US-China Relations Are The Worst I've Ever Seen: Stephen Orlins

become rather strained. First it was trade tensions, tariffs, uh, and mostly on the economic front. Now it's kind of spilling into the political realm as well. We can get the latest on all things he was China. We can do that with Stephen Orleans, president of the National Committee on US China Relations based in New York City. Steven, thanks so much for joining us here. You've had such a long history in China, dealing with the US and China,

the relationship they're doing business in China as well. What if you could give us maybe your thirty thousand foot view about the US China relationship right now from both sides. Well, I've been working on it, i guess for forty three years, since my time in the State Department and at Leban Brothers in the Carlisle Group and now as President of the National Committee on US China Relations. And I think it's fair to say this is the worst that I've

ever seen the relationship. And it's a confluence of three factors, and you have to look at the factors are related, but to some degree there's still separate. One. You have to remember the April seventeenth memo that leaked from the Republican National Committee, which is when when the administration is attacked on coronavirus issues there to say we banned Chinese from coming and then blame China. So there has been this very strong uh statements by the administration to blame

China for everything. That's that's one, So electoral politics is a role. Second is what are called of the Navarro Pompeo parts of the administration um where they really believe China is an existential threat and they want and it's going to change our way of life, and they're trying

to put in place policies which are irreversible. And the third is Chinese actions where their actions in Hong Kong's, their actions in xin Jong in the South China see create an environment in the United States where there is not huge opposition to these policies which get put in place. And we're seeing pushback on on TikTok on w chat now, but it's it's um, it's not as strong as it

would be if China wasn't acting the way it shouldn't be. Stephen, when you say irreversible policies, what do you mean what can't be reversed? Well, if you take, for instance, the for sale of TikTok, that's irreversible. So if Microsoft and ends up buying TikTok, then either a President Trump that changes his mind or a President Biden can't go to Microsoft. So how you spent and was just getting you can

you can now reverse that sale. So those kinds of actions are irreversible, setting kind of a putting in place. You know, the the Houston consulate closing is not irreversible. That actually, you know, a new president or President Trump changes his mind and says, okay, let's reopen the consulate, and as a result of the American consulate in cheng Doo will reopen. So there's reversible actions in their irreversible actions.

So Stephen, you know, I think maybe one of the most reasonable views I've heard is that uh, okay, we we as the United States, need to take a tougher stance on China. A lot of people on both sides of the ais'll agree upon that China has not been fair and some of its relations, particularly economic and trade relations with the US. But the way that President Trump and his administration are going about it, uh is all wrong. What's your view, It needs to be multilateral. To go

about this unilaterally will not work. So take as an example one which kind of matters to your listeners, the blocking of listings of Chinese companies in the United States. When you do that unilaterally, you're playing whack a mole. We haven't agreed with Hong Kong, Singapore, Tokyo, London to have the same restrictions. So what happens is Nasdaq and ny SE lose that business. The Chinese don't lose anything that they basically will will issue in Hong Kong, Singapore, London,

or Tokyo. So if you don't have a multilateral approach, this getting tough is really uh not an effective way of of of operating. And a lot of the things they want to get tough on our our, our, our fictional You know, we have to have a real analysis. We have to have a nuanced view of what is going on in China. We don't. We saw today the Chinese are expanding their digital currency. Central bank digital currency is now uh it's in an experimental phase, but it's

going to expand greatly. That is a Chinese government competitor to we chat, an alley pay that the Chinese government is putting in place, competitors to these people who we are trying to block in the United States. It's just not there's no nuance in these views. What's the right way to proceed. If Joe Biden were to win, and obviously that's not at all you know, something that we

can predict, how would he proceed? I don't well, he will have I mean, the biggest difference will be a multilateral approach that Chinese that a lot of Chinese who have a there who who believe China should exceed to be the number one power in the world. Like President Trump, they feel that his unilateral approaches, you know, his tariffs on Canada, his his diminution of NATO, a lot of things where he makes our allies less inclined to work with US is good for China. That basically lays a

