China Drains Cash From Banking Device | Bloomberg: The China Explain 3/15/2024

Half an hour away from the open in HongKong, Shenzhen and Shanghai are watching the China show.I'm Yvonne. Here's our top stories this morning.Asian shares followed declines on Wall Street after the latest U.S.API prices weaken the case for imminent Fed rate cuts.China's one year MLF redo this hour, with most economists expecting a holdeven as the economy remains under pressure and market sentiment fragile.And we're going to hear exclusively from the U.S.ambassador to China, Nicholas Burns, about the bill to ban tick tock andcurbing Beijing's access to high tech.

Chips.The People's Liberation Army will take advantage of that technology tostrengthen itself at the expense of the American military.We're not going to do that. We're not going to compromise onnational security and we're not going to negotiate. Hey, happy Friday.We made it here. Take a look at the price action herethis morning. We continue to see a bit of a downbeatstart story when it comes to risk appetite this morning that high pricesthat we got out of the US certainly sort.

Of solidify the hot CPI print that wegot just a few days ago. So certainly that's what we're seeing alot when it comes to the bond market here today.And we are seeing that sell off across Asia, fixed income when you have the USten year yield basically rising as much as ten basis points, the biggest one daymove in a month. And then we're watching very close tothat yen rise. So we're a bit surprised to hear that.Ringo the wage talks and the final outcome that came out of these springnegotiations here. So very much watching what happens withyen.

We're at one 4846 here right now.So certainly a little bit of weakness, although we did get that slight boostearlier on. Another report about the BOJ may beending negative rates next week as well. So U.S.futures are flat. Asia is a bit on the back foot and thedollar is catching a bit here this morning.And most of the equity markets are slightly in the red.You take a look at how things are looking with the Nasdaq and dragging.That's where we saw quite a bit of downside yesterday.We're down close to 3% in the 80 hours.

And this is how the China futures areset up here. So we're watching, of course, the CSI300. This winning streak that we've seen areset to gain weekly gain of five weeks in a row.That's the longest streak that we've seen actually for some time now.We're watching those horn Hi earnings as well.Take all of that, the stock popping there after hardware sales, thatcertainly did offset some of the weakness or at least what we've beenseeing, the challenges around Apple and iPhone sales.And that's certainly one to watch.

China futures looking like this yearright now. So we'll talk a bit more about thenational team. Seems like they're stepping back a bitrecently, but foreign investors are also coming back in a marginal way as well.So maybe enough of a buffer there to really keep this equity market going.Futures are flat, slightly lower here, I should say, for equity futures here.And we're at 235. And this Chinese ten year, you arewatching that one, your MLF, it looks like they could be on hold.Luber Economics says, hey, they could cut and they should cut here right now.Seven 2039 for your dollar China here.

This morning.This is what the agenda set up here today looking wise.We talked about the mlf a little bit later on.We have data from home prices, new and news coming out at the bottom of thishour. We'll see any signs, if any of any turnaround when it comes to property sales. We're talking about the financingsupport for inflows. We talk a little bit more about thatjust now. Pharma stocks have been pretty hot justgiven some of the push for innovation, the like from policymakers in Beijingand Seattle, earnings coming out.

We've got May, too, as well stillfocusing on the earnings season there. But there you go.There's the hon. Hai shares up some 5% with Taiwanopening here in the last few seconds. Well, okay, let's talk about that one,your I.M.F., That's the next thing to watch here.Now you take a look at where things are, right?So consensus seems to be for a hold. Y Well, of course, we just had thattriple R cut not too long ago. There's also some concerns about thebanks, right? If we see rates heading further, are wegoing to see more of that NIMS.

Compression here?I'm really going to make it difficult for those lenders.So for the most part, some are thinking stand pat at 2.5%.This is what the breakdown is in terms of what people are expecting here.A hole that seems to be taking the majority of the votes here right now.But bloomberg economics is still one of the four that is forecasting for a tenbasis point cut. Why?They say, well, yes, you think about all those concerns about banks, therenminbi, the like. Yes, that's valid.But they believe with the boost that we.

Got from that triple, our cut certainlymeans they need to continue to increase that impact with maybe a MLF cut heretoday and lead banks to extend more and cheaper credit.It's interesting, they said right now their priority should be about fightingdeflation more than anything. So watch out for that one.Obviously, we're still focusing on geopolitics here.As we wrap up this week, U.S. Democratic and Republican senators areresisting calls to fast track the passage of a bill that would forceTiktok's Chinese owner to sell the app. And the bill passed by the House thisweek demands Bytedance divest within six.

Months or shut down the platform.Democratic Senator Richard Blumenthal says the deadline is too short andRepublican Ted Cruz wants a review that could tie it up for months.So this could be a lengthy process here. However, the Senate IntelligenceCommittee chair told us he supports expediting the bill.They're collecting enormous amount of personal data about Americans.The genius of tick tock, it kind of knows what you like even before you mayknow, and that kind of personal data. 170 million Americans were on 90 minutesa day. If you don't think that is a securityrisk, but potentially you could be.

Blackmailed at some future timeby agents of the Chinese government, then I think you don't understand theunfortunate real world that we live in. Meanwhile, the top U.S.diplomat to China has hit out against Beijing's objections to a possibleTikTok ban. Ambassador Nicholas Burns spokeexclusively with our chief North Asia correspondent, Stephen Engle.We've heard a number of complaints from the government here in Beijing this weekabout the American debate on tick tock. I find it supremely ironic becausegovernment officials here are using the platform to criticize the United States.They don't give their own citizens the.

Right to use X, to use Instagram, to useFacebook to have access of Google. And so it is ironic, indeed, that thegovernment here is complaining about a process when they shut down access for1.4 billion Chinese to all these platforms.Every country has a duty and responsibility to protect its nationalsecurity. And what the president has done over thelast year and a half is to make it impossible for sensitive Americantechnology, advanced semiconductors for A.I.purposes, to be sold to China because we know it will happen.We know that with a play, the People's.

Liberation Army will take advantage ofthat technology to strengthen itself at the expense of the American military.We're not going to do that. We're not going to compromise onnational security and we're not going to negotiate.And you can bet that the government here in Beijing is taking similar measures.They have not allowed for most of the last 20 years the export of coresensitive national security, applied Chinese technology to the United States.And so, you know, every every government and certainly our government has a rightto take these decisive steps. And that's what we're doing.I also talk to a lot of businesses, and.

We all know about the FDI numbers,foreign direct investment down to the lowest gain since 1993.There is hesitation not only because of the economy is weak, but also because ofthe myriad of different national security and the opacity of such policy,especially coming out of the National People's Congress.We didn't get a lot of clarity on policy.We do know and you were in that 60 Minutes interview where you did talkabout US companies such as Bain and Company Mintz and others who have seenraids and they've seen arrests of U.S. citizens.Can you can you elaborate on the threat.

And the pall that is being cast over theinvestment community and doing business, Americans doing business in China atthis time? I think this is a question central tothe US-China relationship for the next year and the year beyond.We have a $575 billion, two way trade relationship.China is the third largest trade partner of the United States.There are thousands of American companies doing business here.Here's the problem. They're hearing conflicting signals.Some senior Chinese government officials say private sector investment is welcomein China.

Your investment will be protected.But then these companies are also hearing a different message.Whether it's the raids against American companies of last March and April,whether it is the opacity of the counter-espionage law where espionage isdefined in such a general way that normal activities in any other countryof the world, the collection of data could be construed as espionage.And so we see American firms backing away, or at least being very cautiousabout investing a lot of money here because they're not sure where the linesare. And I think the voices that they'rehearing from the government here in.

China about national security, they'rethe strongest and loudest voices right now.U.S. ambassador to China, Nicholas Burnsthere, speaking with our chief North Asia correspondent, Stephen Engle.And we are going to be hearing more from that extensive interview with Stevecoming up throughout the next 2 hours or so.Meanwhile, we're hearing a lot more talk when it comes to tick tock.Who potentially could buy if, in fact, this ban goes through?Stephen Manoogian says he spoke to the potential co-investors about buying thecompany from its Chinese parent company.

The former U.S.Treasury secretary made the comment to CNBC but declined to give specifics.But Asian runs a private investment firm that counts Saudi Arabia among itsbackers. And Bloomberg intelligence estimatestiktok's U.S. business would be worth up to $40billion. I think the legislation should pass andI think it should be sold. I understand that technology, it's agreat business and I'm going to put together a group to buy.Tick tock. You're trying to buy tick tock.I am.

Because they should be owned by us.US businesses. There is no way that the Chinese wouldever let a US company on something like this in China.All right. So watch that space very closely, ofcourse, of what goes on in the Senate. But certainly we're watching some othertech related stocks here this morning, Samsung.That stock certainly is seeing quite a bit of movement here.We have a Bloomberg scoop coming out that just came out saying that the USplans to award more than $6 billion to Samsung Electronics and really helpingthe chip maker expand beyond just that.

