Bitcoin ETF Race Is Heating Up Despite SEC Oversight: Balchunas

about that is our our own Eric Valtunist. He has a senior E t F strategist for us at Bloomberg Intelligence. Eric tell us about the latest. What did the SEC recently say? They put out a letter last night and they had thirty one questions opening to questions about yeah, that's it right, um in five sections. It reminds me the end of back to school when they're like, we have one question, but it's twenty seven parts and he

spends all day answering it. Um. Look, a lot of these questions are answered in the prospectus is it's they're asking something like how will then not have be calculated? Well, the perspective does address that. I think, really, what's going on here. If you want to just kind of like be honest about it, the SEC will be honest. I'm just gonna be real right now, go ahead, the SEC. This is a hot issue. They realize there's investor demand for this big time, right, so they won't be sensitive

to that. At the same time, they're just not comfortable, so they want to show everybody that they have been very thoughtful about this. They're taking this very seriously. Here's what they're concerned with. They want to throw it all on the table, and I think that. But the thing is a lot of these are already addressed in the prospectus. Some of them get really deep, like how are you going to protect against the hack? Now, that is a question you will never ever probably be able to answer

with security. So there's always going to be some unanswerability to some of these questions. So are you basically saying the SEC is basically doing a c y A exercise with this list of questions, saying to the public, look, guys, we're concerned. We've got general concerned, and so we're not going to prove these things yet. Thinking about it, we don't know exactly why. We understand everyone wants to buy these things. We get it. We're we're sensitive to that.

But um, I was barrish last night after I read it. But I talked to a few issuers, and I don't on the prospect on the prospect of a bit quin et F launching, say in the next year or two, but I don't know. I think issuers are in there, They're gonna work with them. I've heard people are like, we are definitely going to address these because I was thinking, man if I was an insuer and they just came out with with all this, I might just be like, oh, you know, what, the heck with it, I'll just try

to launch so much money at stake here. I know the first one out gets easily it's a billion dollar product. I mean easily could be a billion dollar product in a couple of days. So that is what makes this all so exciting, although exhausting for me, because there's this is a race, and I'm telling you every other week there's some major turn in this race. And then this week we had the blockchain ETFs launch, which a lot more easier to launch. Right these are tracking equities that

are involved the blockchain technology. But even there, the sec got a little nerve nervousness and made them take blockchain out of their name and use something more generic, UM like transformational data sharing. So there's a lot of concern at the SEC that they are going to be looked at as being a little too liberal. Um not not not a catchy enough name for you. I'm gonna say that, roll off the tongue transformational. Listen him. I got good news for you. The tickers block well that that that

helps small brain here. This is but this is yesterday. We had reality shares that are the earlier this week on on our show, and he said, he corrected me, is that actually that's no longer our name, and that was the reason why it is the SEC. There's his next gen economy. But would you think of it? I don't know anyway, I call him the blockchain ets. The tickers speak to that. So they're doing well. They're all already both trading a lot, and they're off to good starts,

especially for indie issuers. I'm gotta ask about this idea of turning everything into an exchange traded fund. The one of the arguments war exchange traded funds is you get daily liquidity. You can trade it like a stock. Oh and by the way, it's not going to hit you with those tax those onerous tax bills like a mutual fund, even if you don't sell the fund. I'm sorry, how

does that connect with these kinds of offerings? Right? I would go back to the originally t F s P Y. It really was put out there to be a physically backed version of a futures contract. So there is a trading element to e t F and there always has been. And I would argue, h y G, that's a leasa's favorite et F. The HI J and K might be your favorite, but it's a it's a it's a who knows. I don't even need to talk. People can still in

the place ahead Eric, What else do I like? But these are predominantly these kind of things, Bitcoin, marijuana, junk bonds, These are predominantly used by traders looking to get quick positions on those. You know, the retail investors are When you say quick positions, are you trying to say you have traders who are trying to make quick money taking advantage of people. No, no, just quick access, but just thin get one out. But it's got to be a

