Transcripts For BLOOMBERG Bloomberg 20240704

Japanese yen holding fairly steady. We saw that kneejerk reaction overnight and we had local immediate reporting they would exit away from negative policy settings next week the focus on those union group negotiations. Nomura saying the wage hike is likely to be around the 5. 1 range. This is the state of play so far. Yen strength, we have seen it putting pressure on japanese stocks and we saw the miners outperforming yesterday. It will be interesting to see how that sub index performs today considering we are seeing iron ore going down. Equities more broadly so far under pressure ahead of the boj meeting that concludes early next week. Lets take a look at the outlook for career, very much driven by wall street. Further weakness. It was that focus on the fed and the message or the takeaway perhaps from the ppi data, we had further data around resilience in the labor market. Perhaps the fed can afford to take its time when it comes to cutting rates as we saw moves higher for treasury yields and we saw stocks under pressure. Trading in the red. Focus on the tech sector in particular we had the likes of adobe reporting in after hours and it seems like they are concerned around competition from new ai entrance into the space. A lot of pressure on any ailinked name to start to deliver and see it lifting its bottom line. Adobe, one of the biggest laggards in after hours. Haidi were seeing a lot of laggards in the australia session. A lot of pressure more broadly. Certainly the leadership in the wrong direction is what we are seeing. Materials, we talked about the downside be continue to see for iron ore in particular. Down almost 10 for the week, the worst week since may. Also a bit of pressure across other Industrial Metals despite moves to the upside we have seen including the biggest oneday jump since november 2022. Downside as we see trading in bonds really following the move we saw in treasury yields. Climbing to the highest moves in more than a week. The report on wholesale prices eroding confidence or conviction we will see the fed move imminently, still pretty much following the track of the intermediate and longer material rising as much as 10 basis points during that session. The retail sales gauges are weaker than expected. Rising oil prices, the other piece of the action in terms of restoring the focus back onto inflation. Oil holding at that for month high. Flipping is forecast to a deficit. We also have expectations from a quarry that we will see is cyclical upswing for the economy and therefore better demand and higher pricing across commodities complex. Annabelle really a lot for us to be digesting this morning. Lets bring in our next guest who has been adding to International Equity exposure. With us is willem sels, cio at hsbc. I am interested because there are sort of two Different Things we are getting out of the u. S. You have hotter than expected u. S. Inflation from the cpi and ppi readings, then the activity data that suggests a cooling coming through. So do we need to temper these expectations around foot cut around fed cuts or repricing for the right amount of moves . Willem i think we are pricing for the runaround of moves. For the right amount of moves. When i am encouraged by is two things. One, when you look beyond this next year or what is happening in 2024, the long end, the long dot, the fedex rotation, the fed is pricing in 3. 5 . They are thinking 2. 5 . That gives you upside for bond returns. The other bit is real yield is again at 2 for the 10 year and that is too high for the level of growth where we are. So we think that will come down. Annabelle talk us through how that plays into equities. Willem on the equity side i care more about the growth element which is a positive. The earnings as well, especially in the u. S. You have two countries where earnings are positive to u. S. And japan. The inflation data, i am not too worried about that because it is very much at a margin that it is both expectations. And what you see is the margins of corporates are still going up. So the equity market is actually taking it more in its stride than the bond market is. The equity market is only moving relatively small in the u. S. Last night because those earnings are there. But certainly whilst you are probably more focused on bonds at the end of the year exclusively, now it is a mix of both bonds and equities. Annabelle what is going to drive the earnings expansion . Is it ai that will be adding to productivity gains . Willem ai helps. Obviously you are going to have a high filtering through into the economy in terms of productivity gains. Any Business Owner i talk to amongst our clients, who are quite often Business Owners, everybody is looking at how they can use ai in their company to make gains. In some companies that is still marginal, in some it is significant. But i think you also have quite Strong Demand growth. And we are at the bottom of the economic cycle. In europe we have already had the weakest quarter. In the u. S. It would probably be this one. And then stabilization, acceleration. Markets looking ahead towards the rear acceleration. Haidi when it comes to japan, mildly overweight on the back of common themes that have driven the rally so far. Do you think there is going to be meaningful upside or downside from what the bank of japan does in terms of how it correlates to the yen and how much it has been a driver of this equity rally . Willem so, the rally in japan to me is much more than the weakness in the yen, and therefore much more than what is happening with the bank of japan. Clearly it is a very important data point and our belief is that we are going to