big cities locking down as well, that's going to
Speaker 1: take another chunk out of Chinese growth, another chunk out
Speaker 1: of global growth, and it's going to add more uncertainty
Speaker 1: to the inflation outlook. We're used to the world's major
Speaker 1: regions broadly or often moving together in response to similar forces.
Speaker 1: But with everything that's going on right now, it feels
Speaker 1: like that six months from now, those three regions could
Speaker 1: be on very different paths. How do you deal with
Speaker 1: that when you're thinking about what's going to happen to
Speaker 1: the to the world and the world's growth. Yeah. So,
Speaker 1: with apologies to Francis for Kayama, it seems like history
Speaker 1: has restarted right um, and it's not just the last
Speaker 1: few months. Go back to twenties sixteen. The election of
Speaker 1: Donald Trump was the beginning of a fissure between China
Speaker 1: and the United States. COVID accelerated the sort of forces
Speaker 1: for deglobalization UM, and now Russia's invasion of Ukraine has
Speaker 1: added more pressure in the same direction. So that integration
Speaker 1: force globalization force, which moved the US, Europe, Japan, China
Speaker 1: onto one integrated global economic cycle, and that's now moving
Speaker 1: in the other direction. Globalization is unraveling, and that means
Speaker 1: you're going to have the US, Europe, Asia on different trajectories,
Speaker 1: central banks moving in different directions, a much more challenging
Speaker 1: environment for policymakers, for businesses, for investors to navigate. Let's
Speaker 1: just touch it briefly. On Europe, we're going to hear
Speaker 1: in a little bit about the policy shifts that we've
Speaker 1: seen in Germany in direct response to Russia's invasion of Ukraine.
Speaker 1: If Europe is headed in a path where Germany is
Speaker 1: spending a lot more and on defense and other things,
Speaker 1: and on weaning itself off Russian oil, and to some extent,
Speaker 1: the rest of Europe is also going to be spending
Speaker 1: and potentially borrowing more for a prolonged period. Does that
Speaker 1: change the way you think about Europe's contribution to the
Speaker 1: global economy or does it not really figure I think
Speaker 1: it's a really interesting question. I mean, in some senses,
Speaker 1: the European project has been in a huge success right um,
Speaker 1: But in another sense it's kind of underdelivered. UM. On
Speaker 1: economic policy, the crises that we've seen over the last
Speaker 1: decade the European sovereign debt crisis, which affected Greece and
Speaker 1: Italy and Spain were a kind of a failure of
Speaker 1: coordination at the European level, right, it was a sort
Speaker 1: of failure of Berlin and Rome to agree on the
Speaker 1: right strategy to lift Europe out of that slump. And
Speaker 1: on foreign policy and defense policy, well, the failure of
Speaker 1: coordination has been sort of even more manifest. So the
Speaker 1: question is, is Russia's invasion of Ukraine kind of a
Speaker 1: spot k movement for Europe? If you will? Is this
Speaker 1: a movement where the reappearance of a common enemy on
Speaker 1: the eastern border provides the catalyst to do more in
Speaker 1: terms of having a unified defense and foreign policy, and
Speaker 1: also to do more to ensure that European prosperity is
Speaker 1: spread more widely than the border of Germany. We might
Speaker 1: come back to you a little bit later for a
Speaker 1: for a little bit more on on China, but for now,
Speaker 1: thanks very much. Now, I promised you three windows on
Speaker 1: the world, and we're starting with the American Midwest. If
Speaker 1: you think the US is entering into a wage price spiral,
Speaker 1: chances are you're a bit worried by the red hot
Speaker 1: US labor market, and there's no harder jobs market than Indiana.
Speaker 1: Our senior global economy reporter Sean Donnan went to check
Speaker 1: it out, because you've got all this extra stuff. I'm
Speaker 1: looking for the names now, Vera, this is Doc Holidays.
