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This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our Daybreak anchors all around the world. Straight Ahead on the program, we look ahead to how big tech may fare in twenty twenty six. I'm Nathan Hager in Washington.
I'm Caroline Hebcker here in London. We look to a year in UK politics and what twenty twenty six may hold in store for Prime Minister Kissedalma.
I'm Doug Prisoner, looking at what's in store for the Chinese economy in the new year.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three year, New York, Bloomberg ninety nine to one, Washington, DC, Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Syria XM one twenty one, and around the world on Bloomberg Radio, dot Com and the Bloomberg Business App.
Good day to you. I'm Nathan Hager. We begin today's program with a look at the economy. On Tuesday, we get a second read on third quarter GDP. This comes on the heels of some softer than expected readings on inflation and kind of a mixed report on the labor market as we start to get more of the releases that we should have gotten weeks ago but we're getting
now due to the government shutdown. For more on this and what to expect from the economy in the new year as well, we are very pleased to be joined by Ed Harrison, senior strategist at Bloomberg News and author of Bloomberg's The Everything Risk newsletter. Great to have you with us on the program, Ed, and I'd just like to get your expectations for the GDP print this week, given some of the questions around some of the latest data we've seen in this past week.
Yeah, Nathan, is a good question, because the CPI report was marred by the inability to collect data in the previous month, that's October. But luckily, this GDP report is a revision of data that goes from July to September. So these are numbers that aren't going to have any sort of anomalies because of lack of collection. We've already seen one number. The Atlanta Fed is talking to us about three point five percent number that's the GDP now
that they put out. But where we actually stand as anyone's guess.
Three and a half percent would be a pretty big jump from the preliminary number. What's got you thinking that we could see even more of an eye popping number this time around?
Yeah, I think just based on the data that have come out for Q three, they've done the statistical analysis and they updated the Atlanta FED and run it through their models to produce a now cast, and that's telling them that it's going to be at three point five percent. The range of the top ten and the bottom ten four casts are you know, somewhere between two and a half and three and a half percent, So that's at the high end of the range of economists that are predicting that number.
Of course, third quarter GDP is a backward looking indicator, and we're trying to think ahead about where the US economy could be going into twenty twenty six and the current quarter as well. Are we going to be thinking about this third quarter print as something of an anomaly given some of the data that we've gotten a more forward looking view of the economy.
No, you know, I think that, you know, there's a lot of anngst about the labor market, but there's less angst about the growth level of the economy, and I think that this bifurcation is due to this so called case shaped economy where there's a lot of price pressure still in the pipeline. Lower income, lower wage workers are feeling that even more, and they're also taking the brunt
of a slowdown in the labor market. But at the same time, there's this AI spend that's happening, there's a large government deficits, and the well to do are actually doing relatively well. So people are expecting numbers both for Q four and for twenty twenty six to be relatively good. And we know that especially because of the tax cuts that are due to hit already in the first quarter of next year.
Well, you raise the question there about whether the top line numbers on GDP sort of mask what everyday Americans could be feeling when we think about, as you mentioned, all the spending going into artificial intelligence. I mean, what could that mean for a labor market that the Federal Reserve has put a lot of attention on, saying that they're worried about some of those cracks that we're seeing in the data.
Yeah, I think if you look back in terms of the numbers that we've seen. We did not an unemployment number for October, but we have gotten from the Establishments the Establishment Survey in the last six months three numbers that were negative, saying that nonfarm payrolls actually declined in three of the last six months, and so the running
total average over the last six months has been very low. Basically, what that means is for the average worker, the job opportunities are lesser, even though we have this boom in AI. You could call it a mismatch between job availability and
the abilities of the working population. But the only positive that we've seen is that in the last report, more people came off the sidelines, re entered the labor market and we're looking for work, and that's usually a sign that they're optimistic that they'll be able to find a job.