Project in Texas that has already beenannounced. We are seeing the stock down some 1%.TSMC watching these chip plays very closely behind high.That's the outperformer among that pack here today on the back of those earningsat 8%. Pop here just about 10 minutes into thesession or so. All right.We'll be taking a deep dive, of course, into not just tech, but also US-Chinarelations. Later on in our show, we have the EastChina Normal University and why they think a tech talk ban unrealistic,according to Joseph Gregory Mahoney.

He joins us a little bit later on.But first, good to hear from Tsinghua University as we look ahead to thePboc's NLF decision do in the next few minutes.Joining joining us next. Okay.Now the opens of trade in Shanghai, Shenzhen and Hong Kong.Looks like right now sentiment not too great when it comes to greater thisregion but if you do futures yeah. Slightly negative on this gloomy HongKong Friday morning this is the China show.Good morning. All right, Here's your step up to theChina Open here today.

Looks like we're seeing some downsidewhen it comes to A50. Futures down about a fifth of 1% for5/10 of 1%, I should say. But really, we are on track for a fifthstraight week of gains when it comes to onshore equities.You talked about foreign inflows are coming back set to be a second straightmonth of really inflows and southbound continues to be quite strong as well.720 for your dollar China here this morning.We're of course, counting down just about 6 minutes away from that one yearMLF rate. Let's bring in our next guest, ProfessorZhou name deputy dean at the National.

Institute of Financial Research atTsinghua University. How do you how do you see monetarypolicy playing out in next few months or so?Of course, obviously we had that ambitious growth target of 5% announcedat NBC. Is monetary going to be key todelivering that, you think? JourneyI think is definitely an important ingredient of the all the policy boxesthat we are going to have coming out of the Chinese government.But I don't think that monetary policy will be taking the front seat in settingthe pace for either the economic growth.

Or for helping with the US stabilizingstabilization of the financial sector. I think the in the RC apparently istaking more and more of the the dominant role in setting industrial policy andsetting the major tomes of economic policies.Is this. I was going to ask you about the balancesheet of the central bank. They had a ¥5 trillion of assetsrecently, which is the quickest buildup we've seen in a decade.How much do you think this sort of expansion could actually lift growth inChina? It certainly helps them.I think just like what the western.

Central banks have been doing overCovid, I think in accommodating or more easing attitudes towards the monetarypolicy is not only providing the much needed liquidity to the economy, butalso improving the expectation of the overall environment.I think that one thing we have to keep in mind is I think the monetarymultiply, so to speak. So how much of the money that thecentral bank has put into the system is really going to generate additionaldemand or additional usage of its office space?So I think in the past real estate has been a very important multiplier in thatdevelopers will get the money and to.

Take the low by the land and they usethe land as a collateral and to make another round of investment.But with the weakening of the real estate sector or actually the the prettymuch inactivity in the real estate sector.I mean, I think that one has to discount it to a certain extent.How much that if I truly will eventually be helpful in generating the totaldemand or aggregate demand, some people will look at a number likethat and they're saying, oh, this is looks like a Western style QE.Can we call it that? I think that the people would rather younot call it that.

But I think in essence, we really do nothave a lot of new ideas of modern monetary theory or the monetary theoryin general. So in a way, when you are facing aslowdown in the economy, more accommodative monetary policy isnecessary. So whether it is taking the form ofinterest rate cuts or in the form of just generating a bigger balance sheet,I think that is just the choice of different policy possibilities in thetoolbox. And you mentioned about the propertysector woes and the like. I mean, how important do you thinkconsumption is going to be for the.

Economy this year versus previous years?And you know what? And what are your expectations on thelift that consumption can have on the economy for 2024?Well, I think it's critical. I have been saying this for a long time.I think consumption will have to be the only driving force to lift China fromthe high middle income class country to a high income country.So in a way that I think a consumption is really not only important, but alsoprobably the only driving force for China going in the coming decades.And this year, I think I mean, there are a couple of writers flaws in there, someuncertainties for the brightest, because.

We can see that the foot traffic isreally improving. So I think that is showing increasingeconomic activities. And also we're seeing that of things arestabilizing and people are having far more visibility with that.Well, what is the new norm going to look like?So I think that's going to be helpful somewhat.The downside is I think we're also seeing that if people are travellingmore, but then they're actually per capital or per trip spending less.So I think this is somewhat consistent with my observation.I think the younger generation, like the.

Previous generation who made a certainkind of stimulation to consume, they're already quite active with theirconsumption and the fact that we're seeing they're slowing down theirconsumption or not growing their consumption is larger because I thinkthey're really reaching the point of their income or disposable income.So I think that in the end, the growth in disposable income is eventually goingto be the determining factor or how consumption is going to shape up in thecoming years. Yeah, this is a good point that I think,you know, the young are still quite active when it comes to spending, butwhy do you think household savings are.

So sticky?That is it just a concept of of times? People are frugal in some waysand is cash handouts and some have really debated about is that going to bethe answer to really getting people to spend again?I do a lot of research in behavioral finance in which we really studypeople's fear and greed and I think is really the fear.I mean, first of all, the fear from Micklethwait or the author myself, thatand then the fear of the uncertainty in the economic environment.And I think in the previous year or so, the fear in the falling housing pricesand the falling stock prices, which.

Really don't make the households wonderwhere can they put their money without having to suffer a loss as they arewilling to put more and more money into the safest option that they can thinkof, which is the savings account? Okay,Good point there. I'm just wondering in terms of what weheard from the NPC, there's been a big push when it comes to industrial policy,right? New productive forces and the like.I'm just wondering, just given what we've been seeing when hold on a second.We have some breaking news, Judy. We are watching that policy.I want you.

I'm afraid so.Okay. Unchanged a two and a half percent.So this is basically what people were expecting.But they are withdrawing a net 94 billion renminbi through that mess.All right, let's move on. I'm going to get to Jenny a little bitmore on this. While we were just talking about, whichis about new productive forces industrial policy.It's interesting, though, that we continue to hear this sort of aggressivepush towards high tech manufacturing innovation, the like.But we're facing quite a bit of.

Overcapacity.Right. And tensions with the US, with Europe aswell. Do you do you think that policymakersneed to sort of adjust their industrial policy to address some of these concernsout there? Well, I think instead of adjusting, Ithink the policymakers are actually doubling down on the industrial policyin a way that, well, we're we're seeing some kind of industrial policy comingout of the US or Europe. So that's giving some confidence orjustification for China is thinking even harder on how to utilise that industrialpolicy to better itself in the.

Competition in key technologies.So I think that's probably one key message coming out of the the twosessions this year about I think China is actually continuing, if notincreasing its emphasis on the industrial policy and the so-called anew quality product. Of course it's.Yeah. I'm just wondering terms of what we justheard from on the left. Right.So it's unchanged. They refrain from a net cash injectionfor the first time since November 2022. What do you think are some of thereasons driving this?.

Is there really a concern about thecurrency in some ways, as well as what we've been seeing when it comes to banksand their margins, if we continue to see more rate cuts in the pipeline?Ah, those are big factors that the PBOC and policymakers are really thinkingabout now. Yeah, I think I've been commenting onthis for for some time, and I think that the public is somewhat in a delicatebalance. On one hand, it needs to be morecombative, whereas the economy, but on the other hand it has to be verythoughtful with how the exchange rate goes.I think it's giving the PBOC some.

Breathing room or some sweet spot in thenext few months with the Fed's plan to cut interest rates.I think that's a that's going to give China's central bank of greater room tomaneuver in the next few months. So I think it's going to be more activein playing this balancing game between growth and stabilization of the R&Dexchange rate Judy.Have a great weekend. Thanks so much for joining us.Deputy dean of National Institute of Financial Research at TsinghuaUniversity. I just want to recap course at PBOC.See, they're keeping that one year.

I.M.F.interest rate unchanged at two and a half percent.Also refraining from that net cash injection as well.We'll see how that all plays out. But yes, largely speaking, that wasexpected here when it comes to no change to that.MLF Here in China, we are seeing some strength, though, slightly after thatannouncement. Seven 2021 so reversing some the initiallosses there when it comes to the currency, this is what the free marketis set up looking like here today. So of course, we're still on bull marketterritory, own bull market watch.

When it comes to the shares.We didn't quite get there this week, but we're still watching the tech space veryclosely as well. Hang Seng, though, pre-market down 1.2%.This is Bloomberg. All right.Your free market is looking a little better on the gloomy side here today.Tech led HS Tech were down about 2%. But obviously lots of gains are reallydriven by the tech space here this week. Shares also down about 1% in terms whatwe're tracking, of course, is the onshore market seems to be looking alittle bit better in terms of prospects. Right.We're talking about a five week winning.

