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00:00I'm Caroline Hyde in today's triple take and it focuses of course on geopolitics but not just Russia and its relationships with its allies. Is China still one. We're going to be of course focusing in on the Chinese economy the country kicking off its National People's Congress. Well we will get the latest economic targets. We also dig into the multitude of obstacles facing China as it looks to hit those growth goals. Of course the war in Ukraine a key trading partner soaring inflation as well flagging consumer sentiment among the numerous issues but remain as China. The future. They they have a cautionary tale unfolding in front the rise of what's happening with Putin and Russia. Yeah you have to think about sort of not only the war in Ukraine but the response by countries around the world. And at least for right now it's been to try to economically isolate Russia. We're now getting a breaking news a little bit earlier today a great scoop here by our reporters at Bloomberg that the Biden administration is finally considering cutting off imports of Russian oil. The administration is discussing the impact with oil and gas industry domestically here. We should point out no decision has been made just yet here. But we do know that a lot of members in Congress have been very vocal about this. Whether we get that pivot from the Biden administration still remains to be seen. And we should point out too that the amount of gas oil and gas that we import including refined products is still relatively small about 8 percent estimate on the high end. That includes the refined products. And if you take out those refined products it's something like 3 percent here. But that brings us Taylor of course to the big take which is again as you start to isolate Russia economically and then sort of raises the question about Putin's allies and the biggest ally that he had at least prior to this war was Xi Jinping and China. And is that still the case. Why don't we ask the reporter who can help us answer that question. In our big take today is our Bloomberg senior economics reporter Shawn Donnan. So walk us through that. Relate the economic relationship between Russia and China and how China pivots if at all given this war of Russia on Ukraine. Yeah look it's been really interesting. We saw in the lead up to the war in Ukraine we saw Vladimir Putin go to Beijing for the opening ceremony of the Winter Olympics. We saw Xi Jinping really embrace Vladimir Putin and Russia and the strategic alliance with Russia at that time. And now it's just a few weeks on that looks like it may have been a real strategic blunder for for China. That's certainly the view of some folks here in Washington. No limits. Friendship was what it was said all the limitations. Now when it all does it actually fast forward a relationship unwinding that we'd seen you know between when Trump was in power and the stunning. We saw that shredding all relationships between China and the U.S. Now as they see us Xi Jinping looks on at the isolation that's currently of Putin. How much does it make him want to ensure that he doesn't get blocked off from donors dominance or indeed has some sort of buffer to join his dominance. Yeah look I mean look the the really interesting thing is the most important economic relationship in the world today is still the relationship between the U.S. and China. And that is going to color anything that China does in relation to its rule when it's dealing with Russia and its relationship there. So it really has to think about this possibility of being cut off from the U.S. from the rest of the global economy. It would look at these measures that the U.S. Europe UK have taken against Russia and say Jesus that's a potentially worrying sign and a sign that maybe we should be speeding up the setting up of our alternatives to that. And the reality is China has been at this for a long time and it hasn't gotten very far. The renminbi the Chinese currency now accounts for roughly 3 2 3 percent of global payments. The U.S. dollar is by far still the primary global reserve currency. And that is not going to change anytime soon. So China has a tough choice here in terms just because of how intertwined with the rest of the global economy. It's its own economy. So so based off that then when you hear people start to talk about this idea that you know the global economy could be split up into sort of more regional blocks with China maybe anchoring one over there in the east. Is that just kind of a pipe dream. Is that just not really in the cards at least economically speaking for China. Oh look I think it's definitely in the cards. And I think this week there's a lot of people who believe that that trajectory is accelerating that we're moving towards a more divided world. But at the same time what we're seeing this week is the reality that China doesn't have all the cards here. And I think there was a view over the last few years that that China really was in a fairly strong position simply because it was growing as a share of global GDP. Well the reality is we've learned this week that America still has a lot of power because of its control of the financial architecture in the world. And they can turn the switch off fairly quickly. They don't call it