buyer and a seller. Well, someone's gonna lose money. If someone's gonna make money, who's gonna be the loser. That's the way the bond and stock market work anyway. I mean there's traders and people trading those all the time to actually things behind them. Well, and this is the key. Hold on a second, Well they do they do? You know any t F? Again, I always tell people that it is uh, it is a mutual fund. It holds the stocks in it with a custodian and the or

the bonds. All right, so you know here's the thing. I think this is the issue is you know, with with jump bonds, with stocks, there is something that is a security that is backing these e t f s. With bitcoin, I mean Morgan Stanley and Goldman Sacks have laid out issues with how do you act as a custodian of bitcoin? I mean what is bitcoin? How do you store? Who's going to make sure that you know that hackers aren't going to get in? I mean we've we recently had a story about how hacking bitcoin is

a massive industry. I mean, these are some major issues are and when you approve an e t F, you're basically saying it's ready for prime time. So that's what the SEC. This is. You know, Middle America can then go to their brokerage account and buy this thing. That's

what the SEC is concerned with. However, there's a product on the market GBTC, which is an over the counter traded trust trades it huge premiums and I've heard some discount brokerages classifying as an e t F. So I would somewhat you use the alternative argument, which there's other products out there that are more dangerous. At least with an e t F, you'd bring in the nation's richest market makers doing the tightest arbitrage. You'd bring in a lot of liquidity, and you'd get as close to the

best possible deal. It's the best structure for something that is as archaic or or not archaic, but as uh new as bitcoin. I've seen it done with China A shares they had Chinas before the government even allowed as shares. They had to use quota from people in Hong Kong. A t f s have this sort of history of like nudging their way into an area, maybe even before it's ready, and then you figure out later, oh it is fine. But I would say bitcoin is a special case,

it's not fine. Yeah, And look at the end of the day, though these are investment vehicles, investments do they go down. But the question on bitcoin, though, is unlike g l D, where I guess you're you're your feel secure that the gold bars are in a vault with guys with machine guns guarding it. Here you're like, yes, someone could hack it. What would happen? Um, Although I will say there are e t N s in the world. E t N s have credit risk. Lehman had an e t N People do not get their money back,

so there are products. That's why I think bitcoin, if I were out there, I would do it an e t N wrapper because people already go in knowing there's credit risk. So I think E t N might be a better vehicle for bitcoin. But no one's launched one for whatever reason. We're filed for one. Why why do

you believe that to be so? I think right now big banks are less willing to have anything on their balance sheet because of regulations, so they've scaled back on their E t N s. But if one of them would just step up and say, you know, this is actually a great opportunity for us. We're Okay, having this, uh, I think it could be a really big hit product. And if that gets liquidity and an e t F launches after, no one will care. They'll still use the

e t N mostly. Okay, not to change the subject too much, but you sit there reading the t leaves of E t F world, and I just want to get your sense what should we be paying attention to. Are there any shifts in flows that are really notable that you think are representative of shifts in a market sentiment? Yeah? Two things I'll give you real quick is one, I find people are hot about industrials and aerospace and defense. Yeah,

this is the Trump trade. But I will say those those e t F s kicked back in after tax reform, so I felt there was a little kick to the Trump trade after tax reform. People thought it might have might not have the legs it does, but it does apparently so X L I, I T A have seen a lot of inflows in the past couple of weeks. And another one you're again back to your favorite topic, is high YOU'LD debt. We've seen this interesting shift into interest rate hedge gtfs. They haven't taken a lot, but

it's like a swell out. There could be a big wave soon, and that is h y g H. These are e t f s that basically take like the high you'ld debt or investment grade debt and then they short treasury futures in order to have no rate risk. What you're going to find is they're starting to out perform h y G. So h y g H has outperformed h y G by a good degree since rates have quietly started rising over the last four months, and we've seen flows into this. This thing is a basically

doubled size in the past couple of weeks. Watch for people rotating out of h y G into h y g H, out of l q D into l q d H. It reminds me of currency hedge dtfs a couple of years ago, where it says I want this, but I don't want this. It's sort of a package trade. That's what these rate hedge dtf do. And I think they could have some uh, they could see some flows. Eric.