Streak that we are set to hit forShanghai, and that's the longest streak we've seen since July 2022.What's really driving into this trade? Well, you know, is it the national teamnecessarily is one sort of a question. If you take a look how the inflows intoETFs has been recently, we actually have seen a bit of a drop in terms of slowingsort of ETF inflows are maybe signs of the state led funds stepping back.Yeah, the open coming up next. This is Bloomberg. Welcome back.Your watching the China show. We're taking down to the open of marketshere, the free market.

Hong Kong not looking too good hereright now. We're down about 1.2%.Obviously, that U.S. spy report seems to be rolling a littlebit of the risk assets this morning, just given what we saw with that tenbasis point move to the upside when it comes the ten year yield in the U.S.So stocks a little bit on the back foot here today.We're watching very closely new home prices coming out any second now.BELL Yeah, and there's also that decision to keep the key rate in Chinaon hold. And that is going to be something reallydisappointing investors here, when you.

Take a look at it in aggregate as well,draining that net liquidity from the system.This is about drip feed stimulus and that's what investors really have notbeen wanting to see here. But you've got the markets that aregoing to be starting to trade here, Hong Kong, mainland China, in just a fewmoments here. And it's been said, setting up for a dayof weakness. So at the start here, you just keepingan eye on those bank stocks in particular.Not really seeing too much reaction coming so far, but the picture is to thedownside for the season nine 300.

As I say, they're holding that one year.MLF Right. At 2.5%.It was a decision that was in line with what economists had been expecting, butas well refraining or draining that liquidity from the system there, around$13 billion, that's refraining for the first time that we've seen sinceNovember 2022. As I said, it is that drip feed stylethat's coming through. The reaction is what we are just seeing.Again, not too much so far in the currency so far, but just a little bitof weakness for that. You just under that 7.2 mark.Let's change on.

Take a look.Broader markets, what we've got in is set up for today because yes as you saidof on it is also that Wall Street story that's playing into it because we hadstocks slipping overnight. There was that PBI that came out.We also had more data around jobs numbers or the labor market pointing tothat resilience there. It does tell us that the Fed really canafford to hold at this point in time. What else is playing into the storytoday? You just seen those new home prices.Again, they're falling for another month, down around 0.4%.So you can see that's really going to be.

Something that plays into the iron orestory today. If you change on, you can see that dailyon contract, they're down around 6/10 of a percent.But on the Singapore contract, you are heading back down to that $100 a tonmark mining stocks. So it's pretty mixed in the picturetoday. But broadly actually materials have beenhas been dragging Asia stocks to the downside.Let's change on just take a look at how those property names are faring inrelation to those home sales prices. And again, you are just seeing some nottrading just yet, 112 note as well.

Given those woes that are continuing toextend, you seeing them really pulling back from February land sales as well.But even that's a little bit more context on those numbers.Yeah, you know, if you take a look, I mean, it's a 0.36% drop month on month,right? It's it's I believe it's a ninthstraight month where we actually have seen contraction when it comes to newhome prices. But that drop is slower than January.But keep in mind, back in January, that drop was -0.37%.So we're only talking about a basis point or two in terms of differencehere.

So it seems like it remains the samesort of picture used. Home prices, though, a bit of a steeperdrop, 0.62% month on month, but that drop also was slower than the previousmonth as well. So as you say, you know, China Wonka isthe one to watch, is the bellwether here right now.Those contracted sales were down, what, more than 50%.So I don't think it really kind of shows a much change really in terms ofphysical sales in this property market here right now.Let's bring in more on the market action that's going on here in China and bringin our Asia equities reporter Charlotte.

Yang.You know, despite this data as bad, M.F. unchanged certainly could lead to somedisappointment, but I think it was largely expected.You are seeing broadly speaking, sentiment is improving in China in someways. I think broadly speaking, definitely,especially if we compare it was the pessimism in January and also peoplelike not knowing what to do in February. Right now we are seeing no response, itlooks like is heading to the second consecutive inflows.And but what we see is actually a pretty big divide between those who are stillvery cautious, saying this is just like.

A clear position opportunity, given howcheap Chinese bourses, like a small group of investors who are getting moreoptimistic about this new vision, that there will be more policies coming outto achieve the ambitious growth target. So I think what remains to be focus isdefinitely, well, how high inflation will do after that.You know, news we had and then it was property.That's still the big problem everyone has.Yeah we're tracking some of these southbound flows have been strong.It's like 20 straight days where mainly investors have bought in northbound.Also, as you mentioned, is there a need.

For the national team to still supportthis mark in a big way or is it, you know, time for them to kind of move onthe sidelines a bit? Yes.So this really this really interesting piece of research coming for offramp onthe intelligence, because everybody has been wondering, you know, how much hasthe national team buying how this spate of them buying so.Well, it's it's hard to say how much they've bought so that.But for the broader market, we are seeing that the buying is actually beingslowing. They've bought $50 billion over the pastfive months and they've been.

Concentrated in late January andFebruary. What market was at this panic sellingmoment? But right now that buying has beenslowing since the last two days. This is the first few days of last week.So at the moment, it looks like they are standing on the sideline just monitoringhow market will go from here. Okay.What else are you watching out for next week?We've got big data dump out of China, the like.What's your team watching closely. Yeah I think is definitely was not howretail sales is faring and also the.

Industrial prices and and whether thatand also whether that earnings you know by spies we're seeing with somecompanies can continue into next week because you know the actually the bulkof the earnings will only come later the last few weeks of this month.So still worth watching. Yeah.And as you say, positive surprises have led to quite rewarding results when itcomes to stock reaction as well. Charlotte, thank you.Our Asia equities reporter Charlotte Yang there and what's really movingthese markets here this morning. We've got plenty more ahead.This is bloomberg.

All right.We're checking Nippon Steel here this morning.We're just hearing of when it comes to Nippon Steel, this stock not moving awhole lot, but there were some statements coming through from thecompany when it grounds to talking about their proposed acquisition of U.S.Steel. And they're saying basically right now,determined to see through this transaction.They're progressing with the regulatory review on U.S.Steel and they will commit an additional $1.4 billion in investment after thisdeal has been made.

So no layoffs, plant closures untilSeptember 2026. That's according to Nippon Steel herethis morning. But certainly they continue to defendthis deal after we heard from President Joe Biden earlier saying that thecompanies should retain American ownership.So that leads us to more, of course, the geopolitics and what we've been seeingin our big interview of the day. The U.S.ambassador to China, Nicholas Burns, says channels of communication betweenthe two nations militaries are starting to open up.Here's more from our exclusive interview.

As the ambassador weighs in on U.S.alliances in the Asia Pacific and Beijing's increased military spending.The two presidents, President Biden and President Xi, agreed in San Franciscothat we would begin again serious high level communication between ourmilitaries. This is has it happened?It's beginning to happen. And it's critical because our twomilitaries are operating in very close proximity to each other in the Spratlysand Paracels, and the Senkaku is in the Taiwan Strait.And so, Chairman, our new chairman of the Joint Chiefs, Chairman Brown, hashad a discussion with his Chinese.

Counterpart.And we hope very much that Secretary Austin will be able to talk to hiscounterpart in the in the coming weeks or months.And and then we hope there will be even conversations at a more tactical levelbetween our militaries. This is common sense because you want todrive down the possibility of any kind of accident or misunderstanding betweenour air forces or our navies. We do know at the National People'sCongress, China increased the military budget by 7.2%, the biggest increase infive years. First of all, are you concerned by thator how should we read that?.

Well, we're concerned about is the factthat the PLA is not transparent about how the money is being spent.You know, in the issue of China's nuclear weapons buildup, they're nottransparent with the rest of the world, and that's a problem.And, of course, you know, the United States has been a principal militaryactor in the Indo-Pacific since the close of the Second World War.What we've been doing and President Biden has had a lot of success in this,is to build up our alliances with Japan, the Republic of Korea, the Philippines,Thailand, Australia. We've created our case and of course wehave the quad with India, all designed.

To protect the democratic countries ofthis region and protect international law in places like the Taiwan Strait andthe South China Sea. We're also hearing that the Bidenadministration wants to and is exerting pressure on allies like the Netherlands,like Japan, like Germany, like South Korea, to further the curbs of otherproducts into China. How does that not expand that pressureand actually bifurcate the relationship further?We've been very clear that we adhere to a small yard high fence scenario,meaning these are targeted actions that that regulates investment by Americancompanies in the air sector here.

These are common sense actions by theUnited States. Any American government would have totake this action, given the competition we have underway in the military spherebetween the People's Liberation Army and the United States.And I don't think there's an American alive who would say that we should selladvanced technology to the play. So the president's actually in thenational defense here. And as I say, we're not going tonegotiate or compromise on this. And these are the actions that agovernment has to take to protect in the 21st century.In an age when technology is at the.