Speaker 1: That's fine. Step onto the factory floor at metro Plastics,
Speaker 1: family owned forty five year old injection molding company in Noblesville, Indiana,
Speaker 1: and you quickly confront the present and the future of
Speaker 1: the US economy. Inflation maybe at forty year highs in
Speaker 1: the US right now, but business is buzzing. According to
Speaker 1: owner and executive director Carol Croll, whose parents started the
Speaker 1: company and who on this day is leading us on
Speaker 1: a tour of the factory floor, it just kind of
Speaker 1: depends on the job set up. Okay, this is where
Speaker 1: kind of automation comes into play. They're not having to
Speaker 1: get the parts out of the bin. It's all coming
Speaker 1: up to, you know, at the level station where they're
Speaker 1: just swarming the parts. And yeah, like many in manufacturing,
Speaker 1: Metroplastics has a problem. It can't find the workers it
Speaker 1: needs to keep up, which is not just an issue
Speaker 1: about recovering from the pandemic, or about the present state
Speaker 1: of a tight labor market. It's also about long term demographics,
Speaker 1: retiring baby boomers, and the structural issues America's factories are
Speaker 1: being forced to confront as they compete in the global economy.
Speaker 1: Even as a pandemic, trade wars and supply chain snarls
Speaker 1: of prompted conversations about the end of an era of
Speaker 1: globalization and the need to reshore production. There's some awkward
Speaker 1: economic realities that don't always get talked about, including just
Speaker 1: who is going to work in those factories. Metroplastics has
Speaker 1: a hundred and thirty employees. It's a twenty four hour
Speaker 1: day operation that is increasingly being automated. On this day,
Speaker 1: a machine nicknamed Doc Holiday is melting plastic chips, shooting
Speaker 1: molten plastic into a mold, and turning out caps for
Speaker 1: a suspension assembly that will eventually go into a tesla.
Speaker 1: It's doing so without any visible human involvement. A camera
Speaker 1: and a robot are doing quality checks rejected Pasty Wow.
Speaker 1: Every so often, a human operator will come over to
Speaker 1: box some parts and carry them the few steps to
Speaker 1: a station where an autonomous robot nicknamed uber will pick
Speaker 1: up the open box to carry it across the factory
Speaker 1: floor to shipping. But this is the future, right. The
Speaker 1: search for workers is on nationally, but it's a particularly
Speaker 1: acute one in Hamilton's County, Indiana, which is home to
Speaker 1: Metroplastics and has one of the lowest unemployment rate it's
Speaker 1: in the country. It bottomed out at zero point eight
Speaker 1: percent in December last year, and though it has crept
Speaker 1: up since, the most recent numbers still have it lying
Speaker 1: at half the three point six percent national unemployment rate
Speaker 1: recorded in March. Jim Brainerd is the Republican mayor of Carmel,
Speaker 1: the largest city in Hamilton's County. It is a decidedly
Speaker 1: red county in a deeply read state that voted overwhelmingly
Speaker 1: for Donald Trump. In Hamilton's County, in fact, hasn't voted
Speaker 1: for a Democratic presidential candidate since. But ask Brainard what
Speaker 1: he thinks the top economic priorities are in America today,
Speaker 1: and he will tell you two things that are definitely
Speaker 1: not from the Trump playbook. One loosening immigration rules to
Speaker 1: attract more workers, and two increasing wages for low income workers,
Speaker 1: particularly in the service sector. America is the only country
Speaker 1: in the world that really had immigration like we have
Speaker 1: had uh and we need to embrace it and don't
Speaker 1: even have people to fill our jobs. Metro Plastics isn't
Speaker 1: the only manufacturer in Hamilton's County that is desperate for help.
Speaker 1: Companies have been turning to inmates on work release from
Speaker 1: the local jail, even as local officials complained they can't
Speaker 1: find enough guards to work at the jail. At SMC,
Speaker 1: which makes pneumatic equipment, the struggle is on to recruit
Speaker 1: people to work in a two point six million square
Speaker 1: feed facility that, if it was a shopping mall, would
Speaker 1: be one of the ten biggest in America. It has
Speaker 1: been built with a business expansion in mind, so in
Speaker 1: April one, the company started offering unlimited leave and vacation
Speaker 1: time to employees, on top of the free healthcare and
Speaker 1: other benefits. Sometimes even that isn't enough in today's labor market.