When you talk about that perhaps transition from let's say h y G to h y g H in order to take advantage of that hedging capability, does that sale of h y g doesn't that affect the value of the underlying asset. Right, So if people sell h y G and there's a lot of selling pressure, yes, uh, somebody will take the h y G and do a redemption. That would put selling pressure on the bond. So the e t F would Uh, if people were selling h y G, it would put selling pressure on the bonds ultimately.

But again that's probably gonna happen in concert with people selling bonds. That It's not like somebody Yeah, but if you're in a rapper that says, oh no, don't worry about it because we're gonna hedge out the risk for you. Uh, that might give you that false sense of security. Well again, it still does whole own high yield debt, right, and then it also is gonna short trauge. In other words, it's not just saying we're gonna do this and then we're gonna do whatever with the money. It actually does

it with the money. I'd almost equate this to the way, you know, if an institution has a prime broker and you want to put that trade on, that's what they do. E t F have democratized everything, and like you said, does everything need to be democratized? That's a big debate. But package trades getting a currency hedge exposure or high yield debt exposure, that is ultimately what's happening here. We gotta leave it there. I want to thank you very much Eric Valcunus, he is our senior E T F

analyst for Bloomberg Intelligence. Well, the world of fashion has changed dramatically, mainly in the way that it is being marketed and distributed. Here to talk about that is Rebecca and Ory Minkoff. They are co founders of the Rebecca Minkoff and Ury Minkoff brands, and they joined us here in our Bloomberg eleven three oh studios. Thank you both

for for being with us. Rebecca, I want to start with you, and I want to ask you specifically about how you have changed your use of social media over the past few years to more directly target your customers and frankly bypass big advertisers. I think what's really key, and it's something you know started before social media is it's always been about my conversation with the consumers. So social media has allowed us to continue to have a

dialogue with her directly. We didn't have to have any middleman and so social media is that tool that we use, whether it's Instagram or Twitter or Facebook to really just talk to her. And uh, you don't to advertise her because she's not looking for that anyway. She just wants an authentic connection and if I can be that for her, then then she's happy and so am I. But have you actually cut back on more traditional means of advertising

as you more directly connect with her. We've actually never had to do the traditional advertising route because we had that connection early on, so we didn't have to invest, you know, hundreds of thousands of ad dollars in glossy magazines. I think it was about I know you, you know me, and we're going to talk and it's going to be authentic and that's more real. Or I want to bring you in and just to talk about the actual business

of fashion. Because in reading a recent issue of Women's Where Daily, Uh, there was an issue with one of your distribution and supply chain partners, and I thought it was interesting the way you handled it was to go directly to Facebook and use that as a medium to communicate obviously not only with your other business partners, but really with your customer base. Yeah, you know in this day and age, community is so portant and our customer

bases is so important to us. UM. We moved to a new warehouse, third party logistics warehouse right before the holiday season. We also moved to a new web platform really to optimize around long term growth UH. And the demand for our product was so great that they just couldn't keep up with it during the holiday season, and so we had some some shipping delays because the expectations just we're not there with it was just far outceded

expectations UM. And it's not a bad problem to have, not a bad problem to have, but you know, our community is so close to Rebecca and they're so embracive of her in the brand UM, and some of them felt disappointed. So it's important for Rebecca to God and make a statement to them directly and to really sit there and answer their questions. And it's something that will be continuing to refine. Rebecca. I also ask you about

the Women's March. I know you have an initiative where you are outfitting some of the leaders in the Women's March Committee and then in photographs you can click on the different things that they're wearing, and it shows you how much they are and how you can buy them. And I'm just wondering about if this is the first sort of cause that you've associated yourself with, how you choose causes, and how you do that while not alienating any of your customers who might not agree with your cause.