Heart of international politics, some ofit has to be regulated. That was U.S.Ambassador to China, Nicholas Burns there with our chief North Asiacorrespondent Stephen Engle in Beijing. Let's bring in Joseph Gregory Mahoney,now, a professor of politics and international relations at East ChinaNormal University. Professor, it's really great to haveyou. Let's get your take on this.This Burns interview where he's saying, look, at least military communication isopening up. But when it comes to curbs on technologyand higher manufacturing, those things.

Are still very much in place.What does it tell you about the relationship between U.S.and China now? Well, you know, one of the concerns thatwe have, of course, is that relations or rather communications were interrupteddue to the US intervening in Taiwan affairs.And, you know, of course, they took their own dark track during the Trumpadministration and then went further off track with Biden.One of the things that China was concerned about is that the UnitedStates was using these high level military communications in order to giveit more cover, to push more assets,.

Military assets into this region.And China was thinking, okay, well, why would we want to talk with you so we canbetter coordinate you moving more assets in.And so, you know, but nevertheless, this is what they did in San Francisco.They agreed to this. And then, of course, just in the pastcouple of weeks, we've seen reports that now the United States has deployedspecial forces on the front lines in Taiwan.So I think this was always a concern and it shows it demonstrates the generaltrend. As for the chips restrictions and whatPresident Xi calls a technology blockade.

That aims to encircle and suppressChina, clearly this is something the United States is completely committed toand it will continue to advance. Do you think they'll commit to a ticktock ban? I mean, how realistic is it, do youthink? Well, yeah.So it's sort of funny because I saw the Burns interview and one of the things hesaid is that it's ironic that China wouldraise this issue when China blocks American companies, when America whenChina makes companies like Google and other firms illegal in China.In fact, what's ironic is that just.

Before the Super Bowl, the Bidencampaign launched its own TikTok account to try to appeal to young Americanvoters precisely the young people it aims to protect, it says, from Chineseinfluence or spying. At the same time, what we see is that,in fact, it's not illegal to use Twitter or X or Facebook or any of theseproducts in China. Rather, there is a law that says thecompanies have to abide by Chinese national security laws.Now, some technology firms choose to do that.Apple, for example, located servers in China.Tesla has accommodated the law.

Therefore, Tesla does a thrivingbusiness here, as does Microsoft. So, you know, it's really not a matterof targeting specific American companies or trying to force them to change orsell their products to non American firms.It's really about the US Congress targeting a Chinese firm, veryspecifically a firm that has been abiding by US laws.So how do you think China is looking at this this tick tock debate and this billthat's being circle around Congress right now?I'm just wondering, you know, is this something that could spark someretaliation from from Beijing?.

And what form you think?Well, the first problem, of course, is whether or not this ban will actually beput in place. It'll have to pass the Senate and thenbe signed by the president. It could be challenged in court.And then then it comes to the question of enforcement is, is the United Statesgoing to build something like its own great firewall?Is it going to criminalize Americans using Tik Tok?What how do you enforce this sort of ban?And it's again, sort of funny because it's precisely the sort of thing thatthe United States has said that it.

Doesn't want to do, that it doesn't dothat, that it's now is sort of trying to say, well, we have to emulate China onthis point because China is doing the same effect.China is doing something different. But nevertheless, it's kind of aquestionable and dark path as to whether or not it will be a ban and what theconsequences are. I'm not sure.But certainly China does operate on the principle of reciprocity and we couldsee American firms being targeted specifically.And I think firms like Apple, Tesla, GM and others should be worried at thispoint.

And I guess people are also talkingabout what this U.S. election will mean for China, Right.If it were to be Trump 2.0 or another Biden term, I'm just wondering, it seemslike both are sort of a lose lose situation for Beijing.Is that the right way to look at it? You know, I think a lot of Americansshare that opinion, too, that it's a lose lose situation for for America.But nevertheless, the the consensus that seems to be emerging inChina is that Trump is as a as a bigger disrupter and that he will bring moreinstability faster. But that instability would affect bothChina and the United States, and.

Therefore, that would be something toconsider now. Beijing hates instability, so there'sthe costs there. But at the same time, Biden seems tohave a more strategic bent. He's much better at building alliances.And so over the long term, Biden is also a danger.So it's really a matter of picking your poison.But in the case of China, of course, they don't get to pick.That's up to the American citizens. You mentioned if it's Trump 2.0, thatthere is, you know, a sense that he might resist his impulses that he'sforced out of.

Right.Tariffs and increase of that. We saw that with the Ticktalk ban.And he's kind of backing out from his decision or from his sort of what hestarted was this ban went back in 2020. So is there something that people arekind of underestimating with Trump 2.0? Well, you know, again, it's sort ofdifficult because we see a lot of comments from Trump and that are notsimply directed at China, but also other countries.For example, what he said about Iran, where he would potentially advance moreassassinations, more sanctions, maybe even direct attacks.This sort of gives us some clues into.

What his broader foreign policy mightbe. And I think certainly there have beensome questions about how he might treat China significantly increasing tariffsor not refusing to defend Taiwan if attacked or not.So, you know, these are these are things that are in themselves are alreadycreating instability because people don't know what to expect going forward.If Trump is re-elected, I was going to ask you about, you know,what you initially said about the military sort of actions that we'reseeing, particularly when it comes to the South China Sea recently and theclashes that we've seen with the.

Philippines, for example.And it seems like the strategy from from the Philippines now is more of sort oflike a, you know, publishing out. Right.What goes on. Is that strategy the right approach anddoes it work in terms of reining in China when it comes to, you know,asserting these historical claims on the South China Sea?Do you. Well, I think what we've seen with thenew presidential administration in Philippines is the Philippines tiltingmore in the direction of the United States.We've seen the expanded presence of U.S.

Forces on Philippine military bases.So it seems that the Philippines has made a choice and has chose a side atthis point, although, of course, it still has substantial economic relationswith China. I think the other the bigger question iswhy is China asserting itself in the South China Sea?And this is because, as Burns said in his interview, the U.S.has been operating here since the end of World War Two quite extensively in theSouth China Sea, has long been the soft underbelly of Chinese national security.And we know from some reports that there's quite a bit going on underneaththe water.

For example, American submarines runninginto seamounts and all sorts of other things that have directly threatenedChina's security. So I don't think China is assertingitself in the South China Sea in order to challenge Philippine sovereignty, butrather to protect itself. And the Philippines are simply acasualty of this. Unfortunately, the Philippines arefollowing the U.S. down this path, and it will continue tobe a flashpoint. Joseph, great to have you, Joseph.Gregory Mahoney there, professor of politics and international relations atEast China Normal University.

Some other geopolitical stories thatwe're following for you today. The leader of Yemen's Houthi rebels saysthat the group will expand their anti ship attacks to Israel, link ships inthe Indian Ocean. He says the Houthis carried out threeattacks in the Indian Ocean this week and won't stop until the war in Gazaends. A ship broker said this week that seatraffic using the Cape of Good Hope route is up 85% since December due toHouthi attacks in the Red Sea. The Biden administration has sanctionedtwo Israeli settlements in the West Bank and called on Israel to do more to endviolence against Palestinians there.

It's the second time since February theadministration has imposed sanctions on Israeli settlers.Separately, U.S. Senate Majority Leader Chuck Schumer hasbroken with official policy and calling for Israel to hold new elections.India's elections watchdog says Prime Minister Modi's BJP received nearly halfof political donations made through electoral bonds over the past fiveyears. The BJP took in more than $730 millionworth, compared with about 170 million for the main opposition Congress party.The government introduced the bonds in 2018, but last month the Supreme Courtstruck them down as arbitrary and.

Unconstitutional without putting morehead. This is Bloomberg. All right.Just want to recap what we just saw in the last few minutes or so that whileyou I.M.F. unchanged at 2.5%, but also withdrawingthat net injection, so a net drain of $94 billion, which is what we haven'tseen for some time here. So it was a hold.Plus, they're not injecting cash into the system.What does that tell you about monetary policy moving forward?New home prices as well as U.S.

Home prices.Those are interaction there. But the drop was slower than what we sawin the previous month there. So maybe but still, we're still talkingabout, I think six or eight or nine months, I should say, of contractionwhen it comes to new home prices. Also, that fix much stronger one heretoday. We're talking about more than 1000 pips,stronger than what estimates were this morning.Pre-market action, pre-market hold on. Market is doing this right now.We're seeing 1% losses for Hang Seng as well as MSCI China, CSI 300.We're seeing marginal losses, though.

It looks like we're still on track for afifth week of gains for Shanghai stocks. And certainly we've been talking about,you know, can these sort of foreign inflows back into this market offset thenational team sort of inflows into ETFs, which have been waning of late here aswell as tech, though? That's what we're seeing most of thedownside here today. We're talking about copper prices.Iron ore continues that decline. Of course, we're watching thoseSingapore futures and whether we're actually getting closer to 100 or 110.Now these days, Shanghai crude, though, is seeing a bit of a pop here thismorning and it's is not doing a whole.

