target, industrial production false in may. haidi: mark carney says investors are ignoring the potential costs of climate change. 20 years after the handover, what does the future hold for hong kong and china? indeed, talking china, breaking news, manufacturing pmi and nonmanufacturing data from a slight move to the upside, 51.7, looking for 51. what is your instant take? >> it is a surprise. i thought sentiment is weaker. you have a cooling off for the real estate market. it means momentum in the economy continues to be robust and that very gradualonly slowdown at worst in the coming few quarters. let me bring up a chart, #7313, the diversions nonofficialcaixin manufacturing. the official number has more of the state owned enterprises. is the reflation going on now? >> i don't think the reflation is still going on there. the decline is because of commodity prices. rishaad: deleveraging as well, perhaps weighing into all of this. >> i don't think china is deleveraging there are economy. they cannot afford to do it. deleveraging in the financial markets, you can see it in particular in the bond market, and that tells us the pboc does not have to tighten monetary conditions any further. we will probably see lower interest rates, which means downside risks to growth our minimum. haidi: you say they are not deleveraging. you have an upside risk when it comes to economic growth this year. to 7%. gdp picking up does that mean an upside risk to growth and the is covering up the systemic risks building up as a result of deleveraging? >> the 7% as a potential for next year. there is a good chance the economy will accelerate next year. they should be deleveraging. they are choosing to aim for the ambitious growth target over deleveraging because that is what is needed for social stability, particularly the second half of the year with the 19th party congress. a year wheres stability trumps everything else. risks say, the systemic are not going away. we were expecting that pmi number two receipt further, but instead it is of the, so does that tell us deleveraging is covered and overcapacity is not happening, being put on hold for what is essentially an election year for beijing? >> this is true. i think overcapacity will continue. they are over target. they can afford to slow in the first half and still do well. what is more important is china doing well, stabilizing financial markets, which are looking good. i believe it is time to invest in china, especially chinese bonds, which will attract $1 trillion over the five years to is an attractive investment destination. rishaad: for that to happen, bond connect? >> of course. it provides attractive advantages to other programs in place and makes sure foreign investors will accelerate investments. rishaad: the jury is out on that though. there is different thinking on that. thank you so much. let's move onto markets and looking at what is going on. david: the been read, the story across markets, stocks down, the dollar down, yields up. we could go on and on over these .ndividual bond yields dollar,ook at the kiwi .3 percent, highest level since the start of this year. aussie dollar, a chart in a moment, $.77 the reaction. given the spike in volatility overnight, i dropped is dragging down the index right now, but still up for the month, which would be 1.5% higher this month, months going back to january, and the first time we have not seen a monthly decline in stocks in the asia-pacific going back to 1988. chart,dollar, today right at $.77, the reaction to the pmi data. have a look at the dollar backrend, the unwind going to when donald trump was elected, back to september levels now. this has to do with the 10-to spreads, here we go, all the way down. there,e a spike right the move up and yields overnight, and very quickly, valuations why. the u.s. does look expensive. #585, asia 14.2 forward pe there, not bad. going back to one of our top stories, hong kong marking 20 years of chinese rule, and president xi jinping on his first visit to the territory since taking office. we are at the hong kong garrison where he is there to inspect troops. what has been happening today so far? yes, definitely a show of force, about 6000 pla army, navy, air force personnel based in hong kong. invisible,een mostly and out of sight kind of force, igh profilee h since the handover. beijing saying the force will be more visible in hong kong because to be blunt in the last 20 years we have not seen the troops on the streets, and for good reason as well. to engender goodwill with the people here, but this is an impressive show of force at this former british airfield and ericsson. it was handed over in 1997 on july 1, now a pla air force and army garrison. we have hundreds of army vehicles lined up here, helicopters from the pla air personnel from the navy. there are probably several thousand soldiers that just marched up behind us here. i cannot count there are so many. we are awaiting the arrival of president xi jinping, so in about 20 minutes time. force, an full aircraft carrier here in hong kong along with one frigate and two destroyers, the aircraft carrier has its full contingent of fighter jets, so it will be an interesting couple of days with xi jinping in town showing to the hong kong people that the british, they're at least rent of 20 years ago, and the new landlord is showing their face. haidi: steve. rishaad: will he be addressing those troops? is he expected to say anything today? are within your shot of where xi jinping will likely be. there is a large screen, so we able to see if he does say something. , so he will similar likely review the troops from the traditional chinese sedan, going past us sometime after 9:30 and say the traditional statements, comrades, good work. keep it up. these kinds of morale-building moves. rishaad: thank you so much for that. over from the territories to singapore, looking at the first word news headlines. governor kuroda's headache. japan's core consumer prices higher for a fifth straight month in may, but the slow rise means inflation far from the boj 2% target. consumer prices excluding fresh , the jobless rate rose unexpectedly to 3.1%, industrial output fell 3.3%, a worse slowdown than expected. president trump then president putin are set to meet as heads of state for the first time at the g-20 next week in hamburg, coming as bilateral relations are at their lowest in decades. it includes russian intervention in ukraine, american sanctions, and the kremlin's alleged meddling in last year's elections. the white house declined to say if those subjects would be addressed. aboutkorea has formerly two kill the former south korean leader, saying she would face summary execution should an attack be attempted on kim jong-un. she is accused of planning to overthrow kim and his regime. it was added that the plan was scrapped because she was impeached last year. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. haidi: still ahead, india's game ,hanger on the eve of the new the implications for the economic landscape. this is bloomberg. ♪ >> the really important point about the people in hong kong is that the understanding of the relationship between pluralism, rule of law, prosperity, free markets, free politics is part of their dna. it is amazingly good for morale that it is not just older people. joshuahe people like long and his generation who feel passionately about freedom, and they should be representative in the government of hong kong. they usually win the majority and elections, but unfortunately the elections are pretty limited in what they can achieve. >> i first came to hong kong in 1970. there weren't as many high-rises then. if i had any money then, i would have made a lot of money if i had invested in real estate. anybody who sells hong kong short is making a mistake. >> hong kong has been very relevant to the opening up and development of the chinese economy, and we are now even more relevant the coast there are major initiatives and economic development that have developed, and with our unique position in our traditional strengths and advantages. haidi: some of the comments from our egg guests speaking on the hong kong handover. let's get a quick check of the business flash headlines. delivering aafter rosy forecasts and announcing plans to forge closer ties with consumers. allow amazon and instagram users to buy shoes directly. the upbeat forecast follows a sales slowdown in a particularly its north american market. veteran investor carl icon easing off aig after introducing a new ceo. he is one of the biggest holders of aig stock. he wants to give him time to improve the company performance. sureys he may reduce buyback, raising questions whether he would support him. haidi: bhp opening a of credit for its joint venture in brazil. it will have access to more than $150 million with plans -- funds released as needed. the mine has been closed since november 2015 after an accident that killed people and polluted waterways. the reopening process has been delayed due to a water rights dispute. china, theght, in reference rate. >> strongest level since november. 6.7744 is your fix. ,t is not entirely surprising but especially the move overnight and adjustments in the majors. have a look at futures right now. not that given the drop we are seeing across equity markets. an adjustment lower here in that so a stronger fix from the pboc, strongest since november. rishaad: thank you very much indeed. joshua wong joining us next after his release. this is bloomberg. ♪ our next guest is a joshua wong, one of the key leaders of the occupy protest, now the joiningy general of -- us here. you were released from jail 30 hours ago. what happened and how are you feeling right now? ago,sterday, to bring days the dayized the action before the visit of china's president. we just catherine and have the , where thethe square handover of hong kong, and we have to let people around the world aware one country, two system has already change, and now -- >> have you been told anything in the last 48 hours? >> in the last 48 hours, i have been arrested. >> did they send you a warning? has the government said anything to you? >> the police arrested me and claimed i'm the one involved, and also questioned i am the one who was on the statue. we organized a demonstration before and during the chinese president, because we want the world to know it is not a time for celebration. it is a time for hong kong to have a demonstration. >> you have argued been detained. i have been detained in the police station for 33 hours. >> how far are you willing to push it for the next 48 hours? >> tonight evening outside of the hong kong exhibition center, we will organize and have demonstration. when xi jinping is there for celebration and to have the dinner with upper class elite, i activists andg the youngsters are hoping to get on the street and let people know that it is time for us to have demonstrations and ask for elections and against the selections. and tomorrow morning and afternoon will be the rally of hong kong people to come to the streets. >> we heard from president xi. he said hong kong is always in my heart and will continue to offer hong kong support. what you make of those comments? >> i would love to point out that judicial independence and rule of law of course would be the cornerstone of hong kong, but it is eroded by china under the communist regime. when we realize even businessmen have beenlishers kidnapped from hong kong to mainland china. that it is a proof threat to the hong kong business market. >> his comments have been perceived as soft touch, but in other comments praising him for clamping down on the small independence movement here in hong kong. don'to mentioned challenge beijing's authority. you think you will ever get your message heard? >> from my observation, no matter who, both of them are hardliners and would love to suppress hong kong, and the fact demonstration, they receive, but don't listen to it. >> what can you do? the protest are not working. what else can you do? >> we organized the umbrella movement to make people aware that hong kong people are not just economic animals. we still can't achieve concrete results. as we both realize, china is the second largest economic power in the