This is definitely not the first time I've been working with a cause. I think, you know, when we had our first Sea By Wear in the streets on Green Street, there was a lot of social unrest at the time, a lot of bombings had just occurred, and I said, I can't just have a fashion show, you know, So we worked with Not on our Watch. We had as incredible graffiti artist do some art on on the back of these jackets, and the proceeds went to Not on

Our Watch. And then last February in our fashion show, we worked with UM Girl Rising, so empowering girls in different communities. Again worked with an artist and the proceeds went to these organizations and UM. My relationship with the Women's March actually started last year when they reached out, they said, we want a uniform. Is there any way you know, it's like two days before the march. Do you have any shoes or bags that could make us

all look the same. And I said, hell, yes, um, you're like, absolutely, I do my wardrobes done someone to the warehouse, Um, and you know, I was really proud that I was able to support them with something small that you know, made them feel really empowered that day. So you know, this year in Louis of a fashion show, because I am due during fashion week with my third child, I said, how can I really do something that's impactful again?

And I reached out to the organizers said I would love to profile tell your stories and for me, it's about female equality and empowerment and if someone has an issue with that, then I don't frankly want them to be my customer. Well, I guess with the issue being that sometimes you know, it's increasingly taken a more political totally, so perhaps the insinuation there is what people would object to,

not necessarily women's empowerment totally. And um. We also made a significant donation to support their book launch and the

Women's March. In general, speak if you can about the influencers that exist on line in the world of social media, because that is also changing the whole way in which buyers interact with you as the creative element, because not necessarily to go to a runway show, for example, if you have the right influencers or people that are able to put up the photographs or their comments on Instagram or Facebook, have you found that that is better in

many ways? You know, Ori and I started working with influencers. In the very beginning, we had interventions, people telling us you're working with Cless celebrities, You're going to ruin your brand with these people, and we really decided to be fearless and not listen to them. And I think it was about, again, how do you get these people that have great communities, great people that follow them and and

have it again a genuine connection. So I think we talked about the influencers that you know, convert to sales, the some that also just get you brand recognition, but it still has to be authentic at the end of the day. It's so powerful today the relationship between you know, the influencers and their consumers and their followers and our relationship with them, um and that's how you build community

in this new digital day and age. And those influencers don't necessarily have to beat celebrities in a more traditional sense of the word even better if they're not really Yeah, I think, I think, you know, there's there's this authenticity, there's this you know, growing up, you always had you know, the person next door that looked great, right, Well, not that person next door has millions of people following them, and they're known for their style and their discovery and

how they go through their life. And people are reacting against the glossy everything is perfect. They want to know, you know, what that person's life is like and their ups and their downs, and these people are are sharing them. So it's this live reality TV version of of really

cool people online. And these communities leverage in the millions and so and even now we're seeing a trend even away from macro influencers towards micro influencers, where you have people that have followings of five or ten thousand, and their communities are so engaged that they'll literally follow them

to the ends of the earth. So we run campaigns and work with influences, you know, macro micro all the time, and and and when we find an influencer that has an authentic connection to the brand, an authentic community, we all just grow together. I love this idea of many cults kind of propping up on different social media platforms. And we noticed that one of your bags has a sponsored icon next to it on Amazon, and it raises this question of how you use Amazon? Does that mean

that you can pay them for better placement? Um? How has it kind of changed the way you go about things? So we do not sell directly to Amazon our bags. Um we did in the past. Uh. And we we decided to not work with them directly. Uh simply because, um, you know, there's a lot of discounting and so forth, and it was important to us to keep the integrity of respecting the full price window is the full price window. Um, So we opted out of that direct relationship Amazon does.