Are you expecting that we're going to see the kinds of levels in AI spending that we've seen not just this year, but in the years prior as well, And what could that mean for inflationary pressures?
You know, Nathan, I think that AI that it's from
an investment perspective, we're sort of at a tipping point now. Recently, in the past two or three weeks, we've seen a rotation out of the large cap tech companies that have been driving the market forward, which are very AI related, and the reason for that is concern about number one, the level of spend and whether that's sustainable, but also the fact that the spend that's being done now is increasingly done with diminished cash on the balance sheet and
higher debt levels. And there's a concern particularly around companies like Oracle and their balance sheet, their ability to continue to invest into artificial and given the deterioration their balance sheets.
I really appreciate this and thanks again for being with us. That is Edward Harrison, senior strategist at Bloomberg News, author of Bloomberg's The Everything Risk newsletter. I want to get more now on big tech because the Magnificent seven stocks once again fueled double digit gains on Wall Street, even with those questions about whether the valuations on some of these companies may have run too far too fast. Let's get more and what to expect from tech in twenty
twenty six. We are joined by man Deep Saying, Global head of Tech research at Bloomberg Intelligence. Man Deep, I'll start off with the question that does seem to dominate the market all of twenty twenty five. Is it a bubble?
Well, I mean the best way to fram it is, you know, look at the multiples of these companies, both in terms of earnings and free cash flow. And when it comes to earnings, I think what this year has shown is earnings have been very resilient and these companies have the levers when it comes to you know, cost rationalization, slower hiring, and they can sustain you know, low to
mid team's growth easily. When it comes to free cash flow, the story maybe different in twenty twenty six, given all of these hyperscalers are looking to raise their capex by forty to fifty percent and we are already at very
elevated levels. And what that means is even for a company like Meta, you know, you may see negative free cash flow, which is why they've been talking about, you know, rationalizing their spending on the metaverse for example, and I think you may see more of that in the first half, where companies may have to prioritize you know, certain types of AI spend and really offset it with either you know,
slower hiring or in some case even headcount productions. If the ROI on AI is getting questioned more and more, and we know this is frontloaded in terms of spend, and that's where I think you may see a bifurcation when it comes to some of these mag seven names.
When you talk about prioritizing AI spend, the types of AI spend, what are you looking at, what's going to be a winner, what's going to be a loser.
So the clear ROI when it comes to AI spend is with the inferencing workloads. And that's what Microsoft has shown us this year is they were very selective in terms of you know, how they you know, partnered with open ai and what they left it for someone like Oracle to you know, take up. And I think Microsoft has shown that they have the best visibility in terms of what kind of workloads enterprises are willing to pay for,
and they have really positioned the company that way. Oracle, on the other hand, has this huge i would say exposure to open ai when it comes to their backlog, and that's where the quality of Oracle's backlog is getting questioned because if open ai doesn't ramp up their revenue the way they have laid out to investors, you know, in terms of getting to two hundred billion dollars in
revenue by twenty thirty. Then that will limit their ability to spend you know, the one point four trillion in commitments that they've made, and that will have a bearing on someone like Oracle.
We have seen though open ai making announcements of a lot of investments it's planning to get into the new year. I'm thinking, particularly just this past week about a deal that they made with Amazon. Is there further room for more deals like this for some of these large language models.
So you're right that open ais it clearly has pivoted away from Microsoft and now it's actually working with like someone like Amazon. That would have been unimaginable twolve months back. But you have to remember the Microsoft contract with open ai and the binding they have extends to twenty thirty two.
So it's not as if, you know, open ai can natively integrate with Amazon or Oracle, you know, in terms of what they do at the model level, they could use the compute from an Amazon, they could use the compute from Oracle. But Microsoft still remains in terms of, you know, how they build their API and the LLM functionality, and that I think will be a limiting factor for someone like open Ai that is looking to partner with
as many companies. In fact, the Disney partnership was notable as well in terms of what they're looking to do on the content side. But they just can get off, you know, what they have to do in terms of Microsoft partnership, and that will have a bearing in terms of how they roll out the product and their large angry mob.
