Transcripts For BLOOMBERG Bloomberg Markets Asia 20240713

Planning to sell bonds and admitting gdp targets this year stemming from uncertainties due to the Global Pandemic. Ourinda lets get to markets, anger markets coanchor Tom Mackenzie in the forbidden city. China dropped its gdp target for the First Time Since 1994. That is significant. Tom it is. Our bloomberg sources expected they would do this, but the economists werent entirely sure. They have dropped the gdp target completely, facing up to the economic reality. This was the result of the coronavirus. You saw First Quarter gdp in china drop. Surveys suggest you will get 1. 8 growth for 2020. They are giving themselves space to react to this virus and put a floor under Growth Without tying themselves in knots over an artificially high gdp. High gdp target. Stimulus was a focus for investors. You got that line about the special government bonds quoted at being raised to 3. 7 5 trillion yuan. Alsoeficit target as well when you think about stimulus, you want to think about the deficit target that was raised to 3. 6 versus 2. 8 . The deficit will likely come in much higher than 3. 6 because special government bonds dont get included in that. You have support for Small Businesses. They are talking about loan relief to be extended until 2021. Of the texas says smes in china account of 60 of all employment in this country. You 2021. Companies,ays smes in have fil banks and brokerages, allowed to issue 300 billion yuan of bonds for smes to support them. We are the pboc saying they will step up their support to the economy. We are getting this report suggesting you will see further cuts to Interest Rates and reserve requirements. Then there is jobs finally. 9 million urban jobs will be created. That is the target. It compares to 11 million for 2019. The official Unemployment Rate in china is close to 6 , but most economists say it is closer to 10 . The job situation is dire. It is putting pressure on the communist party. It is a concern for them. They have may be as many as 130 Million People in china unemployed or furloughed. To focus on employment growth is a priority for premier leader li keqiang. Haslinda china also made good on its position in hong kong. It said it would push through the security law. How do we read into that . Tom that is right. We heard about this last night from officials at the npc when they were questioned about the issue of hong kong. It seems like beijing is taking a pretty hard line once again on hong kong, trying to bypass the local Hong Kong Government to enshrine a security law that would effectively make it illegal to push for things like secession, sedition, foreign interference. Those areas would now be made illegal if this law was enshrined into hong kong basic law. It seems beijing is trying to find a workaround. 2003 when they tried to pass it, it triggered street protests. Beijing says this is very normal. They say they are just trying to ensure the territorial integrity of china and have the tools to tackle what they say are incidents of terrorism. In hong kong amongst prodemocracy activists, this is a red flag. Very concerned. We heard from an opposition lawmaker in hong kong saying this could be the end of hong kong as we know it, the end of hong kong as an international city. The concern is it could give the police and Security Services in hong kong the powers to interfere with free speech, the freedom of press, in ngos and other areas, and undermine the semiautonomy hong kong had. There is a potential u. S. Response as well. President trump is likely to come under pressure to reveal hong kongs special trading status. That could have broad implications for hong kongs economy. Rishaad tom, one thing which wasnt really addressed was the language coming out of president ts,ald trumps twee particularly yesterday. That wasnt addressed. Certainly it is something that everybody is thinking about. Tom suddenly this will be a shadow over the National Peoples congress. It will be discussed in the halls of power. For the first time, President Trump taking aim at xi jinping, someone who back in january is it in trump said he had an extraordinary relationship with. In the past 24 hours, President Trump saying there is a Disinformation Campaign perpetuated by china against the europeans and united states, saying it was coming the very top. Apparently firing at xi jinping for the first time. Now the state media officials here have held back from directly criticizing President Trump. We will see if that changes. My sense is probably not. You had li keqiang saying they will stick to this phase one trade deal. That is one small area of cement binding these two countries as they attack each other in multiple areas, whether it is geopolitics, supply chains, or human rights. The phase one trade deal continues to bind them. Li keqiang says they will continue to implement that deal. Big question marks about the practicality of that deal. Continue buycan levels is a major question mark. Security is front and center for officials here as they square up to potential threats from the u. S. It looks like the suspending on military will the spending on military will slow for 2020, the slowest rate for a number of years. It was 7 in 2019. The Big Questions are whether ift number is realistic and china is pumping more money into the military than it makes publicly available. Rishaad 1. 