tv Bloomberg Markets Asia Bloomberg June 10, 2019 9:00pm-11:00pm EDT
quick is not talk a.m. in beijing. welcome to bloomberg markets "china open." down to theting open of trade. david: get to your top stories today. president trump is ramping up the rhetoric on china, he's now threatening higher tariffs if president xi does not meet him at the g20. ivanka: a psychologically anortant -- yvonne: important moment. are cicc and credit suisse embarking on an offer that could
raise 20 billion u.s. dollars. tom: so president trump pivoting from mexico to china with the fresh warning on tariffs. you have to wonder how the threat will be interpreted here in beijing. nonne: president trump in that interview saying perhaps h could could be part of it as well. david: it does seem that we might see that rally continue. .3% higher, the dollar flat across the treasury market. yesterday the big drop in global
oil prices. while we wait for that trade, when you look at the asian markets and the data coming through, south korea, the first , not really drop dampening spirits at the moment. that's the state of play across the broader equity markets in the region 3-wood when you look at china, the last couple of minutes or so, about 80 ticks down on the dollar china. we were above seven for a couple of days for the first time since late last year. things are getting underway this tuesday. >> the one is under pressure again as korean exports for the first 10 days of the month match the weakness we have seen all year. outgoing shipments were down more than 16%, while ship deliveries collapsed on most
31%. exports and all of may were down 9% and initial reading suggest june will not be any better. the u.s. says it has great concerns about a new bill in hong kong that would ease the extradition of people to mainland china. the state department says it could further undermine the city's freedoms and damage the business environment. hundreds of thousands rallied on sunday against the proposal and what was hong kong's biggest protest since its return to china in 1997. the race to become the next u.k. prime minister has formally kicked off. a record 10 british conservatives are fighting for the chance to lead their party and the country. theythe next two weeks, will narrow down the field to two.
johnson is leading the pack with the pledged to push through brexit with or without a deal. the japanese prime minister ruled out calling an early aection, according to newspaper. that would in speculation of what had been billed as a possible double election with abe calling a snap vote at the same time as the scheduled upper house election next month. the ruling party is under pressure after an unpopular sales tax hike to ease japan's massive debt load. i'm su keenan. this is bloomberg. is: president trump threatening to raise tariffs on doesn't meetf xi with him at the upcoming g20 summit. he said he could impose tariffs
on 25% are much higher. he added that he is confident it will happen. i think he will be there. we are scheduled to talk and i think interesting things will happen. our guest previously covered chinese financial institution at which ratings. always good to have you here in asia. as we take a look at the trade deal, we's -- we had the south korean export numbers for the first 10 days of june and still doesn't look pretty. we were all expecting a recovery by this time this year. did we overestimate the recovery in the first half? >> i think people did. we had been telling people we don't think it will bottom until
q3. we have to keep in mind that the chinese government moved into the easing mode in every single month for the first half we were seeing disappointing credit data. we didn't really start to see a pickup in credit until q1. we started to see it pullback in april. we are really only talking about three months of transmission here and that is not enough to lift all boats and certainly not enough to lift all boats internationally. one of the things we have been telling people, and we do have a different credit measure than the pboc, we are definitely looking at much stronger credit this year than last year, but last year absolutely collapsed. last year's flow was about 20% of gdp. the 10 year average has been 36% of gdp. we think we are getting to 27% this year, but that is still way below coverage. i think that is really important for people to keep in mind. we are better than last year but
we are in a low average credit environment. that means we will still have problems with that repayment with certain companies, we will have issues with banks under pressure and all of that is clearly manifesting as well as weak export data from a number of countries. is, doso the follow-up we get more in terms of bank lending, and how long do you actually have to wait before the first quarters credit binge starts to actually show up in the numbers? you mentioned three months is not enough time. charlene: in terms of how long does it take to transmit, usually in china there is either delay. it can be 9-12 months before you start seeing gdp data. however you can see it earlier it than that in some of the headline data. but it's still just three months worth of money so it will not lift things nearly as much as people think.
context of what has been happening with the takeover, but also just to provide the resources for banks to extend more credit. one of the things that happened last year was that in the second half, we were getting a lot of ,indow guidance from the pboc but it wasn't transmitting, and a key reason we believe it wasn't transmitting is the credit to deposit ratio in china is now 100%, and that is really important. when you have excess deposits, if the authorities come to you and say lynn for, you got the extra money, you just do it. when you are at 100%, you don't have extra deposit sitting around. of have to make a decision borrowing at 3.5%, and you're telling me to land at a high risk sme, it doesn't make sense. we are in a climate where the authorities now had to inject a lot of witty to keep credit
moving. david: why don't they cut rates? that would help them bring down the cost of financing. charlene: we've been talking with clients about what china can do to step up easing versus what they have been doing in q1. top of the list, in my view, is rate cuts. usually that is one of the first things the chinese government does when they are in stimulus mode, and they didn't do it this round. their policy premium over the u.s. has dwindled considerably as the fed was hiking and the pboc was not moving. the worry lester was if pboc starts cutting -- the worry last year, was putting pressure on the renminbi. they did not want that. i think it opens the window, certainly, for the authorities to cut, and they have been signaling that they tolerate
whicha weaker renminbi opens the door for more rate cuts, i think. tom: you talk about the window that has opened as a result of the dovishness from the fed. what level of weakness around the renminbi, what are we looking at in terms of what level might trigger market volatility? clearly that is something investors must be assessing now. it is becomingnk consensus that they are breaking through seven. i don't think it is consensus that they go significantly above seven. a full 25% move from the pre-tariff level last year would take the renminbi all the way up to the hong kong dollar peg level of 7.8 which would cause tremendous volatility across asia, particularly within hong kong, given all the questions we've had recently about the peg. i think going that high is
simply off the table. i do think they could go into the low to mid seven, 7.2, 7.3. if they start going above that, i think the market is deftly going to say where is the next resistance level and what does it mean for the hong kong dollar? about,lots more to talk charlene will be staying with us . later, catch our interview with the founding partner who singles out some of the lesser-known startups that are disrupting china's tech sector. this is bloomberg. ♪