Speaker 1: Kelly Stacy is the president and CEO of s m
Speaker 1: c s North American unit, which has some sick seen
Speaker 1: a hundred employees. You'll hire people, um and then they
Speaker 1: just don't show up. They don't even show up for
Speaker 1: their first day. Yeah, they because they've got another offer.
Speaker 1: We have no idea. You've got them all on board
Speaker 1: and everything, and in the first day they just don't
Speaker 1: show up. We don't know what happens soon. In a
Speaker 1: recent report, experts at the Economic Innovation Group, a nonpartisan
Speaker 1: Washington think tank, made the case that despite all the
Speaker 1: claims of a rapid economic change in America in the
Speaker 1: twenty one century, the reality is actually the opposite. In
Speaker 1: their words, America has so far this century been quote
Speaker 1: mired in a period of unprecedented complacency unquote that has
Speaker 1: undermined what has been one of the US's key advantages
Speaker 1: through history, it's economic dynamism, or it's embrace of change
Speaker 1: and new immigrants. Here's Canon Fikrey, one of the authors
Speaker 1: of that e i G. Report. These issues that you
Speaker 1: know we could have taken in stride back when we
Speaker 1: had healthy, supergent populations both annually, are now going to
Speaker 1: just be felt much more acutely because we don't have
Speaker 1: as much positive forces on the other side of the
Speaker 1: ledger counteracting a kind of negative drag. The metrics that
Speaker 1: e i G. Points to include things like the slowdown
Speaker 1: and not just immigration but interstate migration within the US,
Speaker 1: and a diminishing share of workers at startups. Any plea
Speaker 1: for more workers may seem counterintuitive given that we've just
Speaker 1: gone through an economic crisis that's some millions lose their
Speaker 1: jobs in America or amid a conversation we're having about
Speaker 1: the future of work. But another way to think about
Speaker 1: it is that in the long term, America may not
Speaker 1: have the workers it needs to live up to its
Speaker 1: current rhetorical ambitions. According to census data released in March,
Speaker 1: more than two thirds of counties in the U saw
Speaker 1: more deaths than births in and therefore a natural d
Speaker 1: increase in population. Hamilton's County, Indiana, is a vision of
Speaker 1: what many communities in America aspire to be. It's still
Speaker 1: growing fast. It has advanced manufacturing and growing tech in
Speaker 1: biotech sectors. Its cities are building new downtowns and walkable neighborhoods,
Speaker 1: has great schools. Still, Carol Croll and Metroplastics need workers. Now,
Speaker 1: this is how she lays it out from the company
Speaker 1: conference room. We do some automation automatically, other automation. It's
Speaker 1: just kind of being forced upon us because we don't
Speaker 1: have any other choice, because we can't find people to
Speaker 1: do the jobs. Over the years, the company has taken
Speaker 1: other measures to attract people. They introduced six hour shifts
Speaker 1: to try and draw stay at home mothers who wanted
Speaker 1: to be home with their kids in the afternoon. There's
Speaker 1: also a tuition reimbursement program for students. The temp agencies
Speaker 1: she and her brother, who runs the company's operations side,
Speaker 1: are relying on to fill the empty slots on the
Speaker 1: overnight ift regularly struggled to find people, Karl says, and
Speaker 1: even when they do, the attempts don't always show up
Speaker 1: or last long. In what are now seventeen dollar in
Speaker 1: our jobs. That's not just about the weird economy. The
Speaker 1: pandemic is leaving behind, and that's not going to go away.
Speaker 1: That's a long term issue. It is very much a
Speaker 1: long term issue in email. Some of it's the economy
Speaker 1: and what's going on, but I think a good portion
Speaker 1: of it that we've known has been coming for a
Speaker 1: while is the baby books are leaving the marketing period.
Speaker 1: You know that there's not a whole lot to replace them.
