This is Bloomberg day Break Weekend, our global look at the top stories in the coming week from our day Break anchors all around the world. It's straight ahead on the program, a look at the US labor market with the February jobs report.
I'm Tom Busby in New York.
I'm Stephen Carol in London, where we're looking ahead to the UK government's budget announcement and a key political moment ahead of the elections.
To you later this year.
I'm Brian Curtis in Hong Kong. We look ahead to the National People's Congress meetings in Beijing next week. What sort of prescriptions will they have to fix the Chinese ECONORESS.
That's all straight ahead on Bloomberg Daybreak Weekend.
The business news you need to wrap up.
Your week, Available on Apple, Spotify, the Bloomberg Business Happen everywhere you get your podcasts.
Good day to you. I'm Tom Busby.
We begin today's program with a look ahead to the February jobs report here in the US and the state of the US labor market.
For a preview, We're joined by.
Michael McKee, Bloomberg International Economics and Policy Correspondence. All Right, well after a big upside surprise in January, three hundred and fifty three thousand jobs added. What are you expecting to see for February.
Sort of a return to what was considered somewhat normal. The forecast at this point is for one hundred and eighty thousand jobs. That may change ten twenty thousand either way as we get more data in between now and next Friday, but basically that's roughly where we have been for the past year two years. The revisions hired to December and January were quite a surprise, and nobody thinks that that can be sustained. But if it can, you watch the bond markets move.
But the unemployment rate expected to hold steady three point seven percent. That would be about two years under four percent.
It would be one month over two years. Yes, two hours a month, and that is probably well, it's close to a record nineteen sixty eight. I think when half of American men were serving in Vietnam, so there weren't as many people to work. That was the last time we saw anything like this. The question is is if the unemployment rate stays that low, do we see any inflationary impact from that? So we'll be looking at average hourly earnings very closely. They were up six tenths of
a percent in January. Now that there may have been some distortions in the data that led to that, but they're only expected to be up two tenths of a percent. So if that's the case for February, then we can have big job gains and the FED isn't going to worry about it.
And I mean, let's face it, there are challenges right now to the labor market, not just AI jobs and automation jobs, but we've seen a lot of corporate layoffs being announced. Big ones Cisco Systems that's four thousand jobs, as to Lord three, one hundred, Nike, Expedia. I mean, none of these or most of them are not tech companies. So there is a change going on.
Well, there's a change going on, but it is not going to be as bad as it appears. If we see a huge wave of layoffs, that would be one thing. But what we're seeing is a lot of companies sort of right sizing what they think they need for the months going forward. And what happens is that companies always announce layoffs either in a press release or they do it as part of their earnings, but they don't announce hirings.
And so when you look at what happens, there are millions of jobs lost every month and there are millions of jobs gained every month, and the number that we report is the net difference between the two. So, yes, there will be a lot of layoffs going in to the data. But is it significantly more than usually happens. That's going to be the question going forward.
Well, it's sort of like Apple.
They're going to eliminate their EV unit, no electric cars, but two thousand workers will just work on AI.
We're going to shift right over.
And a lot of the jobs that companies cut are cut through attrition anyway, so they're not affecting the unemployment rate because people are not all of a sudden unemployed.
Gotcha.
Another big event this week you want to talk about, and that is FED Chairman Jerome Powell is going to be on Capitol Hill.
That's always a big deal for Wall Street. The chairman is the one who sets the agenda. Powell basically says he's not driving the agenda the way that Alan Greenspan did say or Ben bernanke. He's much more collaborative, but it is still the Chairman to whom everybody defers, And so what Powell says about the economy is going to be worth a lot more than what any of these other Fed officials, as important and as smart as they are,
have to say. So you're going to have everybody tuning in, particularly to his opening statement, to see if he makes any kind of reference to when or by how much they might cut And then they'll be listening for Q and A for his reaction to things like layoffs and how strong the labor market is, and whether they think the January inflation numbers, whether CPIPPI or the PCE really reflect what's going on with the strength that they showed.
Well, I know you'll be listening and you can hear Chairman Palace testimony Wednesday and Thursday live right here on Bloomberg Radio. Well, our thanks to Michael McKee, Bloomberg International Economics and Policy Correspondent. And now we moved to the US retail sector and a closely watched fourth quarter earnings report out on Tuesday from Target, whether it may give us a more clear picture on the health of the US consumer and how stubbornly high inflation may be affecting spending.