Lot.We're down one basis points for your 30 year yield.So it seems like the risk is tilted more towards bonds here today over equities.Hon Hai, though, this is the outperformer in Taiwan that we'rewatching very, very closely on the back of those earnings.So, yes, they did talk about the weakness when it comes to iPhone salesand the like, but I certainly did drive most of those results and really helpedin terms of being a buffer when it comes to, of course, those smartphone sales.So certainly Hon Hai is one of the key outperformers here in the Asia Pacific.You take a look at how Asia's tech is.

Looking here right now, mostly lowerhere right now with Ping on Health Canada, the international, the onlyexceptions there. But our exclusive interview with SuntoryCEO coming up as well as we count down to those rego wage talks. Welcome back to the China show, thesecond hour. And here's a pulse check on what the CSI300 is doing just a half hour into the session here, seeing some downside.Hong Kong was feeling a little bit more. And was that hit from the rising yieldsthat we saw across Treasuries and here in the region?Bell has an update for us.

Hey, Bell.Yeah, it's all about those moves that we're seeing in the bond space inparticular because we had Treasury yields, for instance, tracking highovernight, that ten year hitting around that 4.3% mark and today in the sessionas well. Are you seeing that rise coming through?So we had U.S. inflation data API numbers coming out.We also had more signals of strength in the labor market.And so that just tells you the Fed's got time here going in its favor and it canactually afford to wait to cut rates. And so that's leading to those moves.You say dollar strength off the bat,.

Currency weakness coming through.Got the Korean one leading the drop that you can see down 8/10 of a percent closecurrency, of course. So it does really tend to have thosemore outsized reactions so far in the Asian session.What else are tracking is that broad weakness we're seeing in equities acrossthe picture today? And there's a couple of different themesthat are playing into that. But I want to get into the China story abit more detail. Let's change on and take a look at how atrading so far 30 minutes into the session.And you do have that, I'm going to say.

Disappointment.It's a sense of disappointment. Traders always want to see more when itcomes to Chinese stimulus. And we just had the PBOC holding thatkey rate steady at 2.5%. Yes, it was a decision that was expectedby by most in our survey. But still, it's that drip feed approachthat we're seeing to stimulus. Again, that cash drain coming away fromthe banking system to trying to control liquidity as well.So you do see, again, as I said, weakness in Chinese equities, theChinese yuan holding fairly steady at this point in time, but concerns as wellbuilding or continuing around the health.

Of China's economy very much reflectedin what we see in iron ore prices. You've got the contract in Singaporeslipping back down to that $100 mark. Iron ore as well under pressure on theDalian contract. But let's change on ag ain.That story of the materials complex is really feeding into that dynamics thatwe're seeing so far in the Asian trading session.Taking a look at the on that function for the broader benchmark here, thematerials standing out, the clear laggard so far in the session.What is moving to the outside, a little bit of positivity coming through.We can end on that note.

Energy very much in focus because we hadthe IEA overnight. If you just change on now flipping itsforecast into deficit, it was earlier seeing a surplus through the course ofthis year. So there are those things about thatshorter term question of of oil supply is looking constrained.You're seeing WTI pushing about that key psychological $80 a barrel level.And again, those energy supplies moving to the upside, of course, Iran, it'salways that question how long do you see that in place?When do those concerns around China's demand really start to take that morecenter state again?.

Yeah, I mean, you look at iron ore andwhat's been doing right. We're seeing one of the worst weeks insome time here when it comes to iron ore, metal prices as well.Well, thank you for that update, Kara. We'll have plenty more coming up withBill on what's really driving the price action here this morning.Let's bring in our Bloomberg. My strategist, Mary Nikola, now joiningus out of Singapore. Mary, we'll start on China.I mean, it seems like this was a disappointment, the fact that there wasno cut to this MLF They're draining cash also out of the system in some ways.Is that how you read it?.

Yeah, there is a huge aspect in the factthat, you know, equity markets won't be happy with thisand the fact that any opportunity that you get to ease, they're not taking thatchance. And if you look at some of the data, thedata is still coming out weak. So there's no fundamental support thatdrives equities higher. So what you really need is more supportfrom the government. And obviously we're not seeing that whenthe MLF rate stays steady. And of course some of the data comes ina lot weaker and just it just says the same narrative about China being on veryshaky grounds.

And, you know, it brings us to thediscussion of the Fed as well. Right.And, you know, PPE, prices that seem to be leading to this sell off that we'reseeing across Treasuries once again. And perhaps that's why we're seeing thisthe Asia-Pacific region really reacted negatively to that.It brings us to our question of the day. You know, if we actually see any changeof the dots next week from the Fed, from 3 to 2, what would that mean formarkets? Yeah, it means more dollar strength, infact. So if we're going to start seeinganother repricing, we've already had a.

Sharp repricing from, you know, sevencuts by the market. Now we're about three.So pretty much in line with the Fed. But then, of course, you get down to twothat puts a puts up another a little for the dollar as well.But then at the same time, you have to keep in mind how Powell is going topitch this. So if let's say we move the parts from 3to 2, how does Powell accompany the statement?If he accompanies it with more easing, then the impact on the dollar willlikely be limited. However, if he says highlights concernsabout inflation, that will be read as a.

Little a lot more hawkish.Yeah, I mean, there's so much going on next week Mary, whether it's the becausehey it's the Fed or we were asking our viewers what matters more which whichcentral bank's going to matter more next week you think.Yeah. It's interesting because there's 13central bank meetings next week, but only two really matter.So it's the BOJ and the Fed at least four markets, right?So if we look at how the BOJ is going to react, does it actually exit negativeinterest rate policy? Does it get rid of y'see see as well?So that really will depend on what we.

Get from the Ringo wage negotiations.That could be the key tipping point that brings the BOJ over the line and to dosomething on the Tuesday. But then in the broader context then youalso have the Fed and the Fed potentially shifting to its plots from 3to 2, obviously creating a lot of angst in the markets.However we position it, it's just going to create more volatility, more angst.But in the meantime, the dollar is likely to remain supported, especiallyif we see that that continued anxiety over where the Fed could be headedand the yen is in the middle of that. Right.As you say, are we seeing a yen that.

Could be, you know, closer to 150 now,which is where we are in some ways? Or are we talking about 140 levels?Where are we likely to hit first? The I think for the yen, it's a lotshakier grounds where you would probably have more upside potential in dollaryen, we'll have more upside potential. So you could hit probably 150,especially if all the concerns about the dollar coming through.And then if the if they actually follow through, you will get a jolt for theyen. So you could see some sort of exuberancethat they're finally exiting policy. But we've got to remember that for thefor the BOJ, they're actually just.

Normalizing policy.They're not going to start a hiking cycle.If you look at forecasts for the for the BOJ policy rate, it's just going to moveto 0.1. And whereas every other global centralbank, they're in a much different state. So if you look at is there really analternative for funding currency other than the yen?Not really right now. So that will keep the pressure on theyen. But the initial exuberance from the BOJfinally exiting policy could bring dollar yen to, let's say 145.But anything look, anything lower is.

Going to be a lot more dependent on theFed. Very, very soft.Very. Nicola, there are my strategists joiningus out of Singapore. Still ahead, we're going to stick toJapan and hear how Japan businesses are preparing for the eventual end tonegative interest rates. And of course, what's going to happenwith those Rango talks. Right.The expectation is maybe four 5% or higher in terms of wage growth.Is that enough to pivot from the DOJ? Our exclusive interview with Suntory'spresident CEO Takashi Minami is next.

This is Bloomberg. One of our top stories here thismorning. Japan's largest umbrella group for laborunions, Rango, is due to announce the initial results of spring wagenegotiations later on today. And this is going to be key, right?Is it the last puzzle for the Bank of Japan to decide on whether to exitnegative rates as soon as next week? Let's get the corporate angle now andbring in Takashi Indian Army president and CEO at Suntory Holdings.He also chairs the business lobby group, the Japan Association of CorporateExecutives.

He's joined by our Asia executive editorPeter Ostrum in our Tokyo studios. Peter, take it away.As you mentioned, we are here today with Takashi NAMI.Thank you so much for joining us today, the CEO of Suntory Holdings.Your company is one of the most prominent in Japan and it gives youaccess to see how the Japan economy is doing, how Japan consumers are doing aswe head into this next week where the BOJ is going to have to contemplatewhether to exit negative rates. What's your view on the state of theJapan economy and how consumers are doing at this point?At this moment, the consumers are not.

Confident yet and that they are soworried about the future. The one thing is whether the our SocialSecurity is sustainable or not and that their wage will increase sustainably.So the key factor is how we can extend the the current momentum of our wageincreases maybe next year and onward. So I think that will be happeningbecause the key factor is a huge labor shortage.So big corporations started to to recruit and retain good talent.In doing so, we need to raise wages. So next year that will happening too.So I'm so much confident that the consumers will be back to to buy things,but not to luxurious.