2 6 trillion yuan in defense spending we are talking about. Tom mentioned that olive branch regarding the phase one trade deal. Coming up, more on chinas moves to impose a National Security law in hong kong and how that could affect financial markets. We will discuss that coming up next. We ask house chinas how ch inas decision to scrap its gdp target could affect the economy down the line as it dems to recover from the slump as it attempts to recover from the slump from the pandemic. This is bloomberg. Haslinda lets get back to our top story with china saying it will not set a numerical target for gdp growth this year and is shifting focus to preserving employment under the worst economic slump in decades. Joining us is a finance professor at peking university. Great to have you with us. China says great uncertainty prompting it to drop the gdp target. Its economicart policy from here, then . This is potentially good news for china. The fact that they dropped the gdp growth target means they really intend to let sustainable demand, these consumption exports and private sector, drive growth. But if they only drop temporarily while they figure out the impact of the pandemic and later select a target that relies heavily on nonproductive spending, as it has in the past, then this doesnt really change anything. Any gdp growth target, implicit or explicit, that exceeds the real underlying growth of the economy is automatically a credit growth target. Policy is also important in terms of how china aims to address the issue of unemployment. Tens of millions of newly out of job people in china. It said it will create 9 million jobs. It was 11 million before. I guess unemployment could be the new crisis in china . Michael i think that is almost certainly what they are most worried about, and particularly local unemployment as opposed to migrant workers. My guess is they will focus heavily on urban unemployment and measures more geared toward raising employment. For example, supporting consumption. The consumption and Services Sector is a very big employee of people. That is where they will focus much of their firepower. We have been hearing this for a le now, that [indiscernible] haslinda stimulus we have seen so far, is that enough to address the issue . Just today in extended its loan relief to smaller businesses until march 2021. We know smes pretty much employ most of the chinese. Michael it is a real problem. Have,f the data that we the impact of covid19 has been worse on Small Businesses and the selfemployed. The rich and middle and upper middle class have not been too badly affected. It is the bottom half of society most affected. That is where much of the employment is. We really dont yet have all of the data, in part because we dont know if the pandemic is completely over or not. But to the extent that it is, we see some recovery inactivity. Recovery in activity. Companies hasrge recovery swifter than in the smaller business area, the selfemployed, things like that. Restaurants are still pretty empty, etc. We are still trying to figure out the full impact, but it is hard to imagine there will not be a Significant Impact when all of this is behind us. Rishaad rish in hong kong. Jobs are very important. If they dont have the jobs, it is essentially breaking that compact, isnt it, that is implicit in the deal the communist party has done with its people, which is stay out of politics and we will give you ever rising prosperity. Ichael Something Like that china is much less flexible. It is much more difficult to significant institutional changes, for example, in unemployment, which is why i think the government made it clear that that is the bulk of their focus. One of the problems we are seeing is the division of responsibilities. The Central Government would like local governments to play a more active role in relieving domestic unemployment and boosting domestic consumption. The problem is local governments are indebted up to their eyebrows. There is not much room for them significantly. Many of them are already debt burdened. I am curious to see how this conflict resolves itself, whether the Central Government will play a bigger role in unemployment alleviation or whether they will try to focus much of the costs of unemployment alleviation on local governments. Because if it is the latter, i think we are running into serious debt constraints. Rishaad absolutely. Nearly 500 billion worth of local Government Special bonds designed to stimulate those regions. Ignore china targeting hong kong, saying they will perfect the territorys security law. Plate toa lot on their get involved with this now. Michael they are perhaps not unrelated. One of the things that seems china not just in u. S. , int in the europe and elsewhere, that has the domestic economy gets tougher and tougher, there is more of a tendency to turn to nationalism to address these domestic problems. U. S. , in europe and elsewhere, that has thei dont think china is diffet from anyone else there. I suspect that geopolitical issues will probably become more important, particularly given that this is an Election Year in the u. S. Plenty of room for fights over there. I see this as a response to a bad economy. Kong,da speaking of hong it is good to bidding less and less to the chinese economy hong kong is contributing less and less the chinese economy. How willit is good to bidding ld less to the chinese economy thi . Michael i am not really an expert on the chinese economy. Of course, living here in beijing, i am not eager to talk about hong kong issues. So if you dont mind, i will step aside on that question. Rishaad michael, thank you very much indeed from peking university. Up next, we will have a look at china and this new National Security legislation that would give the communist party further control over hong kong. This is searing up tensions in the city. Hang seng now 3. 