Now for a preview. We're joined by John Edwards. He's Bloomberg News US Consumer team leader.
John. Thank you for joining us.
Great to be here.
Well, let's start with what you expect the headline numbers to be from Target in this what's the holiday quarter an all important one?
Yeah, Well, what we're looking for is continued decline in same story sales from Target, and they have, you know, had that figure going down for some time now. The previous quarters report did excite the market, largely because of improvements in inventory management. So we'll be watching to see
if that continues. But you know, the stock is up pretty significantly since that report, so expectations are fairly high, even though the business continues in some areas to struggle, you know, So we do expect those same store sales to be down once again, but you know, we'll be looking for the trend what they say about, you know, what they're seeing in terms of continued consumer strength. That was you know, certainly something that Walmart pointed to in their results recently.
Yeah, the same source sales drop, not just Target, not just discounters, it's across the board.
Is yeah, yeah, I mean, yeah, we're you know, we're we're seeing some some retailers managed to uh to bring those sales up a little bit. But but yeah, it's uh, you know, the consumer is resilient. But but picky is is what we're seeing. You know, people are being very uh the way Walmart put it was you know, choiceful in Uh.
That's that's a new one. Choiceful wow.
Yeah, in in how they approach their their spending. So you know they uh, you know, employment remains robust, so that's that's a support. But uh, you know, inflation, even though it's moderated, remains you know, elevated from you know, pre pandemic and people remember what things you know, used to cost only you know, three or four years ago. So so that's sort of of you know, reins in spending a little bit and has people you know, continuing
to spend but being picky about it. So given that target is pretty exposed to you know, those discretionary items, you know, the sort of general merchandise, that's part of where their struggle comes from in terms of bringing those same store sales up.
Yeah, and they know their customers though. They are a nimble retailer, and just last week they announced a new springtime clothing collection yep, with most prices under fifty bucks.
Who is it, Diane von Furstenberg.
There you go.
So, yes, they've had that tradition for some time of you know, enlisting major designers for capsule collections, and that has done pretty well for them.
Yeah.
They also have a new in house brand called deal Worthy. Yeah, and that is hundreds of items, some as low as a dollar each.
Yeah.
Yeah, so you know, they do have that value proposition as well. You know, so they certainly try to be you know, sort of current and somewhat fashionable, but always mindful of, you know, keeping those prices relatively low. Yeah.
Now, let me ask you about Macy's announcing that over the next few years it's going to close one hundred and fifty stores, and they're obviously pivoting toward a more upscale consumer, right with Bloomy Dale's Blue Mercury. Are discounters like Target Walmart going to be the beneficiary of those closing.
You know, to some extent, But you know, a lot of it depends on, you know, really the mix of retail in a given area. It's often there isn't a sort of one to one exchange between a you know, a big traditional department store like a Macy's and you know, more of a discount model like a Target or a Walmart. But yeah, certainly, you know, they can expect to see some pick up from from some of those lost shoppers, but a lot of it and a lot of why those stores are closing in the first place is you know,
a lot of it will just shift on line. And you know, and and certainly you know, Target, Walmart and others will hope that some of those online sales they pick up as well, but a lot of them will continue to go to Amazon. And you know, as as we've as we've seen before.
As we see in our own homes, now that that Target has made a big push online, it's also a subscription based plan like Amazon Prime, like Walmart Plus.
What what's the status on that?
Yeah, well, listen to here if we get any update on that. You know, our reporter Jaywon Kang broke the news that Target is considering a membership program along those lines, which could launch as soon as this year. We're not sure exactly when, but you know, and they're somewhat you know, late getting into that market, given that you know, Prime is well established and Walmart Plus seems to be doing
pretty well. But you know it's another way to you know, get shoppers to be stickier, keep coming back to your locations looking for those membership points.
Well, that's great, a lot to look forward to.
Well.
Our thanks to John Edwards, Bloomberg News US Consumer team Leader, and coming up on Bloomberg day Break weekend to look ahead to the UK's tax and spending plans for the coming year. I'm Tom Busby and this is Bloomberg. This is Bloomberg day Break weekend, our global look ahead at the top stories for investors in the coming week.