Just to be real clear there. So in other words, you were saying that they wanted you to discount your bag in order to give them part of the profit, or because they thought that it would be in the past successful. In the past, we had a wholesale retail relationship with them. But obviously they could they could set

their pricing. It's it's illegal in the US to dictate pricing. Um. And but we found that but you could choose not to sell to somebody um and we found that we couldn't get them to respect our pricing windows um and and and with that regard, we chose to not continue

a business relationship with them for our bags. That being said, they have a large marketplace, so any third party person can set up a store and go sell on that marketplace, whether they're an individual, they could do fulfilled by Amazon and it can be marketed to Prime members. So for the end consumer, it gets very confusing of whether there's an authentic relationship with the brand or whether someone bought

a bag somewhere and it's frankly reselling it. So whatever you're buying there of current goods is mostly through you know, a reseller doing it rather than us having a direct connection with Amazon. Today, Rebecca, you are ahead of the curve in so many ways, and it seems as though you're at least three years early when it comes to virtual reality. You know, virtual reality is sort of the big buzzword right now, or artificial intelligence and enhanced reality

and so on. But going back to September off you were offering virtual reality headsets so that people could actually see some of your shows using their I phone. I think it's important, um word I like to take risks in this space, and because of his technology background, he likes to take even larger risks and feels confident doing so. And I think any risk that he proposed, by any chance that you have shot down. Yeah, there were a couple and I hadn't want to do that backfired. What

you learned from details? You know, I think I think it's important to understand who your partner are. Obviously we're not a technology company, so it's it's really vetting the partners and can they deliver on time and can they support you? And what we found is that there are some amazing startups um and you get this one on one attention, or sometimes there's very large corporations and they

have internal support. So we figured out what works. Um. I think, you know, one to tell people what it gives people a hint so they don't have to go through the same pain in agony. Hint in terms of what to avoid, what to avoid, you know, I think one time, always listen to your sister. Sometimes listen to your sister as someone with an older brother. UM No, I think I think one time we we decided to

encourage um. You know, a live feed of sorts during a live presentation, and and and sometimes when you do that, you get you get some people that have um ulterior purposes or motives and threw up some inappropriate content during a live experience. So my sister suggested, Hey, maybe we shouldn't do this, and I was like, no, I got this and I didn't have it um. But fortunately everything

else has has worked out. I think with the virtual reality, as you said though, it's fascinating because I think, whether it's three or five years from now, you'll be sitting in your apartment or you'll be sitting in a city that doesn't have, you know, a Bergdorf Goodman or a Becka Minkoff store, and you'll feel like you're live walking through there, um and and and we think that's an experience of the future, and we just wanted to start playing with it. So this is this raise is a

really key question. Is brick and mortar dead? It's definitely not dead. I think it's just changing, and it's changing very quickly. I think if you're going to get someone to get out of their pajamas and get up off the couch, what are you going to give them in a brick and mortar store. You're making us sound so lazy if you're gonna get act, can we just talk

in that context. Can we just talk money for for a second, because the cost of commercial real estate is no joke, and if you're running a retail operation, it is a major cost. Have you seen changes in the in the price that the landlords looking to charge you. We're seeing more favorable rates, um, much more favorable rates with landlords and they're willing to also test stuff out now.

So I think for us, it's about we have fireside chats, we have community events, we have Forbes book Club, so we're constantly doing things to get people together off their phones in the store. And if you don't buy anything that night, it's totally fine. We just want you to connect and come away learning something. I think what we're seeing is that, you know, it isn't it isn't all.

It's when we create community and we create events. Yes, there's the transaction in the store, but a lot of those people are then creating content and that content lives online, lives on mobile lives and apps, and then you're seeing a spike in online sales. Right. It's it's the phone,

It's the fear of missing out. It's we had this amazing experience with Rebecca uh and a female leader, and all of a sudden, it's the people that weren't there that kind of want to be there, and we're seeing those sales start to spike as a result of these micro events that we do. So brick and mortar isn't dead, but that brick and mortar better be pretty darn cool to get people. And it might be less expensive, and it might be less expensive, it might be more temporary,

it might be outfitted in different ways. Fascinating conversation. Thank you both so much for being with us, and congratulations on your soon to be addition, Rebecca. Rebecca Minkoff and Orri Minkoff, co founders of the Rebecca Minkoff and the or Minkoff Line, which is the Men's Line. Thank you so much for joining us here. You're listening to Bloomberg Markets with Pim Fox and Lisa Abramowitz on Bloomberg Radio.

