Forecast. It will call come the cost of rising debt. Haidi later on, under pressure by the stock surge to develop big bets. Rishaad and stormy skies. For backtoback annual loss. Were also talking about nafta and the renegotiation. I want to bring out chart 1358, which give some context. Canada and the United States meet in washington for the first round of talks to renegotiate the deal. Donald trump calls nafta the worst deal ever made and vowed to withdraw from it. Mexico and canada want to agree to favorable terms with the u. S. Were going to have a look at what might make for a new agreement, what would it look like . How will it affect global trade . We have some guests coming up. U. S. Imports from china way exceeding those from mexico or canada. Putting all of that into context. Becauset is interesting weve have expectations that the rhetoric translate to a harsh stance from the Trump Administration, given lyrical pressure, perhaps there is political pressure, perhaps there is more of a need to talk out that stands from trump. It could be a lose lose situation for all parties if it does not go well. We are about 30 minutes out from the open of market in china and hong kong. We are coming online in malaysia. Risksght for wall street, receding, but not a lot of inspiration to be found. It is looking like an extension when it comes to asian equities. The dollar downs gains for the third session, that is. Utting pressure on asia we have a cost, leading gains of 6 10 of a percent. The korean yuan has fallen a quarter of 8 . President tells to avoid war at any cost in contrast to what trump has been saying. We have korean debt risk turning lower after spiking. Traders are truly putting these concerns behind them. Cross. He yenyuan it did spike on august 9, but we did not see the rise above the jump that we saw in april. If you take a look at the degree of the correction from the may action we have gotten this year. Not a mucharyen is higher it could be favorable for the yuan against the yen. Topics trading higher, the nikkei with gains and losses here. We are trading in a fairly tight averages. Ing north korean risks have not been completely removed, putting a cap on stock prices. With Energy Leading gains of 1 , given the rebound we are seeing in oil prices. We are back above the 50 per barrel mark. One company is due to report interim results but they are pending on internal announcements. We are waiting on auto, Cathay Pacific and tencent. Rishaad well be talking about tencent and cafe in particular. And cathay in particular. Now to first word headlines. President trump has again stoked the flames of charlottesville, blaming both sides or the violence over the weekend. He claims the actions of white that liberals violently attacked them. His initial reaction blamed many sides for the violence. That was a horrible day. I will tell you something. I washed those closely, much more closely than you watched it. You had a group on one side that was bad and a group on the other side that was also very violent. Nobody wants to say that but i will say it right now. President trump also attacked Business Leaders, quitting his it Business Leaders who have quitted his advisory team. Ceos have gone out of the door. Pressure, are other urged to quit the business prime business council. The president of iran is morning the countrys Nuclear Program could be quickly ramped up if the u. S. Continues its threat and sanctions. The comments are the most direct yet on critics of the 2015 deal struck with world powers. President trump has repeatedly said he wants to abandon the ord and has new sanctions and Congress Passed new sanctions on iran earlier this month. Capital management says management of chinese macro data says there is a risk of sharp declines over the next four months. Stocks including fortescue steel expect a slowing Property Market to weigh on fundamentals. Inr is too plentiful. Since the discoveries in australia and his ilk, even without the currency changes. It makes production of iron ore cheaper. Over time, chinese consumption off as ore will tell they use more scrap and still making. Global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. This is bloomberg. Haidi thanks. The International Merger has increased its estimates for chinas annual growth rates for 2020. It is warned that it would come at a cost of financial risk and rising debt. ,om, it is a mixed assessment isnt it . Tom they have upgraded their forecast to 6. 4 annually between 2017 and 2020. As you say, there is a payoff. That is they are expecting 300 debt to gdp by 2022. In , compared to 240 2 2016. The upgraded the growth forecast to 6. 4 . From has been progress china in terms of transitioning into the economy, they say. Trying to take the sting out of the financial economy. Trying to reduce the amount of credit and leverage in the corporate sector. What they want to see more of is letting companies, the zombie companies, hit the wall and go bankrupt. They want to see a change in Capital Allocation and say it to be a sweeping change. They say now is the time to push through these reforms, and that will help the risk in the mediumterm. Say itty congress, some will put the reforms on hold everything till that event is out of the way. Occurred,else is been the chinese have now talked topped japan in u. S. Treasuries treasuries. We have a chart that shows what has been going on since 2012, 5179. You will see that since 2012, it has been china at the top in terms of Treasury Holdings and japan was number two. In october of 2016, japan overtook china and held that position until june. China back on top, most Analysts Expect that to continue for the short to medium term because of the trade increasing between u. S. And china and demand for the treasuries. Rishaad the money supply data for china, what does that tell us about what is happening credit wise, the credit expansion in the country . Tom it is an important selection of data to monitor given the focus on the Deleveraging Campaign and that level. The broad money supply, the into supply number m2 supply number came in below estimates. They are still determined to take liquidity out of the system risk theinue to de Financial Sector in particular. Suggestions they want the final some of the credit to the corporate, to the households. We have a chart that shows this over a longer time frame, aggregate financing and new loans. 