path for China to operate. What President Biden will operate on is a multilateral approach, and that can be very problematic for some of China's plans. So if we had something equivalent to a t p P UH, it would force China to change its trade policies, it's investment policies, it's protection of data policies. That t p P had lots of things in it which China would have had to agree to in the end or would have been excluded from this global training system. So I think the

big difference is multilateral versus unilateral. Alright, Steven, thirty seconds left. What is your view or what do you think the view is in with within China as it relates to kind of how they should proceed with the United States over the next ten years. Well, they're they're worried about the next eight three days, you know. They they think that they're they're very focused on not overreacting to the

provocations from the Trump administration. They believe that either a re elected President Trump or an elected President Biden would have different policies towards China. I think in the long term they're looking for China. You know, again, there is no Chinese government view. It's it's a lack of nuance. There are people in the Chinese government with different views. Some want a very constructive, productive relationship with the United States,

some want to confront the United States. So we need to adopt policies which reward those who want to cooperate with the United States. And again, you need nuance in policy and need people who understand China in government to make those decisions. Stephen, we have to leave it there, but it is an excellent, you know, chance to speak with you. Steven Orleans as President of the National Committee in US China Relations. So we know, we tale that's had a tough time. It's been having a tough time,

as they say. And now bankruptcies have started in earnest. Let's bring in somebody who is a bit more at the cold face of retail and husband for decades, Craig Johnson, as president of Customer Growth Partners. Craig, where are we in the bankruptcy you know cycle? Are we halfway through? Yes? Are we? You done well in terms of the bankruptcies that occurred so far. We think we're i'd say about

halfway done, maybe fifth or sixth spending. Um. This actually isn't a sign of unhealth on the behalf of retailers. It's really a sign of weeding out of the poor performers and the poor players and what has been a vastly overcapacity industry that should have been right sizing normally five every year, weeding out the week stores, the weak competitors, and has put that up. So what we've had, by dint of the whole cod but closures is a forced

right sizing, and that's what we're saying. It's interesting, it seems like when we've listened to a lot of the retailers, particularly the Parker stores, it seems like over the last several years we've been hearing announcements of a hundred stores here, two hundred stores there. Are you saying that that's still not enough, that this industry really needs a We're still you know, overstored by maybe thirty in this country. I would maybe not thirty percent, but by a good And yes,

there have been cutbacks that the department stars. Remember you go back to generation ago, comprised ten per cent of the entire retail market. Now it's down to zero point nine percent. So you do the math, Craig, Who's next? Um, I'm not I'm not sure who is next. We don't like to speculate on on on on people going through chapter eleven. But I can say that you know the people who are that that are the share gainers of

these companies? Are you know? Round up that the top six usual suspects, you know, Walmart, Amazon, Costco, Target, Home depoet lows All, had Stour are having stellar quarters, had stellar cards, haven't reported still beginning, But we can identify some of those that have been lagging, right, Craig, I mean some of those who just were not prepared for a downturn in the economy, who weren't getting consumer tastes right, who were maybe over discounting or not discounting enough. I mean,

what were the mistakes? If we can't, if you can't mention the names, then at least let's mention some of

the mistakes they make. Absolutely, So you take let's take a couple of department stores where the J C. Panni your name and markers are most recently like a day after ago, um Stein mart Um, and the commonality is is that they did not shrink their store footprint in commencially, um with the decline in aggregate to man people, just what department stores offer, even includings Markman markers, is not as relevant to customers as it was even five years ago,

much less twenty years ago. And um so those are few. The other part of it as apparel, apparel is shrunk dramatically over the years in terms of aggregate demand, um, and yet there still seems to be plenty of retail square feet out there even after the closes we've had,

uh in the apparel sector. And you know, as the senior brand, you know, a parent of an Taylor and Justice and Lost and so forth, they went chapter eleven months and a half or so ago, and you know, we're wouldn't be at all surprised, as the other folks