There was a legal question that emerged after Steve Bannon's testimony in front of Congress recently, where he invoked executive privilege for not talking about some of his experiences with President Trump. Here to talk about. That is Noah Feldman Felix Frankfurter, Professor of law at Harvard University. He's also a Bloomberg View columnist, and he comes to us from Boston. Noah,

thank you so much for being with us. You know there, just if we want to back up here, there is a perception that some of the claims being used by the Trump administration are sort of on the fringes of law. And certainly Steve Bannon's claim of executive privilege, uh, covering the time before President Trump even became president that protected him and his conversations, uh, sort of goes over the line you ought to column about this. Can you explain

why it may not? Sure? The basic idea of the executive privilege is that the president should be able to talk to his senior most advisers in a way that won't substantly be revealed to the world. And I think most of us agree that that's in general a good principle, and it has some basis in the Constitution insofar as the president has powers, including his foreign affairs powers, that he's supposed to exercise in his own terms. The question is when the president is not yet the president should

he be able to take advantage of the privilege. And if you think of it's solely in terms of the fact that he is president when he exercises the privilege, and the answer is no, because there's only one president at the time, and during the transition of Barack Obama was president. But if you think of it in terms of the job that the president actually needs to do, that job begins after he's elected and before he's in auguent.

He has to choose his most senior advisers, he has to talk about he gets briefed by officials from the pre existing administration. There's plenty there that we would not want the world to necessarily be able to hear. So if you see it purely in functional terms, there may

be some reason to extend the privilege cautiously to the transition. No, uh, I wonder if you could describe what is the sort of modus operandi here of having abandon, testify or indeed deposed, let's say, by Robert Mueller and the investigation, Because isn't this really just about what action happened. It's not about who said what to whom, It's about what actually happened.

That's true we probably don't want to divide public hearing in front of Congress from a private conversation with an official of the Department of Justice, And in fact, the

courts have treated those differently. Um, when it comes to a conversation with Mueller, if Mueller issues a subpoena, then there's good solid Supreme Court President going all the way back to the nixt and Watergate TPS case, which says that any interest of president has some confidentiality is going to be overridden by the need of the Department of Justice and of the courts ultimately to get the fact in a criminal investigation, and that conversation is going to

be inevitably about whether laws were broken, and that's gonna trump. On the other hand, a congressional inquirer can go a lot further because Congress is not merely investigating where there was wrongdoing, but also what happened, you know, how was foreign policy made, what was said, and who was speaking.

And unlike a lawyer who's asking questions under conditions of a criminal case, a congress person can ask almost anything in the course of a h an investigation, in the course of a of a hearing, and their interest is in politics, not only in and who broke the law, and that could potentially be be further reaching, and there's a different legal regime governing it because that's about a conflict between Congress and the president rather than between the

judiciary and the precedent. Well, no, maybe then you can offer your thoughts because you've written a variety of books, the most recent of one is The Three Lives of

James Madison, Genius, Partisan and President. And at what point does all of this become such inside baseball that uh, you know, investors look at it and go all right, So we'll let the legal system run its course, but that's not really going to affect what happens in terms of Washington because at least right now, nothing's happening and

we can't even get a budget. Well, look, I totally agree that there does be an extraordinary degree of conflict going on, and that's the luckily the job of the politicians to sort out, and I think the market group generally leave that to the politicians. Here, we really should clearly distinguish two things. One is the criminal investigation of

the president and his associates, which is ongoing. Mueller will engage in the most aggressive of lawful ethical investigation that that he can engage in, and it's important to understend that that will include being able to question Bannon about anything that Bannon may have seen or heard that would cross the line into illegal conduct. And no claim of executive village is going to defend uh the executive branch

or Bannon or President Trump against that. Separately, there's a question of the struggle, the two years struggle between Congress and the president over who gets to keep what's secret, and there I think you're right to see this as kind of inside baseball wrangling with the presidents. He trying to say as little as possible, in Congress trying to find out as much as possible, And in fact, our