world, so if hong kong it is hard enough for us to get bargaining power, the only way out in the next three decades is to strengthen the bargaining society.the one country, two systems can operate for 50 years and change policy, so from now on until 20, it is necessary to protest for rule of law, judicial independence, and democracy. >> you think you will get president xi jinping's attention? >> we get his attention since the umbrella movement three years ago. they are aware that the young people hong kong ask for democracy. before the handover, no one could imagine the ebola movement happen or university students would form a political party or elect as a lawmaker. sideis why time is on our and we hope in the next three decades to continue our pattern and the people to know it is time to ask for free elections to freely elect the leader of our city. out theres a concern from the business community and ceos that these political tensions that have risen up have impacted hong kong as a financial center. to what extent do you think you are guilty of starting this and raising these tensions? and io not regret at all feel what we have done in the previous day and what we hope to do in the future is preserved and protect the uniqueness of hong kong recognized as the asian financial hub an international city. if hong kong lacks rule of law and judicial independence and democracy is under threat of china and the system seems to move backwards from one country, two systems, and the worst scenario, one country, one system, so it is not only hong kong people or lower-class people. it also becomes a threat to that this is market interests. that's why we hope is to let people know that the previous 5-10 years, tension or struggle asking rose, but we are the china government if they have promised to let hong kong have free elections under the international treaties registered in the united nations. we hope to ask the chinese government to protect the interests of hong kong. ago, tense of years of thousands of protesters were in the streets of hong kong. could think president xi draw similar demonstrations here? >> i think it will be more people come to the streets again than 5-10 years ago because the fact is in the previous five years, when hong kong is still far away from democracy, a book publisher and businessmen can be thinkped and objected, i those incidents already proved that hong kong people really worry is one country, two systems in name only, or one country overrides two systems? that is why july 1 and after this i believe there will be hundreds of thousands of people to come for the street and ask democracy. >> what you want to hear from president xi. >> i hope that he could aware that hong kong people are not the ones advocating for independence. we hope to protect hong kong and ask for democracy and to ensure judicial independence and free economy and hong kong. separating yourself from the independence movement in a way, right? >> you have always done that. there are a certain group of people in hong kong that asks for hong kong's independence. i would say the propaganda from the pro-china or procommunist all people that ask for democracy as the ones who advocate for hong kong independence. i am not asking for independence. i just want to ask for self-determination, which means that after the expiry date of the one country, two systems, after 24/7, i hope the political status of hong kong could be determined by hong kong people. watch out there. it is windy. determined by the pro-come in his camp. >> jason wong joining us in hong kong at the maritime museum. back to you. you very much indeed. joss world long -- joshua wong there after being released by the police. the pla army base their, the british army pre--1990 seven. president xi jinping is arriving there as we get 9:30 here in hong kong. a symbolic visit, resident xi jinping's first visit since coming to power in 2012. haidi: that's right. in power for five years and visiting today, inspecting the pla troops. this is certainly quite a show and pageantrypomp if you will of this military display, but interestingly, despite not visiting hong kong in the five years that he has and in power, he has said that hong kong has always been in his heart and the central government of beijing will support hong kong's development as ever. he has arrived. it is interesting, joshua wong saying the concern it would be one country, one system, deteriorating further from the one country, one half system the country is seen as operating under now. president xi jinping says he considers that one country, two systems a success. president xi jinping arriving on day two of his three-day visit as hong kong march 20 years since the handover from british rule. let's get over to david who is taking a look at our markets. declines at the open. have a look at the equity column. ,ou have the nikkei, australia trading at these levels for the most part of the morning session. singapore open, down, a sizable move when you look at the shade of the red. bottom of the heap, have a look, this gives you a sense of the risk aversion today when you're best-performing market is still down .1%. dollar back down, strong fixing from the pboc today. 6.77 is your exchange rate now. aussie dollar above $.77, a late-term push from data out of china today. right, so, hong kong, down about 1%. that may get that up. there we go. we have erased all of the canes for this month. also a decline across equity futures in the region and the spike in yield we are seeing from new zealand all the way up to japan. right, so, here we are. volatility, a big pop overnight in the vix. a little adjustment up, but the nikkei 225, a lot of this has to fairly heavy weighting when it comes to the tech place. -- plays. getting there. ishaad: right, this president xi jinping doing the troop inspection of the china pla barracks and the hong kong regimen. regiment. it is his first visit since becoming president of china in 2012. celebrating that handover tomorrow for the region. it is a three-day visit. he has said that hong kong was always in his heart. the beijing's central government has always been