have in the Wage Negotiations at least as much as last year and therefore in need a normalization of the bank of japans policy. We think they will start with the ending of the yield curve control and then the following month, a change in the policy rates. But i think it goes beyond that. It is basically this end of deflation which i think then plays into peoples minds and they are no longer expecting deflation. That is point number one. The second point is obviously that change in corporate governance, which is real and already having a significant effect on dividend payouts and therefore shareholder value. Haidi there is also structural changes when you talk about china and a lot of them not necessarily pointing in the right direction for investors. I wonder what prism through which you view value in china right now. Willem in china, we see clearly valuations are very low. We are basically waiting for the stimulus that is coming through, to feed through actual economic and earnings growth, for that to create more positive momentum. In the meantime we diversify within asia and obviously japan is a big destination. It also typically has very low correlation to other markets, which is one of the reasons we look at japan. We also look at india, indonesia, and south korea, where we all see opportunities of that supply chain change but also digitalization and in the case of indonesia also the net zero transition. Annabelle i am curious how much you are checking the value out program and the chance korea it will perhaps be able to rose the socalled gable discount. Willem it is obviously a concentrated market depending on what index you look at the the reason why we are positive on korea is we do think with the ai and people being enthusiastic about that, where can we find opportunities outside the magnificent seven. We do like the magnificent seven as well as the rest of the u. S. Equity market but people are looking actively for other ways to play that trade and south korea is one of those destinations for us. Annabelle willem sels, global cio at hsbc. Speaking of korea, there is going to be a key test of that today. Samsung cmt, it will be quite a showdown between that company and activist shareholders. Essentially there are phones that are proposing moves around dividend payouts, share buybacks as well. That is going to be tested today in a key annual general meeting. We have already heard from south koreas National Pension service which has a 7 stake in samsung cmt backing the company on this. That stock is dropping more than 4 in the session. 10 minutes underway now for korea and japan. Lets switch on and look at another sector we are focusing on and that is iron ore. You have iron ore dropping for a fourth straight session in singapore so far. You are seeing weakness not only in the aussie miners but names in japan and korea in terms seeing weakness as the materials index for the asx 200 leading the decline today. Lets change on. Moving back to the tech space, that focus on what we are seeing in terms of adobelength names. We had adobe dropping at the top more than 10 in afterhours giving a bit of a weak revenue forecast, concerns around ai entrance entering the space. A little bit mixed in the tech space. Haidi coming up next, the pboc may be about to lower a key lending rate for the First Time Since august as beijing aims for ambitious target. We get a preview just ahead. This is bloomberg. Okay yall we got ten orders coming in. Big orders starting a business is never easy, but starting it eight months pregnant. Thats a different story. I couldnt slow down. We were starting a business from the ground up. People were showing up left and right. And so did our Business Needs the chase ink card made it easy. When you go for Something Big like this, your kids see that. And they believe they can do the same. Earn unlimited 1. 5 cash back on every purchase with the chase ink business unlimited card. Make more of whats yours. Annabelle you are watching daybreak asia. Haidi u. S. Senators are resisting calls to fasttrack a passage of the bill which the bill passed by the house this week demands that bytedance divest within six months or shut down tiktok. Democratic senater Richard Blumenthal says the deadline is to show and republican temp truce ted cruz wants a review that could tie up for months. But the senate chair said he supports expediting the bill. They are collecting in enormous amount of personal data about americans. The genius of tiktok, it knows what you like even before you may know. And that kind of personal data of the 170 million americans who are on 90 minutes a day, if you dont think that is a security risk, potentially you could be blackmailed by agents of the chinese government, then i think you dont understand the unfortunate real world that we live in. Haidi meanwhile, the top diplomat for china has hit out against beijings objections to a possible tiktok been. Annabelle the ambassador spoke exclusively with Stephen Engle. We have heard a number of complaints from the government here in beijing about the american debate on tiktok. I find it supremely ironic. Because government officials here are using the x platform to criticize the u. S. They dont give their own citizens the right to use x, instagram, facebook, to have access of google. And so it is ironic indeed that the government here is complaining about a process when they shut down access for 1. 4 billion chinese to all these platforms. Every country has a duty and responsibility to protect its National Security. And what the president has done over the last 1. 