1299. S g in 2009, thatkup continues until 2016 come early twice 17, and the trend is now downward. It may start to flatten out the next public months as we had toward the party congress, but it is expected to take down after the event. Another thing to know, shadow banking rocked for the first time in nine months, seen as a positive. Rishaad thank you very much. Still ahead, another loss looming for cathay. How it can get back on the top. Haidi up next, a new nafta, as talks kickoff in washington. What are the chances of President Trump eating his way . This is bloomberg. Is Bloomberg Markets asia. Rishaad sparks could fly when the United States, canada and mexico meet in washington, d. C. To start renegotiation of the 23yearold nafta trade. Our guest is a former trade negotiator who worked on nafta during the george bush senior presidency. Were also joined by a trade negotiator with the Japanese Foreign ministry and a professor at a university. Research fellow at Research Fellow. What do you think will be the key Sticking Point of the the key start of the negotiations . First of all, i would like to mention that in light of a submission by usdr in july regarding the renegotiation of nafta, i think this guideline shows that the United States is going to make a kind of reasonable approach to the renegotiation or modernization of this 23yearold agreement. Campaign, the president ial campaign, mr. Trump has been saying there would be additional 35 of duties on imports from mexico, or even eventual withdrawal from the nafta agreement, but none of rhetoric ne hartline rhetoric hardline rhetoric has appeared. Rather, it is to recapture what has been negotiated during the tpp agreement. Since the United States has withdrawn from participation in the tpp, i think the renegotiation with canada and mexico has been largely designed to recapture or restore what the United States got through the tpp negotiations. Digitaleas include trade, ecommerce, such things never appeared in the nafta text 23 years ago. Get back whaty to they have previously obtained in the tpp negotiation. This is how i look at this starting of nafta renegotiation start renegotiations. Is this going to be a real renegotiation . Or is it going to be donald trump being seen to renegotiate with some added, uptodate elements, or will it essentially all looker, warts and at the treaty . Thatok, i certainly concur the tone of the guidance the u. S. Administration provided to congress on their negotiating objectives was fairly moderate. I think were looking at primarily an update and a modernization of the nafta agreement. However, i think it is important to keep in mind that there are a couple of contentious issues which could be quite difficult to resolve. For instance, the United States has indicated it would like to remove chapter 19 of nafta. Chapter 19 allows companies to appeal trade sanctions to independent, binational panels rather than national courts. I can tell you from experience, this was extremely important to canada, and also very important to mexico, as well. The Trump Administration has indicated they would like to remove the provision from nafta. So while there will certainly be some what i would refer to as common sense updates and modernizations of nafta, and it will look in those respects a bit more like the transpacific partnership, there will be some meddlesome and difficult issues to resolve between the United States, canada and mexico. Haidi professor, im curious how useful or not useful is the fixation on the trade deficit . You can going into the negotiations focused on the trade gap is going to be a fruitful strategy for the u. S. . U. S. D. R. E the submission on the guidelines for the nafta renegotiation include access,t of market particularly in the agriculture sector. U. S. And canada, for instance, have been constantly disputing , or even poultry, those things. Are also acts contentious area. Areas, United States gives priority in terms of improvement of Market Access into the canadian and mexican markets. They have a view to reducing u. S. Trade deficit with those partner countries. Stephen, im wondering how the current domestic Political Climate and the pressures President Trump is under, in addition to that we are going into a key Political Year in mexico with the present president ial elections, whether that will put added pressure and change the tone of the negotiations. Stephen i think it will certainly introduce a certain sense of urgency into concluding the negotiations. As you mentioned, in july of 2018, we got president ial elections and mexico, and later in the year, we have difficult and contentious u. S. Midterm elections. From the perspective of trade negotiations, it can make things much more difficult. Thats why there will be a very strong push to conclude these negotiations by the end of 2017 or early 2018 at the latest. That is a fairly ambitious timetable to get to, but at least potentially doable. Haidi hold that thought, we