Welcome to the Bloomberg Daybreak Asia podcast. I'm Doug Chrisner. We know that Chinese officials are moving to revitalize the domestic economy by focusing on domestic consumption, and in a moment we'll take a look at the Chinese consumer as well as consumer behavior right across the Asia Pacific with David Mann. He is the chief economist for the APAC at the MasterCard Economics Institute. But first let's get reaction
to the report on US consumer prices. In the month of November, Core CPI was up three tenths of one percent month on month and year on year, a gain of three point three percent. Now, both of these readings were in line with expectations. For a closer look, we're joined by Robert Shine. He is the chief investment officer at Blanky Shine Wealth Management. Robert, thank you so much
for making time to chat with us. I think it's fair to say that the CPI print deepened the conviction that the FED is going to cut interest rates next week by twenty five basis points. But I'm wondering when you look at the inflation story here in the US, whether or not you're seeing signs of concern beneath the hood, are you.
Well, the market actually cheered from this report, even though we saw it tick up a little bit. Obviously we have PPI as well tomorrow. It's going to give us another sort of indication and read. But the CPI itself, you know, the inflationary impulse underlying in the economy is on a downward trajectory, which is welcome. That's what we need to see, That's what the FED needs to see. Clearly, we had FED fun futures point to a ninety percent
cut for next week, so that'll solidify that. But I think the real concern, I think this is what you're asking is in twenty twenty five, the concern is is that inflation rears back right and so it's still stubborn and we see an uptick in inflation which could pull the rug out of under the what we're seeing in terms of the rally. There's a lot of great setup as to why the market can continue to grind high
and higher highs in twenty twenty five. But the biggest problem I think for the markets and investors to consider is if inflation is still there and it basically gives the pausing effect on the easing policy for the Federal Reserve.
So I'm curious about what the house view a blanket shine is on the outlook for inflation next year.
Well, I think you got to look at from a bigger picture. Another reason why the market and the sentiment of the market is the Santa Claus rally is continuing, the trend is your friend, is because of sort of what the new administration's policy by way of the Treasury Secretary Scott Asset and Trump's appointee has basically laid the baseline and he talked about three things that he's going to focus on, which I think from a policy standpoint,
are instrumental to combat inflation, but everything else. One is the debt and deficit. So one of the key policy items that was proposed is to get the budget deficit to three percent it's currently at seven. Number two, get the GDP growth from two percent currently to three percent. And number three, which is most important, it's the inflation that we're all worried about, which is increasing. You know, drill, baby drill, so increasing three million barrels a day of
currently what we're us is producing. And they're going to deregulate and they're going to increase production. So you know as well as I do. Energy market is within everything, and I think that's the key. So if they could, you know, day one policy, you know one, get that in Washington and get their agenda moving through, that could help subside some of the inflationary pressures.
The government is such a powerful influence on the economy. When I'm listening to I'm wondering whether it's possible to reduce fiscal spending by that amount and yet produce economic growth at a rate higher than what we're currently experiencing.
Yeah, So if we look back in the last twenty four months, with all of the spending policies and bills that have been enacted, that has been inflationary, and quite frankly, a lot of that money. Like let's look at the Chip Sack. Last I checked this summer, it was a fifty four billion dollar passing of that act and only a billion of the fifty four billion has actually worked
its ways in the economy. That's a big problem because there's a lot of money that it still has to be earmarked for the future, and that spending is inflationary, so it's not going to be an easy road ahead. And as you know, eighty seven percent of the time inflation comes on two waves, but it takes some time. So we'll see how this plays out, but that would be the biggest concern in twenty twenty five.
So I hear your painting of the landscape, so to speak, and I'm more curious about what it's leading you to do in terms of putting new capital to work in markets.