5 years is to make it impossible for sensitive Ai Technology to be sold to china because we know what will happen. We know that with the Peoples Liberation army, they will take advantage of the technology to strengthen itself at the expense of the american military. We are not going to do that. We are not going to compromise our National Security. And we are not going to negotiate. Can you can bet that the government here in beijing is taking similar measures. They have not allowed for their about for the last 20 years the export of course Sensitive National security applied Chinese Technology to the United States. And so every government and certainly our government has the right to take these decisive steps and that is what we are doing. Stephen we all know about the fdi numbers, down to the lowest gain since 1993. There is hesitation not only because of the economy is weak, but because of the myriad of different National Security and opacity of such policy, especially coming out of the National Peoples congress. We do know, and you were in that 60 minutes interview where you talked about u. S. Companies who have seen raids, and they have seen arrests of u. S. Citizens. Can you elaborate on the threat and the paul that has been passed over the Investment Community . This is a question central to the u. S. China relationship for the next year and the year behind. We have a 570 billion twoway trade relationship. There are thousands of American Companies doing business here. Heres the problem. They are hearing conflicting signals. Some senior chinese Officials Say the private sector is welcome here. But these companies are also hearing a different message. Whether it is the raids against American Companies last march and april, whether it is the opacity of the counterespionage law. Espionage is defined in such a way that normal activities in any other country in the world, the collection of data could be construed as espionage good and so we see american firms backing away or at least being very cautious about investing money here because they are not sure where the lines are. The voices they are hearing from the government here in china about National Security, they are the strongest and loudest voices right now. Haidi that was the u. S. Ambassador to china speaking with our chief north asia correspondent Stephen Engle. Steve mnuchin says he has spoken to potential coinvestors about buying tiktok. The former u. S. Treasury secretary made the comment to cnbc but declined to give specifics. He runs a private Investment Firm that counts saudi arabia among backers. Tiktoks u. S. Business would be worth up to 40 billion. I think the legislation should pass and i think it should be sold. I understand the technology, it is a great business, and i am putting together a group to buy tiktok. They should be owned by u. S. Businesses. There is no way the chinese would ever let a u. S. Company owned Something Like this in china. Haidi we have breaking news when it comes to samsung and the chips act grant it is potentially going to receive. The u. S. Is planning to award more than 6 billion to Samsung Electronics to help them expand beyond a project in texas they have already announced. This is under the chips act grant and awards are expected also for samson and tsmc and intel put the money would be one of the major awards from the Commerce Department. It is expected to announce that in the coming weeks. We are expecting more than five alien dollars to taiwan semiconductor. The federal funding for south koreas leading chipmaker would come along significant additional u. S. Investment. In 2021, samsung announced a 17 billion texas project. All of this really part of the three chips act grants to a lot of these producers of older Generation Semiconductors and now we are hearing more is on the way. Annabelle the focus on that geopolitical rivalry between washington and beijing. Lets go back to china because most economists that are surveyed by bloomberg expect the pboc to stand pat on rates friday. Bob bloomberg believes they could produce lets bring in our Greater China Senior Executive editor john liu in beijing. Bloomberg economics is a little out of consensus but why hold the consensus view of chinas economy is off to a weaker start this year . John i think it depends on priorities. Because it is a choice between two bad options. One, the economy is weak and cutting rates would send a signal that the government is doing more. It would encourage more lending and bob borrowing and that would be a positive thing for the economy. On the downside, there is a gap between chinese and american rates. And if the u. S. Fed is keeping rates at where they are and china is cutting that is going to widen that gap and that theoretically would be reflected in a weaker yen. The pboc has to think about what is more important, is getting the economy growing and hitting the 5 target for 2024 more important than maintaining a stable currency. Haidi and of course with that pretty ambitious 5 target the data is going to be scrutinized more than ever. What do we expect here and how does that paint a picture that might convince investors that things are may be progressing better than they think . John we should get data on monday for the first two months of the year because the Lunar New Year holiday, sometimes they are january or february. Next week the data is expected to show continued weakness. Economists are expecting retail sales to have slowed from december. We are also expecting investment in property to have continued to decline. And so we have heard a lot about the gdp target for 2024, the government doing more stimulus measures. That is not expected to be showing up in the data just yet. So continuing weakness and the market generally waiting to see signs that stimulus has taken effect and things are getting better. Haidi john liu there in beijing. The stakes are high heading into tuesdays bank of japan decision. Money managers revealing their expectations in terms of whether the boj will move. Paul jackson joins us now from tokyo. So much of this comes down to around 4 00 this afternoon. Will all be revealed . Paul yeah, well were waiting for this wage figure to come out this afternoon. This is going to be the average annual pay deals as tallied by japans Biggest Union federation rang go. And if this is a big figure, this could help to tip the scales of the bank of japan in favor of a march move to raise raise Interest Rates for the First Time Since 2007. What exactly are we looking for in terms of the numbers . Last year the initial tally was 3. 