I'm Tom Busby in New York.
Up later on our program we look ahead to a gathering of China's top political advisory body and legislature. But first in the UK, the government preparing to present its tax and.
Spending plans for the coming year.
It could be the Chancellor, Jeremy Hunt's last chance to announce big policy changes before a general election do this year, but will economic headwinds prevent him from making his mark? The key question everyone wants answered, but will he prioritize cutting taxes over bolstering public services and for more, Let's go to London and bring in Bloomberg Daybreak anchor Stephen Carroll.
Tom The ceremonial red box used to carry the Chancellor's budget speech is being dusted off and speculation is rife about its contents. Jeremy Hunt and Prime Minister Rici Soonak have been at pains to paint themselves as responsible stewards of the UK's public finances, especially after the previous Conservative government sparked a crisis in the guilt markets with their
tax and spending plans. During the Chancellor's last big announcement in November, he promised measures to back British business and soothe the cost of living crisis. This time around, things might be working out in his favor. The UK's fiscal watchdog, responsible for checking the plans, has disclosed its preparing forecast, using data that will potentially improve the public finances and
create more room for things like tax cuts. But Jeremy Hunt will still have to balance steps that might please voters ahead of an election expected later this year and being fiscally responsible ahead of the lobby groups have been lining up with their shopping list for the Chancellor. On the Bloomberg UK Politics podcast, we spoke to the manufacturing group Make UK. They've laid out a plan for radical changes to how the British economy is managed, including splitting
up the Treasury into separate Economy and Finance ministers. Here's some of what make UK's chief operating officer, Ben Fletcher told us about what they want to hear from the Chancellor.
We are still one of the ten biggest manufacturing nations on Earth, and in the last twelve months we've actually overtaken France to move from ninth to eighth in the Global League table. So British manufacturing is strong, it's healthy, and it's a sector that is in a position where
it can start to grow. What we're looking for, I think is a recognition from government that we're a huge part of the economy, that there is real potential there, and we are making some fairly radical requests of government and indeed, in what's likely to be an election year the opposition parties as well, because what we're saying is there's a kind of hidden gem here within the economy.
It could deliver you some really substantial growth. It would support a huge number of new businesses and growing businesses. It would lead to growth in other considery and related sectors. Like logistics and so on. But what we do need, I think, is a bold vision for manufacturing and a policy agenda that reflects, that responds to that and really seizes the opportunity that we're presented with today.
Is this essentially about just wanting more money from the government. I mean, if you're looking for more defense spending, that's one way of funneling money into the sector that you represent. But the UK is never really going to be able to compete with it spending from the likes of the US.
It isn't just about money. I think what our central ask is for quite some time now and today really distills this and brings it together on the back of our big national conference. What we're saying is that we need a plan, and unlike most of our big competitor nations around the world, Britain doesn't have an industrial strategy and it doesn't really have a clear plan. Government expenditure is always important, and when we think about defense, very
importantly for our sector, big infrastructure projects as well. Government expenditure is vitally important for triggering private sector investment. But the really big message of today is that if we're going to grow, if we're going to deal with the very threatening landscape that we face if we're going to continue to be a major manufacturing power. The thing that we're going to need from the government, and the message that we're sending to the opposition parties is very consistent.
We really need a plan because the nations that we're competing with do have much clearer plans. That's very important for triggering in with investment. It's really important at the moment for triggering confidence. And when we think about both defense and infrastructure, we think about the challenge of net zero and moving our car industry in a massively different direction, We're going to need to have really clear skills policies.
We're going to need a massive investment in people leaving school and college the right kind of skills and the
right kind of qualifications. So whatever set of issues we look at, whether it be defense, whether it be challenging that zero, whether we think about some of the big challenges of automation and digitization, which are going to be absolute game changes in British manufacturing, what we need are a series of decisions by government that can enable us to have the workforce of the future, to allow the current workforce to transform but really importantly set a very
clear message to the big private sector businesses that they can have the confidence to invest because if we get government spending right, the thing that will absolutely dwarf that is private sector investment and we need the right landscape for that.