CAC dollar for nothing. Shawn Donnan there. A great story on the Bloomberg terminal here about some of the options that Xi Jinping has to consider moving forward. And we want to continue that conversation and move it forward with Mary Lovely. She's a senior fellow over at the Peterson Institute for International Economics and a professor of economics at Syracuse University. Her research includes projects investigating how China's foreign direct investment policies affect trade flows. And Mary I want to start off with really the practical question here is really what direction can China go just in terms of its options. Can it isolate itself into some sort of Eastern bloc or does it really have to maintain that broader connection that broader sort of a meeting with Europe and the U.S. and the rest of the developed world. Well listening to Sean I certainly agree with his view that China may be a little bit over its skis here. It is not ready to separate from the West. It's still dependent on the West for technology for markets. And so in that sense it definitely is not ready to decouple. It's not looking to decouple. How then does China respond or continue to respond given the U.S. and Russia arguably have never been further apart. Well Xi Jinping has a very narrow path here. He politically has thrown all in with Vladimir Putin. The Chinese media is being pumped full with propaganda from RTS. So from the Russian sources on the other hand he has to drive this economically away from Russia. So one thing we might consider is whether China will play the spoiler role in terms of U.S. and allied sanctions. And there I think the answer is going to be clearly no. That that the while some trade will continue. The possible backlash or downside for China is just too large. Talk about the downside of China's own trade routes because how dependent it is itself not just on Russia but on Ukraine. You've done an awful lot of research as we know into foreign direct investment. And that was sort of how they wanted to build diplomatic bridges but also built that grain options for example. Yeah this is gonna be a problem for them. Clearly Russia which is going to be cut off from international markets to sell their grain will be able to move some of that to China. But in terms of other products China is going to have some ability to sell to Russia and Russia is going to find some outlet for those products. China is a major supplier of electrical equipment computers monitors office equipment just like it is to the US. It's also a big supplier to Russia. But where any of those products contain sanction products or are me with products that contain U.S. sanctioned content they're going to have to they're going to have to not sell well. And so. Well that brings us to the question Maria. What insights do you have right now about I guess how strong the Chinese economy is. I mean we know Xi Jinping is vying for what would be a really an unprecedented run as leader of that nation. That's coming up later this year. And it seems like the consensus a few months ago was there was no real you know opposition to this at least not publicly. But now we're hearing a lot of questions about the stability of the economy. We're hearing a lot of questions about the progress on the Covid crisis over there. Where do we stand right now. Well stability stability stability has been the watchword that we've heard going into this year. It's a bit complicated by the economy slowing down. And then the question is how do they stimulate the economy. Because having a safe landing a soft landing this year is going to be very important for Xi Jinping. Whether or not Xi Jinping is in power at the end of the year I think is not in doubt. But there's still a lot of shuffling of seats on the euro. So there is it is important for Xi to guide this both politically and economically. Well this year of course some of the key factors which I'm sure you've been talking about that are slowing down the economy include ham handed regulation of the tech company as the need to deliver in the property market and defaults in the property markets bankruptcies and of course declining consumer sentiment partly as a result of Covid lockdowns. So they've got a lot on their hands. How did they stimulate. Did they turn to the old tools of investment and public spending. They're raising the debt for local governments and they're also just turning to the same traditional carbon heavy polluting industries like cement and other forms of construction that they've been trying to get away from. So they're really in a bit of a box but they will do what they need to do this year to try to get growth as close to 5 percent as they can. Mary lovely really fascinating stuff. Thank you so much. Have a very good weekend senior fellow at the Peterson Institute for International Economics and professor of economics at Syracuse University. Coming up what is actually China's National People's Congress of course opening on Saturday in Beijing. We discuss the economic challenges facing the country and what to expect from the gathering in the minutes with US CEO of China Beige Book International. This is bringing back. Today's triple take focusing in on the current geopolitical crisis which comes as China's elites are gathering in Beijing for the National People's