a strong backer. ago, going onrs to say we will support hong kong's economic development and improvement of people's lives, willing to work with all sectors of hong kong society in maintaining hong kong's extraordinary journey. to ensure one country, two systems also, we just had joshua wong they are saying it was no longer, well, one country, two systems and all that, one country, one and a half systems, or even one system. unease ands of concerns about the mainland undermining the more politically liberal traditions and the legal system here in the sar. haidi: that's right. a lot of concern despite president xi jinping taking a soft touch or when it comes to addressing the criticism of this idea we are heading towards one thetry, one system, saying effective crackdown when it comes to the way cy leung dealt with the umbrella revolution with many many weeks of protests on the streets of hong kong, asking for the democracy many felt had been promised. saying essentially it has then a crackdown and not much more will need to be done. there is a lot of discontent at the moment. it isn't just to do with this issue of democracy being brought to hong kong, but some of these issues related to the domestic state of the economy, the reliant nature of the relationship with the mainland , wealth disparity, innovation, education. it is an inflection point for hong kong as the state looks forward to the next 20 years. those liveve pictures of the hong kong garrison, president xi jinping inspecting troops, the pomp and pageantry of the military parade there. a chinese conglomerate has just close on the acquisition of a pharmaceutical maker from valeant, paying $820 million in cash. the core product is the prostate cancer drug. tom mackenzie is standing by with the senior vice president. this means a lot of negative news flow of a cross-border deals, but what does this one represent? it is a significant deal. i am pleased to be joined by the the company and also the senior vice president. thank you for joining us after this deal. why is it significant, why make the deal now? stone deal forle sanpower. it has a whole spectrum of infrastructure and capabilities. this is the first ever deal by a chinese company to acquire innovative products in the united states. care, strategy for health then we would like to bring it into china and other markets. >> you paid around $820 million , about aor dendreon 100% premium over what valeant paid for it. did you overpay? >> actually, the acquisition is around $495t million, and also they spent $150 million and upwards in time,cturing, so at that company was a bankrupt with a lot of problems, so valeant was facing a lot of challenges and risks. after two years of turnaround, dendreon is already profitable. pay $820wer, to million for a business which of i can quote balance numbers from the press release, second half in forecast for dendreon is $113 million in sales, and $65 million in ebitda, so roughly seven times ebitda, which we think is a fair price. >> prostate cancer treatment, and as you say the revenues on sales have been picking up. they were around $250 million last year. you say they are picking up, but the margins are relatively low. how do you plan to boost margins and profitability of this drug in its home market in the u.s., but also new markets? the 2016 number is around $300 million in sales. the margins as such as said before, if you calculate $113 million in sales and $65 million in ebitda, translates into 30% ebitda over sales, in line with valeant's margins. teame past few years, the has successfully turned around the business. the drug only penetrate 7% of patients, and there is room for growth. year, first half of the new patient numbers have article in up by 10%, so we are quite confident that we have expands the capabilities by the management team and with sanpower's resources that we could continue the trajectory and improve margins in the future. opportunity as well is introducing the drug into the china market, but how do you overcome the regulatory hurdles? there is a backlog of approvals. how will you get past that? can you give us a time frame when it will be given the green light in china? >> very interesting question. as you know, there are very strict regulatory hurdles bringing any innovative product into china. a new product entering into the chinese market sometimes it is five years post u.s. launch, but needs in significant china right now. the drug right now, the rate is 99% in the u.s., and 53% in china. the authorities have been working diligently to unlock some of the administrative blocks come and we are making a lot of progress recently. in may, they have issued three accelerating the regulatory pathway for innovative products. >> are you looking for more deals? >> we certainly do, but we would like to find deals that fit our portfolio. >> thank you very much. deal, $820ut that million to buy dendreon from valeant. rishaad: thanks very much indeed for that. tom mackenzie there. looking at beijing as we look at what is going on with 20 years after that handover. what is the future for business in the city? we will be asking that next. this is bloomberg. ♪ rishaad: we are back. one company at the heart of hong , china light and power providing electricity since 1901. the vice chairman joins us now to have a look back at the hand over 20 years ago and ask where the city is heading. that is the first question. >> i think hong kong will continue to be an attractive place to do business. we had been always a place for businesses to come for trade. we have many advantages in hong kong. we have the freedom of movement information,pital, and very strong infrastructure, rule of law, and a business fairly environment. i think this will continue to position hong kong well in the future. rishaad: how about the way hong kong looks to china now. that will be something important now and looking ahead. #533 shows expectations and confidence in china by the ,ong kong media i have to say this is set handover, most confident at that stage, then we have had all this uncertainty creep in hitting this peak during market gyrations last