So that would make UK's Chief Operating Officer Ben Fletcher, speaking of Lizzie Birden and I in the Bloomberg UK Politics podcast. To help us look ahead to what to expect from the budget is our UK Government reporter Joel May's Joe, great to have you with us. First of all, how much do we know about how much money Jeremy Hunt has to play with in the budgets?
So we have latest forecasts that the OBI has been giving Jeremy Hudh and our latest understanding is that he has about thirteen billion pounds to play with. Now that is much less than he had at the autumn statement in November, and it's near an historic low. So he really is starting from a weak position compared to chancellors in the past, and that's the framework that he's having to wrestle with when coming up with his tax and spend decisions.
Yeah, so the.
Fiscal rules here are very important. Because there's sort of a guideline for how governments have to make these decisions. How important is it that he comes in under that thirteen billion.
Yeah, So the fiscal rule is that you need to have national debts falling as a share of the size of the economy within five years. It's self imposed rule, but markets like it, and it seemed to be the test that you need to pass to maintain in credibility with markets to respect that rule. And he's at thirteen
billion now. He would like to do things like cut income tax and cut NASH insurance, but each of those measures takes him closer and closer to breaking the rule, so he has to be careful about that, and we think that he's likely to want to maintain a buffer of say six billion. You always want to you always want to keep something above that that that that zero figure, just in case there are sharks, just in case things go turn for the worse. So that's why we think
he'd like to end up. Obviously, the other thing to add is that he can boost the headroom, and that's what you can do through spending decisions. For example, you could say, let's not spend as much in the future gives us more money to play with. Now there'll be a polity controversial thing to do, but it could boost the headroom so he can manipulate that headroom figure. But there are difficult choices, and.
Instantly you've actually put these difficult choices into a game that people can go on the Bloomberg website and play and decide how exactly if they were a chancellor for the day they do it. Just talk us through how the game works.
So yeah, it took me what thirty seconds a minute to explain that nature of.
The physical a so now you can try.
Yeah, So I thought, what better way could we do this? Well, let's make a game where you just are thrown into the scenario yourself and you have that headroom given to you, and you have to make choices. So you're right, We have this budget game on bloombog dot com where you can decide will you cut income tax, will you cutlash insurance, will you cut inheritance tax. You have all these tax and spend choices, and at the end of it, you're given a result. How would markets react, how would voters
react to your choices? We use our best kind of estimates of what's like to happen and you get a result. So yeah, I encourage all our listeners to play the game.
I mean, it's a really interesting exercise because you essentially it's because it's yes or no choices, do you want to do this? And then you know when you get to the end, it decides whether or not you've crashed
the economy. I think on our team we have about a fifty to fifty rate of who's crashed the economy and who hasn't, which I think is probably almost I'm not going to make a parallel to previous chancellors and how they've performed on this as well, but it says it lays out the difficult balance that has to be struck at a moment like this. We're also in an election year in the UK, so that means that also the Chancellor has one eye on what's going to win votes.
Talk us through some of the measures that we do think he's going to take when he gets up to make that budget speach.
So we think it's very likely you get to prioritize personal tax cuts because those are the tax cuts that are likely to have most impacts on the popularity of the Conservative Party and help them to win the next election, and so that will take the form of we expect an income tax cut of at least one percentage point on the basic rate. That would save people about two hundred pounds a year for an average earner. He'd like
to go further. He would like to do say two p off income tax, but it all comes down to that headline question we've just been talking about. He also might cut national insurance, which is a payroll tax, and he already reduced NASH insurance by two pence in the pounds in the Ausome statement. He might do that again because he sees it as a measure which also incentivizes people to return to the labor markets. It makes work
more attractive and that can boost growth as well. He's always trying to look at measures that will boost boost growth in the economy. That helps his numbers from the AVR as well. But then there's also a list of things that are kind of on the table but might
not happen, but might happen. So for example, reporting that the non tax status that might be abolished, because that would be a move that would raise revenue, it would also jam labor to a certain extent because labor are assuming that they could use the revenues from scrapping London tax status to fund some of their own policies.
So this was the policy that Labor had been talking about for quite a long time.
Exactly.