Speaker 1: For Bloomberg News, I'm Sean do and now to Berlin
Speaker 1: and an unlikely Revolution. I interviewed the German Chance let
Speaker 1: O left Schultz last summer in the run up to
Speaker 1: the German election. As Finance Minister, he'd been particularly emphatic
Speaker 1: in his support for that controversial Nord's Dream to pipeline
Speaker 1: that would have taken Russian gas direct from Russia to
Speaker 1: Germany below the Baltic Sea. Germany had pressed ahead despite
Speaker 1: Russia's occupation of Crimea and despite the poisoning and detention
Speaker 1: of Alexey Navalny. So I asked him what President Putin
Speaker 1: would have to do to make Germany change its mind.
Speaker 1: He dodged the question back then, but I guess now
Speaker 1: we have our answer. Chancellor Schultz finally did cancel the
Speaker 1: program last month in the wake of the Russian invasion
Speaker 1: of Ukraine, and this week he admitted the whole thing
Speaker 1: had been a mistake. But that's not the only longstanding
Speaker 1: pillar of German policy that's been sent tumbling in the
Speaker 1: last few weeks. Our German economy reporters, Caroline Look and
Speaker 1: Yana randall have this story. And if you would have
Speaker 1: told me what to do with in the first one
Speaker 1: hundred days since my appoint and I am, I wouldn't
Speaker 1: believe what we have to to face a warm, sweet
Speaker 1: budgets that Germany's finance chief, Christian and Lindener, speaking in
Speaker 1: Berlin last week. He's from the country's business friendly Free
Speaker 1: Democratic Party, and he's a key player in Germany's new
Speaker 1: government that took shape late last year. He's an unlikely
Speaker 1: candidate to introduce massive new spending bills, and yet he's
Speaker 1: had to do just that. Capabilities always in the first
Speaker 1: one hundred days, a complete change of the the policy
Speaker 1: agenda of the new coalition, Ladies and gentlemen. So it's
Speaker 1: a great pleasure for me to Since Russia's invasion of Ukraine,
Speaker 1: Lindner and the three party alliance ruling Germany planned to
Speaker 1: issue hundreds of billions of euros in debt to finance
Speaker 1: large scale investments in defense and climate protection. It might
Speaker 1: well end up being the highest borrowing the country has
Speaker 1: seen in any year since World War Two. For a
Speaker 1: country obsessed with fiscal discipline that's underspent on its military
Speaker 1: for the past thirty years, it's been a remarkable shift.
Speaker 1: I thought it was necessary, but I didn't think they
Speaker 1: turned around so quickly. This is tiny carebo from Frankford.
Speaker 1: But necessity gives birth to new virtues and being part
Speaker 1: of the government comes with different responsibilities and being in oppositions.
Speaker 1: The Greens also had to learn this. It's good they
Speaker 1: changed their mind so quickly. It's exactly what we need
Speaker 1: right now. She's retired after a long career as a
Speaker 1: pilot and we met in a neighborhood cafe to talk
Speaker 1: about the many challenges for Germany ahead. She wants to
Speaker 1: see fiscal policy returning to balanced budgets eventually. She wants
Speaker 1: to see the country reducing its reliance on Russian gas,
Speaker 1: and she wants to see Germany taking more responsibilities in defense.
Speaker 1: Were capable of achieving a lot, We just have to
Speaker 1: step on the gas Italy. Among the new measures is
Speaker 1: a one billion euro defense fund Germany announced just two
Speaker 1: days after Russia's invasion. Philippa Zeluna, who was a former
Speaker 1: finance ministry official herself and now leads the Ditsons think
Speaker 1: tank in Berlin, says it must have been a hard
Speaker 1: decision for the finance chief and his party to agree to.
Speaker 1: They had campaigned on a platform of bringing debt down again,
Speaker 1: and that was really surprising. I mean, first of all,
Speaker 1: military spending, that's not something that we normally go into
Speaker 1: debt for and secondly, a hundred billion is just a
Speaker 1: huge number, and they came out of nowhere um and
Speaker 1: I don't think that many analysts saw it coming. That's
Speaker 1: especially true for Germany, with its checkered past. The country
Speaker 1: was completely demilitarized for several years after World War Two.
