Our guest is Larry Who, head of China Economics at McQuary Group. Larry, lots of time to talk about China and the Asia Pacific, but I do want to ask you about these comments from FED officials. And I don't think we want to make too much of it, but they're talking about, you know, being somewhat concerned about what's happening globally, and they also, uh you know, are saying that they they're concerned about financial conditions. Could there be one reason why we're seeing a little bit of a
let up in some of the risk off tone in markets. Yes, I definitely I think now, you know, as a as Antina economist, you know, for China faced a lot of uncertainties, but of course on the FED hiking cycle under the Titan, the financial condition globally definitely is a head wind of faced by China today, which gonna you know, I want hand the impact the market, the risk epetite. Also you're not going to impact China exports later on. What is happening to is this very strong dull and that is
fading through into Asian currencies. We got do you want there? A fourteen year low inviting more aggressive pushback from authorities in China. What are you expecting to say from the central bank? Uh? Well, you know, I would say so far that intervention has been pretty mild because the weakness of UN is mainly driven by the strong dollar. If you look at the UN against a basket of currency,
it has remained pretty steady so far this year. But of course, you know, if you are in the UN continue to weaken, we're probably going to see more intervention,
more powerful intervention from policy makers. You know. For for instance, they can roll out, they can use the so called counter cyclical factor, which means that you know, fixing because the daily fixing a bitter stronger than usual to send the market a very strong signal that PBOC one uh no a step a stable UN instead of a sharper depreitiation. So this has been a really strong risk off market. There's a couple of huge pivots that are out there, um that will happen at some point, but when we
don't know. One is China perhaps easing up on COVID zero. Maybe the experiment that we see in Hong Kong is is a forerunner to that. And the second big pivot would be that the Fed says, Okay, we can take a pause here. Which of those two do you think happens first? And about when? Well, that's a that's a very hard to connect. The vailability is pretty it is
pretty low. But our house view is that um, the FED probably gonna pause um in first quarter next year and probably you know, given the US economy slow down quickly. On the for China side, my base case is that we're going to see some gradually losing in zero COE policy after the Party Congress. Uh no China and likely to live with the COVID overnight. Which but but I think they still can you know, losing a beta on the margin, you know, regarding the current zero COVID policy.
And I actually I think there there is a certain payor could happen, which means that the China could China policy action means policy easy and could have been more decisive. Larry, we've been talking about a lot of the headwinds that the China economy is facing. And we know about property, we know about COVID. You're also saying the population and
the aging population is something we should be watching closely. Uh, Well, that's more about the long term structural thing, right, so I would say the long term structural easier for China is I think the two biggest one is that, as you said, one is the aging population and the other is where the China could have moved into a new growth model which less driven by investment. Right. But I would say the cyclical part, as you mentioned, mainly from
the zero COVID side. On property side, Larry, we talked about the Macau opening a little bit yesterday. Yeah, it's not a huge thing, but announcing that group tours would be um would be facilitated as soon as November, and although it may not affect the casino names themselves, so those stocks rebounded. So I know you're an economist. I only mentioned that because it shows you that people, investors, everybody is waiting on some sign that we're going to
get some loosening. Now. I know that you're thinking that COVID zero it's impossible for them to change that. They can do other things like they did with Macau. Are you looking for other measures to really increase the animal
spirits in China? Yeah, definitely. I would say that I think that they're gonna change zero COVID one day, but they're just in a gradual way, right, in the sense that the Chinese is not going to live with the COVID overnight because it takes a lot of more to towards that, for instance at the East, and there's some changing p and the tone, right, But I do think that you know, as you said, um, some loosening in zero COVID is very important to the animal spirit because
that's closely related to the consumption side in China, and you know, consumption accounts for fifty of China economy. That's a big and so far this year it has no growth. Right, that's a big drag to the Chinese economy. That's not likely to really change the needle until next year, though, what are your forecast for three when we see the likes of Goldman slashing there forecasts for China's growth, Well, at this moment, I expect trying to grow fivepon five
percent for next year. I think in large part because the base this year is very low, and I think of trying to could do more in losing zero COVID policy to boost the consumption and do more to support the property sector. But of course for next year, the vliability is pretty low. It really depends on what are
they gonna do after the Party Congress. Yeah, the Party Congress coming up, and a story that we haven't really talked about too much, but I think it's something we need to at least raise today and perhaps with you as best. She jumping hasn't been seen in public for about ten days or so. Any significance at all, Well, I don't have strong in insight sound on this cue, and we're probably we're going to continue to watch why he gonna appear again and looking to to the Party Congress.
I mean you've mentioned what you think could potentially be a little bit of an easy in some of those dynamic zero COVID zero policies. What else is is really needed in terms of a tangible move here we mentioned the property sector, but just really trying to bring the economy up. Well, I think what what really needed at
this moment of two things. Why is zero COE policy which related to consumption, and the other is I will say probably an escalation of policy stimulus from here right so far this year you will give the downward pressure we do see. You know, China policy makers throw out the more and the more policy easing, but so far they have largely played catch up instead of be pretty
very proactive. It's it's pretty it's a bit different from what they did in the past, right So I so, so I would think that after the Party Congress, probably they're going to have the time under the freedom and to do more in terms of policy easing from here. Yeah. We even our headline from Bloomberg Intelligence is that the Communist Party Congress is limited a little bit by the FEDS. So let me ask you a question I posed before the break. What's the FED going to break next? Uh?
Give you three choices? Okay, Basically what's looming is corporate earnings and secondly jobs and then the U. S economy itself. Uh well, no, I don't. I don't really have no strong insights on the US economy, so probably I cannot give you the exact an answer. But for me, I think of for China probably under the main impact is on exports. So I think in the next six to twelve months, is Tchina exports going to continue to trend down? Alright?
Great to have you with us. Larry Larry who head of China Economics at McQuary Group in our Hong Kong studio alongside Brian