Special status applied to typically very wealthy individuals who have earnings coming from outside the UK and they're able to benefit from a tax advantage, and closing this loophole as Actually, when you ask Labor politicians as you and I do frequently, what they're going to do if they win the next election, it comes up quite frequently is one of the things
they're going to do to boost tax revenues. So the potential that the Conservators could decide to do it before them an interesting consideration.
Yes, exactly, because Labor have repeatedly been saying, oh, we would fund you know, more doctors and lots of nice things with the revenue raised from scrapping the Nordmon tax status. But if the Toys have already done that and have spent that money themselves on a tax cir elsewhere, then Labor have lost that. So that's why you can see there's that there will be a piscal advantage for the Tories if they discrap the no on tax status and yeah.
And the other dilemma here is also the question of public services. There's an awful lot of discussion about how public services are under pressure, particularly the health service here in the UK, and the question of how much money these services need also comes into the budget play. And boys you mentioned you know the Chancellor can choose to pull back on some spending decisions, that that's something that could prove very controversial.
Yes, And the situation Hunt already has is an autumn statement where he baked in spending plans that were already seen as rather unlikely and criticized by economists, and the argument being, look, you're perhaps unlikely to ever have to implement those plans if you don't win the next election, So there's a very little cost to you to having
an implausibly low assumption for future public spending. But then you use that what's been described by the ABI and others as a fiction, use that fiction to create revenue now that you can spend on tax cuds.
Let's talk a.
Little bit about the politics that comes behind this, because even within the Conservative Party, see there's a lot of debate over where the Chancellor should apportion his limited choices, as we've been discussing, even within his own supporters.
Yes, there is. I mean there are those on the right of the Conservative Party, those backs of Liz Trusts, who would say that you should do things like cut inheritance tax for example. That's they say that would be a widely popular measure. They also want to go and be more aggressive on things like corporation tax and cutting
that and do more for business and so on. But it feels like those in more the center of the party, those closes to Hunt are more conscious of the electro dynamics and thinking that personal tax cuts, that which you can sell to your average voter, are perhaps more preferable at this time, and therefore we should do that. So there are splits within the Tory camp and Hunters decide who he's going to go with.
Okay, we should make for a very interesting budget today. Joe May is our UK government reporter. Thank you very much for joining us with the details of that, and of course we will have full coverage of the budgets here on Bloomberg. I'm Stephen Carroll in London. You can catch us every weekday winning here for Bloomberg Daybreak. Here at beginning at six am in London and one am on Wall Streets.
Tom, thank you, Steven, And coming up on Bloomberg day Break weekend, we look ahead to a gathering of China's top political advisory body and legislature. I'm Tom Busby and this is Bloomberg. I'm Tom Busby in New York with your global look ahead at the top stories for investors in the coming week. China's top political advisory body and
legislature gathering for their annual two sessions. What should we be watching for during the eight day meeting For more, Let's go to Hong Kong and Bloomberg Daybreak Asia hosts Brian Curtis and Doug Krisner.
Tom, we look forward to the annual meetings of China's parliament, the National People's Congress, next week. The NPC will set policies that will guide the economy over the next year. It's an opportunity for policymakers to do a kind of research to shore up confidence in consumers, in businesses and investors.
Now, in terms of what to expect, Bloomberg Intelligence thinks the NPC will announce a larger budget deficit for the government. That means more fiscal spending. In addition, our economists are expecting more supportive monetary policy along with additional efforts to smooth out the correction of the property market.
And then, as we heard from Catherine Jung at Fidelity, there's also messaging.
There's definitely a messaging that seems to be coming from the regulators about what they're going to say at the NPC, But in reality it's probably going to be this continuation of tweaking of accommodative measures. So areas of the economy that needs support, such as property, are likely to be key in terms of their focus, but really is about restoring confidence, especially with the consumer. And then the knock on effect would obviously be an impact on corporates in the overall market.
That is Katherine Jung at Fidelity, And as we mentioned earlier, restoring confidence may require more deficit spending by the government. Bloomberg's Jill Diese says that will be key in showing how far policymakers are willing to go to revive the economy.
I think what we'd be looking for out of this meeting is, you know what they're going to be setting that budget at? How much in sovereign debt they plan on issuing this year. What exactly that level of calculation looks like, because as we know, China is still dealing with a lot of serious economic pressures that don't really seem to be going away, and they've got to kind of manage what that recovery and growth structory looks like.
