00:00 Speaker A
While Chinese officials are said to weigh a new Gulf of Stimulans to prevent American rates, according to Bloomberg. The potential measures come as in -depth fears for an increasing trade war with the US, has thrown global markets. Hong Kong's Hain Seng index led on Monday morning under Asian shares, with his largest one-day fall since 1997. Leland Miller, co-founder and CEO of China Beige Book, is now joining us. Leland, great to talk to you this morning. Thank you for coming to us.
00:32 Speaker A
Um, I want to start with what we see in terms of China who responds here in the United States.
00:44 Speaker A
Do you think there is an opportunity to close a deal with China when it comes to rates, or has the US over -playing his hand when it comes to Beijing?
00:56 Leland Miller
I don't think this is, this is pro or negative a deal. Uh, there would always be a negotiation or a run -up to a negotiation. There would always be an increase in leverage. We will increase rates. A number of other things were going to do and then it would offer to take part of this stuff if Beijing did what Trump wanted him to do. So I think the, this does not really tell a story about whether there could be a phase two deal negotiation or not. Uh, what you see is a slope in rates, very dramatic, much more than the expected markets. And then an unexpected Chinese reaction, which was intended to look mutually, but really touches rates and a number of other things. So I don't think this tells a story about a phase two action or not. I think it tells a story that China has not been yet, but will soon be the story when it comes to rates.
02:14 Speaker A
And so, as you know, China has different types of measures that they can implement here. They can take revenge, capitulate, devalue their currency or stimulus or spend a combination of them all. What do you think is probably from China or do you think it's all the above?
2:35 AM Leland Miller
Well, it depends on whether what's happening. I mean, you are now, you are, you, what China has been doing in recent months, has armed the gun. It has prepared the land for a larger tax stimulus if they need it. It offers the idea that monetary stimulus will continue and accelerate. Uh, so there are all these things that, you know, arm the gun for when they see how the landscape is going on. Uh, look, Wall Street has predicted 25 of the last two large stimulus explosions. So you know, the headlines will always be the same, China is going to do stimulans, China is going to do stimulus. It has never really been true. It is now interesting, because if you look at our latest data, we actually see transport construction companies that are the best proxy for infrastructure and tax expenditure. Uh, they started to set up their loans last month and, and the month before, they look at the possibility of doing something bigger, but I think you should actually see what the landscape is before China pulls the glass on a sort of, the lever to the lever on one of this kind of larger, larger movements.
4:12 AM Speaker B
What, Leland, what about this idea that this will force China to reinvent their economy, to finally leave that export -driven model, mainly to an infrastructure more to this kind of consumption -based model? This has been a bit of a chat in the markets in the last six months in the past six months in the past weeks or so. Is it possible that China can stimulate their own growth in this way, do you know, ticking all those household savings, etc. instead of the old model of infrastructure and export? What would you be about that debate?
04:53 Leland Miller
I think the debate is total nonsense. There is no evidence that has happened over constant statements that we are going to switch from investments to consumption, which we have heard for ten years now. If you see that some of these very large rates will continue, then China will have to restructure its economy, but it will not restructure his economy in the direction of consumption, it will restructure its economy to steer its overcapacity everywhere all over the world. So as soon as the US closes itself or partially closing, they will send more to Europe, more to Southeast Asia, more to the rest of the world. So unless the rest of the world has a policy reaction that could be on time, then China will simply double on his double down, which is more production, more exports. And look, this is not going on a crazy limb. She, she and the government and the party have said this time and again that they wanted to rely on productive forces of new quality, they wanted to produce more, they wanted to have a whole government effort to export the manufacturers to dominate the fourth industrial revolution. These are things they have said. I think we should finally listen to them.
06:27 Speaker A
How do you think China is to tackle their surplus if that is a kind of end goal of Trump's rates?
6:41 AM Leland Miller
I think that if the American government's question is normal, you know, buy more raw materials, make more purchases, etc., I think China would be very open to that. It does not require any form of restructuring, it should simply require some sort of short -term agreement to limit the trade deficit and make the figures look better. I, I think that if all their problems were to disappear from this administration and that everything they were asked were, they would be very interested in that kind of deal. The question is that the type of deal that Trump administration will offer them? I think it is very difficult to believe that everything you are going to see in A would just be again in a potential phase two. So I think there should be a series of questions from the Trump administration before we can evaluate this. Uh, but it really depends on what the Trump administration Beijing asks to do.
07:57 Speaker A
Okay, Leland, we have to leave it there. Thank you very much. Really appreciate it.
08:03 Leland Miller
Pleasure.