risk,ity and systemic whether regulators are doing enough. let's bring back our guest, charlene chu. some sound bring in that we got from the pboc governor when i spoke to him on friday. i asked him about the quiddity pressures. take a listen to what he had to say. targetedthey have a result and also given our market liquidity to channel to smaller banks and some nonfinancial institutions, they -- their funding problems will be getting better very soon. right, are governor
the funding pressures on these banks going to start to ease? charlene: i think the immediate pressures we have had in terms of some of the rates going up and some of the options failing, should improve, given the fact that the pboc has come out and said they would stand behind some of the issuance. i think it will improve things, but i think there is a much bigger issue at hand. that is that banks are now finally aware of counterparty credit risk and are having to review all of their exposures, and saying we may actually incur losses on these, and do we actually need to exit some of these exposures? this is not a one-week process, this will be over the course of the next several months. i do think this could be a persistent problem where we just see banks withdrawing their lines to other, smaller financial institutions and we wind up with a wholesale funding shortage. the pboc could easily step in
and inject money and fill that gap, but keep in mind they need to step in and inject money to keep credit flowing in the system. so there is a lot the pboc is having to juggle at the moment. tom: consistent pressures. the yuan reference rate has been set at 6.89 against the u.s. dollar. not a big change in terms of the reference rate. in terms of the nonperforming loans, the official number is at around 2%, but your model suggest it is much higher. how high are the nonperforming loan levels here in the banking sector? charlene: we take a different approach than most analysts. most analysts are bank equity theyst simply stretching loan portfolio. we take a very top-down approach looking at all credit across the system. the we use is similar to
credit to gdp gap. what we are looking at is how much credit is generating how much gdp, and how does that compare with the pre-credit boom average level. we have done this for a number of countries around the world and in every case where there has been a financial crisis, that return collapses. when we take that approach in china, we come up with a bad of totalmate of 25% credit outstanding. that is very large, but we have seen those kind of numbers and other places around the world, including china in the late 1990's. it is not like china is an outlier in terms of that bad debt ratio. where they are an outlier is in the nominal size. it is a banking sector that is approaching 40 22 again dollars u.s. in assets. when you start talking about 25% of that being bad, you are
talking about very large numbers at that point. withtuff we are seeing these smaller banks is indicative of a much larger bad debt problem in the chinese banking sector that the authorities and banks have just been kicking the can down the point,, and at some clearly that does become a problem and it cannot be kicked forever, which is the message byng sent, as well as another bank. yvonne: there are still a couple of dozen banks that have not reported for 2018 yet. does it break the notion of implicit guarantees? charlene: it does, and that is what has changed the game over the last couple of weeks. if they had just come out and said they had taken over, i think we would be in a very different situation. they came out and said we have taken it over and if you have large interbank exposures or you
are a large corporate depositor, you may only get 70% of your money back. this made everyone say, wait a minute, we could actually incur losses on exposures to another bank? we thought this was risk-free, that the pboc would stand behind every financial institution, and clearly that is not the case. since then, there have been some messages coming out of beijing that seem to indicate a higher payout ratio that could go as high as 90%. i think they are realizing that was too much of a shock, but clearly they have sent the signal they don't want to stand behind everything, which is why every bank has to now review all its counterparty credit risk exposure. david: that brings up some any questions. if china is a ticking debt timebomb, why don't we see any major indicator whether it's credit default swaps, credit
spreads, tell us that it is, or are we looking in the wrong place? charlene: i think the key reason is because so much bad debt is hidden in the channels. there are two types of shadow credit in china. you have small, non-bank financial institutions, that tends to be a minority of shadow credit. the majority is something called channel business which is a term used frequently in china, not used outside china very much. what it means is banks taking assets and channeling them off balance sheets or to a non-bank financial institution. and get ridlly lend of it. you have to say, which exposures are getting channeled off balance sheets? they are bad or they are to like listed companies or sectors.
so we get a disproportionate amount in the hidden channels where there is no auditing or reporting. inre is no signal, and it is the form of an investment product. that is very important because it is not just a loan where it comes due and they are not repaying and the financial institution takes the risk. , its the trust product comes due in three months in three months and the loan is not repaid, but the product needs to be re-and paid -- repaid to investors so it shows up as liquidity risk. one of the things we were seeing in the second half of last year was banks were not lending. pboc was injecting some money and people were saying there is enough money in the system that we should not be seeing an issue. i think what was happening was, we were seeing a lot of asset quality pressure in these hidden investment products, and a lot
of the liquidity was going to address those problems. it just doesn't show up in traditional ways, which is why the rating agencies are not looking at it in the same way. we don't have the same type of market indicators. yvonne: always good to get your insights. we like to bring your attention go.tv ,ecome part of the conversation sin questions for the guest throughout the show. this is bloomberg.
this?ore do we know about >> we've been told that alibaba could file for a secondary listing in hong kong within weeks. cicc and credit suisse as their lead banks. for cicc, obviously it is a no-brainer because the actually own a stake in this chinese brokerage firm, and for credit suisse, they were very involved in the 2014 ipo. so they are very familiar with alibaba's business. david: that answers the question of why these two banks were chosen. you mention some other banks might be joining at some point. >> you can see there are no u.s. banks in the steal right now. some are speculating is because it is a china play and they are trying to list closer to home. and with the trade war
escalation it might exclude the u.s. banks. but we've been told they are still in talks with a lot of banks. we could see more names being brought to the table. david: and it is still this year? >> likely in the next few weeks they will file for a secondary listing. yvonne: checking the free markets as well. david: it was a very good day yesterday. msci china had its best day since january. we are looking at some of the changes in recommendations coming from analysts. unicom, there we go. upgraded by ubs. up, we'rethat board looking at 100 points on the hang seng index. yvonne: after we saw the biggest
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yvonne: you are watching bloomberg markets "china open." a wet start to the morning here in hong kong but when it comes to stocks, we are seeing more firmer footing. president trump saying he will raise tariffs on china if xi does not meet him at the g20. it seems like markets are kind of shrugging it off. tom: kind of in line with what strategies were saying.