In the run up to the NPC meeting, the economy did actually see a modest reprieve of late consumption picking up slightly during the Lunar New Year holidays. The CSI three hundred has bounced about ten to twelve percent, and while property is still soft, it weakened in January at a slower pace than in December. Well, joining us now for a deeper look at the NPC meetings is Jenny
Marsh Bloomberg, team leader for Greater China ECO GOV. So, Jenny, let's delve right into a couple of specific items first before we get to some of the sort of broader takeaways from the meetings, the setting of a growth target, what that might be, and then also what sort of level of deficit spending might we see as a percentage of GDP What can we expect.
So the consensus among most economists right now is that they're going to maintain the target of around five percent, so it's not going to be below five I think is what most people are expecting. The caveat there is that, you know, it's going to be much harder to achieve this year because twenty twenty three had the benefit of the low base of you know, previous year when the
COVID restrictions really impacted activity. So I think it's important that the government does keep this around five percent, not below five percent, because it's going to be all about confidence.
You know.
One of the biggest things that plague the Chinese economy last year was a crisis in confidence among investors, you know, foreign business people and consumers. So they've got to come out with a positive message. But at the same time, it does have to be realistic because it's going to be a lot of work and sort of careful policymaking this year to make sure they don't under shoot their own target.
So maybe we can agree that up until this point, Beijing has been fairly restrained in trying to provide additional stimulus to get the economy going. The question is whether or not we begin to see a pivot point at the NPC where things are modulated maybe to a higher rate than what we have seen in the past. Do you think that's likely.
I think they're going to continue on the same course.
You know.
I think Premier Le Chang was very clear when he was speaking at Davos in January saying, you know, they'd reached five point two percent. He front run that number for last year, saying they've done it without stimulus. You know, he seemed very proud of this. So I think, you know, that's a very clear signal that they're not going to go back to sort of the old playbook of using
sort of really big broad stimulus. But I think what we might see is more targeted help for sectors that really need it, so such as property, you know, support for local governments by sort of shifting debt from local
provinces onto the central government's balance sheet. Whether that comes in the actual official fiscal deficit target or if they do what they did last year where they sort of tweak it during the year to sort of put more spending on the on the central government's budget remains to be seen.
Yeah, there has been a kind of an incremental move up in the level of deficit spending used to be three percent with the target then three point two, and you hear about three and a half percent or maybe even more. I'm curious whether or not our team at Bloomberry Economics thinks that it would Would it send a bad message if it was, say raised to four percent or something like that.
I think four percent would be quite dramatic. Yeah, So I don't know if that would send a bad message. You know, it would send a signal for sure that the government's willing to take on more debt. I mean, three percent is extremely low deficit ratio target anyway, for an economy the size of China's.
When it comes to growth, one of the themes that we have heard in the past is high quality development, and I suspect that we're going to hear that theme reiterated.
And as we know, there have been instances where regulators have really been able to kind of clamp down on a lot of the entrepreneurial spirit as it relates to high tech, particularly, and I'm wondering whether we're going to see some acknowledgment of overreach maybe and also an admission that regulators and authorities need to embrace the entrepreneurial class, and this is a really powerful way of driving growth going forward.
A high quality development, I think is one of the key things sort of to be watching out for. Shi Jimping like increased his mentions of the slogan last year, I think to one hundred and thirty eight times, which was sort of double the previous year, so they're really ramping up. But yeah, it's still this kind of fuzzy sort of phrase that people don't fully understand what it means.
It sort of broadly seems to mean that they're okay with not prioritizing chasing sort of growth, and they want to prioritize slower growth if it's more sustainable and you know it isn't going to sort of saddle the country with more debt through things like stimulus. I think that sort of will leaders to sort of look at for signals on you know, green innovation, perhaps evs, more support
for that supply chain resilience. There's also another phrase I think people are going to be watching out for within that umbrella, which is new productive forces. And that's a saying that she introduced during a trip to Halo Jean at the end of last year and then sort of since was mentioned in a polyp beer study session, another broad,
fuzzy phrase, it's sort of hard to pin down. So I think any meat that they put on the bone within the work report and various other documents that are published will be something investors are very very key to sort of get information on.