You've been quite outspoken about theimportance of raising wages in Japan, where wages have not been going up thatmuch recently. I think at Suntory in particular, you'veraised wages about 7%. We're going to get these numbers forJapan later on today. Why is that so important to how theeconomy works from here on forward? I thinkconsumers should be more confident that we should really be increasing.Furthermore, and we want to be the spearhead because we are the biggestfood industry player and we should lead it to change the momentum.And we are getting out of the deflation.

For 30 years.Right. And to the inflation, that should bemoderate. So people don't know yet and that thereis still inertia. Andof course, investor you see you mentioned that consumers are not soconfident. Investors are very confident.They've driven stocks to all time highs, as we've seen here.But you make the point that that puts some pressure on corporations here.Can you explain what you mean by that? Usually, high stock prices tend to bekind of a good sign for companies.

Well, there's a disconnect between thethe real economy and the stock market. But we have to feel that the disconnectand how to feel, as you said, to raise that these returns against the equityand the investor the cash. But we need the huge passion fromworkers because we need more talented people and we need to retrain them.So which means to to to to keep the current momentum toother the the future density, we have to keep raising the wages and make peoplefeel, wow, we can consume and that momentum is needed.So the key thing is definitely we have to finish it, the deflationary spiralspiral.

And now.Okay. Thank you.Yvonne has a question. Takeshi?Yeah, Takeshi. Sounds great to talk to you again.It's interesting because you're the chairperson of the justices arecorporate executives. Yes.It's interesting that Suntory is leading the way in terms of these wageincreases. Are we seeing that across the board withthe corporate execs that you talk to, especially when it comes to thesesmaller firms?.

Well, yes.Smaller firms, whether they are making money or not, they need to raise wages.So that's a huge change from the before. The reason is they need people.And the current momentum is pushing people to to change jobs in especiallySMEs. So to retain good people, they have todefinitely raise wages. Otherwise they can't keep people.And there is a many cases nowadays we see the bankruptcies of SMEs because ofa shortage of labour. That is a phenomenon.Yeah, and I can assure you, of course. You talked about wages raising wages by7% force entry.

Does that mean what could follow is someof the price increases in your products? Because I think, you know, you raisedrisky prices early last year. Are we seeing the strong enough wagegrowth to suggest that maybe product prices can also be seeing some pricehikes? Well, that's a good question.I'm not 100% confident, but before summer, I think we have a hugeopportunity to be able to raise prices. But after summer,we don't know about that because how we can keep the current above 3% inflationthat is a sustainable or not. And add that to the sharing a conceptbetween US business and Vogue.

So we have to keep raising wages for thenext two years to come. So that's another issue we have todiscuss and how. So that means we have to keep investing,such as a digital healthcare. Private sector needs to invest more tocreate more demands to people, though we need more people.But that means huge demand to people means keep raisingwages. So more investment is needed.But there is a huge opportunity for Japanese corporates to keep investinginto Japan nowadays. Question for you, As Japan makes theseinvestments in the economy, one of the.

Key areas has been the semiconductorsector. We've seen big investments in Kumamoto,in particular in Hokkaido now too. That's put a lot of pressure on realestate development. In particular, it's hard to get workersfor those areas. Is that sustainable and will that leadto future growth? In which other areas are going to be keyfor economic growth? Well, how we can fill the gap of thelabour shortage are three options. One is extending the working age fromfrom 64 to 74 or five. And it's been a, you know, on way and alot of people work even after the 65.

That's a huge, huge potential for us tobring more laborers to women. I think we can have more opportunity forfor women to work farther, more. Third, people from abroad.And I have to say it's been a taboo, but we have to, you know, get rid of thistaboo so that we can bring more people from abroad.And in case of the chips, we definitely need a high skill.The laborers and three or four more projects are waiting for chip factoriesin Japan. Japan is best fitted for making chipsbecause of clean water. And the second issue we have to resolveis energy.

So some more nuclear reactors are goingto be resumed and more energy is needed. But the chip block, you know, factoriesin Kumamoto and Hokkaido will be booming to attract more people from abroad, too.You mentioned immigration has been sort of taboo in Japan policy in the past.There are some programs at this point to at least make incremental changes.But what advice would you have for how to change those policy issues to helpbusinesses like Suntory and beyond? Suntory all used to use the levers fromabroad as a cheap labor. But we have to bring them to to treatthem, as do the other Japanese people, to be honest.So that means we have to create the new.

Community rule to accept the people fromabroad, which means immigration should be discussed positively.And my Association of the Business Committee community will discussfurther, and perhaps we will propose to the governmentsome changes. Okay.And you've talked a bit about the weekend.Over the past few years, we've seen the the yen weaken a fairly substantialamount. What's your view now on the yen andwhere it is and how businesses navigate through this changing currencyenvironment?.

Okay.First and foremost, to what extent the World Bank of Japan, the ease of themonetary policy, I don't think are they will they want to is the policy, themonetary policy and the least. I think they will change the the thefrom a negative to positive but a slightly it doesn't mean they want tounleashed I mean the get that the monetary policy unleashed so which meanswhich means the still Bank of Japan will keep the easing policy of monetary andmonetary policy and and that means the chea I mean we can one be changed.But the key factor is the Fed. The Fed will lower interest rates threetimes to four times to what extent?.

So I'm sure the current level will benot to sustain to perhaps to the 140 or 135.So 150 is the cheapest, about the weakest.So but the trajectory is not so much of a volatile.In terms of the value of yen, I spend that that's needed for business sincethe volatility is the major risk for us. So let's say 135 around and the 40 butdown from here. Right.That's true. But you make the point, it depends offit as not to make the point that the priority is the economy in the health ofthe economy going forward.

Not exactly where the currency is.And the Bank of Japan won't make these decisions in a vacuum.They have to be aware of what the Fed is doing.So the Bank of Japan can revert, can move out of negative rate territory.But partly how far they can move will depend on what happens in the Fed, inother central banks. Is that your point of view?Look, let's take a look at the long term basic already dismantled.About the 1% means it's now standing around a 0.7 or six.So it's up to the market already. So it's awful.I mean, now the already the message is.

We are given to the market.And I think the current market, a moneymarket, is based on the messages given by the Bank of Japan, which is not theunleashed, but the to some extent and negative rate will be dismantled.And the waiting for feds and perhaps, perhaps.Okay. I want to ask you one last question.One of the biggest deals now that we are talking about in cross-border deals isNippon Steel's attempt to buy U.S. steel.It's become quite controversial. Some story has done one of the biggestUS-Japan Japan US deals so far.

You bought Jim Beam a few years ago.What's your advice about how to navigate something like this?And this is a $14 billion deal that has national security implications.What would be your suggestions about how to navigate something like this giventhe political tensions around the deal? Well, this is a tough time for thecross-border deal between any countries. The United States at that election year.So and the labor union is a different and the here.So how to collaborate with the labor unions is such a huge challenge.But definitely the key of the stakeholder is definitely labor union.Great.

Okay.Thank you so much. Thank you for spending this time in thestudio with us, our new studio, and we will give it back to you, Yvonne.Thank you very much. Thank you.All right, Peter, you're a pro. Please come back and do more of this eyecatching. Do not be there.President and CEO at Suntory Holdings and chairperson of the Japan Associationof Corporate Executives. Thank you so much for joining us.Their wide ranging interview they're doing when it comes to the yen.Of course, we're still talking about.

Those Ringo talks that could behappening 415 Tokyo time. So we're getting the official numbersthere. How these results came through.One 4856 A little bit of weakness on your Japanese yen and weakness acrossequities across the region as well, with the Hang Seng leading things lower, down1.6%. Plenty more ahead.This is Bloomberg. All right.Bit of a pullback when it comes to some of these chip stocks here this morning.We're watching Ruchi, though, those assets very closely here.So the Journal is reporting that.

Apparently they did actually leavevoluntarily a U.S. lobbying meeting as well.So you're seeing U.S. assets on the back foot here.They were down some 7%. Morgan Stanley coming out with a veryinteresting note here, talking about, you know, they're spending in event keymed to recover. And that's, of course, all thesegeopolitical tensions that are really riling the biotech space in China.So those two are on the up in terms of what we're seeing in chip stocks and thelike of tracking the Samsung scoop that we had about them poised to win over a$6 billion when it comes to expanded.

U.S.investments. So beyond just that project that theycurrently have announced in Texas, But we're still seeing when it comes to someof these chip stocks today, a bit of a pullback of more than 1% for Samsung,TSMC and events in Japan. Hon Hai, though, is doing its own thing.A hardware sales is what's really boosting the earnings.There is the stock up some 8% and we're watching oil as well and metals inparticular, right. Whether it's copper, whether it's ironore. Oil, though has been holding that fourmonth gain.