3 down. Details are on the way. This is bloomberg. Rishaad this morning we are talking about the National Peoples Congress Taking place in beijing in the forbidden city. The bank of japan has also been making headlines by launching a new Lending Program designed to help Small Businesses stay afloat amid the Global Pandemic. It didnt add any major stimulus at the emergency meeting that took place earlier. We have Kathleen Hays joining us now. Accomplishing to something, but what is it . Kathleen theyve got an economy hit hard by the coronavirus. The latest numbers showed recession. They came into this period already with weakness. They kept their policy tools unchanged. They are focusing on getting money to the businesses that need it most. Inflation did turn negative, but that is not where the focus is right now. We will come back to that chart in a minute because i want to get first to what they did. The main concern the boj has now is keeping Small Companies afloat. Yes, they have inflation falling. They might do more. They already have a negative right. They already do yield curve control. This direct Assistance Program is very important. It is different from what the fed is doing. The feds main Street Lending facility has all kinds of steps to get money to Small Businesses. Give freeboj will loans to banks and give them a small amount but still pay them to loan the money out. The boj said today with a previous Lending Program, now adding this new one, that the amount of stemless they are putting forward to the Small Businesses of stimulus they are putting forward to Small Businesses totals ¥75 trillion. Earlier on bloomberg we spoke to a former boj board member. She thinks they definitely need to be more bold and innovative like the fed. Nevertheless, this is where the focus is now. They were the first ones to go really aggressive on those policy tools. It is not too surprising they are not moving them now. Cprinda how bad was the report . Should the boj be doing more to prevent inflation . Kathleen lets bring up this chart again, just because it is pretty dramatic. The white line is cpi minus fresh food prices. 0. 2s at minus yearoveryear. They were coming out of deflation. You go back to the 2014 time period. That was ending a period of deflation. Is japan going back there . Official said the boj should be bolder like the fed. Couldnt they innovate more . She thanks governor kuroda is thinks governor kuroda is hesitant to take steps that look like he is helping abe. She thinks Prime Minister abe needs to get money to the people who need it. Like many central banks, there is more they need to do. Is showing heda is doing whatever it takes. Rishaad Kathleen Hays in new york. Lets move to the latest business headlines. Geodet to invest in its digital unit. 2. 3 of theing kkr platform, valuing this unit at 65 billion. It plans to use its millions of subscribers as an ecommerce base. Later on, alibaba out with fourthquarter earnings. Investors looking for further signs of an economic recovery in china as it emerges from the google pandemic and is expecting a rise in online sales from the Global Pandemic and is exacting arise in online sales from retail trends. Alibaba faces increased scrutiny amid the rising tensions between the u. S. And china. Shares did close lower ahead of those numbers. Reuters reporting that baidu is considering delisting from the nasdaq and moving to an exchange closer to home. Discussions are in the early stages and coming a day after the Senate Passed a bill to bar companies under the control of foreign governments. Baidu says it is merely undervalued and told bloomberg it is just rumor and declined to comment further. Haslinda taking a look at where the markets are now, red across the board. Sentiment getting a hit from tensions between the u. S. And china, largely over hong kong. President trump issuing a warning as beijing plans to include a National Security law into hong kong. Csi 300 down by 1 . China front and center because of the much anticipated policy meeting. Beijing dropping its 2020 growth target, down 1. 