May 20, 2024 • 24 mins
Featuring
Rana Mitter, Professor of US - Asia Relations at Harvard's Kennedy School of Government, previewing the inauguration of Taiwan's new president, Lai Ching-te.
Fred Neumann, Chief Asia Economist & Co-Head of Global Research Asia at HSBC, visits our Hong Kong studio to give his outlook on the trading week ahead in the APAC.
Michael Heath, Bloomberg Eco-Gov Editor in Sydney, weighs in on the helicopter crash and subsequent disappearance of Iranian President Ebrahim Raisi.
Apple: https://podcasts.apple.com/us/podcast/bloomberg-daybreak-asia/id1663863437
Spotify: https://open.spotify.com/show/0Ccfge70zthAgVfm0NVw1b
TuneIn: https://tunein.com/podcasts/Asian-Talk/Bloomberg-Daybreak-Asia-Edition-p247557/?lang=es-es
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business app.
Speaker 2 (00:27):
Taiwan's president or in president elect, Lijingda is to be
sworn in as president today and that will put him
right at the center of very difficult relations between the
United States and China. And joining us for some discussion
of this is Ron A Mitter, who is Professor of
US Asia Relations at the Harvard Kennedy School, to get
(00:47):
some insights on this. So, by most accounts, Leijingda is
likely to make a speech today that would be one
of continuity, but there's always the chance that there'll be
some thing in there that rocks the boat. What are
you expecting in terms of the tone.
Speaker 3 (01:05):
Well, I think Brian that he's going to try and
pump up the volume a little bit when it comes
to the question of Taiwan being separated from the mainland.
His predecessor who's just leaving office president saying one was
pretty careful to make sure that she didn't trigger that
red line, which Beijing has always said is going to
be the trigger for an all out opposition by them,
(01:26):
and that is, of course, the decoration of independence by Taiwan. Now,
I think it's highly unlikely that lightingder As the new president,
is going to actually utter the I word of independence,
but he may try and use language that's a bit
more forceful than that of his predecessor. That having been said,
I'm sure that there will have been extremely strong signals
from the United States from the Biden administration, but he
(01:49):
should not try and upset the current status quo, particularly
since mainland mainland China's relations with the US have been
getting better in the last year, and so while they're
going to be stronger rhetoric, I don't expect to hear
any difference in terms of Taiwan's policy.
Speaker 1 (02:04):
Mister Lai managed to get around forty percent of the
popular vote, so there is not a strong mandate, is there.
Speaker 3 (02:12):
Well, forty percent is pretty strong. I think there are
an awful lot of politicians who would like to have
that In the context of Taiwan, which is three major
candidates all coming together. It is certainly the case that
if the two candidates who lost, Coen Jur and Ho
Yui had actually managed to get together with their respective
parties and run together against him, then it's possible he
(02:33):
might have lost. But that having been said, he can
certainly go back and say he actually does have the
presidential mandate because he's got a lot more votes than
either of the other two. His problem is a little
bit similar to the one in the US at the moment,
which is that even though he has the presidency, Congress
is split. Essentially the opposition KMT Nationalist Party does have
(02:53):
a very significant number of seats, pretty much actually slightly
more I think one more than the ruling DPP in
the presidency actually has, and that means that it may
be hard to get legislation through Taiwan's Congress, even though
lighting the does have the presidency in his hands.
Speaker 2 (03:11):
Professor, I'm curious about the nuanced line between declaring independence
and stating that we already have independence, because that's basically
what William Lai has been saying. He's pushing for the
status quo. The status quo is de facto independence. So
how nervous would China be if he starts talking about
that in great detail? And even if it isn't a
(03:32):
declaration officially, it's statement that we have it.
Speaker 3 (03:37):
Well, that phrasing of we don't need to declare independence
because essentially we have it already was actually used in
the form by saying one his predecessor as well, so
it's not completely new in that sense. I think that
Beijing is getting more and more nervous about the idea
that there might be any kind of formal separation, and
that's why we've seen, in fact, just today that there
have been yet more sorties of fighter craft in the skies,
(04:01):
not quite above the island, but certainly quite close to it.
And they've made it very clear again that they regard
any statement that goes in the direction of independence to
be one that they would consider a trigger warning from
their point of view. That said, it is certainly the
case that they've acknowledged for a long time that Taiwan
has been autonomous. That might be a better word to
use than independent. And the question now comes as to
(04:24):
how long they're willing to tolerate something that looks genuinely
like the status quo. In other words, that Taiwan will
not get and probably won't move very hard to seek
formal independence for its status, but rather seek to try
and find, say, international organizations such as the WTO or
sections of the United Nations, where it can have a
(04:44):
sort of substate role. There are precedents for other entities
which are not fully recognized states getting some sort of
recognition in international organizations. The question is whether Beijing will
consider that now part of its red line.
Speaker 1 (04:58):
So what does this mean for the United Sis dates,
particularly in the context of a US presidential election at
the end of this year that may say a change
in administrations, but.