Yeah, So I think twenty twenty five is going to be all its the anticipation that's going to be the theme
of the year moving in. And the reason why is one is going to be the Federal reserve right, the easing cycle, the front running of the Fed and trying to guess, you know, how many more cuts are they going to give us, you know, next year, and then all us alongside of that policy anticipation is going to be Washington right, tax reform, energy reform, even immigration in some parts of that as inflationary depending upon how it's going to be handled. So the theme is a lot
of unknowns. You have to have sort of a defensive posture with some cash equivalent not cash because cash is not your friend as industrates come down, but has some dry powder on the sidelines available to take advantage of some opportunities coming our way. I do see more volatility because of all the anticipation, meaning the markets are going to front run, you know, some great news and headlines, and then reality might set in, right Congress might you know,
might not agree on everything. So we're going to have to wait and see how these plays.
So dry powder to deploy when opportunities present themselves on the horizon. Is that a euphemism for a pullback that you're perhaps anticipating in the near term.
Yeah, we're long overdue. I can see well into the maybe the first quarter market continues, but you know, any sort of you know, geopolitical or again disappointment from Washington on policy or anything that shows that the federal Reserve is going to have to take a pause, we're going to be pulled back.
So where are you on markets offshore, particularly Asia? We know that China has been doing a lot to stimulate the demand side of the equation, not just supply, which is a little new I think for Shi Jinping. Is there anything interesting in your view in markets offshore, particularly Asia?
Well, definitely, given what we're seeing in the global markets. You know, we're seeing markets cool off if you will. And so over thirty percent of the global banks have cut right now, and three of the five countries have stimulated, most recently China with that big announcement, and that's you know, long overdue. They've had years of even dealing with that real estate crisis and unwinding that and that takes time. So to get the consumer back in, the investor back in.
I think those announcements that the government's willing to stimulate is going to be welcome and they could make the Asian markets more interesting in the new year.
We had a report to earlier today being generated by CBS News saying that President elect Trump has invited Chinese President Chi Jinping to Trump's inauguration. It seems like an olive branch, even though the new Trump administration is threatening tariffs. When you look at this relationship US China, what does it lead you to conclude in terms of a new trade relationship. Is it going to become more adversarial or will something new and favorable get worked out at the end.
So I would encourage investors to watch actions, not headlines. Right, there's a headline a day that spokes and sircs fear into what might happen, right, the anticipation effect of what might play into the tariff war, if you will, A lot of that's rhetoric. I think if you go back to the very first day of the Trump administration, he
jumped on a plane and went over there. That was one of the biggest messages that even though adversarially the headlines and the media and the global communities want to make something of that, by Trump actually making an actionary point to go over there was a very big first step. And obviously he threw on three hundred billion dollars worth of tariffs even though they shook hands and broke bread. However, the Biden administration kept on most, if not all, that
three hundred billion in tariffs. So tariffs are in there. I don't see, you know, if we look at Walmart today, I don't see a lot of the goods that come from China on our Walmart shriff shelves in the United States. They haven't gone up exponentially relative to anything else. So they can work. They are a sort of a tool to get somebody to the table to discuss what would be a fair, equitable outcome for all parties.
So we're talking about tariffs as one part of the incoming administration's economic policy. But you kind of alluded to this early, which has to do with deregulation. So if we can accept that as an endgame, is it necessarily the case that we're going to see a lot more in the way of merger and acquisition activity.
You're exactly right. In fact, if you look at the US markets in the last twenty four months to even thirty six months, we haven't seen IPOs, we haven't seen m and A. But if you start deregulating, think about it, right, energy sector, healthcare sector, and a few others, even the financial sector with the reserves put on banks, and that's where we saw the bank rally since election day here
in the US. There's going to unleash some animal spirits in the marketplace and we could see a pickup in M and A and IPOs, and that's where we were confident of markets moving higher in the new year as well.