it will have edged up a little bit in the past week between china and the u.s.. they predicted there would not be too much downside on the back of that comment from president trump, but he did outline his desire to hit back with more tariffs. in terms of what we've got, a bit of green on the board across the way, but not too much. msci.p .2% on the i want to switch to some of the airlines, we have some downgrades from credit suisse. all downgraded by credit suisse. oil price has weakened and that may be of benefit longer term. thedollar debt and whether weaker yuan played into that. some of those considerations
around the chinese airline. coming in at 6.89 versus the average forecast. we've seen a tick up in terms of option suggesting that investors are turning a little more bearish on the currency in the view that it could cross past the seven level. maybe to g20 meeting will be a catalyst. it's been a little stronger in the session so far today. looking at the offshore right now because you mentioned it as well. outright, just dipping below seven right now. is the state of your equity markets. it's against the backdrop of data coming through from australia.
the actual number might not make sense. to one, in terms of context, one is the lowest level, going back four or five years. that is a data point at this point in time. equity markets look like this. we are coming off a very good day on monday, the best day for msci china since the beginning of january. we've come off the highs of the session. a quick look at dollar hong kong. let's talk more about what is to come. back in focus for asian markets and those comments from trump, but they are ignoring the threats about the g20. >> the expectation is very low
at the moment for a trade deal. there is some positive signs on pushing for the resumption of trade talks. speaking at a board meeting in russia, he called trump my friend. even though he is threatening with tariffs, he also called xi a great man. so there is some chemistry. we don't need to exclude the possibility of a deal as of yet. but of course, in case of no seee deal, we could volatility coming back. but what is different this time
had aast year is that we power put. central banks are turning more dovish. i don't think there will be a panic if we don't have a deal. david: does the market go up? we know from experience that the market will remain supported, but will lay put be enough in the absence of a deal for chinese stocks to rally from here on? we need to have a recovery back to make this real. the markets are hoping for liquidity coming back and that central banks will turn more dovish. tom: what about the yuan?
the option market suggest that the trade is turning more bearish and there is greater acceptance across the board that it will break through the level. >> if you are asking my opinion, in my humble opinion, i don't think it will break seven. we have to remember in the last months story that the u.s. is proposing a new rule to include anti-subsidy tariffs from countries that undervalue their currency. so there is no practical gain , even if the yuan weakens beyond 7. it can help exporters but they if the tariff is not enforced. willnk as of now, the pboc
be dovish. see other trade talks go and that is the real key to the next course of action. david: thank you so much for giving us the low down on where we go from here. , youan follow this story can scroll up and down and get expert commentary. yvonne: su keenan joins us with the latest from new york. nokia which isth remaining bullish about its expansion into 5g networks. the company is falling behind in the next in a ration wireless race. telling bloomberg he is winning contracts quite handsomely against its main rivals, erickson and huawei. quitecomplete -- compete
favorably without the current concerns. su: the former pakistani president has been arrested after losing a legal bid for a bail extension amid investigations into alleged money laundering. he denies any wrongdoing. the nation's second largest opposition group. he is the latest politician to be arrested since the prime minister came to power pledging a hard line against corruption. to iran, it is stepping up the rhetoric by warning that the u.s. cannot expect to stay safe after diplomatic and economic actions against tehran.
the prime minister offering a series of threats over president trump's rejection of the nuclear deal and more recent sanctions against the arabian oil industry. he said the u.s. has launched an economic war that it will not be able to finish. global news 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm su keenan. this is bloomberg. tom: thank you very much indeed. china's new tech board is expected to launch in shanghai amid pressure to bolster supply with alibaba. let's discuss all that and more with a leading investment platform specializing in china's venture and growth capital markets.
judy, thank you for joining us. since we last spoke to you, i believe david spoke to you in shanghai, conditions around the trade war have escalated. the tensions have escalated, we have the actions against huawei. has your investment strategy change fundamentally in light of these tensions and how you pick winners and avoid the losers? >> the short answer is not really. we have always focused on two thees, one side is opportunity generated by the rising consumption of the next generation consumers which are mostly domestic market facing and the other is leading the technology impact into those subsectors that still represent strong growth, namely health ase or education, as well e-commerce or capital efficiency opportunities. tom: we were talking to our
previous guest and she put out some notes talking abo the indebtedness of households here in the softness around the consumer. that will start to play out. the trade war will exacerbate that, so the strength of the domestic consumer is starting to look more fragile. is that a concern for your investments? way, theld it this overall trade war escalation would have impact to the real economy. you look at the breakdown, the different subsectors, and that would generate a new set of opportunities. with the reshaping of the global supply chain and requirements for better capital newciency, there will be a set of opportunities to cope with that. for example, there will be an import substitute for medical the already high
tariffs, but not only , thesenting the global attractive second lobe market only behind the u.s.. only increasing into r&d for medical devices, for example, and also debt,ample, construction it's a $15 billion market for equipment rental. economyurther slowing and higher capital efficiency, you see those to be opportunities rising for long-term capital opportunities. david here in hong kong. very nice to see you. that's the investment part that we will return to. i'm curious on what the tech
cold war does for fundraising. sometimes you guys tap american investors. aversion oriced an difficulty when it comes to future fundraising for you guys? judy: not immediately, i would say. illiquid long-term market, and are investors, especially the institutional investors in the u.s., they have a long-term rational outlook. capital markets, there will be sentiments, no one likes and certainly. the trade war cast that shadow over the capital markets which not immediately impacts our fundraising in the private sector get. but the first impact would be on exit evaluation on our
portfolios when we are aiming i believe it, and will diversely impact the fundraising somehow. yvonne: at the start of the year we saw the chinese bc market a little more risk averse. there was a lot of venture capital heading toward blade stage -- late stage type of companies instead of early-stage startups that really need the capital. has that changed at all in the last couple of months? focusing on this market for the last 10 years in china. there was some correction the last few quarters, it was a poor year in 2018. you will see a lot of unicorns whose valuation is somewhat disappointing.