Speaker 3 (05:09):
The rest of this calendar year. My guess is that
it's pretty much baked into the calculations on both the
side of Beijing and of Washington. In other words, they
know that both sides have known that this inauguration was
going to happen. The election actually happened four months ago
in January, and what's happened so far has not produced
any great surprises since then. Also, both sides essentially don't
(05:30):
have a great interest in raising the temperature on US
China relations more broadly, in the run up to that
presidential election. Essentially, the Chinese side know that if President
Biden is re elected that at that point they're going
to have to work out how they'll deal with the
timeline question over the four years after that, in the
face of an administration which has made it very clear that
(05:51):
it does continue the consider the continued status quoa of
Taiwan to be a core US interest. If President Trump
is re elected, then I think the general sense from
the Beijing side is that they're not sure what he
might do, anything from actually doubling down on harsh words
or actions with China to maybe being less involved as
a sort of more isolationist position from the outside world.
(06:14):
And so from that point of view, Beijing will speak
strong language, it will send those fighter planes into the
skies near Taiwan, but it's unlikely to want to trigger
any kind of major confrontation now before it knows the
result of that US presidential election.
Speaker 2 (06:29):
Everything we've seen in the past is that Taiwan people
would not in any way support becoming a part of China.
I mean, that's the sense of things. And you talked
about autonomy. How much has what's happened to Hong Kong
hurt China in the eyes of Taiwan people, losing its
semi autonomous status here right, I.
Speaker 3 (06:52):
Mean the parting of the National Security Law in twenty
twenty in Hong Kong had an extremely negative effect on
impressions of getting closed to China in Taiwan, and in fact,
in the previous presidential election back in twenty twenty, which
was held in the kind of shadow of that Hong
Kong National Security Law, Taiing Ian was essentially able to
(07:13):
get reelection in large part by citing the example of
Hong Kong. But there are other means of getting close.
Political closeness, as you've said, is something that most Taiwanese
people don't seem to want to have. They prefer a
version of the status quo. But something like eighty percent
of Taiwan's businesses are in some way tied to the mainland,
and the mainland has shown certainly in the last few
(07:34):
months that it's capable of operating partial boycotts or sanctions
against Taiwanese goods. It could be pineapples, it could be chemicals.
Both of those have been hit recently to show that
if it wants to squeeze Taiwan's economy, then it has
the capacity to do that. I would look to that
sort of area, or for instance, companies like fox Conn,
run by a Taiwan millionaire, Terry Gull, but operating largely
(07:58):
in factories on the south coast of China, for where
Beijing may choose to squeeze less on the military front,
probably more on the economic front.
Speaker 1 (08:06):
Professor, what do we know about the cabinet of the
incoming president? Who is he surrounding himself with.
Speaker 3 (08:13):
Well, he does have, amongst others, people who know the
United States very well, including Vice President be Kim, who
is of course someone who has American family and is
very well known in Washington. In addition, it's fairly likely
that he's going to push hard on domestic economic issues
with his cabinet, one of the reasons being that although
(08:34):
one of the factors that most analysts would say led
to his reelection was the fear of the opposition parties
getting too close to China, at least on the part
of forty percent of the voters, there is a lot
of dissatisfaction within Taiwan itself about the state of the economy,
and because of that, issues such as youth unemployment, for instance,
(08:54):
it's going to be important for Li's government to essentially
come up with more economic growth. So figures like Selby
Kim will be important in terms of US relations, but
the domestic economy and domestic politics will probably be much
more at the center of what happens in the next
four years than it might appear on inauguration day itself,
when obviously attention is much more on what Beijing is
(09:17):
going to do.
Speaker 2 (09:18):
Excellent stuff. Thank you very much. Professor Professor Roni Mitter,
Professor of US Asia Relations at Harvard Kennedy School, joining
us in our studios for a closer look at China
and indeed the Asia Pacific is Fred Newman, Chief Asia
(09:38):
Economist and co head of Global Research for Asia at HSBC.
So Frederick, thank you very much for joining us here
in our studios. As usual, let's start off with China,
looking at some of the measures of late Again, we're
hearing from economists that you know, it's a step in
the right direction, but it may not be enough, and
you know the chasm is huge and such. Your thoughts
(10:02):
on the developments we saw at the end of last weekend,
whether they might.
Speaker 4 (10:05):
Work well, it's not the magic bullet that we've been
ho we'revoping for. But look, they're taking new measures. That is,
they had rolled out new tools to actually address the
housing problem. Now you could say the money they put
behind is not large enough, but at least they're thinking
a little bit outside the box. For example, they brought
a new central bank tool. The Central Bank will provide
(10:28):
money at very low interest rates to commercial banks to
buy excess housing. We hadn't had that specific program before.
And so the hope is here that look that at
least they're opening the toolbox a little bit, and that
would give them then the potential opening to add further
funds in the future. But certainly in themselves, this is
not going to solve the housing crisis. And once we fell, swoop.
Speaker 1 (10:51):
Okay, So let's say that we're going to get incremental
steps over in the future, something of the same order
of magnitude. How many years is going to take fred
for China to get out from underneath this problem?
Speaker 4 (11:04):
Well, look, we already three years, three plus years into this,
and you think that housing market corrections magnitude would take
five six years with the economy to fully digest. So
I would say we're looking another couple of years here
at least before you really can say the housing crisis
behind us, and that's you know, that's in the US.
(11:24):
It took many years as well for this to be digested. That.
The thing though, at the moment, is we yet need
to stop the bleeding. We're not even talking about recovery.
We still talking about prices falling, We're still talking about
housing construction being under pressure, we still talk about demand falling.
We just want to arrest those downward trends, stabilize things,
and then it's going to take another couple of years
(11:46):
before you see things really accelerate again.
