What Are the Roadblocks to China's Economic Growth?

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Oct. 18 (Bloomberg) -- Bill Rhodes, president and CEO of William Rhodes Global Advisors, discusses the outlook for the Chinese, Japanese and European economies with Adam Johnson on Bloomberg Television's "Bottom Line." (Source: Bloomberg)

From bloomberg had creditors -- headquarters, i am adam johnson in for mark crumpton her.

Jpmorgan has come to an agreement over the sale of mortgage bonds.

A health-care benefit for retirees is facing a shortfall.

We will take you to the show where artwork worth $2 billion is up for grabs.

It could be yours.

To our viewers in the u.s. and those of you joining us from around the world.

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The government goes back to business.

Su keenan on the $4 billion settlement with the u.s. government.

Big after the bell news.

They have an agreement in the settlement talks.

The federal housing agency, this has been ongoing.

The bank agreed to a $4 billion accord.

A possible deal originally asked for six billion and the bank which could be included in a broader deal the bank is seeking.

You are looking the big gainers on the deal.

Google, chipotle, and ge all surging.

Google strong results pushed their stock for the $1000 mark for the first time.

This is off sent by a big frequency of clicks on google ads.

Chipotle says its third-quarter profit rose 15% as more advertising boost traffic at its stores.

That includes a new campaign called skillfully made to help maintain revenue growth.

But some big changes, why don't you tell the viewers the latest?

Dell computer sought his last board meeting today as a public company.

Michael dell and his partners from silver lake plan to install a new slimmed-down board later this month as it becomes a private company.

The transaction will be great for shareholders.

This is a company that carries a lot of risk, and a lot of volatility, and the market going through a lot of turbulence.

A public shareholder standpoint, it is a difficult stock to hold.

Gaining about six percent.

The online retailer's new kindle fire ships today and ubs raising its rating on the stock from neutral to buy saying amazon has a chance to speed up revenue growth.

In a sign that washington is back in business, president obama named a new member of his cabinet.

Jeh johnson has been tapped to be the next homeland security secretary.

Good evening.

According to the president, he is a cool and calm leader.

The president nominated johnsen to head the department of homeland security and called him a key player.

From the moment i took office, he was an absolutely critical member of my national security team and he demonstrated the qualities that will make him a strong secretary of homeland security.

As the top lawyer, johnson worked on the radar killed osama bin laden and took part in the decision to repeal don't ask don't tell.

His private sector resume is important.

He defended citigroup over a $900 million arbitration lane, represented smith barney, defended r.j. reynolds tobacco company in an advertising suit.

He wasn't looking for the opportunity but he could not turn down the president when asked to serve his country.

I love this country.

I care about the safety of our people.

I believe in public service.

I remain loyal to you, mr.


If confirmed, i promise my ability towards the task of safeguarding our national and homeland security.

If confirmed, johnson will find himself in the center of the immigration debate.

His birthday falls on september 11. quite a coincidence for the next homeland security secretary.

I have to ask you about what is happening right now with the health care website.

This thing has been a disaster.

It keeps shutting down.

What can you tell us?

Mixed reviews.

It was meant to allow the uninsured to sign up for coverage and it has been plagued with all kinds of glitches.

One senator says the bugs will be fixed.

He sat down with max baucus for tonight's "political capital." anything this massive will have bugs.

We are seeing the bugs.

That builds confidence that every ounce of energy is being devoted to getting these patches out to fix the bugs.

Let's hope he is right.

The affordable care act requires americans to have health insurance by january 2014. you can catch the rest of the conversation with senator baucus and an interview with the omb director.

Still in washington, call it a battle for the soul of the republican party, the pro- business wing of the gop has been the dominant force for decades.

Big business appears to have finally reached the point where they are not just scratching their heads about what the tea party is all about, they're going to actively trying and if he did.

As many as 250 business groups led by the u.s. chamber of commerce call for action and republican still side -- declined to follow through.

188 house republicans voted against the deal.

If we're going to fight back ,, if we are going to take back control, we have to become more engaged, more active.

The need to shift chatterjee is underlined by the group said join with ted cruz and mike lee in the push to defend the health care law.

They have the infrastructure to put their own candidates in office and other have the financing to back it up.

The senate conservatives fund, freedom works spent more than 40 million for their causes.

The chamber, 32 million.

As we move into the next round of budget and health care battles, the conservative movement has said that they are not going anywhere.

They have benefited from the shutdown side.

Heritage action pulled in $330,000 during a few weeks of this fight.

Back to you.

Thank you.

Let's look at how the business community is saying about the shutdown in washington.

Bill rhodes is a president and ceo of william r rhodes global.

He is author of the book "banker to the world." inc.

You for being here.

Is a pleasure to be here.

This is some kind of budget proposal, how will they do that?

You have ryan and patty murray, the ones that are supposed to be working on this.

I think what will drive them is the subtlest ration second round comes through in january.

Nobody wants to see that implemented, either republicans or democrats.

They will work hard to try to get something.

If and when they do, it will not be any grand bargain, that is for sure.

That is what we need, entitlement reform.

The congressional budget office says social security runs out of money by 2024 and medicare by 2037. everyone seems to acknowledge this is the case.

You have a problem in the sense that the republican party is divided, as you know, in certain areas.

A lot people feel the president needs to exert more leadership.

Hopefully, what we just went through is scaring the people in washington sufficiently to get them down into business because certainly it has created a very bad image of the u.s. abroad.

President obama, 11 hours after he effectively sign this deal, he accused republicans of brinksmanship.

I i don't think anyone would disagree but that is the tack you want to take?

You have to have better communication between the white house and the republicans.

I think that aynor is willing, mcconnell showed he is willing to do something.

-- i think that john boehner is willing, mcconnell showed he is willing to do something.