the correction actually started a few quarters back. regarding the earlier stage, two or three years early you will see overflow into the early stage. , earlyhumble opinion growth in the major area is very attractive. as you pointed out, there is high demand under supply to the quality deals. with better r&d and the talent pool, there are still attractive opportunities there. globally, fundraising we don't see a slowdown. we see quite warm interest in that area, especially if you look at the early growth venture space in china. tom: judy, thank you for your insights. show, theon the
david: welcome back, you're watching bloomberg markets "china open." confidence in the growth for the economy in the second half, even if trade tensions continue to linger. yvonne: kathleen hays joins us from tokyo. what was the biggest take away we got from that? kathleen: i would say the biggest take away, just because we think what more could the bank of japan possibly do, it
seems like a logical question since they have the key rate negative already. they are controlling, holding the 10 year jgb on the little range on either side of zero, yield curve control. they are boosting the stock market, what more can they possibly do if a slowdown materializes? to him, according to him there is a lot more they can do. , it's economy is a whole disk -- suffering from a decline of a number of companies. they are faced with this growing trend. we might have potential risks,
, we have tomoment carefully monitor the situation. if we continue our control and even if we expand our strength in easing further. saying you are willing to take on this risk of these rising costs and some of these extraordinary steps if you need to do so to stimulate the economy and keep inflation going. time, to avoid as , we may combine to reachonetary tools
this. >> it sounds like an interesting recipe you have. so many central bankers right now are saying they have ammunition and they can do more. the people's bank of china made that very clear. chairman jay powell has said we can do this if we have to. mario draghi said we could cut the negative rates further if we need to do so. markets,to people in the boj cannot do more. you mentioned earlier in the conversation, maybe we could even do something else. do you still have the capacity to show all those people you can do something big, even something new? >> i think so. >> what would it be?
>> further reducing the negative interest rate and further increasing the amount of asset further committing theontinuing to increase monetary base and so on and so forth. options, i think we can still utilize if necessary. and how we could combine them depends on the economic and financial conditions. yes, like mario draghi, i think we can do these things. i love what he said,
like mario draghi, i will do what is necessary. adamant, ifs needed, he doesn't think it's going to happen, there is more that the boj can do and they have proven to be creative in their use of policy, taking new and unprecedented steps. we will just have to see what governor kuroda has up his sleeve. hays, thank you coming up, the editor-in-chief who could remove shares with just one tweet. that is next. this is bloomberg. ♪
times. the editor-in-chief tell me what kind of access he has with beijing and what china might do next. >> i have access to some accurate information for the nature of my job. but i cannot say i am authorized by government to release the information. >> it is fair to say that officials will be passing you information, they will be passing you tips and the knowledge that you are likely to tweet about them. honest, i don't know. the officials and i have a tacit understanding. as i have access to that information, i think some of them know i would publicize the information. >> chinese officials have been talking up the economy but the economic data shows pretty clearly that we are facing a continuing slowdown in the chinese economy. our officials exaggerating the potential for china to whether the trade storm?
>> the loss is bearable for china. people believe it doesn't matter to have some losses. the chinese economy is still growing. we don't have any negative growth. we are still advancing. in addition, the size of overgrowth is still remarkable in the world. goes ahead with traditional tariffs on all of china's exports to the u.s., what tools or policymakers most likely to reach for in terms of retaliation? >> china may target the u.s. services sector operating here. in services is not the same as trade in goods. the u.s. has barely talked about services, china knows this is a fast-growing growing area for the american side. an: he is something of oracle when it comes to china's retaliatory steps and someone
>> almost 10 a.m. here in hong kong and singapore. this is bloomberg markets. >> here are the top stories. ramping uprump is the rhetoric on china. he's threatening higher tariffs if xi jinping doesn't meet him at the g20. inhuawei is given a grilling looked. we'll also hear from a bullish rivalry, nokia. >> and the bank of japan governor says he's confident of in japan but is ready to act at any moment. live in tokyo be later this hour.
♪[music] >> that wasn't the bank of japan, kuroda. what we do have is equity markets. great day yesterday. it, 600 plus, move on the hang seng, thereabouts. background of tariff talk fatigue. >> hmm. the pboc. then yesterday, from mr. kuroda, be b.o.j. now saying we'll here right behind you, two steps behind. >> you just kind of wonder what they can do. there is that kind of central well.ut in the markets as we're kind of ignoring the threats of the president. this ultimate to xi jinping, meet me at g20 or else i'm going to ramp up tariffs. we are seeing here, risk on, when it comes to asia. australia coming back from their holiday. the csi also higher by about 40 moment.ere at the hong kong still extending those
gains though not as eventful as yesterday with that 2% gain coming on the hang seng. seen a stronger one on some of these as well. we'll show you what the market is showing, but we are seeing that on shore rate, 691 here. get that stronger fix from the pboc here today. offshore, we are now at 693. all some of the highs in dollar china that we've seen this week. that is sending a little bit more of confidence, to some of yuan.currencies, like the 1182 here at the moment. fact that wee the did see those export numbers. the first 10 days, still looking territory, still looking pretty dour. but we are seeing here, when it comes to the yuan, a little more correlated today. catching a bito here. also watching that chinese yield, it's interesting
to know from sws research, that government bonds are still an attractive buy here at the moment. they're going to benefit from ecodata, the liquidity. 10-year bopped basically to asd -- bond dropped low as 2.9%, some 30 basis points lower potentially when it comes to those yields. let's take a look at this as well, because we've been talking about how, yes, there's more of a consensus now that we could above seven after what we heard from the pboc last week. you take a look at what we're market as well, at least for now, we've seen the short-term speculation for a weaker one. it seems to have run its course here. traders actually started to unwind some of those sold options. to seven here. we have broken slightly below that here this morning. general expectation is still for that to let it go to seven. the big question is, how much more are they willing to let it
go, the pboc, before it generates some type of market volatility? the chances of it breaking seven possibly as soon as the end of this month in june. news.word >> thank you. we start with the yuan. again aser pressure korean exports in the first 10 days of this month match the year.ss we have seen all outgoing shipments down more than 16% and ship deliveries collapsed by almost 31%. exports in the whole of may were 9%. and initial readings suggested june will not be any better. now.an the country is stepping up the rhetoric by warning that the cannot expect to stay safe. this after its diplomatic and economic actions against tehran. foreign minister offered a of threats over president
2015's rejection of the nuclear deal and his more recent iranians against the oil industry. washington says iran must accept facelobal obligations or the destruction of its economy. >> making threats. blackmail and terrorizing other nations is typical behavior for the regime in tehran. tomorrow they will probably threaten once again. we aren't impressed. iran faces a simple choice. a can either behave like normal nation or watch its economy
>> over the next two weeks, 300 theticians will narrow down field to just two and then party members will vote for the next leader. boris johnson is leading the pack with a pledge to push without aexit with or deal. global news, 24 hours a day, on air, at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 127 countries. this is bloomberg. ♪ >> president trump is threatening to raise tariffs on again. if xi jinping doesn't meet him at this g20 summit. imposing tariffs of 25% or, quote, much higher than 25%.