Thanks for this, Man Deep, great having you on with us. That's Man Deep Saying, Global head of Tech research at Bloomberg Intelligence. Hey, coming up on Bloomberg day Break weekend, we'll look back at the year in UK politics and what twenty twenty six may hold in store for Prime Minister Keir Starmer. I'm Nathan Hager, 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 Nathan Hager in Washington. Up later in our program, we'll look at what's in store for the world's second largest economy in twenty twenty six. But first, from the US perspective, the UK looks like it did pretty well from this second Trump administration. Britain was first to get a trade deal with the US. A second state visit delivered FaceTime for brand Britain, with royals and politicians alongside President Trump and his entourage, while American business leaders at
one point promised major AI investments. But from the UK perspective, the gains haven't been so easy to see. A midweek growth, US demands and a government that's lurched from U turn to crisis. Let's get more now. From Bloomberg Daybreak, euro banker Caroline Hepgar in London.
Nathan, not too bad. I'm surviving typical responses in the UK if you ask a citizen how are you? And so it can be said of the Labor government barely a year and a half into office, Kirs Starmer's government has little to really hear about and a long list of troubles to ponder. And joining me now to discuss where we are at is Bloomberg's UK Political editor Alex Wickham and our Bloomberg opinion columnist Rosa Prince. Great to have you both with me, Alex, Can I start with you?
What do we know about this government at the end of this year that we didn't know when they got elected in twenty twenty four.
I think just how unstable they are and that the Labor government would be I think, I think, you know, Kirsten was elected in twenty twenty four and basically the pitch was We're not going to be like the Tories. We're not going to go through constant political crises and scandals and dramas and change the leader every five minutes
and all of this stuff. I always remember this line that Kirs Starmer had in the election that politics should tread more lightly on everybody's lives, which was sort of a you know, wish for thinking, shall we say and instead, you know, almost straight away Labor went straight into basically copying what the Tories did in terms of you know, a lot of a lot of political nonsense and you know where we are quite astonishingly, you know, at the end of this year is you know, question marks over
whether star War will still be there in a year's time, which you would never have thought even a year ago, eighteen months ago.
Rosa, has it gone wrong? What has gone wrong? And why?
Yeah, lots and lots have gone wrong. I mean the poll speak to themselves for themselves. Labour's ending the year in a terrible position. And Kiss Starmer is the most unpopular primers that ever, I think, including the dreadful Liz trust I think why I'll kind of give a macro and a micro answer for a financial podcast Macro. I think there's generally been a lack of vision and purpose
with this labor government. Kiss Starmer often doesn't seem as if he knows what he wants to do with this enormous power he has big majority and also many many own goals. There were really accident prone government. They were dealt a tough hand coming in and they've kind of handled it really really badly. Specifically, the micro things I think they got wrong this year were a failure to deliver growth, which is what they put all of their
kind of eggs in that basket on the economy. A failure really to get a grip on people's concerns about immigration, which has allowed the Reform UK and Nigel Farad party to really thrive this year. And also a failure by the government in Kirstarmer to control his own labor MPs, which meant he hasn't in particular been able to get those public spending cuts through government, which he really needed to do to make the sums add up.
Okay, so record on popularity, some quite complex policy problems to solve, as you say, the big one was to try to deliver growth, but really a massive challenge. Where does that leave Kirs Starmer and also let's let her in Rachel Reeves as well, the Chancellor going into twenty twenty six.
I mean, they faced this sort of slightly mind bending prospect that they could be a leadership challenge in May after the local elections, you know, which Labour's expected to do very badly. All of the questions all that anybody wants to talk about in Westminster are is you know, Andy Burnham gonna get a seat in the House of Commons so he can run. Is west streeting going to be the sort of the pretender to the throne. Is Angela Rainer going to be a candidate from more from
the left. And all at the same time, Kirs Starmer has got to contend with this sort of immensely difficult international situation which takes up so much of his time on Ukraine US relations.