Speaker 2 (11:50):
The ultra long sovereign bond sales, which you know is
going to be done in several trenches, walk us through
the mechanism for mean, because what it seems like is
that it's the federal govern you know, raising money and
enabling local provinces to buy up some of these unsold homes.
What's the transmission mechanism? How does that money move from
(12:10):
the federal to the provincial governments.
Speaker 4 (12:14):
Well, we're not quite clear exactly how much of that
money will be put towards housing purchases, right, so it's
a bit of a black box. Nevertheless, we know that
the government's saying we need to raise more money. We
need to essentially put more money into the economy, be
it in housing or be it in other infrastructure projects
for example. So by putting out long term bonds, you
(12:34):
really try to raise money essentially for the long term.
You're not going to attack short term money markets. It
aims at a different class of investors, and it's really
trying to establish long term funding mechanisms that local governments
and ultimately could use as well. So that's the idea.
It's going to building a long term funding market. It's
(12:54):
less so that the money is all going to be
available for housing purchases.
Speaker 1 (12:58):
So let's say maybe we're at the halfway point in
terms of the recovery for the property market in China,
and then once we get, you know, fully through this
period of recovery, maybe we can talk about kind of
a recovery in the broader economy. But I'd like to
talk a little bit about what's going on in Taiwan.
The installation of a new president will happen later today.
One of the things that we were talking about over
(13:19):
the weekend, Brian and myself, we know that semiconductor manufacturing
is very, very concentrated in Taiwan. TSMC obviously the largest
player globally. I think ninety percent of the chips in
the world come out of out of that manufacturing facility.
But as countries like the US and maybe countries in
Europe seek to diversify, so it's not so concentrated. What
(13:43):
is the economic future for Taiwan if companies like TSMC
begin to lose their heft.
Speaker 4 (13:52):
Well, it's certainly a big headwind for the Taiwanese economy
because of course semiconductor advanced semiconductor manufacturing is you write,
is the driving force of the Taiwanese economy, and so
losing those fabs to other countries would certainly be a setback.
But make no mistake, the Taiwanese economy is much larger
than this. Yes, they have spectacular advances in high end chips,
(14:15):
but it's very concentrated to one company, a couple of factories.
It's not like thousands of workers work there. It's a
big profit driver, but it doesn't really employ that many people.
So if you just talk about overall economic growth, the
direct significance isn't that large. It's more significant because it
gives other companies in Taiwan access to advanced semiconductors. But
(14:37):
I would argue that ultimately Taiwan has a fairly diversified economy.
We always talk about chips, but there's petrochemicals, there's electronics,
there's other types of manufacturing, and you know, ultimately it
is a very small island's only twenty million people. They
need to if their companies want to grow, they have
to grow overseas. They can't just grow domestically, right, So
(14:57):
there's a limit to which you can actually expand capacity
Taiwan anyway, So it's not necessarily deathnel here to the
Tawanese economy.
Speaker 2 (15:04):
Well, I'm curious though, whether or not you think that
Taiwan plays a bigger role in between China and the
United States, or whether or not it continues to be
sort of there in the background, a potential danger, but
not playing such an active role. So that's the first
part of the question. The second part is in China's
response to the US so far, it's been more words
(15:25):
than actions. Do you expect more in terms of.
Speaker 4 (15:28):
Actions, maybe in terms of the protection on the trade side, Yeah, yes,
some of those things. Yeah, Well on that first, so
we have seen actually the Chinese so far actually not
taken much action against the US lying low and they're
just taking on the Chin and they're still open for
US companies to do business in China. But visa of
a Europe, we've actually seen the Chinese start to say,
(15:49):
if you start to impose these measures, we may have
to retaliate. So they're a bit more aggressive visa of
a Europe because they don't want Europe to follow the United States.
The other thing that the Chinese could alter do is
they could make a life for US companies in China
much much harder. That's not on the cards yet, and
so far they want US companies to be involved. But
of course if there is a you know, if there's
(16:10):
an opportunity then to kind of pay back the US
by shutting out US companies, I think that might be
sort of the next way to do it. In terms
of Taiwan, I think it's going to play more of
a backstory here. The temperature has declined, you know, around Taiwan,
and so we'll have to see how the US election
shapes up. That's of course always a point where you
(16:32):
could see escalating tensions. But I think broadly speaking, things
are not quite as acute as some of the headlines suggests.
Speaker 1 (16:41):
You know you read the news. I mean China preparing
to take countermeasures against the European Union if it continues
a series of investigations around subsidies. We were talking a
moment ago about the Canadian Trade Minister looking at the
possibility of tariffs on Chinese evs. We know what we
heard last week from the Bike administration when it came
to new tariffs on Chinese goods. Do you are you
(17:04):
worried about a new trade war, or at least a
hotter trade war.
Speaker 5 (17:10):
Yes.
Speaker 4 (17:10):
I think the worrying trend here is that if the
US imposes restrictions, other countries will start to follow. And
there's a certain logic to this, because if the US
says no thank you to Chinese electric vehicles, and these
vehicles are being redirected into other markets and they necessarily
get overwhelmed, and then they start to pose restrictions as well,
And so the risk is that you have a cascading
(17:32):
effect here with the European Union, in Canada and everybody
else it's following the US. And that's not necessarily good
for the world economy. It's not necessarily good for consumers,
and so we want to kind of contain trade restrictions
to a bare minimum. It doesn't say that they're not
justifications in some instances, but remember, any disruption to trade
(17:53):
is ultimately a negative for the world economies, a negative
for consumer for consumer choice, and so the hope is
that other countries will become a bit more judicious in
terms of their application of these measures than kind of
using brute force.