go that way as well. So Craig, I was in New York City, UH last week for the first time since the lockdown in March, and I was just shocked at driving in about you know, all the empty storefronts, all the sales saying, you know, store front for for rent and for lease and all that type of stuff. And I'm I really fear for not so much the walmarts and costcos of the world on the on the retail front, but really the mom and pop retailers, it

looks like they're just getting really really impacted here. Yeah, you're on Fifth Avenue or your lower Fifth and lower Broadway and soho. Um, it's like a retail ghost town. It's uh, it's really sad in a sense. Um. But if customers don't want to go, Joeghi Barritt used to say, if people don't want to go to the ballpark, you're not going to stop them. And that's what we have here, is that people just don't want to go into the city.

They don't feel safe, comfortable, and when they see pa boarded up and uh, you know, looting going on with it. I'm I'm in Chicago and originally was very sad to see the entire magnivocent mile just trashed a few days ago. And well, because I live very clost to certain areas and and you know, there was some looting in the early days, and then there was a little bit of looting in Chicago, but let's not overpainted as as mass looting.

Fifth Avenue, for example, back when there are lots of reports that it was being looted, was only in parts damaged, and a lot of the inventory had already been taken out of thanks to coronavirus or just putting that out there, so it's too would maybe, but just consumers. Consumers had great confidence and what's going on, and then we would see more traffic, and without traffic, a lot of these stories are not gonna make it. I mean, yes, the Sacks will make it, and LV is gonna make it,

and god knows, Costco and Wombark they're fine. But stories that don't have that kind of financial strength or customer strength are going to be challenged. So, Craig, this is pandemic. I mean, I guess the question for a lot of retailers is how permanent has the accelerated shift to online shopping, how permanent wi LEPP be, or when we do get back to quote unquote a normal day to day life,

will people go back to stores. What's your view? Well, UM last year online comprised about eighteen percent of total retail sales. UH This year at the peak of the pandemic period, UM in April jumped up to about twenty and the since ratchet back a little bit as the stories are reopened in May and June et cetera. Um, so that penetration is down to about But what that means is we have usually online grows about at one point a year ballpark, and what we've done essentially is

packed five years of growth into five months. Other with's the eighteen to and so we think things are going to stabilize at about and then proceed to the normal you know about what adding about a point or two a point say a penetration a year, uh, and that is that we think that is a permanent change with this obviously with this ratchet, big ratchet, five point ratchet up this this year very interesting. Really appreciate that. Craig Johnson,

thanks so much for joining us. Craig Johnson, President of Customer Growth Partners. Well, we are so fortunate to have the good folks at Johns Hopkins University lend us their time to hear Bloomberg Radio to help us stay educated and stay on the top of the news on what's going on with this virus and remedies and pretend chi vaccines. Lauren Sour has been a great friend to Bloomberg Radio and keeping us up to date on all the latest developments.

Lauren is the Assistant Professor of Emergency Medicine at John's Hopson School of Medicine. I should note that Bloomberg School a Public Health is supported by Michael Are Bloomberg, founder of Bloomberg LP and Bloomberg Philanthropies, and this radio and TV station. So, Lauren, let's start a little bit with vaccines, because I'm I'm really I'm just kind of wondering what is going on in Russia. They say they have a COVID vaccine, they say it's safe, but there really hasn't

been any real phase three testing. Has there? No, there hasn't, And that is one of the biggest concerns that we have right now. UM, when we look at what's happening in Russia with their vaccine clan UM, it's being rolled out uh without phase three UM, which can lead to a lot of downstream challenges that normally you would see

during that phase three process. So UM, different effects that the vaccine can have on a population, different challenges with rolling out just the operational process of rolling out vaccine, and even more safety data is gathered during that phase three as well. And so by skipping that, they not only have the potential to harm the population that is receiving the vaccine, but there are significant downstream effects that

can happen as well outside of that specific vaccinated population. Yeah, can you explain a bit further, Lauren as to what that might look like. Sure, So, UM, the vaccine can create UM antibody dependent effects. UM that can impact how the virus spreads in the community for those who have been vaccine those who haven't been vaccinated. In addition their challenges like, uh, if we find that there are safety