Rachel Reeves has got.
To sort out growth. As Rosa was saying that, you know, it is just the shock absence of any growth strategy is just therefore to see and they have to find a way to deal with these policy problems immigration as well, so important for voters, and you know, being able to get through the next few months is just looking very difficult now. You know, I would say it is hard
to change the prime minister. You know, I always remember back in the sort of Theresa may Boris Johnson days, for a long time journalists would say, oh, this prime Minister's finished, and it took them a long time to go. So it's easier said than done. And people have been saying kiss Darma's finished for a few months now and he's still there, and you know, there is just a chance that he might just survive because it's really hard
to get rid of the prime minister. I think that's perhaps slightly underpriced at the minute, but it doesn't mean all of these problems aren't there still.
And it is quite difficult because each of the political parties has their own system for how they get rid of their leader, and that leader bit the prime minister of course when they're in government. ROSA, how seriously should we take a leadership challenge? And who are the potential successors? I will just remind listeners. Of course, that the deputy leader, Angela Rayner, resigned earlier this year, and she's seen as
a significant potential candidate. Let's listen in to a little bit from Angela Rayner.
The trade union movement taught me that it's not about yourself, it's about us. It's about who we're here for.
And everything that I've done has been an endeavor for us, for our people who are elected doors and who we serve. Rosa. In terms of Rayner, is she the lead contender? Who else might be possibilities if there were to be a leadership challenge?
Funny enough, I'm right in a column about this because my view is that I agree with Alex one hundred percent that Starmer is in real trouble. I'm going to the same parties and here the same things, which is that everyone's very fed up with him. But each of the candidates to replace him has serious issues and flaws that make it hard for them to achieve it. So, yes, people talk about Angela Rainer, but Angela Rana has resigned
in disgrace only a couple of months ago. There is some polling out which shows that the public do not welcome her return to government. Now, she's very popular in the Labor Party, but I'm not so sure she is popular in the country at large. And if the idea is you want to get rid of an unpopular prime minister, why would you replace him with somebody who is also very unpopular, actually more unpopular than he is. The big problem with the most popular candidate, who is Andy Burnham,
is that he's not a member of Parliament. Now he's been giving interviews saying well, I could get a seat, I could keep back. It's really difficult to do that if you've not got the backing of the Labor Party, and at the moment the Labor Party, the National Executive Committee, which is in charge of this stuff, runs elections and elections and probably wouldn't put him in there. So I think he can be counted out for the short term. And then you've got other candidates like Where Streeting the
Health Secretary, is Shabana Mahmoud the Home Secretary. Both I think are a little bit more popular than say Angelina with the public, but they're from the right of the party and this Labor Party leans left, particularly the membership does, and I think they would find it hard to win an election so there's no clear successor to Kirs Starmer, which at the moment I think is pretty much what's keeping him in the.
Job, all of which is quite negative for the government. Is there a flip side alex where Kirs Starmer manages to turn things around? Is it possible? What might be the criteria for that?
Yes, it is possible. I mean, I think Kirs Starmer would say, I'm a year and a half in of a five year term. It's too soon to write me off completely. And to be fair to him that you know, that is not an unreasonable argument that you know, he's the first labor prime minister in fourteen years. Give him a bit more of a chance basically, you know, yes, there could be some interest rate cuts. You know, next year, people could start to feel that the economy has turned
a corner a bit. They need to make serious headway on immigration and find a way to reduce the numbers of small boat crossings. You know, that is I do think fundamental to their electoral chances. They're polling the ability of them to sort of nip in the buds the rise of reform. You know, could they do slightly less badly than feared at the local ellections in May and launch that as a bit of a way of turning around.