Speaker 1: It built up forces again during the Cold War era,
Speaker 1: but slashed spending after Eastern West Germany REUNI. Fight expenditures
Speaker 1: haven't exceeded one point five percent of GDP since at
Speaker 1: least the mid nineties, and the country's army, the Bundeswea,
Speaker 1: has long been ridiculed for its broken equipment. Helicopters won't fly,
Speaker 1: submarines won't swim, and there have even been reports that
Speaker 1: guns won't shoot, at least not properly. Last month, the
Speaker 1: Parliamentary on bods Women for the Armed Forces warned that
Speaker 1: conditions are utterly unacceptable. That will now change, says Chancellor
Speaker 1: or Left Shots, who promises to raise spending to what
Speaker 1: NATO has long said it wants to see here. Shots
Speaker 1: is on one of the country's most popular politics talk
Speaker 1: shows recently. In Germany is the country with the highest
Speaker 1: military spending in the European Union, and if we now
Speaker 1: meet the two percent target, we will be the country
Speaker 1: in the European NATO Alliance with the highest military spending
Speaker 1: in the strongest defense infrastructure. Another change in calls that's significant,
Speaker 1: though somewhat less of a surprise, is Germany's position on
Speaker 1: Russian energy. In the past, Germany's leaders have sought close
Speaker 1: ties to the Kremlin, sometimes overlooking Vladimir Putin's annexation of
Speaker 1: Crimea and his support of separatists in Eastern Ukraine. Before
Speaker 1: the war, Germany imported more than half of its natural
Speaker 1: gas from Russia, but now it wants to be almost
Speaker 1: independent from such flows in just over two years. That
Speaker 1: means North Stream to the pipeline that's taken a decade
Speaker 1: and eleven billion dollars to build, is unlikely to ever
Speaker 1: be switched on, although right now Germany is one of
Speaker 1: the key countries in Europe blocking a regional energy embargo
Speaker 1: and Russia here's tiny Kaba again. Up until now, we've
Speaker 1: pretty much financed Russia's annual defense budget with what we
Speaker 1: paid for the gas we imported from there. That can't
Speaker 1: be the goal, and I think we're learning that the
Speaker 1: hard way. Right now, Germany is urgently searching for alternatives.
Speaker 1: Plans to shut down coal plants by could be delayed,
Speaker 1: and even keeping the country's three remaining nuclear plans online
Speaker 1: for longer is an option being looked at. The plans
Speaker 1: were slated to shut down this year, and just a
Speaker 1: few months ago keeping them on the grid would have
Speaker 1: been a huge blow to the German public. A November
Speaker 1: survey showed just one in five people thought nuclear power
Speaker 1: should play a major role in the future energy makes
Speaker 1: Last month, some seventy percent of Germans were willing to
Speaker 1: rely on nuclear energy beyond this year. I have the
Speaker 1: feeling that the general public has one step ahead of politicians.
Speaker 1: That's another Ronica vin Land, who was both a nuclear
Speaker 1: energy expert and a historian on Eastern Europe. In her youth,
Speaker 1: she used to be staunchly against nuclear but her position
Speaker 1: started to shift after spending a significant amount of time
Speaker 1: in Ukraine as a student. There, she learned how people
Speaker 1: on the ground dealt with the catastrophe of Chernobyl and
Speaker 1: that they don't reject the technology. As such, she's now
Speaker 1: a prominent German voice in favor of nuclear energy. A
Speaker 1: key dilemma, she says, is that the country's Green Party
Speaker 1: has long associated itself with being anti nuclear energy, which
Speaker 1: is also true for certain social democrats. For the German
Speaker 1: public and politicians alike, the debates over embracing nuclear energy
Speaker 1: and reinforcing the military are forcing a rethink of what
Speaker 1: they stand for. You believe hanged the political identity of
Speaker 1: the Greens hangs on the fight against nuclear energy in
Speaker 1: parts of the SPD. That's not different. To tell people
Speaker 1: now that we do need these nuclear reactors would be
Speaker 1: a break from many of these party members with their
Speaker 1: own political identity. It's taken just a few days to
Speaker 1: transform the man long marked in German as chasm play
Speaker 1: on his bland robotic tone, into the chancellor who has
Speaker 1: turned German politics on its head. For Bloomberg News, this
Speaker 1: is Callen Look and Yana Vanor And our last stop
Speaker 1: is Hong Kong, which has not been invaded by Russia
Speaker 1: and is not facing much of an inflation problem, but
Speaker 1: it has been on the sharp end of most of
Speaker 1: the other big shocks that have hit the global economy
Speaker 1: in the past few years, all while having to get
Speaker 1: used to increasingly aggressive interventions in the life of Hong
Speaker 1: Kong's citizens by the Communist government in Beijing. So is
Speaker 1: this the end of Asia's world city as it likes
Speaker 1: to call itself. We asked our chief Asian Economics correspondent
Speaker 1: and longtime Hong Kong resident and occurrent to take the
Speaker 1: temperature I'm living in here so many this is the
Speaker 1: first time, the worst time. I can say the worst
Speaker 1: time in Hong Kong. Because I'm doing the business for
Speaker 1: twenty years. We see many of the things like um
Speaker 1: sas we have experienced nine one one, and we have
Speaker 1: experienced the financial crisis. But this time is not only
Speaker 1: the academic but also there with so many other things.