system expects that to be worked out by negotiations. Unfortunately, in our current era, negotiation between the two sides is harder than it's than it's ever been. But that's nevertheless the way our system is set up. Congress and the President are supposed to work this out amongst themselves. You know, there's a lot of talk right now about you know, well,

there's by us on both sides. There's by us in the part of Muller and his team there's by us in the part of the FBI, UH and and people saying that that these investigations need to go on because President Trump has engaged in some behavior or may have that is problematic. I'm just wondering, from a legal perspective, does the partisan bickering has it sort of reached in and muddied the legal waters yet? Have there been any moves made that undermine the legal integrity going on here?

Not yet. I would say that right now. Within the legal community broadly, and I'm talking about lawyers, judges to some degree when they speak off the record, um legal experts, the general perception very strongly is that Mueller and his team are seasoned, experienced prosecutors who are as objective as

human beings are able to be. I think there's a strong belief that if there's nothing to be shown in the investigation, Muller and his team will say there's nothing to be shown, that if there are crimes, they will reveal them, and whatever their nature is, they will they will pursue them. I think the political screen is seen as attempting to shape and effect the process of that investigation that has not yet happened. I think that of course that's a possibility, but it remains not the case

to this moment. I think, you know, we got Unfortunately, we gotta leave it there. We've gotta run. Noah Feldman is the Felix Frankfurter Professor of Law at Harvard University and a Bloomberg View columnist. He can be followed on Twitter at Noah R. Feldman. You're listening to Bloomberg Markets with them Fox and Lisa Abramowitz on Bloomberg Radio. Bloomberg Markets brought you by Bild. America Mutual BAM has ensured more than forty billion dollars of municipal bonds for essential

public projects across the US. They're high double A credit rating from SMP helps infrastructure infrastructure dollars go further, Build

America dot Com BAM. Well, right now we are hearing a lot of comparisons drawn between President Trump of the US and President Jean Ping of China, and that will only get ramped up next week as we have the Davos World Economic Forum Annual Shindig, and here to talk about really some of the comparisons and perhaps the h the misimpressions are the false impressions that some people are

getting is Elizabeth Economy. She's cv STAR Senior Fellow and Director for Asia Studies for the Council of Foreign Relations, and she joins us. Now, Elizabeth, thank you so much for being with us. I wanted to touch base with you because there is this impression that President Jim Ping of China is kind of taking that nation to the forefront of global domination and managing global affairs and frankly best in the US in some ways, as President Trump

sort of takes more of a protectionist stance. Do you think that people are getting the wrong impression? I do, and and thanks for having me. Um. I think it is certainly true that President Trump has taken a step back from the traditional role of the United States as globe leader. There's no doubt about it. We've seen him, you know, withdraw from the proposed Transpacific Partnership, take a step back certainly on climate change, on various United Nations initiatives,

and obviously in terms of migration UH and immigration issues. UM. But that is not to say that simply because the United States is somewhat in retreat, that China is ready to assume the mantle of global leadership. I think she didn't.

Ping has certainly made his interest in taking on that role clear, But when you actually look at what China is doing, it becomes clear that first of all, China is not a leader or a defender of globalization as a she didn't being asserted last year in Davos, but also really has not stepped up to the plate to lead on any number of global issues, from the refugee crisis to climate change, um to you know, sort of

the openness of its markets. Um so. I think it bears us looking hard at the facts on the ground to understand the reality of China's actions as opposed to the rhetoric of Sijin Ping and a lot of media hype frankly that has surrounded Sijin Pings leadership of China. Your forthcoming books entitled The Third Revolution, Jing Ping and the New Chinese State, can you tell us about this

new Chinese State? And from an investor perspective, what should we take away about what you describe as the contradictory nature of reform under the Chinese president. Certainly so, I mean over the past thirty years, um, you know, there's been an understanding I think broadly both within China and certainly in the international community that has China's developing, Its markets are going to continue to open, Its political system