8 for these annual wage deals. So i think anything around that mark is not going to be too inspiring. Economists surveyed by bloomberg earlier this week suggested 4. 1 . I still think that is the low end of what it might be. I think it will be a strong four, we could even get five. I think if we get to 5 or in the fives, that is going to be a strong signal for the bank of japan. We have already reported that there are some officials at the central bank who favor in march move. There are some who favor waiting until april. So the key question here is whether this figure this afternoon can push them into consensus to move on tuesday. And if it is 5 , i think that is looking increasingly likely. Annabelle i am curious, what is the difference between waiting between march and april . We already have these indications the wage indication will be stronger. What is the difference of, say, 30 days between now and then for hiking . Paul hey look, i think the kind of baseline scenario was always to move in april. It follows a pattern. Governor ueda has been doing things every quarter. When there is a Quarter Report with forecasts out, there will be a whole load of new forecasts out in errol including of the new fiscal year. We will also have a Business Sentiment survey out. They will be more hearings from the regions, from Regional Central Bank officials. And the unions will also be updating their wage figures with more figures from smaller companies. And hey, they employ 70 of japans workers, so it is also important to see if the wages are really spreading to the smaller businesses as well. So what this figure today needs to do, he needs to be so high that it convinces officials that there is no need to wait until april and that with this kind of momentum, Small Companies must be raising at a rapid pace too. Haidi we heard from the finance minister saying japan is not in deflation. They had said earlier in the month they were not considering a declaration either. But i wonder whether the jump in wages, the progress being made, is that feeding through to a better cycle when it comes to sentiment . Is it making households feel more confident about spending, especially when domestic asset prices have been so suppressed . Paul hey, look, you have been seeing really wages in real term falling for month after month. And consumption in real terms has fallen the last three quarters. So to be honest, we arent see ing a great cycle of positive wage growth feeding into consumption. We have not seen that yet. What are be going to get today . We are going to get a figure for wage deals for this year. So really, a lot of this feedthrough into consumption is something that has yet to happen. And i think that is why the figure needs to be very high today in order to convince officials that now is the time to move. Annabelle that was paul jackson there. Recapping one of the breaking lines, this is samsung. We understand it is poised to win over 6 billion to expand investment into its u. S. Operations. This is according to sources familiar with the matter. But we understand 6 billion would help the chipmaker expand the on a project in texas that has already been announced. We dont know exactly where yet. The additional investment would be located. But we are hearing the money would be directed to its rivals tsmc, intel. So they are also likely to get cash in addition to samsung. Annabelle recapping breaking news headline from the last few minutes, samsung dropping a little bit so far in the session but we are hearing from sources that the u. S. Is planning to award samsung more than 6 billion. This will be helping samsung expand operations in the u. S. There is already a project in texas announced but this will help invest in an as yet to be named location. Lets bring in Peter Elstrom from tokyo. This will just be one of several major grants that could be awarded over the next few days. Peter thats exactly right. The Biden Administration has made their efforts to build a Domestic Semiconductor Industry one of the Core Platforms of their economic plan. Very important for them, the chip sacked will have about 39 billion in grants as well as loans that companies will get. The key chipmakers are now beginning to get to the point where they can see how much money will be allocated for them. Samsung of course a south korean company, the biggest memory chip maker in the world. It has had operations in the u. S. In the past. It is planning on building a 17 billion facility in texas. Now this money will help them expand even beyond that in the u. S. We also understand that tsmc, the taiwanese chipmaker that makes many of the most advanced logic chips including nvidia and apple, is close to getting some money too. So the Commerce Department is nicking up speed after what was a slow start in terms of allocating this money. Intel also is planning on getting some cash too. So they are beginning to move down this