Speaker 1: Hong Kong has long been described as a borrowed place
Speaker 1: on borrowed time summer, warning that prophecy is finally coming true.
Speaker 1: On the streets, people like Elizabeth Chan, whom you just heard,
Speaker 1: are worried about the city's future. The beauty saloon business
Speaker 1: she runs has cut staff and closed premises, and has
Speaker 1: even seen around twenty percent of her customers leave the
Speaker 1: city altogether. In the past two to three years, global
Speaker 1: sentiment towards Hong Kong has soured due to Jaconian controls
Speaker 1: to curb COVID nineteen and a political track down by
Speaker 1: the government. We're hearing from the Chinese pros and shooting
Speaker 1: is he is urging the Hong Kong government to stabilize
Speaker 1: and control the COVID nineteen situation. Shorter Flights Repatch are
Speaker 1: a booming COVID pandemic business in Hong Kong, and international
Speaker 1: financial hub that's increasingly cut itself off from the outside world. Really,
Speaker 1: Hong Kong's last pro democracy newspaper has officially closed up shop.
Speaker 1: The first person convicted under Hong Kong's National Security Law
Speaker 1: has been sentenced to nine years in prison for incitement
Speaker 1: to secession and terrorist activities. The law come into force
Speaker 1: after a series of mass pro democracy process in twenty
Speaker 1: This bastion of West meeting East has become isolated from
Speaker 1: the rest of the world. It's democracy movement crushed and
Speaker 1: its civil liberties eroded. That combination of politics and pandemic
Speaker 1: has raised questions about whether Hong Kong can ever regain
Speaker 1: the freewheeling status it had as a gateway between Asia,
Speaker 1: especially China, and the rest of the world. To get
Speaker 1: a sense as to how Hong Kong has changed, a
Speaker 1: boke to David Webb, who first arrived in Barclays and
Speaker 1: in the years since has become the city's best known
Speaker 1: activist investor. He's also known for recording the exodus of
Speaker 1: those leaving Hong Kong on his website. There has been
Speaker 1: apart from the political change which which has driven a
Speaker 1: lot of people, young people and talent away from Hong
Speaker 1: Kong and threatening the future talent pool through their children there,
Speaker 1: there's also been a an ongoing drain of people who
Speaker 1: are just scared of the government's policymaking right now. The
Speaker 1: young mothers with young children fearful of being separated from them.
Speaker 1: That's led to an exodus in the immigration numbers. It's
Speaker 1: almost a women and children first from the Titanic Web
Speaker 1: warns the extent of government intervention unleashed during the pandemic
Speaker 1: runs contrary to an economy fame for its handsover approach,
Speaker 1: and it will be difficult to unwind. I think the
Speaker 1: basic the basic issue is that that the balance has
Speaker 1: been struck towards excessive intervention and conservatism, rather than evaluating
Speaker 1: both the social and economic consequences of the actions. Hong
Speaker 1: Kong's reputation has taken such a blow that it's not
Speaker 1: certain it can recover from the current crisis, even if
Speaker 1: the city's core business model as a channel for money
Speaker 1: flows remains in place, said Angela Jiang of the University
Speaker 1: of Hong Kong, an expert on China's legal system, that
Speaker 1: the government cannot be too complacent just about the fact
Speaker 1: that we are we still remain the global financial hub.