Congress. Now that meeting is going to lay out the policies looking to address the country's biggest challenges. Take a listen here to what some of our guests are expecting. Not a hopeful offer any major new surprises losses becoming is very political. We think there will be real focus this year on keeping their stability. Unfortunately of late we are still hearing regulations that's surrounding the Internet and e-commerce. The more important upside risk actually for China is that you'll stop is that you'll see further rate cuts. At this point we do believe that we could see a bottoming out in slowing growth helped by easing from the PDC they to achieve at least 5 percent. Well which seems to be the bottom line of the Chinese government. A demand problem cannot be easily solved by just pumping liquidity. Any easing on the property is more likely to be aiming for providing a floor on economic activities. I think there is still a fake practical challenge in terms of how much easing can be delivered. Some of the voices. And of course we're going to look at some of the themes we're just having. Mary lovely of course talking about some of the key issues that have been confronting the Chinese economy and that's going to be the order of the day of course when they have the discussion the two sessions China's new session is going to be on. Well whether we see a loosening of the Covid zero policy that was actually something that maybe pushed markets a little bit higher early this week. Maybe that's a better sign for the supply chain. But what about Hong Kong of course seeing Hong Kong dollar just under further pressure. We're seeing pretty currencies. We stop talking about that. Maybe they're talking about it over there. I think there is still a key headwind isn't it. Supply chain stress though of course one that we all feel we talk about on the daily tech regulation. That was something we were talking about a lot as well. And that's sort of something we've got. It was certainly had a lot of other things on our minds here tape crane Russia precedent. So on Caroline Hyde as you say. But the good news is our next guest can do all of this for us and bring back to light some of the issues that maybe we haven't been discussing. Leland Miller CEO of China based Book International the largest private in country data collection network that tracks of course China markets. Talk to us about the key issues facing the economics the economy of China. Some of the things like the property sector the check the tech crackdown that we hadn't been following at least this year. But we are looking at a lot last year. How are you thinking about a slowdown of the economy in the way that China pivots. I'm not particularly worried about the property slowdown. There will be a slowdown. This is not a short term thing. It's going to be extended in the future. The question is is it really a property crisis. And if they handle it right they have the tools to be able to contain it. So I think what you have to do is factor in that there's going to be this property extended slowdown. It's not going to be the driver of growth. So how's the rest the economy doing. You know the NRA our data. Just a couple days old now. You know we had a you know a bounce back in manufacturing a small bounceback in services. And so that was better. But the economy itself is not accelerating and the retail data itself looked terrible. So you've got a very mixed picture. The economy probably is barring a bottoming out for the first quarter of the year but you're not seeing that acceleration yet and you're not seeing the easing that everybody seems to be chomping at the bit for. I'm curious here Leland. I mean as much as we sort of hear about I guess the for lack of a better word the general disdain that maybe the China government has for some Western policies here. China is very inextricably linked to Western economies. And I'm curious that given all the attention right now being paid to Ukraine Russia and what the U.S. and the European response is going to be it's going to be how does China sort of factor into that discussion if at all. Do they want to be part of that discussion. Well it depends what the topic is. So you know when you're talking about a situation like you know the Russia sanctions I think that they're ducking their head right now. But at the same time you know two weeks ago or so you know China was it was talked about as the biggest economic and national party threat the United States for the West etc.. Russia is currently sucking all the oxygen out of the room. But that doesn't mean that the West and the United States in particular doesn't have to have a China policy. We never saw a follow up to the Phase 1 trade deal that is owed and that will be happening sometime in the coming weeks. But I think what China's going to try to do which is play as everyone off against the center. It may not be an optimal situation that China is in having been backed into a corner with Vladimir Putin. But at the same time they do have levers now to say you want alright here it's with what are pretty severe sanctions when it comes down to it particularly on the tech sector that you're going to have to treat us with kid gloves on the trade side. We don't want surprises there. So I think that's that's where this is going