effects in this broader population, this more diverse population. When we do phase one and phase two studies, we're looking for relatively healthy population with certain levels of potential exposure, and that Phase three moves us into a population that's more representative of the general community, and so we may identify safety challenges that um, we didn't see in those early phases that could could could create dramatic health effects for people who are receiving the vaccine more broadly that

we didn't see early. So, Lauren, just we'll just finish up on this Russia aspect, will you? And other folks in the Western the healthcare field, we have the opportunity to kind of see what's going on in Russia. Do you think they're going to be disclosing credible information so that we can even get a read on how this

is proceeding. I think that's the hope. You know, we UM, we recognize that we may not have the full picture, but I think, UM, some of the safety information, some of this potential a D issue will be seen UM, whether or not it's seen through the you know, formally transmitted data or more informally through UM observation external observation. UM. We are hoping I think that they that they actually consider coming back to the idea of ducting a phase

three trial before they push it more broadly UM. And and I think only time will tell them that, Lauren, where are we in the sort of evolution of the coronavirus across the United States? You know, have we hit peak? Yes? Will there be further peaks? When does it come back to the East coast and in in in bigger numbers. But we have a lot to learn about how the virus is UM going to have potential seasonality or how it will UM come and go UM from the various populations.

And some of that also will inform us a bit more about likelihood of reinfection and how immunity lasts. UM. So I think in a lot of places across the country, we are starting to see a leveling off and we hope that that maintains, and we hope that UM that buys us time to create some of these pharmaceutical interventions and improve some of the pharmaceutical interventions like vaccines and

some of our therapeutics. You know, therapeutics don't stop outbreaks, they improve outcomes, and so are the vaccine is one

of our highest priorities. But we are going to see peaks moving UM, you know, and and communities that seem to have had the viruses under the virus under control have follow on peaks again as people get less get more lenient with their behaviors or their UM, you know, their adherence to these new behaviors, and just the general mixing and the population with the fall UM and the challenges associated with back to school, which were already seeing UM with the potential for UH flu season, and UM

with the holidays. So, Lauren, when vaccines do become available, hopefully sometime next year, is the expectation within the healthcare community that I guess vulnerable populations will be targeted first for distribution and then maybe more broadly after that. Yeah, there's several groups working on some different prioritization strategies UM. And this is something that we have done for a

long time with a lot of different facts scene. So there are several groups that are are very UM skilled in in this and and can use the population data to prioritize who should get the vaccine first. UM. We do think a lot about our vulnerable communities. We also think a lot about essential personnel, particularly healthcare workers who have that higher level of exposure. UM. And then some of the vaccines the early vaccine data in the Phase three data will help us will help inform these groups

on how they target UM their priority rollout. Lauren, what what is the top things that people should watch now that it's sort of back to school era and UM, you know, maybe there's a little bit of fatigue sitting in Yeah. I think it's um, it's a slightly worrying combination. So UM, you know, we we as a country sort of made the choice to reopen broad broad communities and um, you know, things like bars and restaurants, and that I think is impacting our ability now to safely reopen school halls.

You know, up to the up to early July, we had about two hundred thousand pieces of COVID nineteen nine kids, and from July to now we have almost the exact same amount. So that's worrisome and I think is indicative of some changes that need to happen with how we safely reopened schools. When you think about that, coupled with possible flu season, um, even if it is a later flu season, because of this distancing, we're very worried, um and we have to pay really close attention to it.