added that he's confident that the meeting will happen. >> i think president xi of china, great relationship with him. i think he'll be there. we are scheduled to talk and to meet, i think, interesting things will happen. see what happens. >> joining us now from shanghai is jennifer hillman, georgetown law school professor and a former u.s. and wto trade official. thanks for coming on the program. we could heard from the u.s. lot of detail a in what he says there. in terms of what a realistic expectation looks like at this point for the g20, what would your view? >> in my view, the best that we can hope for is a truce. where both sides agree not to make it any worse. words, the u.s. would leave the tariffs where they are, $250 billion worth of chinese imports subject to a 25%
tariff. it wouldn't get any worse and that both sides pledge to work for an agreement going forward. that's honestly the best that we could hope for. and my concern is that it could get worse. in other words, if there isn't some kind of an agreement or understanding to at least keep talking, i think things going downhill even from where we are. >> how bad can things get for the global economy? that's, i suppose, the key question here. oft do you make of any form resolution and whether it can be actually be verified, whether it would have traction? >> well, again, i think a couple things to take into account. what could get worse is obviously the united states is already in the process of doing domestic things that it needs to do, hearings and comments from the public, order to be able to impose tariffs on all of the
china.ng imports from so another 325 billion worth of to ancould be subjected additional 25% tariff. so that's sort of already in the works. obviously already in the works as well is the ban on huawei. and, again, where the u.s. is to say that any company that does business with huawei would be banned from doing business in the united states. so, again, a very strong and effort against anyone engaged in business with huawei. those are the things that are place andready in already in train. a lotsly they're creating of concern throughout the world. financein the g20 ministers meeting in japan, just this weekend, a declaration that tensions are creating the potential for real growth throughout again. so of all global growth being with significant concerns over what it means going forward sovment there's
no -- so there's no question escalation of what had been a fairly traditional trade war into what is now becoming a technology war and is shifting on to very, you know, much more i think raisesd, quite substantially the level of concern all the way around, about where is there an end in sight. where is there a solution. >> but jennifer, i just wonder it seems like we're getting closer to 2020. there's going to be some 20-some democratic candidates that are going to go trump,hard on president if he actually softens his trade does thatere, how play into a factor? i'm just wondering, when it sees to china too, if they the situation right now, why not just wait until the next strike a deal?to >> well, again, a couple things. of theses, one is some concerns that the trump administration has been
out there have been for quite some time, though since they didn't begin with donald trump, i don't think they will end with donald trump. i mean, the concern with respect to intellectual property threat, with respect to forced technology transfer and overriding all of that, the concern with the degree of subsidization and the difficulty competing fairly with the number of state-owned enterprises in china, those forerns have been there many years. and, again, they will not go away when donald trump goes away, whenever that may be. and 5gcerns with huawei and the development of is another dispute that is hard to see simply going away. on the other hand, it is very in the united states that the tariffs are starting to hurt americans. the trumpssage from administration to its farmers, to its consumers, is just be patient. be patient. this is your patriot otic
duty -- patriotic duty, if you will, to be part of this fight tradet china on these practices. simply hang in there. starting tos are mount. at least so far, all of the onts of the tariffs imposed chinese imports have been borne by americans, by american i by american consumers. so it is not true when trump china doesn't do x, i will simply tax china in the form of tariffs. not china that's paying the tariffs. it's americans. and they are starting to have an effect. particularly i would say in the farm community, where farmers from markets off this trade war. you're now starting to see farm and/or be low suppressed. >> jennifer, do you think that donald trump really wants to do fundamentally, and do you think that the chinese are right
aat this is just essentially way of keeping them down? >> i do believe that the administration started out wanting a deal. and the question is, what did they really want? and that i don't think anyone knows for sure. when thisnk about it, began, the number one item on request list was that china reduce the -- find a way buy more american products and/or sell less to the united states. trump's initial motivation was, this sense of exporteds that china more to us than we exported to china. so initially my sense is yes, they wanted a deal. and a deal that touched largely on the deficit but also on subsidies, technology transfer, and intellectual property. clear what much less does the administration really want, once they added in the it, becausenent to that does change everything in
terms of the footing and the landscape of what this dispute is. now it's much less clear to me. of all, it's less clear to me, where is the deal to be had? in other words, people like me that have been involved in trade negotiations for years, i could imagine a deal. i could imagine what the deal would look like if we were still on the trade front. i could imagine the kind of rules that one could write and the kind of things that would be done that would benefit both the united states and china. once you add in all of the and the national security component and the ideological becomests to it, it much less hard to see where is that deal that could possibly be put together and a little bit less hard to imagine whether this is what the u.s. wants. >> jennifer, we have a question from one of our viewers. i'll put that question to you. you talked a little bit already about it. buyers ofhat u.s. clients goods have passed that asian-based
manufacturing companies, where they source those goods from, thequestion is, if that's case, that they're passing on that cost to asia, isn't that a heavy load or heavier pressure on chinese companies now? to thatess a follow up is, do you think chinese companies can stand not passing then?n to consumers >> well, actually, i think so far, when the tariffs were only i think the vast majority of the cost has actually been americans and american companies. i do think that's all going to as these tariffs are now being moved from 10% to 25%. again, the date for that is june 15. so any goods that enter the united states after june 15 that on that 200 billion worth of goods list will now be 25% tariff. that is quite materially different. in other words, i do not believe american importers and the american consumers can
25% tariff.b that as a result, two things are gonna happen. one of which is some of those to stop beingg purchased from china at all. so they simply will not be imported. the second thing is, i think all of the american importers are going to start putting pressure on the chinese companies to lower their prices in order to absorb at least some of that 25% cost. so there is going to be, from a pushback tok share the cost of the 25% tariff. >> jennifer, absolutely a pleasure having you on the program. teaches at georgetown university law school. still ahead, governor kuroda telling bloomberg that the b.o.j. can go bigger with monetary stimulus. he have to, though? discussing the outlook for the japanese economy. >> next, will huawei be trump td competitors? we hear from one of the biggest
>> nokia c.e.o. says the company winning contracts to networks. they also said it's too early to tell whether america's blacklisting of huawei is a net positive or negative for nokia. call it anyy to way. i just say that, yes, there's uncertainty and some unpredictability as to how this will unfold. we've done, we've been very thoughtful about, if you are a outomer that wants to swap your existing 4g, how are you going to deal with it? we've come up with four alternatives where you don't have to they your roll-out. beingfocused on just there for our customers when they need us, security concerns
or not. made bye arguments deutsche telecom that they're already in bed with huawei and would delay the roll-out of 5g you think is not correct? on a europeannk, level, that will be any delays. with regard to security concerns, there might be delays on the account of spectrum not the economicse or not making sense for a particular operative. we have four technical solutions you want to swap out your twisting base. and they're all doable. pros and cons, but they're all doable. >> what about the cons that potentially some have paid lip service to, that through the u.s.-china trade tensions, we will see two different technology focuses ending up being built? thatays of delivering 5g will be incompatible in some way? do you think that's a risk that -- >> no, i don't think that's a risk. >> what is the key risk when it comesto security, when it to providers?