summer. coming back to more confidence. what is your take? , they confidence level are volatile. there are many aspects contribute to the confidence level, not only the economic development, but political development, the people's interaction with their mainland counterparts. all these factors, but regardless the growth has been phenomenal over the last 30 years, and the integration between hong kong and china has been accelerating in all aspects of his this in particular. would like that integration from a particular the civil side of the legal side for instance. >> part of that is i think hong kong feels threatened because we used to be ahead of china in every aspect before china opened its door. felt verypeople privileged when we visited in china for pleasure or for business, but the cap has narrowed significantly because china has grown very rapidly, and i have to say hong kong has missed some opportunities to economy diversify our compared not only with chinese cities, but other neighboring cities in the region. it --d: what nadal has nettle has hong kong failed to grasp? employedk we have been in this identity as to who we are after the handover, so a lot of our identity is diverted in two development, which is necessary in the development of a city, but less energy is diverted to developing the economy, and i think developing our young people. rishaad: that brings me to my next question, you mentioned deeper integration in business with the mainland. what about your business? do you feel more integrated with what is going on over the border and the central government there does not influence your business or actually influence your business? what does it do? >> the central government never interfered with our business in hong kong, but the integration with china has offered a lot of opportunities in terms of developing a business in china. across 50 projects helped in theo since we have been importing clean nuclear energy from the mainland for over 25 years because c.o.p. was the first one po cooperate with them -- cl was the first 20 cooperate with them, so there are mutual benefits between hong kong and chinese companies. rishaad: you are optimistic on the future. so how do you engender that hong kong and make them sure that optimism, because so many feel disenfranchised at cluboment, a cartoon in a or in hong kong said, what happened to hong kong's get up and go? the other chap said it has got up and left. >> i am always an optimist. i never expect things to be perfect, like our political system. it is not perfect. we all know that. like the business world, you have to compromise, except there are certain things you have and you may not be able to have, but under that environment there are still a lot of things you can do and continue to prosper, so that is the way i look at it. except kong people can some of the limitations we have come but look at the bright side of things. china is growing rapidly. that provides a lot of opportunities for young people and the economy. rishaad: thank you so much for coming on the program. the vice chairman of clp. , theg up, looking at india country preparing to launch one of its biggest economic reforms in decades. historicreak down this tax overhaul. that is next. this is bloomberg. ♪ rishaad: i am rishaad salamat in hong kong. haidi: i am haidi lun in sydney. india about to implement the biggest policy reforms in decades. the country will have one single tax system for goods and services or the first time. let's bring in our bureau chief for more. this has been a long time in the works. what is the big deal and the implications? why do they seem to be so significant? >> it is indeed significant, guys. this is the biggest taxation overhaul since independence. that may explain the aim. has 29s complicated and states, 20 tax levies across state and central governments. car inre buying a mumbai, the amount of money in -- what this try to do is remove exceptions and bring the ion under one taxation umbrella. the implications in the long-term everybody agrees is going to be beneficial for the economy at large for consumers, manufacturers, and the but in the short-term, everybody critic short-term disruption. rishaad: tell me, are you guys gst? for but it only seemed yesterday that we were talking about the problems in getting it all past. has it been thought through properly? there must be concerns on the ground. >> there are serious concerns on the ground. legally, it is clear. it has been many years in the works. it has passed through several state assemblies and so on, but implementation on the ground is the problem, many small and medium-sized japan are's don't have the infrastructure to get this going. the large guys can hire someone to implement this for him. second, many people do not know how this will work. the third one is cost of collides compliance. 37 times of the year is a lot of paperwork for someone running a small business. people expect this to get ironed out over the next couple of weeks, but near-term disruption is inevitable. disruptions will take place for the next 3-4 reads before some sort of clarity comes from the government, but everyone is expecting this to happen. rishaad: thank you so much for that. mumbai.us there from right, let's get to the action as we come up to about 10:00 in hong kong, singapore, and beijing. that is the scene at the moment at the barracks there in the new territory as president xi jinping's visit continues. ,e have this three-day visit day two of that marking two decades of chinese rule ever since the territory was handed over from britain. this is bloomberg. ♪ ♪ announcer: from our studios in new york city, this is "charlie rose." charlie: william burns is here. in 2015, he became president for the carnegie endowment for international peace. he retired from the foreign service in 2014 after 33 years in the state department, where he helped with russia and jordan. he was only the second career diplomat to become secretary of state, serving under hillary clinton and john kerry. john kerry described him as a diplomat's diplomat, on a short list of american diplomatic legends. good to see you.