Speaker 1: Does not guarantee for tomorrow, like I mean, we have
Speaker 1: other competitors like Singapore and Shamghai and so um. I
Speaker 1: just think that there's a lot the government need to do,
Speaker 1: not just to reform the healthcare system, but also you know,
Speaker 1: how do you build up Hong Kong's repertention station, how
Speaker 1: do you improve Hong Kong image in the financial world.
Speaker 1: There's a lot that the government we need to reflect
Speaker 1: up how what's happening in Hong Kong reflects the broader
Speaker 1: backdrop of what's happening in China, where the government is
Speaker 1: struggling to contain the virus. After two years of COVID
Speaker 1: zero has kept the world second biggest economy sealed off.
Speaker 1: Hong Kong may serve as a patriotage for how China
Speaker 1: eventually transitions to living with the virus and reconnecting with
Speaker 1: the rest of the world. Jang says, China can probably
Speaker 1: live without Hong Kong, but China would do much better
Speaker 1: with Hong Kong. And Hong Kong remains a very important
Speaker 1: strategic asset for the mainland. And you see that Beijing
Speaker 1: has been pulling a lot of resources into Hong Kong.
Speaker 1: And because Beijing want Hong Kong to succeed, right, I mean,
Speaker 1: the People's Bank of China is now actively promoting Hong
Speaker 1: Kong as an offshore trading hut through the u N
Speaker 1: And for a sense as to how business people are
Speaker 1: viewing the crisis, I spoke with Hing Choo, executive chairman
Speaker 1: of Wagwang Shipping, one of Hong Kong's leading privately owned
Speaker 1: ship owners. Chiao says that for confidence to be restored,
Speaker 1: the authorities are going to have to deliver policies that
Speaker 1: highlight Hong Kong's competitive strengths compared with rivals. I think
Speaker 1: since particularly over last ten years, Hong Kong has been
Speaker 1: heading towards a cross road. I think we are at
Speaker 1: the cross road. So at this cross road, a lot
Speaker 1: of decision making that's being taken today and in the
Speaker 1: coming to the three years will determine where we end up,
Speaker 1: will determine where that Hong Kong would make competitive. Chaos
Speaker 1: family run company has been in Hong Kong since nineteen
Speaker 1: fifty two, and the scene the city go through to
Speaker 1: multi before. The city has reinvented itself multiple times. Hong
Speaker 1: Kong was a center for light industry in the nineteen
Speaker 1: sixties and seventies, and transformed into a vital shipping center
Speaker 1: in the seventies and eighties, but in ninety nineties it
Speaker 1: had developed into one of the world's leading financial centers.
Speaker 1: Hong Kong will continue to adjust to the global situation
Speaker 1: um and Hong Kong will continue to reinvent itself. But
Speaker 1: we I think it's important for people not to get
Speaker 1: stuck to an idea of Hong Kong that's fixing, because
Speaker 1: as we can see glocally, things are changing very rapidly.
Speaker 1: For the final word, here's David Webb again on whether
Speaker 1: those fleeing residents will ever return. Some of them hopefully
Speaker 1: will come back after the Titanic is either raised or
Speaker 1: doesn't think, But right now the brain drain is being accelerated,
Speaker 1: and that's very worrying. Tom. You live for eleven years
Speaker 1: in Beijing. You probably more time in Hong Kong than
Speaker 1: most of the people listening. Is it over? Is it
Speaker 1: the end of Hong Kong? So? I think Hong Kong
Speaker 1: has been hit by two really big challenges Stephanie. So.
Speaker 1: The first is a governance challenge. Historically Hong Kong worked
Speaker 1: because it provided a gateway to the Chinese market, but
Speaker 1: Western standards of governance, a Western approach to the law,
Speaker 1: a Western approach to regulation, and Western approach to markets.