I think the other big unknown is is what does he do on Brexit, because there could be this just sort of slight hail Meherry, which is an unpopular leader, needs to find a big, game changing policy to get his party back on side. And if he just junked his red lines on negotiations with the EU on things like the custom a customs union and certain even if not that you know, some other way of forging a closer relationship that could just keep his party happier.
Rosa.
Was this the year of Nigel Pharage and the reform UK Party?
Oh yeah, it really was. Everything seems to be coming up Rosie for Nigel Farage well ahead in the polls, lots of defections from the Conservative Party, which seems to be actually killing off what has been the most successful electoral party not just in Britain but in the Western world, getting lots of council seats wins. He's had some bumps in the road, He's fallen out with members of his
own party. He had some stories which were very unwelcome for him recently about his school days when he was accused of being pretty unpleasant and even racist, so it's not all gone his way. But he even ends the year with a member of the House of Lords for the first time. So yes, at the moment in less Labor can pull themselves together, or perhaps the Tories emerge from where they've been sleeping. It looks like we are heading towards a reform government.
After such an unpredictable twenty twenty five. Is it possible to list what the risks might be in twenty twenty six, what the key themes rosa might be for this UK government in this new year.
Well, all eyes are on May, which is when we have local elections and elections in Wales and Scotland, and that's being seen as a big test of Keir Starmer's premiership and also of Kemy Badenoch, the leader of the Conservative Party, who's actually ends the year in a slightly stronger position. Since the summer, she's been seen as doing quite well in the House of Commons. She had a pretty good conference. The trouble for her is that her
poll ratings are stubbornly the same. She's actually now polling on the same level as the Green Party. So I think the next sort of big landmark moment is may. Aside from that, it's generally these themes. So the rise of reform, does that continue, what's going to happen with the Ukraine and the impact here, and just individual policy areas such as the NHS where we have ongoing strikes such as energy bills which the government's promised to get down and aren't and so on and so forth.
That is Bloomberg opinion columnist Rosa Prince and Bloomberg's UK Political editor Alex Wickham. Always a beautiful summary and a big thought for us with your columns, of which we look forward to in twenty twenty six. Thank you. I'm Caroline Hepgar here in London and you can catch us every weekday morning for Bloomberg Daybreak here at beginning at six am in London. That's one am on Wall Street.
Nathan, Thanks Caroline, and coming up on Bloomberg Daybreak weekend, we look at how domestic demand in China will be impacted next year. I'm Nathan Hager and this is Bloomberg. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Nathan Hager in Washington. Let's turn out to China and the challenge is facing the world's second largest economy in the new year. Here's Bloomberg's Doug Krisner, host of the Daybreak Asia podcast.
Nathan, the Chinese economy is wrapping up twenty twenty five in a stronger place than where it started the year. It's whether a trade war with the US, and the government has focused on confronting several domestic challenges. So what's happening now and where do we go from here? For a closer look, I'm joined by John Leu. He is Bloomberg Chief China correspondent. John joins us from our studios
in Beijing. Thank you for being here. Over the past year, John, you and I have talked about the many challenges that China is facing, and there has been a very important event recently. It's earlier in the month that the government convened the Central Economic Work Conference for twenty twenty six. How much do we know about what was discussed.
Well, we know that what came out of the meeting was this readout that emphasized the need to increase consumer
consumption here domestically in China. There was also a lot of emphasis on pushing forward with technology, trying to make China a more innovative economy and economy that creates new products, new technologies that people around the world will want to buy, and that also, by the way, would reduce China's reliance on the United States for a lot of those technologies, which we've all seen has become part of this trade war as a weaponized way that the US has tried to put pressure on China.
So this is part of the weak domestic demand story that you and I have spoken about. And the elephant in the room is the property market. It's been I think we can say, persistently soft and weighing very much on consumer sentiment, and the headlines right now really aren't improving much. And I'm thinking in particular of China von Kah. This company was once the largest home builder in China and it's been way down, as many property developers have been,
by enormous debt. And now we're being told that von Ka seems to be moving towards some type of debt restructuring. Default right now doesn't seem to be an option. Since Vonka is viewed from what I understand as almost a quasi backed company. Am I wrong in that?