Speaker 2 (18:09):
Are we about to see the yen play a more
important role in the global economy and are you expecting
to see weakness in the dollar anytime soon?
Speaker 4 (18:20):
So yen is unlikely to play a stronger role. It's
so much pressure at the moment. I don't think it
will re establish itself as a reserve currency necessarily anytime soon.
And there's pressures on the en remain quite severe. That's
because US interest rates are sky high and Japanese interest
rates are what they are, and so there is probably
(18:41):
ongoing pressure in the Japanese end. The Japanese Center Bank
is trying to push back against this, allowing yields to
rise to kind of slow down to this end of
the Japanese end. But remember a weaker Japanese end plays
a functional role in Japan's reflation. It raises inflation, it
raises competitiveness, and that's ultimately good for Japan.
Speaker 2 (19:00):
All right, Frederick, thank you for coming into our studios
and joining us here on a Monday morning. We do
appreciate it. Fred Newman, Chief Asia Economist and co head
of Global Research for Asia at HSBC.
Speaker 1 (19:17):
Let's take a closer look at the President of Iran
at this helicopter crash. Michael Heath joins us Bloomberg ecogov editor,
joining us from our studios in Sydney. Michael, I know
it's still early in this event. We have information kind
of trickling in even before the announcement of this crash, though,
(19:38):
I think it's fair to say that relations between Tehran
and Washington were very, very strained. Do we know anything
about what's happening in Iran right now? Irrespective of the
search for the crash site.
Speaker 5 (19:52):
The pictures that are being broadcast on I run in
safe TV and mainly of people either either praying for
the health of the president or obviously emergency vehicles heading
up to the area. As to the higher level politics
of it, it doesn't seem to have been a great
deal said. The US has announced that President Biden has
(20:17):
been briefed on it, but it's very very unclear sort
of the status of it. Was it just a hard landing,
is it something more serious, It's just unknown at the moment.
That's a particularly mountainous part of Iran, and obviously the
pictures have shown very very thick fog there as well
in rain. So really we're just as you say, the
(20:37):
little bits and bobs of information are trickling out, but
until we get something official, it's really just speculation. At
this stage.
Speaker 2 (20:45):
We understand that Iran asked Turkey to send a rescue
helicopter and one with night vision capabilities. It looks to
be very close to the border. Do we know whether
this crashes on the Iranian side or on the Turkysh side.
Speaker 5 (21:00):
It seems to be on the Iran inside. I mean
that area is actually also known as Azerbaijan. It's said
to have crashed in East Azerbaijan. So you've got the
Republic of Azerbaijan former Soviet republic, and then you've got
in northwest Iran, you've got another region called Azerbaijan, and
there's west and East and so it does seem to
have happened just over the border inside Iran, but the
(21:22):
area is known as Azerbaijan. But he was flying back
that those three helicopters involved in the three helicopters, one
of the which was containing the president, was flying back
after the opening of a dam between Azerbaijan and Iran
as they sort of try and warm relations between the
two sides. As well.
Speaker 1 (21:40):
In terms of the person of mister Raisi, I think
he's an ultra conservative cleric. He's obviously the president of
the country, and many analysts believe that he was being
groomed to become the next supreme leader of Iran. So
obviously with his absence, I mean that that would lead
(22:00):
a huge void.
Speaker 4 (22:02):
It would it would.
Speaker 5 (22:03):
I mean, look, in the worst case scenario, it does
really open up a lot of questions because obviously the
Supreme Leader, who is the ultimate authority in Iran. Unlike
other countries where the presidents sort of head of state,
in Iran, it's the supreme leader, you know, sort of
the religious leader of this theocracy. But as you say,
race he was being he was well known to be groomed,
(22:23):
being groomed potentially to take over a Supreme Leader at
some point, so yes, that that would rule will him
out and then of course you under the constitution at
this stage you'd have the first vice President who would
step into his role, and then there would be a
group of guardians who would come together and within fifty
days they'd be they'd be expected to hold elections. But
(22:45):
you're right, I mean, if if if he's he's sort
of had quite a meteoric assent through the through the
ranks in Iran, and if that was the ultimate goal
for him, it really would open up a gap avoid
in terms of the succession planning there.
Speaker 2 (23:01):
In addition to Ibrahim Raisi. Do we know much about
who else was board the flight?
Speaker 5 (23:07):
Yeah, we know the Foreign minister was on there, and
then there was there were some guards, There was a
representative of the Supreme Leader from the region where they
were they were flying over, and the governor there is
my understanding as well. That's about all the detail that
we have, but yeah, it was it was a three
three helicopter convoy and as you were reported in the news,
(23:29):
it seems that it's the President's the president's helicopter that's
had the hard landing there. But Yeah, we're really really
fed on information or detail at this stage.
Speaker 1 (23:38):
We appreciate it nonetheless, Michael for your insight and perspective.
Michael Heath, Bloomberg ecogov editor, joining us from Sydney, talking
about the helicopter crash. The flight carrying Iranian President Raisi
and his foreign minister which crashed on Sunday in the
Mountainous Area North in the northwest portion of Iran.
Speaker 2 (24:01):
This is the Bloomberg Daybreak Asia podcast, bringing to the
stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify, or anywhere else you listen,
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(24:22):
Bloomberg Business app.