is it really a relevant realistic risk to have huawei as a provider? >> the concern that people are beressing is it's going to critical infrastructure, so the focus on security will be there no matter what. it has to be there. second is, where is the network?nce in the is it in the core, throughout the network? flout the to be network -- throughout the network. be used foro industrial networks. about worrieslk around security, i think that makes sense. be criticalto infrastructure. you're going to have industrial 5g networks used for a lot of industries as well as for carriers that will also use slicing to employ it for industrial applications. valid.ncern is that's why we at nokia focus on design for security in our products. a nonnegotiable.
it is not an afterthought. the outset.at whether or not there will be concerns around this in other see.ries, we'll it's too early to tell if this is an opportunity or a risk. some say there's unpredictability and uncertainty, but of all, we'll be there for our customers when we'll haves and multiple technology alternatives. youhat about those who see as a customer? is this something you're having your customersep then happy that you're the most secure provider out there? globalunately we have a supply chain and, you know, we're able to migrate, mitigate theyof the risks, whether be trade concerns or security concerns and so on. yes, we have some, related, toow, cost the trade wars and the tariffs. but none that we can't manage in the scheme of things. >> and none that would put your targets at risk. >> none that would put our
risk.s at >> as a business leader, is it geopolitical risk, trade that keep you up? what is the number one thing you to navigate? investmentely, the is 5g -- even if there were a macro downturn, this is will invest in. we are a an attractive sector no what. company also compete in investing in 5g. big cycle, a long cycle, a deeper cycle than the peaking not before, about 10 years, and going to be there 20 years. >> exclusive interview. now british lawmakers have global cyberi's security. and the u.k. decides whether to allow the company to have a role the next generation of broadband.
>> our china correspondent, she's in beijing for us on the story. what were the highlights of the meeting? let's start with that. >> this is really part of that broader debate we've been thatssing about the role huawei should play in the u.k.'s mobile infrastructure. there were several tense moments this hearing. there were pretty hostile questions that this huawei faced.ve he was even accused of being a moral vacuum. he said that huawei simply operates within the laws of any government, without deciding what's right or wrong. take a listen to this particular exchange. >> we don't make judgments in terms of whether laws are right or wrong. make thoseothers to judgments. >> do you have a view as to whether or not china is a state?ty >> carolinklein is a one- -- cha one-party state. >> do you have a view -- personal --ave a >> you're a moral vacuum.
>> i don't believe so, no. >> now, that wasn't the only instance where the mp's were feeling frustrated and incredulous but we should theresa may had decided that huawei should be someed to provide at least parts of the u.k.'s mobile infrastructure but some of the other candidates are taking a line.arder the expectation is that the next leader will be deciding how to huawei. now, huawei's chief strategy to speaking and we're expecting that. we may learn a little bit more about huawei's response to how went.earing >> what stake in the u.k. -- a of pressure coming from washington? >> right. pressure coming from washington. if they let huawei run free, they run the risk of allies not wanting to share sensitive security information with them. do have an they outright ban on huawei, that's
going to be extremely costly and companies infor the u.k. who have decided to build their next infrastructure theuawei's equipment under callus that it's -- calculus that it's technologically ahead and cheaper than the other competitors right now. how arequickly here, other countries responding? >> right. is still --an canada is still under an ongoing security review. they haven't decided how to but they are doing a review of potentially 4grhauling their existing networks. australia has excluded huawei. decided it can continue to operate freely. france has this informal ban in paris. russia has decided to come out in strong support of huawei, for pilot zones in russia. >> all right. stuff. our china correspondent. life for us out of beijing. get to latest headlines
now. let's start things off with uber. so the company is to face new rivalry over in london. talking ride hailer, back in action, nearly two years operatingaw its license revoked. volt.named valued at about a billion dollars. the company claims 20,000 drivers have signed up in london as it vows to challenge uber by fares and taking a smaller slice of driver earnings. recalling its first all electric cars with concerns of battery fires. the risk that moisture could into the battery cells through a glitch in the wiring harness. audi says it has no knowledge of this.res due to they're seeking to challenge tesla. >> let's take a look at markets here. seeing -- after coming
>> it is 10:29 a.m. in hong kong. in new york.re first word headlines. we start with president trump, on is ramping up the heat china, threatening to raise tariffs again if president xi at the g20 meet summit at the end of the month. cnbc that tariffs would imposed immediately should the two leaders not talk in osaka. the president added the chinese side will make a deal because they have to make a deal. the japanese prime minister, shinzo abe, has ruled out election thatly would end speculation of what
a possiblelled as double election. with abe calling a snap vote at his upper house election next month. now, the ruling is under an up popular of sales tax hike aimed at helping massive debt's load. president asif ali zardari has been arrested after losing a legal bid for a extension amid an investigation into alleged money laundering. wrongdoing.y zardari is the cohead of pakistan's people party, the second largest opposition group. he is also the latest politician since primeed minister khan came to power, hard line against corruption. the world's most expensive work to haves said resurfaced after its whereabouts 18 months.n for leonardom says that lee in
superci's work is on a yacht. the 500-year-old painting $450 in october of 2017. is remainingnokia bullish about its expansion into networks. the c.e.o. dismissed concerns from some analysts that the company is falling behind in the next generation wireless race winning bloomberg he is contracts, quote, quite hand rival, against his main huawei. >> we compete quite favorably help huawei, with or without te current security concerns. we've taken some 23 contracts with them in just the last two years. we win two-thirds of the time
competitor, that win quite we handsomely. >> global news, 24 hours a day, on air, at tictoc on twitter, powered by more than 2700 journalists and analysts in more than 127 countries. this is bloomberg. >> thanks. one of our big interviews of the week, bank of japan haruhiko kuroda is betting on continued growth, even as he acknowledges tradehe threats in the war could prove him wrong. an exclusive interview with our policyeconomics and editor. he says he is ready to take more needed.ve action if kathleen joins us from tokyo now. how aggressive can they continue be? and what are the side effects? is the governor concerned about spillover effects on the banks? >> well, yvonne, certainly this question, has been since the fed -- since the bank itsapan started
extraordinary stimulus four or five years ago now. and as it continues and people hurts the bank, it's much harder to make money when you've curve.ery flat yield but, again, governor kuroda made it very clear, if necessary -- a big if -- he's ready to do just about anything, make that negative rate even more deepen the yield curve control ban, even buy more equity etm's.re when i pressed him about the sideion of the negative effects, the cost outweighing the benefits when it comes to japan's banks, this is what he said. moment, the banking sector as well as other sectors, are doing quite fine. making enough loans extended to the industry and so on. banking sector, capital as liquidity.