8 , still above 30 a barrel. Still to come. This is bloomberg. Haslinda it is 10 29 a. M. In hong kong and shanghai. Im Karina Mitchell with the first word headlines. China has opened its premier political event of the year, abandoning a numerical gdp growth target amid the fallout of the coronavirus and global uncertainty. Delegates will wear masks and observe social distancing as the communist Party Gathers in beijing. The National Peoples congress has been delayed for two months because of the virus lockdown in parts of the country. Here in the u. S. , nancy says the house will review the senate bill that will impose restrictions on Chinese Companies in new york, although she stopped short of promising a vote. She said the legislation had brought twoparty support in the senate, but said the house would give it consideration. The bill puts further pressure on u. S. China ties and tech restrictions on huawei. Lenders led by Credit Suisse are targeting assets of a billionaire chairman as they try to recoup losses of more than 500 million in margin loans that soured. The Singapore Branch is controlled by the family trust. They defaulted on the loan last month. Ke anbi governor is to ma unscheduled live address later, which will be broadcast on youtube, although the subject has not been released. Last month he signaled a possible rate cuts. Oost support b for shadow lenders. It will put 4 billion into a stressed asset fund which will then buy debt. India is asking airlines to cap space based on distance and is dividing travel aced on flying times. Between popular route as the nation looks to get people flying again. Limited domestic flights resume on monday, even as most of India Remains in lockdown. The government says pricing rules will last for two months. Global news 24 hours a day on air and on quicktake on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. Karina mitchell. Markets risk off. Asia in the red. Sentiment getting hit because of tensions in the u. S. And china rising another notch. Hong kong leading losses, currently down by 3. 7 . All 50 stocks on the index are lower. The stage is set for protests to resume against chinas security law in hong kong. Csi 300 down by 1. 3 . China admitting the 2020 growth is one of gdp, this the things the market was looking for. China has gone from a very specific target to gaging a range, and now it is dropping it entirely. The yuan currently easing a tad on the bank of rising tensions. Pretty stable in the lead up to that npc meeting. China 10 year yields up on plans for more issuances. Yuan worth. Take a look at where we are in Southeast Asian stocks. They are lower in tandem with the rest of the region. E are keeping an eye this benchmark has entered a valuationsull, but surging to a 10 month high. It gained about 19 since hitting a record low in march. Pcomp down. The same benchmark lower by 1. 5 . The city state running out of time to hold elections. Classes,t other asset crude currently down about 2 . It posted its longest winning streak in more than a year. U. S. Stockpiles falling by a record. Oils rally above 30 raises the possibility that shale producers might slowly turn on the taps again. 6 10 oftures down by 1 . S p futures also pointing to a lower direction, of course on the back of rising tensions between the two big powers, the u. S. And china. The market feeling a bit of jitters right now. Rishaad no real move into havens like gold for the time being as well. Lets discuss what is going on. Thank you indeed for joining us. Ratherd seem with this vociferous rhetoric between beijing and washington and todays news that the chinese will implement the u. S. Trade deal in the npc work report they talked about the hong kong laws being perfected for National Security. All of that out of premier li keqiang. Is this the moment where the gloves have come off . Hi rish, great to be here with you. I would say the gloves came off a long time ago. I would attribute the disappointing crosssection in risk this morning on the back of a rather disappointing ncpc in that a lot of asset markets on the hopese npc of big stimulus from china. Is not ins out, it the works. A lot of the fiscal measures coming in at the bottom end are expectations, and likewise with the monetary policy, we will get more of this cautious steady as she goes policy. Nothing big bang. It certainly is the case that the pboc and Chinese Government are lagging the kind of stimulus measures we are seeing out of the likes of the bank of japan, the fed and ecb. That will have implications for chinese growth. Not surprising to see them selling off on the back of this. Sue, i suppose the big one for Global Players is the need to perfect hong kongs security loss. This according to the opposition is something they suggest brings an end to hong kong as we know it. Some have gone as far as to say it is the end of hong kong as i Financial Hub as well. As a Financial Hub as well. What is your take . Sue i dont know you can make that sort of statement. Certainly in the case of a rumor, this law forbids subversive activity as well as foreign interference in hong kong asset markets. Foreign interference. Hong kong asset markets are nervous on the back of that. From the looks of this rumored policy, it seems to be a method of invoking article 23. Sue, you talk about how the markets possibly disappointed with the npc. Does that change your expectations of a reacceleration by year end by any chance . Sue a reacceleration . Not too sure what you mean. Haslinda of the economy . Reacceleration of the economy by year end. Sue we are actually expecting quite the opposite. A continued structural deceleration in the chinese economy. The risk is, should china continue with this much more cautious and lagging supportive policy, that chinese growth differentials will narrow. The risk of course is that the Exchange Rate becomes a release valve. In the npc, they repeat the mantra that the yuan will remain stable. They characterized the move from about 6. 