This leads to the so-called grand bargain.

We certainly do.

We could not get simpson-bowles down.

If we don't get a grand bargain, will we get a piece of a bargain?

Will go back to something like this again.

We will be talking a lot more about that.

The world's second-largest economy is growing and with that comes challenges.

Bill rhodes sits with us for a closer look.

Welcome back.

This is "bottom line" on bloomberg television, and streaming on your tablet, your phone.

We are joined by bill rhodes.

You recently met with the head of the vehicles people's bank of china.

Lex china is in an effort to open up its financial system.

-- china is an effort to open up its financial system.

They will have a meeting to decide what they are going to do over this decade with ceasing paying -- with the new president and premier.

It will be a crucial meeting.

They have already started to work on interest rates on the lending side and they will be working on the other side.

They are going to move into a free-trade zone which will be elaborate.

This is like moving on the rmb.

They have already approved it.

This is going to be very important.

This is like a tectonic shift.

People don't appreciate what a difference this is, china is opening in a way that we did not think was possible.

One of the reasons they are opening is that the model that was announced by the leadership back in 1992 is now sort of somewhat obsolete.

That was a model which was to expand investment, expand exports and they have sort of run the course on that.

They have to now open up and move big time into consumer consumption, domestic consumption.

In other words the transition to an infrastructure or a middle class-driven economy.

The consumption will be key.

They have to work on the social safety net, which needs work to be done.

The average consumer saves less, spends more, and we had this meeting last month.

They mentioned that they will put in deposit insurance which will give more reassurance to the consumer to buy.

This will be the driver in china.

You asked me what are the roadblocks.

The banks lent very heavily to get out of 2008-2009. you still have high credit growth.

One of the things china has to be careful about, the regulators, leadership, is that the the banking system remains safe and sound in the sense that they watch out for the nonperforming loans.

That is the key lease feel that they have to work on.

There is no doubt that this leadership is going to open up the economy, which the last leadership talked about but didn't do.

You have a 7.80 gdp, this is kind of a goldilocks number.

This might be what they want.

They will not be able to do this consistently.

Anything over seven percent is what their goal is.

People asked me, where did this come from.

This was the figure of the great economist and got them into the wto.

He talked about seven percent growth to keep any possible social problems under control.

They create the jobs for the people coming in from western china to the coast.

Somewhere over the next couple of years, somewhere between seven percent and 7.5% growth.

When you look at our economy, the european economy, that rate of growth is pretty good.

Inflation in china?

It has been a problem since as you know.

It is not appear to be too much of a problem.

The area they have to watch is food.

The other is pollution and corruption.

These are two areas where the chinese people have tremendous concerns.

Bo xilai.

An appeal.

I know that you are interested to talk to the central bank governor of japan.

What did he tell you?

What they have a policy which is the policy of economics.

-- they have the policy which is the policy of economics.

It is three arrows.

The first is to have fiscal stimulus, which they have done.

I think they will do more.

The second is the one getting most attention which is monetary giving us.

What will make or break it is structural reform and deregulation.

We have not seen much of that.

They have to move on to that.

Like really making an effort on the transpacific partnership, reforming the labor code, things like that.

If they don't do that, the fiscal and monetary stimulus will not get them out of the problem they have had which is almost two decades of stagnation.

We are running out of time.

Europe, out of the woods, yes or no?

It is not clear.

In the second quarter they showed growth.

Some of these countries appear to be going from a situation where they were in recession to where they will move into stagnation.

You still have major reforms.

The unemployment rates are horrendous in places like spain, greece, portugal.

They are still growing in places like france and italy.

They still have a ways to go.

They still do.

What a pleasure to have you.

It is not often that we get the chance to speak to a man that has spoken to central bankers around the road, all within the past few weeks.

Thank you so much.

Great to be here.

United auto workers has been driving a hard bargain.

We uncover the reason behind it.

? the trust responsible for paying the health care cost of union retirees of chrysler faces a $3 billion unfunded obligation.

This is pushing the company potentially to go public.

20 knots is jamie butters a bloomberg news.

-- joining us is jamie butters of bloomberg news.

Tell us how these are structured in the first place.

This is an unusual situation.

Detroit automakers have been building up these liabilities from contracts that they made in the 50's am a 60's, 80's. they have started to add up on them.

The uaw in their negotiations agreed to take on the liabilities for retirees, the future health-care care costs.

They got a bunch of money, some stocks and things, but mostly cash from the company to try to fund this and set it up so that they could invest it and pay for a retirees health care in the future.

Part of that was to make the automakers healthier.

They could get those liabilities off of their balance sheet.

Even if they got less of a perfect deal, they'll these protected themselves in case there would be a bankruptcy, which of course there was were chrysler and gm.

It puts them in a difficult spot because it is very hard to pay for health care going forward.

There are costs everywhere.

We start off talking about chrysler.

It looks like gm has an even larger shortfall.

Can you tell us about that?

G.m. is so much bigger as a company than chrysler and they have so many more retirees.

They have four times as many people in their system.

That fund, they have about $30 billion worth of assets and a projected $45 billion worth of liabilities.

They are hugely underwater.

That is a real burden for the uaw, this trust that manages health care.

They will have to make up that difference through demanding more money, to pay for the health care, or giving them less benefits.

There is some hope.

If the health care inflation reduces, maybe obamacare can slow things down enough.

Maybe they can even that back out.

They certainly will.

We will see what happens with that chrysler ipo.

Jamie butters joining us from the detroit office.

Thank you for your hard work.

Coming up, we will tell you what failed in the rollout of obamacare.

Have you tried to go on the website?

It has not been working.

It is a real problem.

You are watching "bottom line." we will be right back.

This text has been automatically generated. It may not be 100% accurate.


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