As Bell was mentioning.We did see that breakout above 80 bucks for WTI.That certainly is lifting all these energy plays here this morning.Brent's hovering around the 85 level, but you do see the likes of impacts upsome 5%. This is Bloomberg. 11:29 a.m.in Tokyo. Yeah, we're talking in just about 5hours time. We might hear a little bit more abouthow those Rango talks played out here and whether it's enough.Is it enough wage gains to really.

Suggest the BOJ could move next week?You're hearing more reports say they could exit on negative rates as soon asMarch. So certainly that is continue to lead toa lot of volatility when it comes to dollar.Yeah, we're still on the weaker side here today.We're back to around 148 levels for the yen.And we're seeing a bit of a bifurcation when it comes to Nikkei 2 to 5 andtopics here with Nikkei is down, topics slightly though is higher and yields arepicking up when it comes to that ten year JGB, we're up two basis pointsright now.

And so certainly that's one key thingwe're watching very closely what else goes on next week with the Fed BOJ aswell as a dozen or so central bank meetings next week as well, plus thedata dump out of China. So it's gonna be pretty busy.Let's focus more on the geopolitics now. A top U.S.diplomat to China says every country has a right to defend its national security.Washington has been working to tighten restrictions on China's access toadvanced chip making technology. And the ambassador, Nicholas Burns,spoke exclusively with our chief North Asia correspondent, Stephen Engle.Every country has a duty and.

Responsibility to protect its nationalsecurity. And what the president has done over thelast year and a half is to make it impossible for sensitive Americantechnology, advanced semiconductors for A.I.purposes, to be sold to China because we know it will happen.We know that the PLA, the People's Liberation Army, will take advantage ofthat technology to strengthen itself at the expense of the American military.We're not going to do that. We're not going to compromise onnational security and we're not going to negotiate.And you can bet that the that the.

Government here in Beijing is takingsimilar measures. They have not allowed for most of thelast 20 years the export of core sensitive national security, appliedChinese technology to the United States. And so, you know, every every governmentand certainly our government has a right to take these decisive steps.And that's what we're doing. We've heard the terminology thatessentially these are high walls, but small garden as far as the number ofproducts that are on the export curb list.But again, that seems to be widening. If these are the industries of thefuture, it potentially it's going to.

Widen and broaden.We're also hearing that the Biden administration wants to and is exertingpressure on allies like the Netherlands, like Japan, like Germany, like SouthKorea to further the curbs of other products into China.How does that not expand that pressure and actually bifurcate the relationshipfurther? We've been very clear that we adhere toa small yard high fence scenario, meaning these are targeted actions thatthat regulates investment by American companies in the air sector here.These are common sense actions by the United States.Any American government would have to.

Take this action, given the competitionwe have underway in the military sphere between the People's Liberation Army andthe United States. And I don't think there's an Americanalive who would say that we should sell advanced technology to the play.So the president's acted in the national defense here.And as I say, we're not going to negotiate or compromise on this.And these are the actions that a government has to take to protect in the21st century, In an age when technology is at the heart of internationalpolitics, some of it has to be regulated.How much of a national security threat.

Is tick tock?Well, you know, I think, you know, the White House has spoken to this.The president has spoken to it. And I think Jake Sullivan ask the rightquestions when he spoke to it this week at the White House, he said, do we wantan American company or a Chinese company to own this this very importanttechnology? Tick tock.Do we want an American company to have access to the data of millions ofAmericans or a Chinese company? And the actual life and the and theanswers to both questions are obvious when it comes to tick tock.But where do you draw the line?.

Because it could extend to ISVs.It could extend to any other potential app that would come into the U.S.market. We've heard a number of complaints fromthe government here in Beijing this week about the American debate on tech talk.I find it supremely ironic because government officials here are using theX platform to criticize the United States.They don't give their own citizens the right to use X, to use Instagram, to useFacebook to have access of Google. And so it is ironic, indeed, that thegovernment here is complaining about a process when they shut down access for1.4 billion Chinese to all of these.

Platforms.I can tell you that over the last several years we have kept to a narrow,narrow, bent, restricting and narrow band of technologies that are at theheart of our national security that are critical to the national security.And we believe that what we call de-risking is a sensible in fact, it'sit's a necessary policy of the United States.One of the lessons of the pandemic is that we have to alter our supply chainon certain critical materials and critical minerals so that we controlthem back home or they're close to home. We don't want to be overly dependent onChina for technologies that we must have.

To defend our borders and defend ourcountry. How worried or concerned should theUnited States be about what we heard again and again and again in theNational People's Congress, and that is the unleashing of new productive forces.Obviously, they need to do that to build out their own A.I.capabilities, their own advanced chips, and they're going to throw a lot ofmoney, state back money to this. How much of a concern will thatultimately be? No, I think there's a growing concernaround the world that if part of what the government here tries to do to dealwith its own internal economic problems.

Is to ramp up manufacturing and exportthat excess production at artificially low prices or dumping to the rest of theworld, whether it's Europe on EVs, whether it's the United States, whetherit's Japan and South Korea that's going to roil and disturb.And complicated global trade. And we have been very clear about this.I gave a speech just two weeks ago warning about the problems of excesscapacity. Our Treasury Department has warned thesame about the same problem. You get out and about how bad is theChinese economy from your perspective? Well, I think it's clear that, you know,if you look at the official reports of.

The government and you look at the someof the projections for economic performance over the next couple ofyears, most economists would say that the economy here will slow down at somepoint, that the era of four decade era of high single digit growth is over.There are a number of structural problems they've got to deal with.These aren't for the United States to decide.They're for the government of China to decide.But that was obviously the key issue at the double session of the parliament.The long way that that which took place here in Beijing over the last two weeks,it was definitely there.

I also talked to a lot of businesses andwe all know about the FDI numbers, foreign direct investment down to thelowest gain since 1993. There is hesitation not only because ofthe economy is weak, but also because of the myriad of different nationalsecurity and the opacity of such policy, especially coming out of the NationalPeople's Congress. We didn't get a lot of clarity onpolicy. We do know and you were in that 60Minutes interview where you did talk about US companies such as Bain andCompany Mintz and others who have seen raids and they've seen arrests of U.S.citizens.

Can you can you elaborate on the threatand the pall that has been cast over the investment community and doing business,Americans doing business in China at this time?I think this is a question central to the US-China relationship for the nextyear and the year beyond. We have a $575 billion, two way traderelationship. China is the third largest trade partnerof the United States. There are thousands of Americancompanies doing business here. Here's the problem.They're hearing conflicting signals. Some senior Chinese government officialssay private sector investment is welcome.

In China.Your investment will be protected. But then these companies are alsohearing a different message. Whether it's the raids against Americancompanies of last March and April, whether it is the opacity of thecounter-espionage law where espionage is defined in such a general way thatnormal activities in any other country of the world, the collection of datacould be construed as espionage. And so we see American firms backingaway, or at least being very cautious about investing a lot of money herebecause they're not sure where the lines are.And I think the voices that they're.

Hearing from the government here inChina about national security, they're the strongest and loudest voices rightnow. Is it more than just the due diligencecompanies, the consultancies that have been raided, other industries also injeopardy? I think so.I mean, I think it does go beyond those firms that were raided a year ago.And it gets to the fact that a lot of companies don't know what the directionof the economy is here and where policy guidelines and parameters will be.And so they're not quite sure if they make a major investment or whetherthat's going to be a rational decision.

So a lot of people are sitting on theirmoney. Very few companies are leaving thismarket. It's such a big market, an importantmarket, but a lot of companies have Plan BS as well.But revenues down for companies like Apple.But there are two sides to that one. Also, Tesla, we've heard that governmentagencies have been instructed to not potentially buy Apple iPhones or evenChina here in China. Right.So that also casts a pall, too, on the, you know, the appetite to invest inparticular to large bellwethers like.

Tesla and Apple.You know, we've been very consistent in our government in saying we do not wantto see a decoupling of these two economies where the two, the U.S.and China, the two largest economies in the world, we're critical for eachother's success given the trade relationship where fundamental to thehealth of the global economy. So we've been very consistent in sayingthat's not what we're after, but we are de-risking.We are shutting down advanced technology transfer sales to China because fornational security reasons, how many Americans are potentially detained rightnow or being charged with anti espionage.

Charges?It's a problem. We have a number of Americans who arewhat we call wrongfully detained. We don't believe they should beincarcerated. We think they should be freed.I've visited a number of these people in prison.There's another category of people who are subject to what is called here.Exit bans. Their passports are taken away or theytry to leave the country and they can't leave.We fundamentally object to that. U.S.ambassador to China, Nicholas Burns.

There speaking in Beijing with our chiefNorth Asia correspondent, Stephen Engle. And really, I want to bring in RobertLee from our intelligence just out with a report that really talked a little bitmore about the chips and self-sufficiency remaining.China's primary strategic objective here as a U.S.moves to tighten containment measures. And we're certainly hearing that fromthis Burns interview. Robert, what are those challenges inachieving that self sufficiency in China just in the face of tighteningrestrictions on chips as well as sanctions?You know, maybe just before I answer.