0 to 7. 0 as stable. It stands to reasonr furthe reason that further depreciation and renminbi would be the least cost measure in our view for china to take going forward. Expectations for dollar china were below seven in 2021 looks optimistic. Haslinda investors continue to look for yields in a low rate environment. Where should they be looking . Should it be em debt, the likes of indonesia . It within the asian region, really comes down to what your investment horizon is. But within asia, we continue to like indonesia, india, the philippines. There are positive structural aspects such as domestic driven growth. They benefit from continuous confrontation between the u. S. Services driving expectations of Global Supply chains. In the short term, these economies are at risk from the continuous domestic outbreak. There is a bit of nuance at play. Shortterm cautious on the economy. Longerterm we remain positive on these Southeast Asian economies. Global macro strategy. Still to come, china says it will improve National Security in hong kong. To deutsche Lynn University professor of Asian Studies. This is bloomberg. Georgetown University Professor of Asian Studies. Rishaad china has sparked anger and criticism by trying to impose nationals equity laws on hong kong, potentially by passing the 1997 a sick law. 1997 basic law. This with as professor of Asian Studies at georgetown university. Hong kong suddenly has become eems,picenter of, it s everything that is wrong in the relationship between the u. S. And china right now. With this move, they do risk jeopardizing favorable trading status for hong kong, which is very important for the chinese economy in many ways. You have two systems and they can take advantage of laws, etc. If china in some ways is china in some ways cutting its nose despite its face . It is a question of a balancing act. At this point, china feels as though its Political Goals related to hong kong are more important than the economic ones and that chinas economy is big enough and resilient enough that it can withstand a set of sanctions from the united states. Theink their belief is that importance of stability in hong kong supersedes the economic priorities. Does this make this even a bigger flash point between the two of them, washington and beijing . Ultimately, does this mean that hong kongs special status that they have no choice but to remove it . Evan the process by which the u. S. Removes hong kongs special status is a complicated one. It is not one you can quickly do overnight because it is a series of different special status as, not just statuses, not just as a special customs unit. I think the broader issue is the this would highlight very different ideological approaches between the u. S. And china. I think it will bring to the forefront some of the differences and values between washington and beijing that will turn what is already a competitive relationship into one that may take on ideological overtones. Evan, china reiterated its one policy, two systems for hong kong, but is going ahead with a security law. Is that move a violation of the one country two systems policy . Is definitely a violation of the spirit of one country two systems. The Chinese Government and National Peoples congress ass ert the supreme Legal Authority overseeing the basic law. By trying to insert chinese National Security law and undercutting some of the fundamental liberties that are so core to both the basic law and joint declaration is really violating the spirit of it. And threatening the identity of hong kong in and all the freedoms the people of hong kong enjoyed for so many years. Haslinda how do you expect the Trump Administration to respond . How will it retaliate . Evan first there will be a lot of harsh rhetorical condemnations. The fact that this move is coming during a very politically charged election cycle means that politicians on both sides of the aisle are going to be looking for trump to do something tough. I think the Trump Administration is very likely going to invoke several pieces of legislation to decertify hong kong as enjoying its meaningful autonomy. Once that decertification is made, then washington will have to decide what to do about that, what elements of hong kongs special status the u. S. Will withdraw. It is a difficult balancing act. It is the hong kong people and hong kong businesses that are more likely to suffer than beijing. One of the problems washington has is the tools to punish beijing are very limited. My concern is that by withdrawing these special statuses, paul you do is punish hong kong and drive all you do is punish hong kong and drive itso beijing and accelerate existing strategy to make hong kong another city in southern china. Evan, is this the shrillafter two weeks of noises coming out of beijing, and particularly out of the white house, as the Tipping Point . Is this the Tipping Point where you say the gloves have come off and we are heading to a particularly new world order . Evan it could be a Tipping Point in the u. S. China relationship. I am not convinced it will be a Tipping Point in the global world order. U. S. China relationship has been trending negatively for a long time. The Trump Administrations rhetoric on china has been critical. They seem to be pursuing a