is going to continue to liberalize and to reform. But if we look at the past five years under Sijin Pings leadership, he's really turned those kinds of assumptions uh on their collective heads. And so what we've seen in China under she's really uh, you know, a return to the strongman leadership, a centralization of authority under Shi Jin Ping's personal uh leadership, so you no longer have the

kind of collective leadership that you have. You've seen an increasing penetration of the Communist Party into society and into the economy for example, uh, you know, the party committees wanting to make investment decisions for state don't enterprises or for even joint ventures that are done with multinationals. I think most recently we saw that the Communist Party has said they're going to take a stake in China's largest

technology companies like Ali Baba, Intense cent Um. You know, this is not the direction in which we thought the Chinese government was going to uh to move. So we've seen a strengthening of the state don't enterprises under Shi jin Ping, and a lot of people thought that it wasn't going to move this way, right if they look back to two thousand and thirteen and the Third Plan with the eighteenth Party Congress, when a lot of people here in the United States said, wow, look at this document.

It talks a lot about the market being a decisive force. That was true, but what they missed was that the state was going to remain in command of the economy. And certainly we've seen Si Jinping, you know, dramatically restrict the outward flow of capital over the past year, right, putting a reigning in a lot of overseas investments. So a lot of changes that move in the other direction,

you know, as opposed to liberalization. Well, but but when it when it comes to just investors and and the Chinese markets, I mean, we just saw that GDP reading for and you know, a lot of people might say that those numbers are totally fudged, very difficult to really glean any any truth from, but they showed the first acceleration and the most meaningful acceleration since in the Chinese

economic growth outlook. I mean, is this a bad thing, especially as the economy does open up at least two banks. I mean having having a larger presence there for in banks having a larger presence in China, I mean as an investor, isn't it you know they're still managing it well. I would say this first of all, Um, I think

it's it's right to be cautious about Chinese numbers. And everybody knows this, and everybody says this, Um, But you just have to look at the most recent statements from you know, Tien's in one of China's most productive, largest economic regions, where they said that they inflated their growth in seen by a third, or what just came out from Inner Mongolia, you know, a heavy industrial center for China, where they said that their estimates fort over what they

actually were. Just to say, let's let's not get overly excited over the six point nine percent that we've seen this year, because we don't really know the reality. We

won't really know the reality for at least another year. Um. Having said that, you know, China continues to grow, and it's part of Jin Pink's pledge that he's going to double per capita g d P between two thousand ten and two thousand and twenty, and that requires that between two thousand and sixteen and two thousand twenty that g d P grow on an average of six and a

half percent. So whatever is actually happening the Chinese economy, you're going to see numbers that are gonna make sure that that GDP per cabin is doubled by And as far as what it means for investors in China, I would only point to both European Chamber of Commerce and American Chamber of Commerce reports over the past several years that talk about the increasing difficulty of doing business in

China these days. Uh. And while you're right that there was a recent opening for banks that came about after the Trump she meeting, um, in fact, what I've understood is that this is a little bit too little, too late, right, that there's not that much room at this point for foreign banks to to take on a you know, a bigger share of the Chinese market because the Chinese have protected it for so long that you know, Chinese banks

now basically command the banking system. So, you know, I think that's a challenge that many American companies are going to face at the United States is going to face as it continues to press China to open up more sectors of its economy that in fact, China is going to wait until it really commands those sectors and then say, sure, we welcome you in. Of course you're not going to be able to compete, but have at it. Thank you

very much for being with us. Elizabeth Economy, CV STAR, Senior Fellow and Director for Asia Studies at the Council of Foreign Relations. She can be followed on Twitter at Liz Economy. Thanks for listening to the Bloomberg P and L podcast. You can subscribe and listen to interviews at Apple Podcasts, SoundCloud, or whatever podcast platform you prefer. I'm pim Fox. I'm on Twitter at pim Fox. I'm on

Twitter at Lisa Abramo. It's one before the podcast. You can always catch us worldwide on Bloomberg Radio.