I think the chances of a default are probably greater than you think, Doug. We have passed the date of maturity for a bond that VANKA was supposed to pay on the fifteenth of this month. They have a five day grace period that takes us into Monday of next week, the nineteenth. It's not clear if VANKA is going to get an extension on that deadline, which they are asking
those bondholders for. We should find out soon, but there is ants that they will not get that extension and they will be in default.
John, Let's imagine that there is a default. What might the reaction look like.
I think in terms of the markets, there will probably be more pessimism as a result, more concerned about where property is headed and how much lower we can go. I think based on what we got from the Central Economic Work meeting and based on the rhetoric that we've heard out of the government, it seems Beijing is a
little bit less concerned. It seems Beijing's feeling is that if there were a default, it is something that the government could deal with, It could keep it under control, and it will not become some sort of systemic issue that cascades throughout the economy.
So it's not a too big to fail situation. From what I'm hearing right.
That looks like what the government has determined at this point. That could change based on what the reaction is in markets, what the reaction might be for home buyers out there. That could change, but right now, I think that's what we're looking at.
So we're nearly at the end of the year, and I'm wondering whether it's likely that China is going to reach that five percent growth target for twenty twenty five. Perhaps there's the risk that it misses this marked by a small degree.
So I think this is a very interesting question, and I will try an answer in two parts. The first part is they will definitely hit the about five percent target, there's little doubt about that. The second part of that answer, which I think is more interesting, is the number that they report for GDP growth is the real GDP growth number.
It's not nominal if you look at nominal, which is just you know, however, many trillions of dollars the economy was in twenty twenty five minus what it was in twenty four and what the difference is the nominal rate of growth is actually much lower and may not even
get to four percent this year. When they calculate for the impact of inflation and deflation, and because China is going through this bout of deflation at the time, you actually get an increase of about a one percent growth two five percent, And so actually the way people are experiencing the economy is they are not experiencing the same rate of growth as that real GDP number might suggest.
You and I have spoken in the past about the issue of overcapacity, particularly in industries like electric vehicles, and I'm wondering whether that issue was addressed at the Central Economic Work Conference.
It wasn't. It didn't seem to be addressed that specifically, but it is very much on the minds of officials, and there's some language in the communicator around that idea. We've seen, for example, just this past week, China actually impose some new rules that will impose legal enforcement of how car makers price their cars, and so if car makers are selling cars priced below the cost of production,
they actually face legal implications for that now. And so that just shows how very meaningful this idea of excess capacity is. For the government and how much weight they're putting on trying to get through it.
There was an interesting piece in The New York Times in the last week reporting on how Chinese car makers are winning over drivers in the UK, where tariffs are low and buyers seem to be a little bit more open to new brands. This goes to the use of exports as a way of addressing the problem of over capacity. But I would imagine it's got limitations. So if there has to be greater reliance on domestic Chinese demand, what
would it take to get there? And I'm curious maybe you can weigh in on what the local car market in China has been like.
So the local car market has suffered. It's slowed down a lot in the latter part of twenty twenty five, and that's because the government was offering quite generous subsidies to get people out and buying goods and products. Not services yet, but cars definitely had subsidies, and then towards the end of the year those subsidies starts to taper out. We don't have great clarity on whether there will be more subsidies or how that's going to happen, But as
those subsidies started to taper out. You saw the market start to turn and people buying fewer cars.
So let's look at the trade situation between China and the United States. Recently, Scott Bess and US Treasury Secretary, said that thus far, China has done everything that was negotiated with regard to that trade truce. I'm wondering, from your point of view, John, are things pretty much on an even keel now or is there some sort of risk that we could see another blow up in these relations.