regime delegitimization strategy. They talk about china in ideological terms. This move by china right now, especially coming in the middle of a political election cycle in the united states, could mean aat the u. S. Moves from strategy of strategic petition t strategic competition to one that looks more like ideological confrontation. It could be that moment. It depends on how the rest of the international community. Is the rest of the international community, and particularly the u. K. , are they prepared to stand up to china on this action . Haslinda evan, great insights. Evan medeiros from georgetown university. Still to come, vietnam is one of the worlds fewest Success Stories in containing the spread of coronavirus, but its Prime Minister says his country will not be safe from the economic fallout. Our interview is next. This is bloomberg. Haslinda vietnam is expecting Economic Growth to slow this year despite successful moves to contain the coronavirus outbreak. Prime minister Nguyen Xuan Phuc told bloomberg the global followed from the pandemic certainly affected vietnams economy. Like other economies, the covid19 pandemic has affected many facets of the economies of the world, and also particularly vietnam. As vietnam is a deeply integrated economy, very integrated into the world economy, our imports and exports are two times higher than our total gdp. The disruption of supply chains caused by covid19 affected vietnam considerably in spite of our success in containing covid19. Circumstances, it is not possible for us to ensure that gdp growth that we expected in the beginning of 2020 will be met. We have to adjust the projected gdp growth in certain macroeconomic Industries Macroeconomic indices such as overspending and the national budget. Therefore we have set the gdp growth for 2020 to be 5 year on. I believe this is the highest gdp Growth Expectation in asia at the moment. And our exports in the first four months grew considerably. Our trade surplus reached nearly 3 billion u. S. Dollars the peoples livelihood has been maintained in spite of the difficulties we have encountered with the coronavirus. Regarding the export of rice, we are expecting the highest we have exported. We should be the number one rice exporter in the world. Thanks to our success in the early containment of coronavirus, we have a lot of investors and tourists from many countries looking forward to soon going to vietnam. Our market of 100 Million People is also a very vibrant one. People and businesses are all looking forward and eager to resume Business Operations as normal. We have also provided support packages to people with difficulties impacted by coronavirus. As well as businesses in terms of tax cuts. We have also made steps to facilitate the growth of businesses. Regarding our monetary policies, we reduced the Interest Rates and the borrowing costs of loans to ease the burden on people and businesses. And the most important goal we have set is to maintain accurate economic stability and keep macroeconomic stability and keep inflation under control. We have put in place the necessary resources as well as foressary policies to call further investment from all over the world, including the u. S. And japan. We have been successful in many years. Now we shall put in place even better conditions and more facilitating policies. We have always believed that the success of the investor is the success of vietnam. That was vietnamese Prime Minister Nguyen Xuan Phuc talking. Lets have a quick look at business flash headlines. Morgan stanley says it doesnt expect a normal return to the office space. The bank is working on a post virus environment and it wont force staff to return to the office to soon. He expects half to be back this year, but the figure would vary significantly amongst Morgan Stanley operations. Facebook gaming in remote areas where it doesnt have a physical Office Presence and it will let employees work from home permanently if they wish. Mark zuckerberg says the hiring will start immediately. He says Remote Working could make up as much as 50 of facebooks workforce in the next decade as staff become more productive. Haslinda coming up on the next hour of markets asia, how singapores response to the coronavirus compares to other countries. The minister of health and Communicable Diseases joins us exclusively. This is bloomberg. Haslinda it is almost 11 00 a. M. In singapore and hong kong. Welcome to Bloomberg Markets asia. Here are the top stories. Tenant abandons gdp growth targets citing the coronavirus and global uncertainty. A plan to impose security law on hong kong sparks outrage. Investors brace for more turbulence. The local dollar slumping the most in six weeks on chinas move. Alibaba reports later with investors keen to see how business has been holding up amid covid19. Analysts expect sales to show a strong increase. Rishaad lets have a look at these markets. Taking a look at hong kong as it leads the region. Some big losses. The new security law. Saying china will improve hong kongs security laws. Perfect them, his verbiage. Lets take a look at what is the market in shanghai and shenzhen. 1. 3 down. China is 2 lower. Seeing very Little Movement for the currency. It is a tad weaker on the offshore. 7. 13, the handle. With halfe position an hour of trading left on the mainland