Speaker 1: Now that is being taken away as Hong Kong moves
Speaker 1: closer to the mainlands approach. And the second, of course,
Speaker 1: is COVID. Two years of lockdowns, of intense testing and
Speaker 1: then at the end a kind of failure and the
Speaker 1: disease tragically sweeping across the island. So can can Hong
Speaker 1: Kong come back from these two challenges? Well, COVID we
Speaker 1: all hope will at some point be a memory. The
Speaker 1: governance challenge, I'm not sure that's going to go away.
Speaker 1: And just to go back to COVID, this is a
Speaker 1: serious challenge for China. Having had the zero COVID strategy
Speaker 1: that worked so well in the early stages of the pandemic.
Speaker 1: How do you think it's going to extricate itself and
Speaker 1: with with what potential cost of the economy. So in
Speaker 1: trainers control of COVID at home was drastic but effective.
Speaker 1: If you look at China and international comparison back in
Speaker 1: on the economic dimension and on the healthcare dimensioned, they
Speaker 1: look pretty impressive, though they've got a challenge. Their population
Speaker 1: hasn't ever had COVID, so they don't have natural immunity,
Speaker 1: and the vaccines they've developed at home they're not but
Speaker 1: they're not best in class, so they don't have good
Speaker 1: immunity from mRNA vaccines either. And what that means is
Speaker 1: that even when you see a few cases, Chinese authorities
Speaker 1: have to respond by locking down entire cities, and we've
Speaker 1: seen that already this year with the lockdowns in shen Jen,
Speaker 1: in Jelyn and now in Shanghai. The question is what's
Speaker 1: the path forwards? Well, I think many epidemiologists, many health
Speaker 1: experts would say that the right path forward for China
Speaker 1: is a controlled opening. Acquire a bunch of the effective
Speaker 1: mRNA vaccines, give those to the entire population of a
Speaker 1: city or a province, bring healthcare resources into place, and
Speaker 1: then open that province and allow the virus to move
Speaker 1: across it um, and yes, there would be a cost
Speaker 1: in public health, but ultimately the payoff would be that
Speaker 1: the population has a met true of immunity, and if
Speaker 1: that process continues across the rest of the country, ultimately
Speaker 1: the entire population would have a measure of immunity and
Speaker 1: China could reopen. Is China ultimately going to take that path?
Speaker 1: I think the answer is yes. Are they going to
Speaker 1: take that path in the immediate future, in the months ahead,
Speaker 1: I think the answer is no. China does not have elections,
Speaker 1: but it does have politics, and at the end of
Speaker 1: this year there's a crucial political movement, President Hijin Ping
Speaker 1: positioning for a third term as president, a third term
Speaker 1: as general secretary of the Communist Party. I think that
Speaker 1: the willingness to take risks ahead of that crucial meeting,
Speaker 1: which we expect in the fall, is going to be
Speaker 1: pretty low. So if China ultimately does move onto a
Speaker 1: controlled opening path, I think that's going to be a
Speaker 1: three story, not story. Tom Alick, thank you very much.
Speaker 1: That's it for a frequent flyer episode of Stephanomics around
Speaker 1: the Globe. In just over thirty minutes, we'll be back
Speaker 1: next week with a special episode talking to the ubiquitous
Speaker 1: Larry Summers. Last year, he was worried about inflation when
Speaker 1: the rest of the world was not. What's he worried
Speaker 1: about now? Find out next week. In the meantime, check
Speaker 1: out the Bloomberg News website for more and all the
Speaker 1: stories featured today, and follow at economics on Twitter. This
Speaker 1: episode was produced by Magnus Hendrickson with support from Summer Sadie.
Speaker 1: Special thanks to Tom Aulick, Sean Donnan, Karen and look
Speaker 1: Yana Randall. Here's a Fine focal Aggie Cantrill, Yan, Patrick
Speaker 1: Barnett and Ender. Current Mike Sasso is executive producer of Stephonomics,
Speaker 1: though Lucy Meekin also helped out Today and the head
Speaker 1: of Bloombow podcast is Francesco Leave two