Bloomberg Audio Studios, Podcasts, radio news. This is the Bloomberg
Daybreak Aisia podcast. I'm Doug Krisner. You can join Brian
Curtis and myself for the stories, making news and moving
markets in the APAC region. You can subscribe to the
show anywhere you get your podcast and always on Bloomberg Radio,
(00:23):
the Bloomberg Terminal, and the Bloomberg Business app.
Speaker 2 (00:27):
Taiwan's president or in president elect, Lijingda is to be
sworn in as president today and that will put him
right at the center of very difficult relations between the
United States and China. And joining us for some discussion
of this is Ron A Mitter, who is Professor of
US Asia Relations at the Harvard Kennedy School, to get
(00:47):
some insights on this. So, by most accounts, Leijingda is
likely to make a speech today that would be one
of continuity, but there's always the chance that there'll be
some thing in there that rocks the boat. What are
you expecting in terms of the tone.
Speaker 3 (01:05):
Well, I think Brian that he's going to try and
pump up the volume a little bit when it comes
to the question of Taiwan being separated from the mainland.
His predecessor who's just leaving office president saying one was
pretty careful to make sure that she didn't trigger that
red line, which Beijing has always said is going to
be the trigger for an all out opposition by them,
(01:26):
and that is, of course, the decoration of independence by Taiwan. Now,
I think it's highly unlikely that lightingder As the new president,
is going to actually utter the I word of independence,
but he may try and use language that's a bit
more forceful than that of his predecessor. That having been said,
I'm sure that there will have been extremely strong signals
from the United States from the Biden administration, but he
(01:49):
should not try and upset the current status quo, particularly
since mainland mainland China's relations with the US have been
getting better in the last year, and so while they're
going to be stronger rhetoric, I don't expect to hear
any difference in terms of Taiwan's policy.
Speaker 1 (02:04):
Mister Lai managed to get around forty percent of the
popular vote, so there is not a strong mandate, is there.
Speaker 3 (02:12):
Well, forty percent is pretty strong. I think there are
an awful lot of politicians who would like to have
that In the context of Taiwan, which is three major
candidates all coming together. It is certainly the case that
if the two candidates who lost, Coen Jur and Ho
Yui had actually managed to get together with their respective
parties and run together against him, then it's possible he
(02:33):
might have lost. But that having been said, he can
certainly go back and say he actually does have the
presidential mandate because he's got a lot more votes than
either of the other two. His problem is a little
bit similar to the one in the US at the moment,
which is that even though he has the presidency, Congress
is split. Essentially the opposition KMT Nationalist Party does have
(02:53):
a very significant number of seats, pretty much actually slightly
more I think one more than the ruling DPP in
the presidency actually has, and that means that it may
be hard to get legislation through Taiwan's Congress, even though
lighting the does have the presidency in his hands.
Speaker 2 (03:11):
Professor, I'm curious about the nuanced line between declaring independence
and stating that we already have independence, because that's basically
what William Lai has been saying. He's pushing for the
status quo. The status quo is de facto independence. So
how nervous would China be if he starts talking about
that in great detail? And even if it isn't a
(03:32):
declaration officially, it's statement that we have it.
Speaker 3 (03:37):
Well, that phrasing of we don't need to declare independence
because essentially we have it already was actually used in
the form by saying one his predecessor as well, so
it's not completely new in that sense. I think that
Beijing is getting more and more nervous about the idea
that there might be any kind of formal separation, and
that's why we've seen, in fact, just today that there
have been yet more sorties of fighter craft in the skies,
(04:01):
not quite above the island, but certainly quite close to it.
And they've made it very clear again that they regard
any statement that goes in the direction of independence to
be one that they would consider a trigger warning from
their point of view. That said, it is certainly the
case that they've acknowledged for a long time that Taiwan
has been autonomous. That might be a better word to
use than independent. And the question now comes as to
(04:24):
how long they're willing to tolerate something that looks genuinely
like the status quo. In other words, that Taiwan will
not get and probably won't move very hard to seek
formal independence for its status, but rather seek to try
and find, say, international organizations such as the WTO or
sections of the United Nations, where it can have a
(04:44):
sort of substate role. There are precedents for other entities
which are not fully recognized states getting some sort of
recognition in international organizations. The question is whether Beijing will
consider that now part of its red line.
Speaker 1 (04:58):
So what does this mean for the United Sis dates,
particularly in the context of a US presidential election at
the end of this year that may say a change
in administrations, but.
Speaker 3 (05:09):
The rest of this calendar year. My guess is that
it's pretty much baked into the calculations on both the
side of Beijing and of Washington. In other words, they
know that both sides have known that this inauguration was
going to happen. The election actually happened four months ago
in January, and what's happened so far has not produced
any great surprises since then. Also, both sides essentially don't
(05:30):
have a great interest in raising the temperature on US
China relations more broadly, in the run up to that
presidential election. Essentially, the Chinese side know that if President
Biden is re elected that at that point they're going
to have to work out how they'll deal with the
timeline question over the four years after that, in the
face of an administration which has made it very clear that
(05:51):
it does continue the consider the continued status quoa of
Taiwan to be a core US interest. If President Trump
is re elected, then I think the general sense from
the Beijing side is that they're not sure what he
might do, anything from actually doubling down on harsh words
or actions with China to maybe being less involved as
a sort of more isolationist position from the outside world.