So so far, so good. Everything that we've heard and seen so far suggests that both sides are sticking to the agreement. We've seen soybean purchases by China. We've seen some more rare earth licenses issued on the American side. We've seen the tariffs lowered, We've seen that additional add on to putting sanctions on the subsidiaries of already sanctioned company. We've seen that paused, and so it looks like both
sides are sticking to the agreement. I think what's interesting for twenty twenty six is you have a situation where the two presidents, Presidents She and Trump could meet each other four times and so President Trump is supposed to come to China in April. President She is supposed to travel to the US, and then at the end of the year, China hosts APEC in November, and then the US hosts G twenty in Miami, with four meetings on the schedule. I think there are two outcomes. One it
could be a pillar for stability. But at the same time, we've seen as the two presidents get ready for a meeting, we've seen a tendency on both sides to try to look for advantages at the bargaining table, and sometimes that actually leads to more tension in the short run.
It's clear that we've seen many advancements in Chinese technology over the course of twenty twenty five. On the hardware side, I'm thinking of domestically produced semiconductors. On the software side, think of those large language models like deep seak. Is there still a fair amount of optimism that these industries, whether it's chips or AI, will continue contributing in a meaningful way to overall growth in the new year.
If you look at financial markets here in China and Hong Kong, there is a lot of optimism. I would say bordering on excessive. So we had this chip maker in Shahai called meta x. It was founded by some engineers who used to work at AMD. There's this thought here in China that it could become sort of a Chinese competitor to Nvidia and am D and other American chip makers. And when that stock listed on the Shahaigh exchange, it went up more than six hundred percent on the
first day of trading. So there is a lot of interest and excitement about the future of technology in China. But I would make the distinction between financial markets and real economics in that that excitement might be there in markets, but we have not yet seen it filter into real economic activity.
So to what extent is the government invested in maintaining that enthusiasm.
I think the excitement is beneficial for China's technology drive in that it makes financing for innovative new companies much easier to get. It makes that financing lower cost for these companies to get. I think the other thing that this excitement about tech does for China is people who are in the market, people who own stocks, people who
have pensions or have funds. They see the value of those assets go up and there is a beneficial sort of wealth effect, and hopefully, I think the government is hoping that results in people actually being willing to spend more money.
So we've touched on some areas of the Chinese economy. But before I let you go, John, i'd like to get your sense of what we may see in terms of stimulus in the new year. Is something that is going to be handled in a very conservative way, would you imagine?
All indications that we have gotten so far is yes, it will be relatively conservative in terms of how much additional stimulus we get from Beijing. Indications are that the central government looks like it's going to keep its budget deficit unchanged from twenty twenty five, so about four percent
of GDP. If that is the case, then that would suggest the government is taking a much more measured approach, that it's not trying to flood the system with money to try and change the trajectory of the economy, but it's going to take a more targeted approach. And there are some areas that may not get as much assistance as maybe had previously been hoped.
And I'm wondering John about the extent to which currency is a part of that story if you're trying to manage an economy that is so heavily reliant on exports while at the same time not wanting to trigger the outflow of capital.
On the currency front, China's actually in a relatively better position going into twenty twenty six. Then coming into this year, the currency's been gaining versus the US dollar, it's been gaining versus many of its trading partners. That I think is a reflection of the perception of how the Chinese
economy is doing. It is also aided by that trade surplus that you were talking about, Doug, and so heading into twenty twenty six, what we've been seeing is action is being taken by the Chinese government to try and hold back the currency so it's not strengthening too quickly. And so I think that is good for China or it makes the jobs of the regulators easier because it makes the concern about outflows less.
Okay, John, we'll leave it there. It's always a pleasure. Thank you so very much. John lou There, Bloomberg Chief China correspondent. I'm Doug Krisner, and you can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast.
Nathan, thanks 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 Nathan Hager. Stay with us. Top stories and global business headlines are coming up right now.