Robert will leave it there, Thank you so much for joining us. Robert Chine is the chief investment officer at Blankie Shine Wealth Management, joining us today from here in New York City on the daybreak. Asia Pont Welcome, back to the Bloomberg Gay Break Asia podcast. I'm Doug Chrisner. As Chinese officials take steps to stimulate their economy, domestic demand is getting a renewed focus. To help us understand
the impact, let's bring in David Mann. He is the chief economist for the Asia Pacific at the MasterCard Economics Institute. David joins us from Singapore. Thank you for being with us. David, and I'd like to begin by talking about China. We can get to the rest of the Asia Pacific in a moment. I'd like to get your take on the messaging that we are getting from the polit Bureau meeting and what that may mean for retail consumption in China.
Well, I think the best way to think about the change in the messaging that we're seeing from policymakers in China is one in which they're looking to leverage the potential that there is from the consumer spending power that China does have. It has a relatively high savings rate, relatively lower portion of consumer spending within the economy compared to elsewhere. That's partly, of course, as a result of the higher levels of investment that has been in place
in China. For many years, but finding ways of releasing some of that consumer spending power, releasing some of those savings and converting them into consumption could really help to support the economy in twenty twenty five. It is one of those key things where whenever we've been asked over the last few years, as we've been watching the weakness and the housing market, the weakness and confidence, the weakness and investment, what could turn this around? What could really help.
One of the big things is of course on consumer as well as business confidence and consumer spending. So any measures that put more money in people's pockets give them more confidence in general on their own economic personal economic outlook would of course be things that can then turn into even more of that spending and could really draw a line under the growth rate at least next year.
We know long term there are still major challenges with the economy looking at a story of demographics which is in decline as a contributor to growth. But there are a few exciting industries around the world that are popping up, in particular being driven or supported by AI and automation that can really help to counter some of that demographic drag. But that extra spending that you could get from the
consumer side would be very welcome. We would expect amidst the sort of challenges that Channa's economy faces today and we'll be facing throughout next year.
I think it's very significant that the focus now seems to be on revitalizing domestic consumption rather than just dealing with the supply side. Is that striking to you in any way?
Yes, it does make a lot of sense that after so many years where you can't really argue that there's a lack of infrastructure that enables growth, that there's plenty of that that's been built out over the last several decades, that really it is more about the demand rather than
the supply side in the economy. Of course, with investment also, we do note that because there has been that trend slowing in growth in China, companies even from China are looking to invest more outside of the country and going out to find more growth opportunities, whether it's all around the rest of the Asia Pacific region or even further afield.
And so for the domestic economy, the investment side is probably is already that much softer, and so there's even more of that shift in the direction of having the higher portion of consumer spending that you see in other major economies. We think that is the sort of trend that makes a lot of sense in the case of China, that we should go in that direction.
Do you have a sense of the ripple effect and how this economic stimulus may kind of filter through markets across the Asia Pacific.
That one is more of an open question until we know more about the specific details. The one thing that we look at at the MasterCard economic sensitie when thinking about the outlook for say, other parts of the region and what the impact is from other major economies around the world, whether it's the US or China, as the
case may be, the two biggest economies. The big one we're focusing on is through the lens on travel, and on that front, we have not yet seen the complete recovery, at least looking at the official travel data that we can get from China for the outbound traveler going all around the region or anywhere else coming from China. Now, this is something that still means there is a source of extra recovery still yet to actually happen in that space.
The interesting thing though, is when we do see it, is it a more confident traveler or is it a more cautious traveler. When you look at some of the data we've been seeing, for example, out of say, there is more evidence that there is a softer spending than used to be the case, that there are people that are traveling in not spending quite the same way that they used to in twenty nineteen. But at the same time, we're not fully back on the economy itself in being
in a stronger position. Neither are we fully back on the total volumes of people, So just the shar volume story would be helpful. Another location where also this is a major focus is Thailand, for example, in the region where China pre pandemic was such an important source market for the tourism industry, and we think that will go back.
In that direction again.