(06:14):
And so from that point of view, Beijing will speak
strong language, it will send those fighter planes into the
skies near Taiwan, but it's unlikely to want to trigger
any kind of major confrontation now before it knows the
result of that US presidential election.
Speaker 2 (06:29):
Everything we've seen in the past is that Taiwan people
would not in any way support becoming a part of China.
I mean, that's the sense of things. And you talked
about autonomy. How much has what's happened to Hong Kong
hurt China in the eyes of Taiwan people, losing its
semi autonomous status here right, I.
Speaker 3 (06:52):
Mean the parting of the National Security Law in twenty
twenty in Hong Kong had an extremely negative effect on
impressions of getting closed to China in Taiwan, and in fact,
in the previous presidential election back in twenty twenty, which
was held in the kind of shadow of that Hong
Kong National Security Law, Taiing Ian was essentially able to
(07:13):
get reelection in large part by citing the example of
Hong Kong. But there are other means of getting close.
Political closeness, as you've said, is something that most Taiwanese
people don't seem to want to have. They prefer a
version of the status quo. But something like eighty percent
of Taiwan's businesses are in some way tied to the mainland,
and the mainland has shown certainly in the last few
(07:34):
months that it's capable of operating partial boycotts or sanctions
against Taiwanese goods. It could be pineapples, it could be chemicals.
Both of those have been hit recently to show that
if it wants to squeeze Taiwan's economy, then it has
the capacity to do that. I would look to that
sort of area, or for instance, companies like fox Conn,
run by a Taiwan millionaire, Terry Gull, but operating largely
(07:58):
in factories on the south coast of China, for where
Beijing may choose to squeeze less on the military front,
probably more on the economic front.
Speaker 1 (08:06):
Professor, what do we know about the cabinet of the
incoming president? Who is he surrounding himself with.
Speaker 3 (08:13):
Well, he does have, amongst others, people who know the
United States very well, including Vice President be Kim, who
is of course someone who has American family and is
very well known in Washington. In addition, it's fairly likely
that he's going to push hard on domestic economic issues
with his cabinet, one of the reasons being that although
(08:34):
one of the factors that most analysts would say led
to his reelection was the fear of the opposition parties
getting too close to China, at least on the part
of forty percent of the voters, there is a lot
of dissatisfaction within Taiwan itself about the state of the economy,
and because of that, issues such as youth unemployment, for instance,
(08:54):
it's going to be important for Li's government to essentially
come up with more economic growth. So figures like Selby
Kim will be important in terms of US relations, but
the domestic economy and domestic politics will probably be much
more at the center of what happens in the next
four years than it might appear on inauguration day itself,
when obviously attention is much more on what Beijing is
(09:17):
going to do.
Speaker 2 (09:18):
Excellent stuff. Thank you very much. Professor Professor Roni Mitter,
Professor of US Asia Relations at Harvard Kennedy School, joining
us in our studios for a closer look at China
and indeed the Asia Pacific is Fred Newman, Chief Asia
(09:38):
Economist and co head of Global Research for Asia at HSBC.
So Frederick, thank you very much for joining us here
in our studios. As usual, let's start off with China,
looking at some of the measures of late Again, we're
hearing from economists that you know, it's a step in
the right direction, but it may not be enough, and
you know the chasm is huge and such. Your thoughts
(10:02):
on the developments we saw at the end of last weekend,
whether they might.
Speaker 4 (10:05):
Work well, it's not the magic bullet that we've been
ho we'revoping for. But look, they're taking new measures. That is,
they had rolled out new tools to actually address the
housing problem. Now you could say the money they put
behind is not large enough, but at least they're thinking
a little bit outside the box. For example, they brought
a new central bank tool. The Central Bank will provide
(10:28):
money at very low interest rates to commercial banks to
buy excess housing. We hadn't had that specific program before.
And so the hope is here that look that at
least they're opening the toolbox a little bit, and that
would give them then the potential opening to add further
funds in the future. But certainly in themselves, this is
not going to solve the housing crisis. And once we fell, swoop.
Speaker 1 (10:51):
Okay, So let's say that we're going to get incremental
steps over in the future, something of the same order
of magnitude. How many years is going to take fred
for China to get out from underneath this problem?
Speaker 4 (11:04):
Well, look, we already three years, three plus years into this,
and you think that housing market corrections magnitude would take
five six years with the economy to fully digest. So
I would say we're looking another couple of years here
at least before you really can say the housing crisis
behind us, and that's you know, that's in the US.
(11:24):
It took many years as well for this to be digested. That.
The thing though, at the moment, is we yet need
to stop the bleeding. We're not even talking about recovery.
We still talking about prices falling, We're still talking about
housing construction being under pressure, we still talk about demand falling.
We just want to arrest those downward trends, stabilize things,
and then it's going to take another couple of years
(11:46):
before you see things really accelerate again.
Speaker 2 (11:50):
The ultra long sovereign bond sales, which you know is
going to be done in several trenches, walk us through
the mechanism for mean, because what it seems like is
that it's the federal govern you know, raising money and
enabling local provinces to buy up some of these unsold homes.
What's the transmission mechanism? How does that money move from
(12:10):
the federal to the provincial governments.
Speaker 4 (12:14):
Well, we're not quite clear exactly how much of that
money will be put towards housing purchases, right, so it's
a bit of a black box. Nevertheless, we know that
the government's saying we need to raise more money. We
need to essentially put more money into the economy, be
it in housing or be it in other infrastructure projects
for example. So by putting out long term bonds, you
(12:34):
really try to raise money essentially for the long term.