That question and listening to theambassador's interview, it just reminds me again how closely intertwined thetech sector of the US is with China and vice versa.They're both interdependent on each other to a very large degree, and thereare conflicting objectives that there are obviously the concerns on both sideson national security and also economic rivalry.You know, with the US and its allies trying to restrict China's access toadvanced semiconductor process technology.But, you know, from a Chinese perspective, China is dependent onadvanced process technology.

It largely comes from over the US, Japanor Europe. They're also dependent or have beenhistorically on advanced chips, which go into everything from high endsmartphones, telecoms, equipment, you name it.So that's the dependency of China. But equally, as the ambassadormentioned, China's a massive market of 1.4 billion consumers.It's a huge market for American tech companies, you know, making up asubstantial proportion of revenue for the likes of Apple, Qualcomm, Microsoft,you name it. So it's a very fine balancing act, isn'tit, with what the ambassador said?.

You know, based on national securityconcerns, obviously, they want to restrict China's access to advancedchipmaking technology. But the same time, the risk is, I think,that the US potentially could do itself damage in the long run, given the highreliance on U.S. technology companies on this hugeinternal market within China. So I think over the next few years,that's an interesting thing to watch and see how that plays out.Beijing, I mean, it seems like they're just, you know, throwing money at theissue, Right? Is that the right way to do so?I mean, can you still achieve.

Self-sufficiency there?So I think within semiconductors, China is actually building its share withinwhat's referred to as more mature technology.So these are chips that go into everyday applications from air conditioners tovacuum cleaners to, you know, automotive electronics.At the moment, there's no restrictions on an area.It is a theoretical risk in the long run, butbusiness as usual on that front. The issue is the restrictions areimpacting China's ability to either import advanced chips again going intohigh end smartphones, air servers, etc.

And the restrictions are also impactingChina's ability to import their production equipment from the likes ofASML that they could use to fabricate their own chips.And these advanced chips, again, are central to so many applications outthere. So whilst the likes of BI do and Tencenthave said as an example, they have been stockpiling ahead of the restrictions,they're okay for the next year or so. You know what happens after that,Because fabricating advanced semiconductors at the leading edge atthe atomic scale is really, really, really hard to do.You know, it's taken TSMC in their small.

Decades and there is a, you know, therelated supply chain companies. There are not just hundreds, there arethousands of them. For example, companies like Carl Zeiss,you know, a German optics maker whose is 100 year history.Basically, you know, they've perfected the optics that go into some of theseequipments over many, many decades and close to a century.It's very hard for China to sort of replicate and build their own internaltechnology. So it's very hard to put a timeline onit. Is it going to take them years or is itgoing to take them decades?.

It's somewhere between the two and it'sgoing to cost a lot of money. So as I think you mentioned, I thinktheir only option is to continue ramping up the R&D and continue to throw moneyat the problem. Robert, thank you.Great stuff. Robert Lee there.Be sure to check out his report by go to where you check out all that research aswell from Bloomberg Intelligence. Your HS tech movers are doing this hereright now. We are seeing a bit of a pullback whenit comes to some of the tech plays. Of course, as we did enter that bullmarket this week, but mostly all in the.

Rare exception of this ping on healthcare here. But what's really driving that lag andthat drag, I should say, is bilibili. Some of the big plays like NIO show,Haier, smart Tech, Smart Home and the like, and May one here this morning.We got plenty more ahead. This is Bloomberg. Well, Seattle is the next one to reporthis results this Friday. The world's largest battery maker maysee a jump in full year earnings, signaling that it's weathering throughthe fierce competition in China and a drop in raw material prices.For more, let's bring in Danny Lee, our.

Asia transit reporter.What are you expecting out of these results?Expect to see robust set of results and CTO has already given guidance.It looks to see earnings grow despite all the competition.And what we have seen in the back end of last year was them being able toconsolidate their market share once more, strengthen their share in China,and importantly, doing so abroad and being abroad is also very importantbecause where you have this huge price war going on in China, extending fromautomakers down through the supply chain and Seattle is able to control itspricing and have better pricing abroad.

With all the foreign automakers.So this is a good hedge for them. I mean, how much of an edge do they haveoverseas when it comes to their sales There?They are now, at least as of January, the top selling battery maker outside ofChina. So when you can dominate at home andabroad, this is a very good thing for them.And with their market share being around 25% across China or thereabouts, it's areally strong position to be in. And when you look at their customerbase, someone like Tesla, Mercedes, BMW, a huge range of customers, they are ableto better hold on to that pricing which.

Would otherwise be under pressure.We've seen that in earnings. The fact that earnings overall on the ona net income so looks to be a beat. So we'll be looking closely after marketfor what exactly happens. But it's a good set of numbers thatlooks like it could come down the line. Yeah.Is interesting too with latest with those analysts from UBS slashing theprice targets of Tesla, just given the fact that there is this weakness inChina as well, they really think it was a preview of what to expect out ofSeattle a little bit later on as well. Coming up, we're going to look at what'strending online in your China brief,.

Including why beverage giant NongfuSpring has found itself under fire from some netizens out there.We've got the full story coming up next. All right.Here, you're trying to bring it here this morning.A look at some of the stories making headlines in the papers and online.The Shanghai Securities Journal reports that some Chinese high frequency datasignaled the economic recovery has accelerated.They say operation rates of machinery in provinces such as Sichuan and Hainan ledgains, among other regions. Meanwhile, a piece for the SecuritiesTimes warns of a risk of chasing gold.

Prices in the short term spike.Gold prices rallied this month near those record highs as investors bet onthe possibility of Fed rate cuts this year.Meanwhile, this was kind of making the rounds, right?We talked a little bit briefly about this this week, but on Chinese socialmedia. Beverage giant Nongfu Spring has beenfacing blowback from some users questioning his allegiance to China andperceived links to Japan. Let's get to our Asia politics andgovernment correspondent Rebecca Wilke, and she has more on the story.What's going on?.

Rebecca Thanks, Yvonne.I mean, this story has really caught my eye because I think it speaks so acutelyto some of the challenges that even China's domestic giants like Nongfu facewhen it comes to navigating this landscape of increasing politicalcorrectness under President Xi Jinping. And so essentially, this was alltriggered when the founder of Nongfu Spring's main rival, Wahaha, passed awayin late February. And that sort of sparked theseunfavourable comparisons between these two founders with you in links,apparently with the US by Zhong Zhong Shanshan, the founder of Nongfu SpringSon.

And that has had quite a tangible impacton the stocks that we've seen so far. It has become one of the worstperformers on the HCI since that day, as you can see here.We also had about 3 billion USD lost in market cap since the passing of DONG.Now the stock has dropped about 5% over that period, even as the bulk of itspeers have actually seen improvements. Yeah, And the comments you're getting onsocial media, we were talking about it earlier this week.I mean, they're even like, what, Throwing nongfu spring water down thedrain and the like. What are you seeing, Rebecca?Yeah, let's dig a little bit deeper.

Because some of it is apparently quitefar fetched. We had even some users holding up thered bottle cap of Nongfu against a white A4 saying it looked like the Japaneseflag. And a lot of commentators drawing thesecomparisons apparently between the supposedly Japanese design elements ofthe bottle inspired, they say, by the architecture, by decorations from Japan.And as you say, we've also had this spate of videos of people pouring awaytheir nongfu spring products down the toilet or emptying the fridges of all ofthese products, too. And also these calls for boycotts.Yeah, it's very interesting.

Have we heard any response from thefounder at all? What are they saying?Yes. So Zhong Shanshan came out quite earlyon with a statement and that sort of reiterated that he and the founder ofWahaha had put their sort of competitive spirit behind them, that he had respectfor Don, but it really didn't do much to try and stem some of that debate online.We also did see who sits in who is a sort of prominent commentator online, aformer editor of the state broadcaster Global Times saying the Chinese peopleneed to adjust their expectations for entrepreneurs like this, that theycannot expect them to be saints and that.

They have to sort of be more realistic.But all of this is to say that this whole event really sort of jarssomewhat, I think. So some of this push that Beijing istrying to make, I mean, it is precisely these domestic giants like Nongfu thatBeijing is hoping is going to actually lift them out some of the slowereconomic growth that they are in. All right.It's certainly a talker. Rebecca, thank you.Erica Jong Wilkinson, our of politics and government correspondent on, ofcourse, this latest when it comes to Nongfu spring and the really all thecontroversy around that story when it.

Comes to markets.So obviously, we're taking watching very closely what goes on with the oil playsand the like. An energy stocks are certainly one ofthe key outperformers here today. China oilfield services up some threeand a half percent overall, though, waiting for those Rango talks out ofJapan. This is Bloomberg.

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