Let's get to our guess now where yeah's head of research and chief Apack economist at Society General joining us from Hong Kong. So I should talk about including all these downgrades to China growth, but just want to start with the broader picture and certainly what we've seen from the FED at Jackson Hole. Do you think that we are going to see inflation get back down to two percent without causing some kind of global recession. Well, it's
obviously very very challenging. Um, the it's very clear that inflation is driven boast by supply and demand. So the FED has said itself that demand has to be destroyed to some extent to achieve their goal. So inclicitly that means, uh, it's going to be very challenging to to avoid economic pains. All right, let's get to the China picture, because we're continuing to see these downgrades coming through from the Economy of Bloomberg survey now projecting China growth just three and
a half percent this year. I mean, that's well down from other projections of three point nine. But even the five and a half percent growth target the authorities had said, what kind of challenges are we still saying in terms of your view of how we even get to three and a half percent growth. Okay, so there are two
things here. One zero COVID policy, this is becoming a persistent drag on the economic activity and more importantly the confidence of households, and then the and the corporate and the second problem equally equally challenging is the housing situation. The housing was already in a very bad shape before the Sean high lockdown, but it has gotten worse um because of the developers cash flow problem and the project delays and all that. So the was these two big issues.
The Chinese goverman, however, has not done much um. This is really the surprising part. And if they continue to be slow to respond, the three point five percent would be difficult to achieve. What more can be done in your view then, because I mean you do have some kind of policy action in terms of the cut to the MLF recently and that one forty six billion dollars of stimulus pledge. But but what is needed? Is it
more targeted towards the property sector in your view? Yeah, certainly that that should be one very important past to take um. Because the key here right now is to restore the households confidence in the housing and this is about finishing these stored projects and deliver the presol departments to the households. Without that, nothing else can happen. So so the government. It's very clear the developers have no cash flow to do that, and not even the local governments.
So here we actually really need the central government to step in. And here we got some news but no confirmation, so that the lingering uncertainty is not not good. Let's look at the currency moves as well. I mean, the fourth day yesterday of a stronger than expected fix gives you some kind of indication and authorities are not that happy with a near two year low with the one against the dollar, and you saw the on and off shore pushed past six point nine. How much further weakness
for the one? You've got Goldman saying now seven? And uh, and I guess what kind of further implications are you expecting the weak currency to have on this economy. Yeah, we also think seven is quite possible in the new turn. The trouble here is indeed the hawkish FED we talked about and p BOC is in the pressure to to ease to support the economy, and of course the p
BOC once in a while would come. You want to slow down the pace of the depreciation, but according to the past experience, they can only slow, but then they can never stop. So we think there's a more depreciationing in your turn. Okay, so more appreciation to that point of around seven. And just a quick word as well about the business survey that we've seen with American firms optimism about China fall into a record low. I mean, if you have expats leaving, this is going to cause
even further I guess weakness to the economy. Yeah, so certainly, I think this is a reflection of what we just discussed about the confidence confidence shock from the zero COVID policy. Of course, there are also other factors making people more borrows to these days, but this is really the biggest issue. If you can't have the certainty of business continuity, operation continuity, understandably, you know, companies were not want to invest. Let's talk
about the situation in Korea. We had our Kathleen Hayes speaking to the bank of a career governor re at Jackson Hole and the city saying that his comments could raise some hawkish risks in the central banks monetary policy re basically saying that the Bank of Korea won't stop tightening before the FED. What's your kind of outlook here on the Korean one economy? Excuse me, I should say, and also the complications of this one at a thirteen
year low. Yeah, sure, So the current economy obviously is going to slow because of the the the external demand is on the path of deceleration. It's actually already started. And given how important it is for the current economy, it's hard to see how how can how Korean girls can can remain resilient in this environment. But meanwhile they also have an inflation problem. The headline has peaked, it's
likely to decline here. But Korea has a little bit of the same dynamics as in the in the West, which is, you know, the labor market is tightening, so there is demand pool inflation. So that really means yes, the bok has to continue to to hiking trust rates as well. You talk there about inflation. I think the governor said himself that he expects inflation too slow below three by the end of next year. Are you're saying more broadly inflation picking across Asia? Well, it is coming.
Right in some countries, it's already here. Um. The for example, in in As we can see you know, the there are both demand pool and supply inflation. In countries like Sinkle, Singapore, Korea, Australia, they have a titan labor market as well. So in these places inflation is definitely broading beyond the food and energy it would be harder to contain. Well, speaking of beyond food and energy, we've got a Bloomberg intelligence pace saying that the surging Singapore rents us something that's going
to keep inflationary pressures high too. Does that kind of I guess, spur more investment demand for residential properties and and I guess the housing market in Singapore or does it call that demand? Uh? That will come um for sure, but in the short term it's probably is still going to take the policy titaning to cool some of the demand, um,
usually the housing projects. That's gonna take time. Um. And in this case, you know we're talking about you know, the idea that inflation in Asia is actually also a problem for a lot of the central banks if they have to hike not because of fair is hiking, but because they also have to come in their own inflation. Well, yeah, let's talk about where you are in Hong Kong, because that has its own challenges to as it follows the
dynamic COVID policy. And we've talked here about businesses in China, you know, not being very optimistic and and of course the exodus too of the brain drain in Hong Kong. What's your what's your outlook for Hong Kong? Does does the city sort of come back when we get these tough restrictions eased or as Hong Kong change forever? Well, um, it's hard to say at this stage, but apparently it's
going to have a couple of difficult years ahead. One is because Hong Kong still have a pretty a restrictive entry policy well compared to the rest of the world, so that's not going to help. And once people are leaving, it's going to take time for time to come back. And the other thing is Hong Kong economy is very much connected to related integrating into into China Milan, and China is not going to do well in the coming few years probably in terms of growth. It's there is
a recovered there is also a structural their problem. They need to resolve that's got to take time, all right. Thank you for your insights. Where y'ao is Head of Research in chief apack economist at Society General, joining us from Hong Kong,