But in the meantime, while the China recovery has not been full, we have been seeing other markets, including further afield in Europe or the US, but particularly including India, starting to fill in some of those gaps all around
the region, actually including in Thailand Vietnam for example. We noted in our travel report earlier this year that it is it now sees two and a half as many times travelers coming from India into Vietnam compared to where we were in twenty nineteen, and with the projections we have for the scale of the rise of the middle class and the upper income consumers in India over the next ten to fifteen years, the total numbers of people traveling could be approaching the sort of numbers that we
had pre pandemic out of China over the next fifty or by the end of the next fifteen years.
We can't lose sight of the fact that the US and China are bracing for what appears to be a renewed standoff. This obviously after Donald Trump campaigned on implementing some fresh tariffs on all Chinese goods, Do you have a sense of the impact? Maybe that's too much to say at this point. I mean, perhaps the thread of tariffs is a negotiating ploy, but let's assume for the
moment that some are implemented. Do you have a sense of what the impact may be, not only in China but in the APAC more generally.
Well, the main thing, I think the main thing people focus on, rightly so at first, is on Okay, how bad is it, how damaging is this to the amount of exports, for example, that we would see going directly from China into the US as we saw last time around. Though I would note that the ratio of China's exports to global exports is about the same as it was even compared to before twenty seventeen, so the main change has been China exporting more to other places around the world.
The other thing is, if we do see that weaker demand, the weaker overall growth number, it certainly adds to the reasons why you would then see even more of the stimulus measures and even more of that much broader based, stronger types of stimulus measures out of China to counter it. Now, the other thing, those are the points with the negatives
and how to counter it. The other thing we should be also focusing on is this also may well be adding to an acceleration of FDI inflows into many other markets, whether it's around the Asian region including Vietnam, or over into parts of Africa, or even into India, where we see even more diversification of supply chains. Even more companies around the world from all parts of the world, whether it's from the Asia Pacific or from the US or Europe.
Looking to be producing in multiple locations. Of course it needs to make economic sense, but that's spreading out of where it goes and seeing more of those FDI flows. That is something we were very focused on, and we would note that actually the outbound FDI, the cumulative amount of FDI that China has been accumulating in the last few years has been quite noteworthy already and that would most likely also accelerate.
So you're obviously in Singapore, I'm here in New York City. Is there something that people in my neck of the woods are missing when it comes to understanding the dynamics right now? The economic dynamics across the Asia Pacific.
I think the main thing that I would stress is there's so many different stories to be told across the Asia Pacific region. So we can talk of course I mentioned China and India earlier, but even within say the Asian region, which is a collection of very divergent markets all the way from low Cambodia through to Singapore which is a high income advanced economy. That is I think the key thing to be watching for that there's so many stories all the way through and everything in between.
When we think of the major the biggest market in the Asian region in Southeast Asia being Indonesia, and the key thing I think that is really going on that I think has been underappreciated, maybe on a global scale at least, is just how many reforms we have been seeing that are helping to boost investment and growth around
this region. I mentioned India. I think that is a top story in that regard, given it is a place where we believe it will be the fastest growing major sized economy in the region, and indeed even globally, it also has the scale of population to go alongside that
growth potential. But on top of that, places like Indonesia also have been implementing policy reforms, finding ways or looking for new ways to boost key sectors of the economy, whether it's tourism or other types of infrastructure buildouts that
would enable even more growth on the industrial side. I think that's the other thing now on top of that, I would stress, and that's particularly where we bring in Northeast Asia as well in Southeast Asia, is thinking about just how much innovation we've been seeing that now is coming from this region in terms of just how rapidly so much new technology was being developed or new approaches were being developed and rolled out in Asia Pacific and
then being rolled out to the West. I think expecting it to be a source of innovation even more in the future is another thing that I think really folks should pay a close attention.
To, and we will, I'm sure in the year ahead. David Tank, thank you so much for being with us. David Mann there, chief economist for the Asia Pacific for the MasterCard Economics Institute, joining us from Singapore here on the Daybreak Asia podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in
the Asia Pacific. You can find us on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere else you listen. Join us again tomorrow for insight on the market moves from Hong Kong to Singapore and Australia. I'm Doug Chrisner, and this is Bloomberg