You're not going to attack short term money markets. It
aims at a different class of investors, and it's really
trying to establish long term funding mechanisms that local governments
and ultimately could use as well. So that's the idea.
It's going to building a long term funding market. It's
(12:54):
less so that the money is all going to be
available for housing purchases.
Speaker 1 (12:58):
So let's say maybe we're at the halfway point in
terms of the recovery for the property market in China,
and then once we get, you know, fully through this
period of recovery, maybe we can talk about kind of
a recovery in the broader economy. But I'd like to
talk a little bit about what's going on in Taiwan.
The installation of a new president will happen later today.
One of the things that we were talking about over
(13:19):
the weekend, Brian and myself, we know that semiconductor manufacturing
is very, very concentrated in Taiwan. TSMC obviously the largest
player globally. I think ninety percent of the chips in
the world come out of out of that manufacturing facility.
But as countries like the US and maybe countries in
Europe seek to diversify, so it's not so concentrated. What
(13:43):
is the economic future for Taiwan if companies like TSMC
begin to lose their heft.
Speaker 4 (13:52):
Well, it's certainly a big headwind for the Taiwanese economy
because of course semiconductor advanced semiconductor manufacturing is you write,
is the driving force of the Taiwanese economy, and so
losing those fabs to other countries would certainly be a setback.
But make no mistake, the Taiwanese economy is much larger
than this. Yes, they have spectacular advances in high end chips,
(14:15):
but it's very concentrated to one company, a couple of factories.
It's not like thousands of workers work there. It's a
big profit driver, but it doesn't really employ that many people.
So if you just talk about overall economic growth, the
direct significance isn't that large. It's more significant because it
gives other companies in Taiwan access to advanced semiconductors. But
(14:37):
I would argue that ultimately Taiwan has a fairly diversified economy.
We always talk about chips, but there's petrochemicals, there's electronics,
there's other types of manufacturing, and you know, ultimately it
is a very small island's only twenty million people. They
need to if their companies want to grow, they have
to grow overseas. They can't just grow domestically, right, So
(14:57):
there's a limit to which you can actually expand capacity
Taiwan anyway, So it's not necessarily deathnel here to the
Tawanese economy.
Speaker 2 (15:04):
Well, I'm curious though, whether or not you think that
Taiwan plays a bigger role in between China and the
United States, or whether or not it continues to be
sort of there in the background, a potential danger, but
not playing such an active role. So that's the first
part of the question. The second part is in China's
response to the US so far, it's been more words
(15:25):
than actions. Do you expect more in terms of.
Speaker 4 (15:28):
Actions, maybe in terms of the protection on the trade side, Yeah, yes,
some of those things. Yeah, Well on that first, so
we have seen actually the Chinese so far actually not
taken much action against the US lying low and they're
just taking on the Chin and they're still open for
US companies to do business in China. But visa of
a Europe, we've actually seen the Chinese start to say,
(15:49):
if you start to impose these measures, we may have
to retaliate. So they're a bit more aggressive visa of
a Europe because they don't want Europe to follow the United States.
The other thing that the Chinese could alter do is
they could make a life for US companies in China
much much harder. That's not on the cards yet, and
so far they want US companies to be involved. But
of course if there is a you know, if there's
(16:10):
an opportunity then to kind of pay back the US
by shutting out US companies, I think that might be
sort of the next way to do it. In terms
of Taiwan, I think it's going to play more of
a backstory here. The temperature has declined, you know, around Taiwan,
and so we'll have to see how the US election
shapes up. That's of course always a point where you
(16:32):
could see escalating tensions. But I think broadly speaking, things
are not quite as acute as some of the headlines suggests.
Speaker 1 (16:41):
You know you read the news. I mean China preparing
to take countermeasures against the European Union if it continues
a series of investigations around subsidies. We were talking a
moment ago about the Canadian Trade Minister looking at the
possibility of tariffs on Chinese evs. We know what we
heard last week from the Bike administration when it came
to new tariffs on Chinese goods. Do you are you
(17:04):
worried about a new trade war, or at least a
hotter trade war.
Speaker 5 (17:10):
Yes.
Speaker 4 (17:10):
I think the worrying trend here is that if the
US imposes restrictions, other countries will start to follow. And
there's a certain logic to this, because if the US
says no thank you to Chinese electric vehicles, and these
vehicles are being redirected into other markets and they necessarily
get overwhelmed, and then they start to pose restrictions as well,
And so the risk is that you have a cascading
(17:32):
effect here with the European Union, in Canada and everybody
else it's following the US. And that's not necessarily good
for the world economy. It's not necessarily good for consumers,
and so we want to kind of contain trade restrictions
to a bare minimum. It doesn't say that they're not
justifications in some instances, but remember, any disruption to trade
(17:53):
is ultimately a negative for the world economies, a negative
for consumer for consumer choice, and so the hope is
that other countries will become a bit more judicious in
terms of their application of these measures than kind of
using brute force.
Speaker 2 (18:09):
Are we about to see the yen play a more
important role in the global economy and are you expecting
to see weakness in the dollar anytime soon?
Speaker 4 (18:20):
So yen is unlikely to play a stronger role. It's
so much pressure at the moment. I don't think it
will re establish itself as a reserve currency necessarily anytime soon.