process of doling out the money that will help build the Domestic Semiconductor Industry. Haidi that package said to be over 10 billion. Also hearing about money being set aside for military use. Doing know what these packages comprise of . Are they financing guarantees, and does that make a difference for a company like samsung . Peter it is a combination of things. The grants are the money they would prefer to have some of these facilities. The loans, at some point you have to pay that money back. But there are some Strings Attached that have caused some hesitation. The Commerce Department has put some conditions on these process. That is part of why this process has been quite slow in the u. S. Compared to some other places, particularly here in japan. Tsmc is building a plant here in japan and also trying to build one in the u. S. And it has gone much more quickly in japan. They built it in a very short amount of time. In the u. S. It has been much slower partly because of the government issues and union issues and other factors. Haidi of course this takes place amid the ongoing tech rivalry between washington and beijing. Does this give the u. S. A considerable head start in terms of, ultimately not preventing china from being able to have this tech, but certainly slowing its progress down . Peter yeah, i wouldnt say its a head start. Right now you have most of the advanced semiconductors in the world made in taiwan or south korea. The u. S. Is not in the same ballpark as those countries. China is investing in its own domestic chip industry. It is not as advanced as what tsmc or samsung can do. But they have been investing in older chips which they see as vital to the economy. For the u. S. This is a strategic issue. They want a dependable supply for key industries, particularly the Auto Industry. The Auto Industry had to close down factories in the u. S. And japan and europe when there were disruptions to the supply chains during the covid pandemic. So countries are very concerned about that. Theyre also concerned about possible increase of tensions in the u. S. And china over taiwan where some advanced semiconductors are right now. Haidi Peter Elstrom there. Weve got breaking news with more on geopolitics. Voters are headed to the polls in russia for a threeday president ial election with the Vladimir Putin all but assured of winning a fifth term. Despite his war on ukraine and the longterm economic challenges, hes said to be preparing for a long confrontation with the west. Lets bring in graeme gill, Professor Emeritus at sydney who focuses on russian politics. Great to have you with us. Vladimir putin finds himself in an interesting position. There is evidence russia perhaps has the advantage when it comes to the conflict in ukraine. They are weathering the sentience quite well. And the opposition looks increasingly futile domestically. So is he in a pretty good position . Graeme he is clearly in a good position to consolidate his control within russia. Its quite right to say the opposition is in a perilous state. There are only three other people running in the election, and none of them are likely to get anything more than 4 or 5 of the vote, given that putin is clearly very popular, but also that the electoral process is structured in such a way to produce an overwhelming majority for him. He is clearly going to win the election. Internationally, certainly things are not going all of his way. Nato has expanded, he certainly did not want that. But within the context of the ukrainian war, things seem to have turned in russias favor. And it remains to be seen when the fighting season opens again over the next couple of months, whether russia can push that advantage through to get it way period or position in which putin is happy to call a halt. If he can get to that position where he can say this is been a win for us and he can gain what he wants from ukraine, i think he will then look to end the war. Then it will depend on whether the west responds positively to that or not and what happens with zelenskyy in ukraine, who has basically put his future on a military victory. And that military victory just looks to be more and more of a chimeric the longer be go on. Haidi i want to get your views in terms of the International Response and how they deal with russia going forward. But i do wonder about domestic sentiment. It has been referred to as a learned indifference. Is there an unusual sense of normalcy in terms of society in russia . Because there are oppressions and tightening of the screws, there is war fatigue, sanctions fatigue. How does he deal with the population at large . Graeme the russian system has been set up over the last 30 years in such a way as the ideal for it is an apathetic populace, people not interested in politics, people interested in getting on with their lives, in bringing up their families. Putin has tried to create that atmosphere and maintain that atmosphere during the ukraine war. And he has done this in on in a number of ways. One is by the restrictions in the reporting of the war so that there is very little negativity about the war coming across the mainstream media. He has tried to ensure that the economy continues to function in such a way that the russian people did not experience significant shortages and he has been able to achieve that at least in the cities, which is the most important part for him. And he has pressed down on the opposition so that the likelihood of there being any major popular opposition to him and his continued rule is now pretty small. It is possible with the election we will see some demonstrations taking place but the likelihood is they will be met the same way demonstrations