So we talked a couple of times here in this discussion about the possibility of more debt. So we're curious whether or not that would be at the national or the provincial level. We put that question earlier to Bloomberg's Jill desis about getting the balance right.
The line that China has to walk this year is that they're really concerned about local governments in particular taking on more debt than you know, they're able to afford. There's been a lot of chatter about whether or not the central government needs to take a larger role in terms of, you know, taking on some of that debt and alleviating some of those burdens among local governments.
Again, Jill deesis from the Bloomberg Eco Government team, So, Jenny, what's our thinking. Will we see more at the national level or will it fall back down to the provincial level.
You know, I think the trend that we were seeing towards the end of last year was the government was shifting to putting at on the national level for the reason that, you know, they do not want this problem of local governments being in debt and sort of having sort of teaching on default to continue. So I think that's what most people are expecting. There are sort of
other risks from that though. I think, you know, we wrote last year about the fact that well, that's well and good for the government to take on more debt to prevent local government sort of going to these hidden financing vehicles to finance infrastructure to sort of boost their economies. You know, it comes with greater control for the central government. So when the government is raising these funds themselves and then distributing them out to the provinces, they get to
decide more who gets what pile of the pot. And so there's a risk that when you do that, you can disincentivize local officials who no longer you know, have this system where if they are working hard and being innovative, they're sort of generating their own revenue that perhaps relying on handouts from the government. So I think it's a good idea in practice, and it's going to sort of sort of go some way to sort of address some
of the risks involved in local government spending. But they also have to sort of manage how those funds are just out and make sure they keep the local officials also motivated.
So we've talked about the crisis of confidence both among consumers and businesses. We know that we know about the problem and the property market that's apparent. Chinese stocks have been floundering near five year lows, a lot of concern about economic growth going forward. We haven't mentioned the deflation story that is obviously deep into levels that we haven't
seen since the global financial crisis. Brian and I were talking last week with our own John Liu from our bureau in Beijing about whether it's fair to compare what China is going through these days with a turmoil that was seen back in twenty fifteen. Here's John lu.
The relationship with the United States is much worse than it was in twenty fifteen. That was the Obama administration. China hosted the G twenty. Barack Obama and Shiji King stood up at the G twenty in Hanjo and announced that the US and China we're going to cooperate on carbon goals. That period of time has ended. At the same time, there are other issues. The population China is
now shrinking. There's a demographic sort of conundrum that is much more pronounced now than it was in twenty fifteen.
Yeah, that's Sean Liu in Beijing. And it does raise a point here at Jenny about if the United States relationship with China is really winging on the Chinese economy.
Yeah, I mean, I think when we've conducted surveys among investors and economists, it comes up as sort of one of the top concerns the geopolitical swings. I would say since since the she Biden meeting, things seem to have really leveled off and the relationship has improved. But you know, there's a US election looming this year, and one of the candidates or presumed candidates, is threatening sixty percent tariffs on China. So there's a lot of headwinds in the pipeline.
And so for US companies in China, they don't know at the moment, and you know what sort of trade curves are down the road. So I would say it's a year full of unknowns. Right now in terms of the US China relationship.
Are we likely to get any guidance on how much more the government is willing to spend for its military budget.
Yeah.
Absolutely, That's one of the things that we'll be working looking out for in the work report, and it tends to increase every single year. I think China has the second highest military budget in the world after the US, so we'll certainly be looking out for that, and also sort of any language in any of the reports around Taiwan.
I think last year it was kind of fairly a commodative language that we saw, sort of saying that they were looking for like peaceful relationships and to sort of improve ties in the toy's economies rather than any warmongering talk. So we'll also be on the lookout for that as well.
Jenny will have to have you back in the week ahead when we start to get details of the NPC meeting. That is Bloomberg's Jenny Marsh, the team leader for Greater China ECO and GOV. I'm Doug Krisner. You can join Brian Curtison myself weekdays here for Bloomberg Daybreak Asia at nine am in Hong Kong eight pm on Wall Street Tom.
Our thanks to Brian and Doug. And that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Buzzby. Stay with us. Top stories and global business headlines are coming up right now.