if the law inter-- if the situation continues and also particularly, as you know, the economy has a whole is doing well. but economies are suffering from decline of populations, decline of the number of companies, so so that those banks faced with this trend. mean, we could have -- we might have potential risks, but moment, the situation is quite -- we have to carefully monitor the situation. our control.e
expand orf we strengthen, in case of need. >> so you're saying -- in a sense you're saying you're to take on this risk of ofse rising costs, some these extraordinary stimulus tops, if you need to do so stimulate the economy? >> yes. but at the same time, in order much as possible may combinefect, we sort of sidee that effect. >> so governor kuroda of course been very crazy when it comes to monetary policy, coming things like this more modern version of control. so who knows?
the event this is needed and he has to cushion the impact on banks. sure the b.o.j. will have a plan for that. what would trigger for governor need to move from where they are now to trying whatever else they will try, what of these special tools? what would it take to do that? it's all about inflation. he said if prices are losing momentum, that would be the signal for the b.o.j. to do combined, of course, with signs of growth and unemployment to -- employment starting to falter. should it be needed, he's ready act. >> thank you very much indeed. policybal economist and editor. if all that did come to pass, he would be caught between a rock place.ard joining us is martin schultz. great to see you, as ever. target,s 2% inflation why don't they just abandon it? because it's really at the
moment probably curtailing what he can and can't. has he boxed himself into a corner? got a chart showing exactly what's been happening, looking x fresh food and energy, the overall year on year. there we go. that's in white. we're at .9% effectively. i mean, what should he really be in your view, or is he getting it right? >> well, he boxed himself in a long time ago, abandoned the 2% target was basically a signal that tightening is now the next the bank of japan will do and this is not the signal. he will not want to send that for quite a while. what we are doing, we're looking more at an inflation target of 1%. that seems to be more the internal target. this is where the economy seems goinup so much and the economy point, fort that
kuroda, not much to do right now. they embarked on this, well, abe came to power in 2013. then kuroda came to power -- well, headed the b.o.j. in 2014, mistaken. the joke back then was, is he still going to be doing the same olympics?ng into the guess what? that's next year already. is he ever going to be able to exit? >> ha ha! not easily. that timeve seen over is basically, well, monetary policy which provided the push and was hoped to reinflate the economy, is not working in that direction. japan has a number of structural problems. the economy is growing slowly in aging society. we know all that. what had happened over the last just in japan, is that monetary policy has become so the current instrument is more or less fiscal policy.
lot isthat side, a happening. the government will push the economy quite a bit this year. >> yeah. you bring to mind this debate on modern mol tear policy. you're -- modern monetary policy. in japan, is that simply called qqeycc? >> ha ha! good point. this debate is basically an observation of what has been five,ing over the last six years after the financial protest hasmonetary been so strong for so long that basically other instruments have come in. the big problem for central banks is, well, you can easily finance the government but pulling all that back when necessary, and it might be necessary, in one to two years, will be very difficult. to any will not commit of those theories. they will just stay the course for now. >> martin, i'm just curious. 10 yearing at the
treasury now yield at 215. japanese still going to find that attractive, to treasuries?buy because it was that investment that really helped at least yuan. the now that the fed is perhaps on aboutate-cutting path or to start it, how does that impact the direction of flows now? back homed more money into japan now? quites is actually possible. we probably should add to kathleen's indicators the yen rate. better but itven can be easily at 105, 100 to the somer would really send alarm bells ringing at least in and strongent pressure on the bank of japan to do something, to come up with additional policies and mr. kuroda will probably have to
agree that the 2% in the u.s. are not as attractive compared to the profits japanese right now.re having fundamentally to -- the premise that you cannot devalue your currency, at least a developed nation, in order to get economic success. people have tried it. the brits. various others. it doesn't work. >> well, japan got away with it initial year. the and mr. kuroda coming in, that was huge. days, japan was more focusing on the exchange rate going directly in the market. that is not possible anymore. so it was monetary supply. do this easily right now, only when the pressure is getting extreme. i expect the yen to be quite a stronger this year, simply because, well, the renminbi will dollar is on the shaky grounds, at least a little bit, depending on political
factors. debate will be back this year. >> that brings to mind the other debate. it's actually a question from one of our viewers. i'll put it to you. will the bank of japan actually restart a race to the bottom to government bond yields? the question of the day rather, not a question from the viewer. >> well, mr. kuroda mentioned of the regional banks. consolidation is just starting there. so much effects are stronger right now in the economy. enoughks are not earning and households don't get any income on their lifetime the economy seems to be bottoming out right now. so he will be on the cautious side and something really strong the yen dropping or getting than the dollar, would-be would be such a signal. and then a lot of signaling at thet would come into market. >> martin, thank you, as always.