in the past have been, in that they have been put down by the police. Annabelle it really does seem like there are a lot of factors running in putins favor at this point in time. Does this mean that we are seeing someone that perhaps has an increasingly emboldened mindset . And what are the ramifications for that in turn . Graeme he may have an increasingly emboldened outlook, but the problem is in terms of expansion of russia it is not really clear where he would expand to. If you exclude ukraine, basically russia is confronted by a border of nato countries and it is not going to attack nato. It knows that if there was a major conflict between nato and russia, given the balance of forces, the likelihood is that nato would win. And so there is not going to be, i think, an expansion in a military sense following the election. What he will do is he will gain increased confidence that the west is weak. Because this is clearly what he believes. What he believed when he went into ukraine. He believed that the west and nato would not respond in the way that they did. Well, if the west now withdraws from nato, which it is likely to do in one form or another over the next 12 to 18 months, he may get that impression again. But it will not lead to military conflict or military expansionism by russia. It may lead to increased economic disruption but it will not be a military one. Annabelle do your point, it does appear that we are setting up for a long confrontation with the west and that these ties, if not severed completely, have been severely damaged. How does that play into russias ambitions around creating a perhaps a parallel world order where you have the likes of the bricks more operating in unison versus the u. S. And its allies . Graeme clearly it plays into that scenario. But the main driver of a potential brixbased International Order is of course china. And china is the one whose economy has been going gangbusters up until the recent past. It is the yuan that has been seen as the potential replacement currency for the u. S. Dollar if it were to come to that. And russia is sort of part of that process. And the more that he perceives a rejection by europe of russia and that is what he sees at the moment the more he perceives a rejection, the more he will be inclined to worker turn towards china and the other sort of countries that are in brics or surround brics. Haidi there are limits potentially to this socalled no limits friendship, do you think, and what do you think could be the pressure points between beijing and moscow . Graeme well, there will be pressure points. One is that, as i have said, china is the main driver, and china is conceivably the dominant partner in that new relationship. That will not sit easily with the russians because they clearly see themselves as being a superpower just like the former soviet union. And so there will be frictions over that. There will potentially be economic frictions because economies do not really mesh all that well. Russia certainly provides a lot of Raw Materials and energy to china, and china in return has traditionally provided consumer goods. But the more russian industry develops after the war, we assume the more it is going to move into those sorts of areas of development the sorts of things china sells to it. So there will be friction at the economic level as well and at the political level, as i said. Haidi what happens if there is a change in u. S. Leadership after november and presumably funding dries up, support dries up for ukraine . Whether this lack of support potentially emboldens the likes of russia and china as a proxy looking potentially at what they do with taiwan. Graeme i dont think russia will get involved in taiwan. But if trump comes to power in the american plug is pulled on ukraine, what we will see is, i think, a reasonably rapid end to the war. Because i doubt very much that the european unity on the war will be able to maintained will be able to be maintained once a bidens leadership is gone. So if there is a dramatic decline in western support in the provision of arms, and if there is no supply of nato troops on the ground, given the comparative power inequalities between russia and ukraine, i think what we will see is what we expected to see at the start, in that russia will be victorious. Now, whether that translates into greater danger for taiwan is a bit unclear. What we do need to remember is that trump was empower last time, trump was even more assertive towards china than obama had been and that biden has been. If that assertiveness continues to minutes f manifest itself that may lead to a reinforcement of american commitment to support taiwan. Now, if push comes to shove, if they would come to that, its anyones guess. But in many ways, for america, taiwan is more important than ukraine is. Annabelle thank you for your time this morning. Graeme gill, Professor Emeritus at the university of sydney. You can read this. A by turning over to the terminal by heading to bloomberg. Com. You can read that story in full. More ahead. This is bloomberg. J. P. Morgan Wealth Management knows its easy to get lost in investment research. Get help with j. P morgan personal advisors. Hey, david ready to get started . Work with advisors who create a plan with you, and help you find the right investments. So great getting to know you, lets take a look at your new investment plan. Ok, great this should have you moving in the right direction. Thanks jen. Get ongoing advice; and manage your investments in the chase mobile app. Haidi the u. S. Ambassador to china says communication between the two nations militaries are starting to open up. Lets get more from our exclusive