next. In what's interesting you mentioned the consumer and how the consumer is weaker than many would have anticipated. I mean we started this week. We suddenly saw travel stocks over in China get a bump higher. There was talk of some sort of loosening around the zero Covid policy. But then I think of well how we're spending travel because if you're not allowed to fly over Russia that is a problem for a lot of routes that take you from Asia to Europe for example. How are you likely to see an unruly opening of the economy if at all suddenly from a consumer basis. Well it's baby steps and a lot of it does have to do with the Covid zero policy so there is a window this year between when the Olympic ends which Olympics end which is now and when the ramp up to the party Congress begins which is you know give or take a few months this summer when they can experiment with some level of easing up they may or may now call it that. They may or not you know talk about moving away from Covid 0 explicitly but they can start experimenting with what it's like to to to to have a softer policy know if they don't do it now than to get closer to summer. They're going to be boxed in because they're not going to want any surprises around the time in the party Congress this fall. Can you talk to us. Big picture a little bit outside the scope that we've been having a lot of conversations here about King Dollar. And I remember maybe last year or two years ago Goldman Sachs saying that no longer in the near term but maybe 30 years down the road you could have the yuan as maybe starting to be a real currency certainly maybe no longer the status of the reserve currency that we know that the dollar has here in the US. But how were you thinking about an opening up at any impacts that you one could have as it looks to maybe have more clout and influence. It's a pretty bold prediction by Goldman. Thirty years down the road. Look at it there. Do you want is not going to be a reserve currency anytime soon. For a lot of reasons but for one of one reason. Above all they do not want it to be the reserve currency. You know there one is is is essentially the dollar turned red. It is backed by the U.S. dollar. They are very comfortable in a U.S. dollar system. It provides them the stability for them to manage their economy to an extent that China opened the gates open their capital accounts provided liquidity in the world. You would have a big pickup but the Chinese leaders would lose control of the economy which is which is absolutely no go territory right now. So they don't mind making you want a little more available for a first for trade settlement. Other things like that. That's what internationalization is. But the idea of moving even even more than any baby steps towards a reserve currency status. They they don't want that. And then it won't be happening anytime soon. Really appreciate it. Leland Miller of course the CEO of China based Book International. I really appreciate those thoughts as we push forward to that National People's Congress which is starting to kick off in just a few days. We'll be back with our final take next. This is. All right another wild week of course obviously driven by the situation in Ukraine which continues to worsen I guess you can say the war there and of course it's having a lot of ripple effects around markets as sanctions are expanded. And there there's a lot of concerns right now about I guess what the global economy is going to look like when this is all over the inflationary pressures the commodities that we see continuing to have. Well record days in terms of weekly increases but also the geopolitical repercussions. We've just been saying between China and indeed with the relationship with Russia. What I mean is you know this more than anyone the strength of NATO and the EU and countries now applying for EU membership when just a few years ago a lot of us had question maybe the health of the EU and the health of NATO and really coming out in full force. All right. So that's sort of the global picture. We are going to refocus a little bit next week on the domestic picture and take a look at the big reopening here. A lot of cities around the U.S. are going to be reopening on Monday without mask math mandates without vaccine mandates. What does it mean for small businesses. That's going to be the big question and it's going to be a big show for us. What you miss. Well it's over. Sorry. Joe Weisenthal is now going to be called a triple take. One two three. That's where we're going to dive deeply into one big topic and give you three perspectives here on Monday. Got Alyssa Henry over at square going to talk about the activity with small businesses. We're gonna hear from a bank CEO and I.V. mix a big bar and restaurant owner. All that coming up on Monday. This is Bloomberg.

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Bloomberg Markets: What'd You Miss? (03/04/2022)

Caroline Hyde, Romaine Bostick & Taylor Riggs bring the news and analysis you may have missed after the closing bell on Wall Street. Today's show tackles the obstacles facing China's growth Guests Today: Mary Lovely of the Peterson Institute for International Economics, Leland Miller of China Beige Book International (Source: Bloomberg)

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