And there's pressures on the en remain quite severe. That's
because US interest rates are sky high and Japanese interest
rates are what they are, and so there is probably
(18:41):
ongoing pressure in the Japanese end. The Japanese Center Bank
is trying to push back against this, allowing yields to
rise to kind of slow down to this end of
the Japanese end. But remember a weaker Japanese end plays
a functional role in Japan's reflation. It raises inflation, it
raises competitiveness, and that's ultimately good for Japan.
Speaker 2 (19:00):
All right, Frederick, thank you for coming into our studios
and joining us here on a Monday morning. We do
appreciate it. Fred Newman, Chief Asia Economist and co head
of Global Research for Asia at HSBC.
Speaker 1 (19:17):
Let's take a closer look at the President of Iran
at this helicopter crash. Michael Heath joins us Bloomberg ecogov editor,
joining us from our studios in Sydney. Michael, I know
it's still early in this event. We have information kind
of trickling in even before the announcement of this crash, though,
(19:38):
I think it's fair to say that relations between Tehran
and Washington were very, very strained. Do we know anything
about what's happening in Iran right now? Irrespective of the
search for the crash site.
Speaker 5 (19:52):
The pictures that are being broadcast on I run in
safe TV and mainly of people either either praying for
the health of the president or obviously emergency vehicles heading
up to the area. As to the higher level politics
of it, it doesn't seem to have been a great
deal said. The US has announced that President Biden has
(20:17):
been briefed on it, but it's very very unclear sort
of the status of it. Was it just a hard landing,
is it something more serious, It's just unknown at the moment.
That's a particularly mountainous part of Iran, and obviously the
pictures have shown very very thick fog there as well
in rain. So really we're just as you say, the
(20:37):
little bits and bobs of information are trickling out, but
until we get something official, it's really just speculation. At
this stage.
Speaker 2 (20:45):
We understand that Iran asked Turkey to send a rescue
helicopter and one with night vision capabilities. It looks to
be very close to the border. Do we know whether
this crashes on the Iranian side or on the Turkysh side.
Speaker 5 (21:00):
It seems to be on the Iran inside. I mean
that area is actually also known as Azerbaijan. It's said
to have crashed in East Azerbaijan. So you've got the
Republic of Azerbaijan former Soviet republic, and then you've got
in northwest Iran, you've got another region called Azerbaijan, and
there's west and East and so it does seem to
have happened just over the border inside Iran, but the
(21:22):
area is known as Azerbaijan. But he was flying back
that those three helicopters involved in the three helicopters, one
of the which was containing the president, was flying back
after the opening of a dam between Azerbaijan and Iran
as they sort of try and warm relations between the
two sides. As well.
Speaker 1 (21:40):
In terms of the person of mister Raisi, I think
he's an ultra conservative cleric. He's obviously the president of
the country, and many analysts believe that he was being
groomed to become the next supreme leader of Iran. So
obviously with his absence, I mean that that would lead
(22:00):
a huge void.
Speaker 4 (22:02):
It would it would.
Speaker 5 (22:03):
I mean, look, in the worst case scenario, it does
really open up a lot of questions because obviously the
Supreme Leader, who is the ultimate authority in Iran. Unlike
other countries where the presidents sort of head of state,
in Iran, it's the supreme leader, you know, sort of
the religious leader of this theocracy. But as you say,
race he was being he was well known to be groomed,
(22:23):
being groomed potentially to take over a Supreme Leader at
some point, so yes, that that would rule will him
out and then of course you under the constitution at
this stage you'd have the first vice President who would
step into his role, and then there would be a
group of guardians who would come together and within fifty
days they'd be they'd be expected to hold elections. But
(22:45):
you're right, I mean, if if if he's he's sort
of had quite a meteoric assent through the through the
ranks in Iran, and if that was the ultimate goal
for him, it really would open up a gap avoid
in terms of the succession planning there.
Speaker 2 (23:01):
In addition to Ibrahim Raisi. Do we know much about
who else was board the flight?
Speaker 5 (23:07):
Yeah, we know the Foreign minister was on there, and
then there was there were some guards, There was a
representative of the Supreme Leader from the region where they
were they were flying over, and the governor there is
my understanding as well. That's about all the detail that
we have, but yeah, it was it was a three
three helicopter convoy and as you were reported in the news,
(23:29):
it seems that it's the President's the president's helicopter that's
had the hard landing there. But Yeah, we're really really
fed on information or detail at this stage.
Speaker 1 (23:38):
We appreciate it nonetheless, Michael for your insight and perspective.
Michael Heath, Bloomberg ecogov editor, joining us from Sydney, talking
about the helicopter crash. The flight carrying Iranian President Raisi
and his foreign minister which crashed on Sunday in the
Mountainous Area North in the northwest portion of Iran.
Speaker 2 (24:01):
This is the Bloomberg Daybreak Asia podcast, bringing to the
stories making news and moving markets in the Asia Pacific.
Visit the Bloomberg Podcast channel on YouTube to get more
episodes of this and other shows from Bloomberg. Subscribe to
the podcast on Apple, Spotify, or anywhere else you listen,
and always on Bloomberg Radio, the Bloomberg Terminal, and the
(24:22):
Bloomberg Business app.
Popular Podcasts
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.
The Nikki Glaser Podcast
Every week comedian and infamous roaster Nikki Glaser provides a fun, fast-paced, and brutally honest look into current pop-culture and her own personal life.