Latest / The SME Stream / Peter Lewis: Asia Business Correspondent on China considering $1.4 trillion loan to boost economy

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Peter Lewis: Asia Business Correspondent on China considering $1.4 trillion loan to boost economy · The SME Stream

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  Speaker 1: Here the duples L Peter Lewis Asia Business corresponding with
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  Speaker 1: US now Hi Peter.
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  Speaker 2: Good evening head.
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  Speaker 1: So even more stimulus coming from China.
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  Speaker 2: A huge amount of stimulus coming down the pipes, if
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  Speaker 2: we believe the media reports something along the lines of
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  Speaker 2: one point four trillion dollars to try and shore up
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  Speaker 2: basically China's economy and also deal with all the debt
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  Speaker 2: that's been accumulated by the local governments, particularly in the
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  Speaker 2: property market. There needs to be a complete shakeup of
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  Speaker 2: how local governments raise money because they can't raise it
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  Speaker 2: from taxes on land sales anymore because the property developers
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  Speaker 2: are either bankrupt or they've built too many houses already,
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  Speaker 2: and there's far more houses that are unfinished than there
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  Speaker 2: are people to live in them. So this stimulus is
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  Speaker 2: going to be directed mainly at the local governments to
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  Speaker 2: try and help them swap what is in effect local
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  Speaker 2: government debts that's hidden off their balance sheets with central
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  Speaker 2: government debt, and the hope that this sort of unclogs
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  Speaker 2: the pipes and starts getting money flowing again to local
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  Speaker 2: businesses because there's lots of people who haven't been paid.
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  Speaker 2: There's suppliers who haven't received their money either to try
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  Speaker 2: and get that whole process up and running again, and
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  Speaker 2: Beijing is relying very heavily on this to try and
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  Speaker 2: stimulate the economy. I'm not so sure. I think what
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  Speaker 2: tends to happen with things like this is they have
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  Speaker 2: a temporary boost, particularly when you're borrowing a lot of
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  Speaker 2: money to try and stimulate your economies. Maybe the UK
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  Speaker 2: is about to find out, but that economic impact wears
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  Speaker 2: off very very quickly unless you deal with the underlying
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  Speaker 2: fundamental problem. And the underlying fundamental problem in China is
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  Speaker 2: very difficult to deal with because of the demographics, because
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  Speaker 2: there are far less people who want to buy homes
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  Speaker 2: at the moment, So the whole property market is going
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  Speaker 2: to take many years to be resolved, and it's going
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  Speaker 2: to take a long time before prices start moving up again.
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  Speaker 1: Yeah, how long do you reckon? I mean, if we're
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  Speaker 1: talking about demographics where you have to wait for people
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  Speaker 1: to want to buy houses, I mean you're talking about
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  Speaker 1: potentially decades or a decade.
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  Speaker 2: Yes, absolutely, I mean this could take many years to resolve.
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  Speaker 2: We're not going to see house prices in the meantime.
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  Speaker 2: Moved back to previous levels. The risk is that they're
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  Speaker 2: actually going to move even lower in the meantime, And
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  Speaker 2: we don't really know what is the true value of
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  Speaker 2: these homes because the Chinese government won't let us find out.
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  Speaker 2: They have a lot of controls and whether or not
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  Speaker 2: local authorities can raise or lower prices, whether developments developers
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  Speaker 2: can do that. So we don't really know what is
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  Speaker 2: the clearing price of all this unfinished, unsold property in China.
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  Speaker 2: All we do know is that there is way way
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  Speaker 2: too much of it, and the clearing price, the true
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  Speaker 2: price of these homes is probably a lot lower.
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  Speaker 1: Yeah, actually, very good point that you make there. Now listen,
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  Speaker 1: tell me, how are you guys witnessing this u selection.
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  Speaker 1: What do people think of it?
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  Speaker 2: Well, they're waiting with some trepidation for the results next week,
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  Speaker 2: because all American elections tend to be consequential, but this
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  Speaker 2: one is going to be more consequential than any we've
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  Speaker 2: seen for quite a long time, particularly if Donald Trump wins.
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  Speaker 2: I mean, here's the self proclaimed tariff man. He says,
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  Speaker 2: tariff is the most beautiful word in the English language,
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  Speaker 2: and we have to remember that it's threatening blanket tariffs
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  Speaker 2: of twenty percent on all exports into the US and
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  Speaker 2: sixty percent on Chinese ones. Now, if people think he's bluffing,
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  Speaker 2: I think that he intends to carry this through. I
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  Speaker 2: think he feels that one of the big mistakes when
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  Speaker 2: he was last president was not having people around him
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  Speaker 2: who were supportive enough of his agenda. So he doesn't
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  Speaker 2: want to make that same mistake twice. He's throughout the
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  Speaker 2: himself with people who are going to absolutely carry out
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  Speaker 2: that agenda, and Harris is going to be a very
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  Speaker 2: big part of that. So the risk is that this
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  Speaker 2: could totally reorder the global trading system with consequences for
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  Speaker 2: the global economy. The IMF says it could wipe out
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  Speaker 2: the equivalent of the GDPs of France and Germany off
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  Speaker 2: of global growth if he goes through with this, So
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  Speaker 2: it is very consequential. He's already been attacking, and he
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  Speaker 2: doesn't distinguish between friends and enemies. So Japan, for example,
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  Speaker 2: which is trying to get around this problem by investing
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  Speaker 2: an enormous amount in the US in terms of opening
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  Speaker 2: plants there over the past years and decades, could be hit. Taiwan. Certainly,
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  Speaker 2: he was accusing Taiwan over the weekend of stealing the
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  Speaker 2: US chip business. He didn't explain how exactly Taiwan had
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  Speaker 2: done that, but he said they've stolen basically American business
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  Speaker 2: from companies like Intel, and is going to put tariffs
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  Speaker 2: on Taiwan's semiconductor or Taiwan's semiconductor manufacturing makes ninety percent
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  Speaker 2: of the world's advanced chips has huge clients like Navidia, Apple, Microsoft,
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  Speaker 2: So this would have enormous implications for the global supply
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  Speaker 2: chain if he goes ahead with it.
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  Speaker 1: Does China have a preference? Do you think as do
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  Speaker 1: with it's Trump or Kamala who wins.
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  Speaker 2: Well, that's what we've been wondering. It's hard to know
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  Speaker 2: because Kamala Harris isn't going to be that much better
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  Speaker 2: for China because that signals are more a continuation with
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  Speaker 2: Biden's policy, and Biden has hardly been friendly to China.
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  Speaker 2: Are the ither mean some of his tariffs have been
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  Speaker 2: very very damaging to Chinese exporters and also damaging to
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  Speaker 2: China's ability to develop its own high tech industry. So
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  Speaker 2: a continuation of that is not going to be particularly
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  Speaker 2: good for China. At the same time, it could get
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  Speaker 2: ramped up in a very specific way, in terms of
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  Speaker 2: a lot more tariffs if Donald Trump is in power.
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  Speaker 2: So we have been wondering what Beijing prefers. Of course
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  Speaker 2: we don't know. They're not going to say, so we
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  Speaker 2: can only speculate. But I think that they see this
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  Speaker 2: as whoever wins, it's not going to be particularly good
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  Speaker 2: for Beijing.
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  Speaker 1: No, probably not. Hey, Peter, thank you very much. Enjoy
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  Speaker 1: the last weekend before the election. That's Peter Lewis, our
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  Speaker 1: Asia Business correspondents