will get more and a little bit good a little bit more. This is bloomberg. Rishaad we were discussing the renegotiation of nafta. Have a former trade negotiator, and a Research Fellow. Thank you very much for sticking around. Stephen,out here you say chapter 19 will be a Sticking Point tell me something, as well. What is the endgame for actually this treaty in Donald Trumps eyes . Is it essentially a real overhaul, as we have been talking about, ultimately . No, i dont think we are looking at a fundamental overhaul of the agreement. Think it is interesting to note that both the commerce secretary and the u. S. Trade representative have recently said that one of their cutting president s for the renegotiation. S to first do no harm i think there is a recognition there is a core of a good agreement here. They will have to make enough modifications to be able to them in straight or claim they have fixed nafta, because everyone remembers yes . Rishaad fundamentally, he wants to reduce the trade deficit, that is at the core of this, but which supply chains interwoven as they are, it is a big ask, is it not . But it isndeed, useful to point out that although the guidance to congress indicated they wanted to reduce the trade deficit, it was completely ambiguous on how they intend to do that. Lets face it, and discussion about the trade deficit in the context of the nafta region is a lot less relevant than trade deficits elsewhere. Nafta trade accounts for about the percent of u. S. Trade, that only about 13 of the deficit good the u. S. Has Services Trade surpluses with canada and mexico. The typical mexican export coming into the United States consists of about 40 of inputed products from United States. The focus on deficit reduction in the nafta region is arguably less relevant than other parts of the world. Professor, what are the major implications for asia . For asia, it is a litmus test to examine mr. Trumps financial policy overall. Japan, for instance, is very much interested in how this renegotiation will come out. The country which runs huge trade surplus with the United States. Mr. Trump is already repeatedly mentioned this and balance should be rectified. Imbalance should be rectified. Perhaps as early as this fall, there will be a second round of trade and economy talks between Vice President pence and the vice premier to be held. In that light, japan is very closely looking into this negotiation due to start right now. Much, bothk you so of you. Withmer trade negotiator the Japanese Foreign ministry there, and also a professor at a university. Also joining us, a Research Fellow at the heinrich foundation. Looking ahead to the nafta negotiations. Coming up, we will take a look at big tech earnings out of china. Can tencents results keep up with the rise in its stock price . A look at what to expect in the second quarter. This is bloomberg. Got you outnumbered. The dinosaurs extinction. Dont listen to them. Not appropriate. Now im mashing these potatoes with my stick of butter. Why dont you sit over here. Find your awesome with the Xfinity Stream app. Included with xfinity tv. More to stream to every screen. Rishaad it is 9 39 in hong kong. We are looking at u. S. July retail sales, coming in twice forecast, 26 up. Did not do much for retailers in the u. S. Coming up, we get clues to the rates. Donald trump is doubling down and blaming both sides for the balance the violence in virginia. China is top dog again when it comes to the u. S. Treasury moment treasury market. We will look at tencent earnings later. Right, tencent, alibaba later this week, they will give us an indication as to whether the rise in the share prices, trading higher, whether it has been justified, if the risk has paid off. The balances on sheet. Get the fed rate hike before the end of the year. But go over to sophie. Kicking it off with hong kong, hang seng. Stocks, energy and utilities are leading the drop. Energy shares are down. Given the earnings, lets shut cathay arecent and faring. Tencent has outpaced apple. Alibaba reports later this week. China unicom is scheduled to report, but it has suspended trading in hong kong pending an insight announcement. Autoan see, we have geely up. For the homes income you have in terms of what is we hung saying, you have a mixed bag. Lets refresh that quickly. Auto movingy slightly. Lets look at what is going on this country. The profit fell 60 . The company says intensifying competition in china and sluggish corian Vehicle Market korean market is to blame. Asian markets very much looking next. Chinese stocks open lower after a twoday race. Csi falling a second straight day. Currency is under pressure as the dollar gains for a third day. Down tothe yuan sliding the sixth spot. Thank you so much. Lets have a look at what is going on when it comes to the first word news headlines. Is lifting its growth forecast for china, despite that it would come at writing debt. The expanded a rising at 6. 4 annually this year through 2020, compared to a 6 estimate a year ago. Household and Government Debt will rise to almost 300 of gdp by 2022, from 24 2 last year. The assets of the government are very strong. While it might be a disadvantage in attrition and growth, in a crisis, debt comes in handily overall. That is an advantage china has over the historical experiences elsewhere. China has reclaimed its crown as the top foreign owner of treasuries, including holdings for a fifth straight month. They rose to 1. 15 trillion in june, up from 44 billion a month ago. Faulty second place, having overtaken china in october. The two countries account for more than a third of Foreign Ownership of bonds. A new report shows u. K. Inflation weake