interview as the ambassador weighs in on beijings increased military spending. The two president s, President Biden and president xi, agreed in San Francisco that we would begin again serious high level between our militaries. Stephen has it happened . It is beginning to happen and it is critical because our militaries are operating in close proximity to each other. And so our new chairman of the joint chiefs has had a discussion with his chinese counterpart and we hope very much secretary austin will be able to talk to his counterpart in the coming weeks or months. Then we hope there will be conversations that are more tactical level between our militaries. This is common sense because you want to drive down the possibility of any kind of accident or misunderstanding between our air forces or are navies. Stephen we know china increased the military budget by 7. 2 . The biggest increase in five years. Are you concerned by that or how should we read that . Nicholas we are concerned that the pla is not transparent about how the money is being spent. On the issue of Chinas Nuclear weapons buildup, they are not transparent with the rest of the world and that is a problem. And of course the United States has been a principal military actor in the indo pacific since the end of the second world war. What we have been doing and President Biden has had a lot of success in, is to build up our alliances with japan, the republic of korea, the philippines, thailand, australia. And of course we have the quad with india, all designed to protect the democratic countries of this region and protect International Law in places like the taiwan straight in the south china sea. Stephen we are also hearing the Biden Administration wants to end is exerting pressure on allies like the netherlands, japan, germany, south korea, to further the curbs of other products into china. How does that not expand that pressure and bifurcate the relationship further . Nicholas we have been very clear that we adhere to a small yard, high fence scenario. These are targeted exit that regulates investment by American Companies in the ai sector here. These are common sense actions by the United States. Any American Government would have to take this action given the competition we have underway in the military sphere between the Peoples Liberation army and the United States. I dont think there is an american alive who thinks we should Sell Technology to the pla. As i say, we are not going to negotiate or compromise on this. These are the actions that a government has to take in the 21st century in an age where technology is at the heart of international politics. Some of it has to be regulated. Annabelle that was the u. S. Ambassador to china Nicholas Burns with our chief north asia correspondent Stephen Engle in beijing. You can watch us live and see our past interviews on our interactive tv function tv. Check at out. This is bloomberg. When you automate sales tax with avalara, you dont have to worry about things like changing tax rates or filing returns. Avalarahhh ahhh annabelle see atl is reporting results of this friday, it is the Worlds Largest ev battery maker in a could see a jump in fullyear earnings, signaling it is weathering fierce competition in china and a drop in Raw Materials prices. For more lets bring in danny lee. I am curious on this one because we have been talking so much about consolidation in the ev sector and the lower demand we are seeing for ev batteries. Why are we expecting such good results from this company . Danny what they have been able to do in the final quarter of the year is regain market share not just domestically but outside of china in particular where they have better control over pricing. Overall what this has meant is it has been able to strengthen its Competitive Edge in china. And outside of china it is in the mid20s, early 30s. It is in a good position and then they are able to report that is basically better than what the market expected. Haidi is pricing expected to stay as favorable as we have seen for this company, especially when it comes to overseas expansion . Danny for someone like calt, when youre looking to grow abroad, thisis an important segment for them. Especially in china where there has been a lot of competition from other he better makers battery makers. Which we saw play out in previous quarters. As they continue to expand abroad and with a whole suite of manufacturers including tesla, they are able to keep control of the pricing and that feeds into not just the top line but the bottom line. So it is a pretty good outlook when you look into this year when its opposition continues to gain strength and market share. Annabelle danny lee there joining us. Taking a quick look at how stocks are faring so far. We have oil Holding Around a four month high. Iea overnight forecasting a deficit instead of a surplus. That group of stocks is moving to the upside. What is really dragging down the broader benchmark so far is the mining names. Iron ore under pressure again. We are seeing laggards coming through particularly in australia. Samsung cmt is one to note because the focus is going to be tested. Essentially there are activist investors proposing share buybacks. It is now being pushed back on by the company and the countrys National Pension service is backing samsung cmt. The stock is sliding so far. Awkward question. Is there going to be anything. Left over . Yeah. Oh, absolutely. inner monologue my kids dont know what they want. You know who knows what she wants . Me with empower, we get all of our financial questions answered. So you dont have to worry. Empower. Whats next. To be human, to be alive is to learn, grow, and explore