>> welcome back. you're watching bloomberg markets. quick check of your latest headlines. have a look at australia. the company has offered to buy a a cash deal valuing the network operator more than $2 billion us dollars. a deal wouldt says enable it to provide integrated services. it marks the fourth formal
takeover since 2017. the previous three bidders have, away.n mind, all walked takeoverorce, the would be salesforce's biggest today.tion tableau is based in seattle. it turns raw data into more understandability dashboards and charts with almost 90,000 customers, including the likes of verizon and netflix. foxconn is facing up the inner circle of appointing his chief financial officer and iphone. promote decisions to him to foxconn's senior division a light on potential successors. he's expected to step back from if he-day business contests the presidential election next year. to a sharecloser sale in hong kong with sources
telling us that it has two banks picked two of them to lead this offer. asia techg in our reporter. where are we with this? sources are telling us that alibaba is expected to file within weeks that they have chosen cicc and credit suisse as their lead banks. more banks.king to maybe they will bring them on. the company is expected to raise $20 billion. if this is successful, it would be the largest share sale in 2010.ong since >> and this should worry you as markets. why? that's the title. >> oh. because it's the message that it brings. is -- laibl alibaba is listed -- alibaba is in new york and it's looking for a listing in hong kong. what if this is a trend? tonese companies looking come here. coming home. and where people understand the model better and you might be
able to get a higher valuation. and maybe not get caught up in war.rade and all of the implications. >> why would these two banks chosen in particular that you mentioned? and we'll come to that. no u.s. banks in the lead here, that.ing to is that -- >> yes. cicc, a no-brainer. they actually own a minority in this chinese investment firm anyways. credit suisse, they were involved in their new york i.p.o., that helped them raise a record $25 billion. investment has -- i think that's what alibaba really cares about. like you said, there are no u.s. of now. that doesn't mean that they're u.s. investment brokerages in the future. we could see more names being brought to the table. >> the bigger issue here is, you mentioned of course, should u.s. markets worry. thing, you have a tech
board in shanghai that's up and running. as an alternative, i guess, to u.s., but the u.s. still has the deeper, sophisticated investors. >> and enough tech analysts that can cover things. bigger.t way, way if you look at even -- i didn't remembert time but i the market cap of alibaba itself was something like, i don't know, 15% of the hong kong market. and it tells you -- i don't know what the latest numbers are. theust tells you how deep and -- are in the u.s. >> you and tim are writing a piece of what a brilliant idea this all is for alibaba. come to hong kong. >> yes. >> yeah. i think it's a hedge, right? it's a hedge from being overexposed to the u.s. market. they have hong kong, which is tradedplace where it's in dollars. so they still have foreign currency, which, by the way, the you.hai board doesn't give so i mean, you have all the advantages of being in a smaller market. so, yeah.
>> all right. thank you so much. our bloomberg opinion columnist and of course that's her story, asia tech reporter. possible listing here this year. we're looking at markets. >> yeah. markets moving on, that news that you broke here about cicc for this ichiro. we are seeing all these alibaba assets already rallying here today. alibaba health, information up close to 3%. kong exchange obviously benefiting from it as well. cicc, the biggest gain we've seen in four months for the stock. some of alibaba investments as well. so certainly rallying here today. one of them as well, up more than 3%. also watching one other chinese tech company, chinese literature soaring after announcing a program here. buying back about 500 million ang kong dollars over six-month period.
we see the stock climbing the most since late -- i should say on monday, the announcement. so 6.7% is what we're seeing here. course, this is a company as well, having a great day there. let's check how india is doing as well. let's bring in our reporter. many mumbai. good to see you here. how are things looking today? mildlye expecting a positive opening for the indian least that's, at what the exchanges are indicating. even in yesterday's trade, we've witnessing booking at higher levels, around the 12,000 that's acting as a big resistance for that. overall the broader markets are have beenhich underperforming. for the entire listing, on the national stock exchange, was in favor of the decline. going by the internals, some bit of positive cues coming in in
terms of buying from both as foreign well institution investors. however, the buying which came cameom the fi desk, it after three days of selling, though the buying figure was pretty much muted. a meager figure that was reported yesterday. >> thanks. in mumbai, from our bloomberg correspondent. going chart tore chart to compete for our votes. chart.he it is next. and this is bloomberg.
>> it's that time of the day, battle of the charts. andrew james taking on our breaking news reporter, going to be puttering their best -- putting their best charts against each other. >> you see, bottom of your screens. let's kick things off in singapore, with andrew. >> hi. well, the two lines you can see crude priceare the and opec's total oil production. can see, opec's production has been going down this year. is the group's agreement to the less, to balance market. it has kicked in. after a bit of a delay, brent
to those cuts and has gone up. but then, of course, has run five,rouble in the past u.s.-chinaas the trade situation worsened. you can see it dropped there in the red box. what this chart is predicting is that opec is going to need to deeper if it wants to continue to prop up prices, of trade get some sort breakthrough of course. >> like you were saying, the best cure for low oil prices is even lower oil prices. >> well, over in the thailand, foreigners are the biggest net buyers of thai debt since august of 2017. there are expectations that the will not be raising and may actually cut their benchmark rate indeed. and thailand's nearby neighbors, and as india, malzahn the -- malaysia and the
philippines have all cut. expectations that the bank of thailand is likely to refrain from cutting their rates. combine that with the current account surplus and ample reserves. is expected to continue outperforming, especially in a time of sell-off in emerging markets. so people are betting on more appreciation of the thai bot. >> all right. primm, for me, it's your second time winning. exhibit a,have second time. >> and i'm really sorry, i'm to primng to give it here as well. sorry about that, andrew. charts we'vethe just been showing, a recent on bloomberg. we also save them for future reference.
♪ emily: i'm emily chang in san francisco and this is "bloomberg technology." hour, up in the next salesforce's biggest deal to date. salesforce agrees to buy tableau software in an all stock deal valued at more than $15 billion. plus, president trump signals he wants to investigate the big tech "monopoly." we will speak to a former top u.s. antitrust official about the state of play. and