Lauren Sawery Johns Hopkins University. Always an absolute pleasure, and thank you for your time. So let's bring in the editor of the Bloomberg Brief on Municipal markets, Joe Mysak. He comes to us in our Interactive broker's studio in New York. Joe, Obviously, the chat about further stimulus is a tiny bit put on polls because actually we're not getting any signals at all out of Washington that there will be further stimulus, but there have to be. Is

the MENI market getting ready? Oh wow? Is the topic on everyone's minds, and some people think that yeah, this is gonna get done. Others don't. There was one line in the story we carried today by Bloomberg Billy House, and uh, it was a quote from Mitch McConnell, and it was this. It was it was bizarre, I think he said, quote. Democrats think they smell an opening. They have wanted for years to make Uncle Sam bailout decades of mismanagement at broken policies in places like New York,

New Jersey, and California. Not just you know, stop right there, New York, New Jersey, California. These three states make up twenty five percent of the nation's GDP. California is what I think, the fifth largest economy in the world if taken on its own. I don't see where McConnell gets that. New Jersey, yes, is that some pension problems. Surprise you didn't bring up illinoisa there. Uh, certainly should bring up Kentucky,

which has a notable pension shortfall problem. Anyway, So yeah, this is this is really the issue on everyone's bend right now. All right, Joe, you mentioned the great state of New Jersey. I'm sitting smack dab in that state right now, and I saw some news recently that the top court approved the state's planned to borrow up to I guess close to ten billion dollars to cover its deficit.

What does the meaning bond market think about that? Well, you know, I'll tell you we have almost microscopic yields right now. And to the extent that New Jersey sells all the bonds part of them. Um, and there's any kind of yield at all attached to him. Uh, you know,

marketed either right up. Because New Jersey again it's I think, uh number eight, eight, eight or nine in the rankings of states listed by g d P. So you know, New Jersey is a is a it's a little financial engine too, if you will, you know, yeah, they've had problems with the pension and problems with the budget. Murphy governor Worthy seems like, you you know, kind of a steady hand at the wheel. Um. So yeah, I had

to walk. I would eat these up because right now the market is uh, you know, we haven't seen a tremendous amount of supply, so yeah, these are the marketing got up, Joe. I mean remember when Mary do with he made that prediction way back after the financial crisis, and you know it sort of could have gone either way. I mean a lot of people believe what she had to say and thought that armageddon was coming for municipalities. Is there any chance that that something like that is

on the horizon now? You know, Yeah, that's a the doomsday scenario. It always comes around. And I talked to you know, this week, I talked to Paul Bolloy and Vanguard Group and he manages twillion dollars plots, which is the size and in my market, and uh, he doesn't see it. And the reason it is because uh, states and localities of providing funding for essential services, so they're

an absolute must for the economic recovery. And he says that he sees that Congress will do something, Congress will stop being intransigent and uh, you know, so eventually there will be some some rescue money there some release because the alternative is uh, you know, to all we will think about uh you know, but but really what would that mean? You would need some of the faults? Uh you know, maybe you know he's a couple of Chapter

nine bankruptcies at the local level. Um, you know that, but but a whole the doomsday scenario is so oversold and not accurate when it comes to meetings. So I know, before the pandemic hit, the taxable municipal bond market was red hot. We had lots of international buyers coming into that market, just desperate for yield. How's that market trading right now? How's the fund slows the new issuance? How's

that market looking to you? Oh? Baby, taxable bonds are are you know, it's like the it's the flavored d jur in the medi market right now. Because municipalities, you know, fund that rates are solo, they could sell taxable bonds, which as you say, are attractive to uh, out of country buyers as well as in country buyers. Um, they could sell those taxable and refund advanced refund bonds that they sold the tax exempt market a few years ago,

three four or five years ago. And of course the most recent tax Act prohibited the use of the tax exempt financing for advance refundings. So, yeah, taxables are going crazy, and you know one of they uh you know it's uh, you know, it's a portion of the market. Maybe it's six hundred and fifty billion out of the point nine

truly beauty market. But I read a report this week that you are an analyst said, you can easily see it go off to you know, nine hundred billion portion of the market in the next couple of years here, So yeah, it's just we'll keep an eye on that. Joe Mai Sak. Thank you once again, Joe Mesac, edit editor Bloomberg Brief, keeping us up to date on all things going on a must the bond market. Thanks for

listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer. I'm Bonnie Quinn, I'm on Twitter at Bonnie Quinn, and I'm Paul Sweeney. I'm on Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio.