June 3, 2025 • 21 mins
-Leland Miller, co-founder and CEO of China Beige Book
-Matt Wood, Global and US Commercial Technology & Innovation Officer, PwC
-Rep. Andy Barr (R-KY)
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and am Marie Hordern join us each
day for insight from the best in markets, economics, and
geopolitics from our global headquarters in New York City. We
are live on Bloomberg Television weekday mornings from six to
nine am Eastern. Subscribe to the podcast on Apple, Spotify
or anywhere else you listen, and as always on the
(00:33):
Bloomberg Terminal and the Bloomberg Business App.
Speaker 1 (00:36):
Joining us now is someone with tons of contexts, both
when it comes to strategy as well as when it
comes to the economy in China. Leland Miller of the
China Paige Book. Leland, great to see you, Thank you
for being here. I want to start with this question
of what is at stake in order to even get
a phone call between Jijinping and Donald Trump, something that
we've heard a couple times before, but that from what
(00:57):
we understand, hasn't yet happened.
Speaker 3 (01:01):
A phone call should be very easy, but I think
the reality is that the Chinese side is very skeptical
that the US side will keep whatever commitments that it
that it that it's that it asks for, and that
it will convey exactly what it wants, and that it
will have a point person that will be able to
have the authority to be able to make a deal
for what, you know, for whatever the us I want. So,
(01:23):
you know, a call is easy, a meeting is easy.
There's nothing that you really have to give away in
order to do that. But I think that the in
Beijing right now there's a worry that if they come
to the table and and President she looks bad, then
this this will uh, you know, this will be a
net negative for the for the for the relationship, and
for for China's leverage. So they're holding off on that
until they think that they have a have a better hand.
Speaker 4 (01:44):
We'll see if it happens.
Speaker 5 (01:45):
Is week Leland, the ranimbee is up one and a
half percent this year versus a dollar, yet it's fallen
in each of the last three years. I had a
number of friends and attendance at the JP Morgan Global
China Summit last week and they all came away with
this bias toward a weaker dollar. Does that mean a
weaker dollar relative.
Speaker 4 (02:00):
To the yuon.
Speaker 3 (02:02):
Well, the dollar and the yu wan are tied very
closely together. I mean, you know, we pretend like the
yuan is a free floating currency.
Speaker 4 (02:10):
It's not. It's pegged to the dollars.
Speaker 3 (02:11):
So if you have a weaker dollar, you're going to
have pressure on the yuan to fall. But I think
that China will want to keep it a little bit
up relative to that, because their bias is for a
little bit of upside appreciation in a falling dollar world.
So yeah, if you have reciprocal tariffs and the US
China relationship and all these other things weighing on the
dollar and the dollars falling, then then the yuan will
(02:32):
be pulled down a little bit, but it will They'll
want to have a little bit of an upward bias
for it. So yeah, you should expect upward, some mild
modest upward appreciation in a falling dollar world.
Speaker 5 (02:43):
Leland, it was only a few years ago when multinationals
claimed that they couldn't afford to pull out of China
given the economy size, its overall influence. What are your
thoughts on China as an investment destination from the perspective
of a US institutional investor, is China investable now?
Speaker 3 (03:01):
Well, I think you made a nice distinction between you know,
institutional investors and those companies that are in there with
hard assets and a presence throughout China very difficult to
extricate themselves at that point. If you're an institutional investor
and you're looking at China, then you have to be
asking yourself, what edge do I have here?
Speaker 4 (03:17):
Am I just waiting for.
Speaker 3 (03:19):
This ridiculous thesis of you know, things have been down
for eleven years, but now they're going to bounce back
in the stock market? Do you have an edge in
a technology sector but that it's going to be closed
off by export controls or by teriffs in the near future.
You know, it's not impossible to trade in China, but
it's getting very dangerous. And most of the people who
have traditionally done this have done this very lackadaisically. They
(03:41):
look at, you know, Chinese data, they've got a DC
consultant that tells them a little bit about China, and
then they, you know, they buy.
Speaker 4 (03:47):
A bunch of Chinese tech companies. You can't do that anymore.
Speaker 3 (03:49):
So if you're still in China, then you better have
a tremendous edge in terms of investing.
Speaker 6 (03:53):
There Leilan, the Chinese tenure rate is a near one
point seven percent, near multi decade lows. Is there any
ignoaled to take from that about underlying Chinese economic health,
mostly as we consider the rest of the world where
long and yields are screaming higher.
Speaker 4 (04:09):
Yeah, absolutely, there is a signals.
Speaker 3 (04:10):
If you look at our credit data, China Basebook credit data,
it's remarkable what's happening on the monetary easing side, and
we've seen rates continue to go down, down, down, down down,
and this is a this is a time in which
there's elevated inflation elsewhere. So what they're trying to do is,
you know, on the fiscal front there they're manning the
you know, the army, the cannons. On the monetary side,
they continue to cut rates. There's a downside to doing
(04:33):
that because you're hitting the profitability of banks and.
Speaker 4 (04:35):
You're you're you're hurting savers.
Speaker 3 (04:37):
But right now they're just trying to keep the economy
going during during the early onset of this of these
trade tensions, you know, trade War two point zero.
Speaker 4 (04:45):
So they're cutting.
Speaker 3 (04:46):
Rates, but it has a lot of a detrimental effect,
you know, down downstreaming the economy.
Speaker 6 (04:51):
How much fiscal firepower do you think that China has.
There seems to be an assumption that China has a
lot more room than other countries around the world.
Speaker 4 (04:58):
Is that the case, It is the case.
Speaker 3 (05:02):
What's interesting is that for several years, while every headline,
you know, we'd see every day was, you know, China stimulus,
promising stimulus, pledging stimulus, it.
Speaker 4 (05:10):
Was never happening.
Speaker 3 (05:11):
In twenty twenty two, twenty three, twenty four, we got
to the very end of twenty twenty four and early
twenty twenty five, you know, we have a fiscal activity index.
It showed significant things were happening and a significant borrowing
and bond issuance by transportation construction firms. So they were
really getting ready for what might be a real downside scenario.
We've seen that eb off a little bit, so we
have not seen the blast to any type of canon,
(05:32):
but they are preparing in a way very differently than
they did.
Speaker 4 (05:34):
The last three years. This this should have been expected.
Speaker 3 (05:37):
China does not want to do big stimulus, but at
the end of the day, they're going to have to
batten down the hatches their economy if they get a
larger trade tip with the United States, which is.
Speaker 1 (05:46):
The reason why le Lynn and I think that all
of us are trying to get at the ultimate question,
which is who has the most leverage, who's in the
better position economically right now as a US and China
go head to head. We got this data overnight that
China's private factory gauge punched the weeks going back to
twenty twenty two. It went against some of the official data.
Some people are saying it's messier, it's a smaller sample size.
(06:07):
Do you think that China is hurting more or the
US is hurting more? Is it possible to even make
that equation?
Speaker 3 (06:15):
Well, look, first, on the Sisheen survey, I mean, we
agree with the official data here. We're much much bigger
than Serve Hall, a lot more companies than Saisheen does,
and we actually saw it improvement in manufacturing activity.
Speaker 4 (06:27):
Not great.
Speaker 3 (06:28):
It's down from a year ago, but it's up from
the lows that we've seen in the last couple of months,
so there's something there. There's a lot more resilience both
in the consumption side, which is surprising, and the manufacturing side,
which is not in China right now, so I would
take that away from the economic data.
Speaker 4 (06:44):
So I think at this point, you.
Speaker 3 (06:46):
Know, look, we have to be watching the data closely,
but also keeping in mind that China is looking a
little bit more resilient than we thought going into the
Geneva talks and beyond.
Speaker 1 (06:56):
Leilan Miller of China Page Book, thank you so much
for your insight. It's really helpful. Meta signing a twenty
year contract with Constellation and Energy to buy power from
an Illinois nuclear plant more evidence of technology companies appetite
(07:17):
for energy to run data centers, and AI is the
promise of that technology potentially transforms the world we live in.
PwC out with its twenty twenty five AI Jobs Barometer,
which was a link between AI adoption and productivity growth.
Matt Wood of PwC joins us now and Matt, you're
answering the questions that a lot of people have been asking,
which is basically, how many of us are going to
(07:38):
lose our jobs and become irrelevant because of some of
this new technology.
Speaker 7 (07:41):
Well, it's looking like right now none of us. In fact, counterintuitively,
the number of jobs and the wages associated to them
are actually going up, not going down. So we looked
at over a billion job postings globally from twenty four
different countries, and we found that for organizations, whether they
were advanced in their aiuse or early in the AIR use,
they had more job hostings than they had before. We
(08:03):
found that the productivity of people working inside those organizations
was up. We found that the revenue generation for those
workers was three x higher than it's ever been before,
and that the wages associated with those workers were also
going up. And so it's a little canterintuitive to what
maybe some other folks are seen, but our barometer shows
a very very different picture, a.
Speaker 1 (08:23):
Really optimistic look for people who have the tools, have
the capability of using artificial intelligence and machine learning to
actually become more efficient, become more relevant. At a time
where Microsoft is cutting hundreds of jobs because a number
of people currently own their roles can be replaced by
artificial intelligence, how messy would this transition be? Because even
though there are some people who get paid more, be
(08:44):
more productive, and be more in demand if they have
those skills, they're going to be even more people potentially
who lag behind that and can't catch up quickly.
Speaker 4 (08:52):
Enough.
Speaker 7 (08:52):
Well, for sure, the way that we are going to
work is going to change. And for those organizations that
are furthest a head on the AI journey, these skills
are changing the fastest. And this is a this is
a very humane problem. This is not a technical problem.
This is a problem that we have to work through
with all of our workers, with all of our staff,
and as leaders, we need to really sure that we're
(09:13):
investing to make sure that all of our workers in
every industry have the access to the skills and the
education and upskilling to be able to take advantage of
this dramatic productivity game.
Speaker 5 (09:22):
Matt, the courts are going to they just gave Donald
Trump approval to take away half a million visas here
in the US. What impact is that going to have
on the AI sector.
Speaker 7 (09:31):
Well, education is remarkably vibrant place for AI to not
just be used, but also to be created. AI is
very very very early, and a lot of the research
that we need to do to advance the state of
the art is going to come out of those sorts
of organizations, those sort of institutions super important that they
remain funded and remain active.
Speaker 5 (09:53):
Well, Matt, let's talk data centers. For a second, because
we've got this big news in the market with MATA.
You know, I've seen some statistics that last year, for
the four year twenty twenty four, you're in the US
data center build out accounted for roughly or more than
eighty percent of the entire US economy's capital expenditures for
the full year. You know, first we had Microsoft scaling
backets plans following Deep Seek. Now we have Meta, you know,
buying it or leasing a nuclear plant. Who are today's investors,
(10:16):
who are like, who's going to provide the long term
takeout capital for these data centers after all is said
and done here.
Speaker 7 (10:23):
Well, data center is super interesting because they're not just
data centers. It's actually more of a full vertically integrated
stack of investment that covers just an entirely new ecosystem
that is being built out across industries because of AI.
So if you think of just the real estate that
those data centers have to sit on, the energy infrastructure
(10:43):
that has to surround those data centers, the data centers
themselves with all of their discs and their GPUs and
all of the infrastructure required to house and cool them,
then you've got the large language models that sit inside
that infrastructure. You've got the applications that sit on top
of those language model. So there's a full ecosystem that
bleeds from real estate to energy, to computer science to
(11:06):
big tech, which just didn't exist before. And this blurring
of industries into new ecosystems is happening around data centers
because of AI, and I think we expect to see
it across multiple different industries going forward.
Speaker 6 (11:18):
Given the massive investment we've seen from all these companies
into AI infrastructure, how are you thinking about monetization, mostly
as you've seen competition pick up, What will the returns
look like for all of this investment?
Speaker 7 (11:31):
I think it's I think it's an interesting question. I
don't personally see it as an investment that most organizations
should be seeking a return from.
Speaker 4 (11:39):
Today.
Speaker 7 (11:40):
AI is more like intellectual infrastructure for your organization. We
don't look at internet access inside an organization and say, hey,
what's the return on investment of my bandwidth? Instead, you say, well,
all of my work is done in a completely different way,
and in a much more efficient way, in a much
more productive way, three times more productive in the case
of AI. What is the impact of not doing that?
(12:02):
And so you see very very few organizations today that
don't enable broad fast internet access to their organizations and
to their teams. We'll see the same thing with AI.
Most organizations will want for upskilling and retention and for
hiring the very best people and keeping productive the people
they've already got. They're going to want the most robust
AI intellectual infrastructure inside their organization, similar to networking.
Speaker 1 (12:25):
How advanced of companies been in the US and adopt
adapting to some of these new tools Given the fact
that it is quickly evolving, the bigger have an advantage
with respect to data, with respect to resources. How much
is this really bifurcated this sphere from big to small companies,
it's not.
Speaker 7 (12:41):
So much big to small. It's actually again the little counterintuitive.
So those organizations that we see moving the quickest are
actually the regulated industries, so financial services, insurance, healthcare, manufacturing,
those sorts of domains where the compliance with the regulations
around that they've had to live with the past twenty
years and maybe have felt like a bit of a headwind,
(13:02):
particularly around data governance and data quality. Those are all
the things that you need to get right to be
successful in artificial intelligence, and so whilst that headwind has
been there, it's actually driven all the right investments for
those organizations to be successful with artificial intelligence. And as
a result, the aipiece is just a small incremental lift
on top of that and they're able to move much
(13:23):
more quickly.
Speaker 1 (13:23):
Matt Word of PwC, thank you so much for being
with us.
Speaker 4 (13:26):
Welcome.
Speaker 1 (13:35):
Republican Congressman Andy Barr of Kentucky voted in favor of
the President's bill last month, and he joins us now. Congressman,
thank you so much for being with us today.
Speaker 4 (13:43):
Morning, Lisa, Good morning.
Speaker 1 (13:45):
So I want to start with asking about the deficit,
and I'm watching that thirty year bond yield as everyone
on Washington in Washington, DC is do you believe what
President Trump said on his truth social posts last night
that this doesn't add to the deficit, even though you
have a whole host of different estimates saying that it
will add three trillion dollars to the deficit over the
(14:06):
next ten years.
Speaker 8 (14:07):
Well, Republicans are also watching the thirty year We're watching
the tenure, We're watching instability in the bond market. We're
looking at weakness in demand for treasuries, but blaming the
Big Beautiful Bill for weakness in the treasury market or
instability in the treasury market is like blaming the firefighter.
(14:29):
The arsonists blaming the firefighter for the inferno. We just
went through four years of a drunken sailor spending spree
by the Democrats that put.
Speaker 4 (14:40):
Us way behind the eight ball.
Speaker 8 (14:43):
Also COVID, and there was some bipartisan spending associated with COVID,
But it's very rich for Democrats to accuse Republicans of
fiscal irresponsibility when we just went through this spending binge
that produced forty year high inflation, twenty percent increase in price.
Speaker 4 (15:00):
Look, the bottom line is, we know we have to.
Speaker 8 (15:03):
Achieve a greater fiscal discipline and frankly, we need some
bipartisan work on mandatory spending reform. But we also need
is economic growth. We will never balance the budget, we
will never get our fiscal house in order without robust
economic growth.
Speaker 4 (15:17):
I believe, as Kevin.
Speaker 8 (15:19):
Hassett has argued, that this legislation, this one big beautiful
bill could produce, along with the deregulatory project, along with
more energy production in the United States, that we could
achieve that three to four percent GDP growth. That's the
kind of dynamism that is not accounted for by the
Congressional Budget Office and some of these static scores.
Speaker 1 (15:38):
So let's talk about that why it's not being accounted
for that in places like the Committee for a Responsible
Federal Budget that expects us to increase the deficit and
says it only cut spending by zero point eight percent
of GDP. Where are people not including growth that you
see as being part of this bill.
Speaker 4 (15:57):
Well, I mean, the CBO just doesn't.
Speaker 8 (15:59):
They were off a trillion dollars underestimating revenue reflow that
came as a result of growth from the Tax Cuts
and Jobs Act in twenty seventeen. The CBO has a
terrible track record of not including the dynamic impacts of
these tax cuts. And in this bill, not only does
it make key features permanent, providing that certainty instability for
(16:20):
private sector investors, but the business tax cuts are really
the rocket fuel that are included in the bill. So
bonus appreciation for five years pulling forward all that capex.
There's a reason why the Atlanta Fed is projecting four
percent GDP in the second quarter because business businesses and
business optimism is increasing because of anticipation of R and
(16:44):
D interest deductibility, increasing the small business pass through deduction
from twenty to twenty three percent, making that permanent. So
these business tax cuts are really increasing business sentiment and
I think again pulling forward that investment that can really
allow this economy.
Speaker 4 (17:04):
To take off.
Speaker 5 (17:05):
Congressman Eastid on the House Select Committee on the Strategic
competition between the US and Chinese Communist Party, what is
going on between President she and President Trump? Where are
we with that relationship right now?
Speaker 8 (17:16):
I think President Trump is the first president Republican or
Democrat in our lifetime who has taken the threat from
China seriously. Under this president, no more unfair trade deals,
no more Chinese fentanyl poisoning our people through the southern border,
and no more spy balloons coming across the continental United
States deterrence, peace through strength, that is the idea the
(17:39):
Big Beautiful Bill. To the extent we increase spending in there,
there's more military modernization dedicated for the Western Pacific theater.
Speaker 4 (17:47):
That's what we need. We need to win this competition.
Speaker 8 (17:51):
We need to be the best version of ourselves. We
need to enhance, of course, our investment in defense, but
we also have to be strong economically, and we have
to grow. China has its problems, we have a debt problem,
but we can produce growth by being free market capitalists.
Speaker 1 (18:08):
There is a question, though, in your quest to be
free market capitalists of both getting revenue from tariffs that
have to do with continued trade, albeit with something of attacks,
versus decoupling in its entirety. And what you see from
a lot of the data right now is that trade
is going down quite considerably and exports from the US
(18:29):
are going down quite considerably. So how do you account
for some of the revenue and the growth from some
of these tariffs if you're also talking about potentially decoupling
in certain key industries between some of the biggest economies
out there.
Speaker 8 (18:42):
I liked what Jamie Diamond said at the Reagan Economic
Forum in California.
Speaker 4 (18:47):
When he's said.
Speaker 8 (18:50):
When he talked about, you know, strategic de risking from
China on those national security sensitive industries, not complete decoupling
on things like tennisuees or basketball shoes or apparel or
things that do not implicate national security. What I would
say about that in general as a free trader, why
I support President Trump's agenda is because of the enormous
(19:12):
potential that this has to actually open up markets for
American exporters. If we can open up India, for example,
and reduce their protectionism and their trade barriers against our exporters,
that is massive. And if you think about it, from
where we were on liberation data, now we're back in
basically a bull market.
Speaker 4 (19:31):
With a correction embedded.
Speaker 8 (19:33):
Every trade deal that is inked from here on out
is again jet fuel for the economy. We get the
certainty of trade deals in place with more market access
for American exporters, plus deregulation, plus the tax cuts.
Speaker 4 (19:46):
I do see four percent GDP.
Speaker 1 (19:47):
What do you think the Senate is going to do
to change the bill that you would be okay with
in terms of cutting salt tax deductions, potentially adding back
and potentially even increasing some of the CBO's score for
the deficits with respect to medicaid. What are you going
to be okay with?
Speaker 8 (20:04):
Well, look, we've got to get this done. I think
we have to have an ability to compromise on some
of these details, whether it's salt, whether it's Medicaid.
Speaker 4 (20:14):
I welcome fiscal.
Speaker 8 (20:16):
Hawks in the Senate saying hey, we need to do
more on the spending restraint side. So Ron Johnson, my
colleague Ran Paul from Kentucky. Good for them for asking
for a reduced size and scope of the federal bureaucracy.
I like that, let's codify some of the doughe savings.
But at the end of the day, we have to
get this done and deliver this. Seventy seven million Americans
(20:39):
voted for this pro growth agenda. I think at the
end of the day, we'll come together, we'll get it done.
Speaker 1 (20:44):
Congresspin, thank you so much for being here. Great to
do with Congressman Andy Barr here in New York.
Speaker 2 (20:49):
This is the Bloomberg Seventans podcast, bringing you the best
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Speaker 1 (21:12):
Mm hmm.
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:11):
This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
with Lisa Bromwitz and am Marie Hordern join us each
day for insight from the best in markets, economics, and
geopolitics from our global headquarters in New York City. We
are live on Bloomberg Television weekday mornings from six to
nine am Eastern. Subscribe to the podcast on Apple, Spotify
or anywhere else you listen, and as always on the
(00:33):
Bloomberg Terminal and the Bloomberg Business App.
Speaker 1 (00:36):
Joining us now is someone with tons of contexts, both
when it comes to strategy as well as when it
comes to the economy in China. Leland Miller of the
China Paige Book. Leland, great to see you, Thank you
for being here. I want to start with this question
of what is at stake in order to even get
a phone call between Jijinping and Donald Trump, something that
we've heard a couple times before, but that from what
(00:57):
we understand, hasn't yet happened.
Speaker 3 (01:01):
A phone call should be very easy, but I think
the reality is that the Chinese side is very skeptical
that the US side will keep whatever commitments that it
that it that it's that it asks for, and that
it will convey exactly what it wants, and that it
will have a point person that will be able to
have the authority to be able to make a deal
for what, you know, for whatever the us I want. So,
(01:23):
you know, a call is easy, a meeting is easy.
There's nothing that you really have to give away in
order to do that. But I think that the in
Beijing right now there's a worry that if they come
to the table and and President she looks bad, then
this this will uh, you know, this will be a
net negative for the for the for the relationship, and
for for China's leverage. So they're holding off on that
until they think that they have a have a better hand.
Speaker 4 (01:44):
We'll see if it happens.
Speaker 5 (01:45):
Is week Leland, the ranimbee is up one and a
half percent this year versus a dollar, yet it's fallen
in each of the last three years. I had a
number of friends and attendance at the JP Morgan Global
China Summit last week and they all came away with
this bias toward a weaker dollar. Does that mean a
weaker dollar relative.
Speaker 4 (02:00):
To the yuon.
Speaker 3 (02:02):
Well, the dollar and the yu wan are tied very
closely together. I mean, you know, we pretend like the
yuan is a free floating currency.
Speaker 4 (02:10):
It's not. It's pegged to the dollars.
Speaker 3 (02:11):
So if you have a weaker dollar, you're going to
have pressure on the yuan to fall. But I think
that China will want to keep it a little bit
up relative to that, because their bias is for a
little bit of upside appreciation in a falling dollar world.
So yeah, if you have reciprocal tariffs and the US
China relationship and all these other things weighing on the
dollar and the dollars falling, then then the yuan will
(02:32):
be pulled down a little bit, but it will They'll
want to have a little bit of an upward bias
for it. So yeah, you should expect upward, some mild
modest upward appreciation in a falling dollar world.
Speaker 5 (02:43):
Leland, it was only a few years ago when multinationals
claimed that they couldn't afford to pull out of China
given the economy size, its overall influence. What are your
thoughts on China as an investment destination from the perspective
of a US institutional investor, is China investable now?
Speaker 3 (03:01):
Well, I think you made a nice distinction between you know,
institutional investors and those companies that are in there with
hard assets and a presence throughout China very difficult to
extricate themselves at that point. If you're an institutional investor
and you're looking at China, then you have to be
asking yourself, what edge do I have here?
Speaker 4 (03:17):
Am I just waiting for.
Speaker 3 (03:19):
This ridiculous thesis of you know, things have been down
for eleven years, but now they're going to bounce back
in the stock market? Do you have an edge in
a technology sector but that it's going to be closed
off by export controls or by teriffs in the near future.
You know, it's not impossible to trade in China, but
it's getting very dangerous. And most of the people who
have traditionally done this have done this very lackadaisically. They
(03:41):
look at, you know, Chinese data, they've got a DC
consultant that tells them a little bit about China, and
then they, you know, they buy.
Speaker 4 (03:47):
A bunch of Chinese tech companies. You can't do that anymore.
Speaker 3 (03:49):
So if you're still in China, then you better have
a tremendous edge in terms of investing.
Speaker 6 (03:53):
There Leilan, the Chinese tenure rate is a near one
point seven percent, near multi decade lows. Is there any
ignoaled to take from that about underlying Chinese economic health,
mostly as we consider the rest of the world where
long and yields are screaming higher.
Speaker 4 (04:09):
Yeah, absolutely, there is a signals.
Speaker 3 (04:10):
If you look at our credit data, China Basebook credit data,
it's remarkable what's happening on the monetary easing side, and
we've seen rates continue to go down, down, down, down down,
and this is a this is a time in which
there's elevated inflation elsewhere. So what they're trying to do is,
you know, on the fiscal front there they're manning the
you know, the army, the cannons. On the monetary side,
they continue to cut rates. There's a downside to doing
(04:33):
that because you're hitting the profitability of banks and.
Speaker 4 (04:35):
You're you're you're hurting savers.
Speaker 3 (04:37):
But right now they're just trying to keep the economy
going during during the early onset of this of these
trade tensions, you know, trade War two point zero.
Speaker 4 (04:45):
So they're cutting.
Speaker 3 (04:46):
Rates, but it has a lot of a detrimental effect,
you know, down downstreaming the economy.
Speaker 6 (04:51):
How much fiscal firepower do you think that China has.
There seems to be an assumption that China has a
lot more room than other countries around the world.
Speaker 4 (04:58):
Is that the case, It is the case.
Speaker 3 (05:02):
What's interesting is that for several years, while every headline,
you know, we'd see every day was, you know, China stimulus,
promising stimulus, pledging stimulus, it.
Speaker 4 (05:10):
Was never happening.
Speaker 3 (05:11):
In twenty twenty two, twenty three, twenty four, we got
to the very end of twenty twenty four and early
twenty twenty five, you know, we have a fiscal activity index.
It showed significant things were happening and a significant borrowing
and bond issuance by transportation construction firms. So they were
really getting ready for what might be a real downside scenario.
We've seen that eb off a little bit, so we
have not seen the blast to any type of canon,
(05:32):
but they are preparing in a way very differently than
they did.
Speaker 4 (05:34):
The last three years. This this should have been expected.
Speaker 3 (05:37):
China does not want to do big stimulus, but at
the end of the day, they're going to have to
batten down the hatches their economy if they get a
larger trade tip with the United States, which is.
Speaker 1 (05:46):
The reason why le Lynn and I think that all
of us are trying to get at the ultimate question,
which is who has the most leverage, who's in the
better position economically right now as a US and China
go head to head. We got this data overnight that
China's private factory gauge punched the weeks going back to
twenty twenty two. It went against some of the official data.
Some people are saying it's messier, it's a smaller sample size.
(06:07):
Do you think that China is hurting more or the
US is hurting more? Is it possible to even make
that equation?
Speaker 3 (06:15):
Well, look, first, on the Sisheen survey, I mean, we
agree with the official data here. We're much much bigger
than Serve Hall, a lot more companies than Saisheen does,
and we actually saw it improvement in manufacturing activity.
Speaker 4 (06:27):
Not great.
Speaker 3 (06:28):
It's down from a year ago, but it's up from
the lows that we've seen in the last couple of months,
so there's something there. There's a lot more resilience both
in the consumption side, which is surprising, and the manufacturing side,
which is not in China right now, so I would
take that away from the economic data.
Speaker 4 (06:44):
So I think at this point, you.
Speaker 3 (06:46):
Know, look, we have to be watching the data closely,
but also keeping in mind that China is looking a
little bit more resilient than we thought going into the
Geneva talks and beyond.
Speaker 1 (06:56):
Leilan Miller of China Page Book, thank you so much
for your insight. It's really helpful. Meta signing a twenty
year contract with Constellation and Energy to buy power from
an Illinois nuclear plant more evidence of technology companies appetite
(07:17):
for energy to run data centers, and AI is the
promise of that technology potentially transforms the world we live in.
PwC out with its twenty twenty five AI Jobs Barometer,
which was a link between AI adoption and productivity growth.
Matt Wood of PwC joins us now and Matt, you're
answering the questions that a lot of people have been asking,
which is basically, how many of us are going to
(07:38):
lose our jobs and become irrelevant because of some of
this new technology.
Speaker 7 (07:41):
Well, it's looking like right now none of us. In fact, counterintuitively,
the number of jobs and the wages associated to them
are actually going up, not going down. So we looked
at over a billion job postings globally from twenty four
different countries, and we found that for organizations, whether they
were advanced in their aiuse or early in the AIR use,
they had more job hostings than they had before. We
(08:03):
found that the productivity of people working inside those organizations
was up. We found that the revenue generation for those
workers was three x higher than it's ever been before,
and that the wages associated with those workers were also
going up. And so it's a little canterintuitive to what
maybe some other folks are seen, but our barometer shows
a very very different picture, a.
Speaker 1 (08:23):
Really optimistic look for people who have the tools, have
the capability of using artificial intelligence and machine learning to
actually become more efficient, become more relevant. At a time
where Microsoft is cutting hundreds of jobs because a number
of people currently own their roles can be replaced by
artificial intelligence, how messy would this transition be? Because even
though there are some people who get paid more, be
(08:44):
more productive, and be more in demand if they have
those skills, they're going to be even more people potentially
who lag behind that and can't catch up quickly.
Speaker 4 (08:52):
Enough.
Speaker 7 (08:52):
Well, for sure, the way that we are going to
work is going to change. And for those organizations that
are furthest a head on the AI journey, these skills
are changing the fastest. And this is a this is
a very humane problem. This is not a technical problem.
This is a problem that we have to work through
with all of our workers, with all of our staff,
and as leaders, we need to really sure that we're
(09:13):
investing to make sure that all of our workers in
every industry have the access to the skills and the
education and upskilling to be able to take advantage of
this dramatic productivity game.
Speaker 5 (09:22):
Matt, the courts are going to they just gave Donald
Trump approval to take away half a million visas here
in the US. What impact is that going to have
on the AI sector.
Speaker 7 (09:31):
Well, education is remarkably vibrant place for AI to not
just be used, but also to be created. AI is
very very very early, and a lot of the research
that we need to do to advance the state of
the art is going to come out of those sorts
of organizations, those sort of institutions super important that they
remain funded and remain active.
Speaker 5 (09:53):
Well, Matt, let's talk data centers. For a second, because
we've got this big news in the market with MATA.
You know, I've seen some statistics that last year, for
the four year twenty twenty four, you're in the US
data center build out accounted for roughly or more than
eighty percent of the entire US economy's capital expenditures for
the full year. You know, first we had Microsoft scaling
backets plans following Deep Seek. Now we have Meta, you know,
buying it or leasing a nuclear plant. Who are today's investors,
(10:16):
who are like, who's going to provide the long term
takeout capital for these data centers after all is said
and done here.
Speaker 7 (10:23):
Well, data center is super interesting because they're not just
data centers. It's actually more of a full vertically integrated
stack of investment that covers just an entirely new ecosystem
that is being built out across industries because of AI.
So if you think of just the real estate that
those data centers have to sit on, the energy infrastructure
(10:43):
that has to surround those data centers, the data centers
themselves with all of their discs and their GPUs and
all of the infrastructure required to house and cool them,
then you've got the large language models that sit inside
that infrastructure. You've got the applications that sit on top
of those language model. So there's a full ecosystem that
bleeds from real estate to energy, to computer science to
(11:06):
big tech, which just didn't exist before. And this blurring
of industries into new ecosystems is happening around data centers
because of AI, and I think we expect to see
it across multiple different industries going forward.
Speaker 6 (11:18):
Given the massive investment we've seen from all these companies
into AI infrastructure, how are you thinking about monetization, mostly
as you've seen competition pick up, What will the returns
look like for all of this investment?
Speaker 7 (11:31):
I think it's I think it's an interesting question. I
don't personally see it as an investment that most organizations
should be seeking a return from.
Speaker 4 (11:39):
Today.
Speaker 7 (11:40):
AI is more like intellectual infrastructure for your organization. We
don't look at internet access inside an organization and say, hey,
what's the return on investment of my bandwidth? Instead, you say, well,
all of my work is done in a completely different way,
and in a much more efficient way, in a much
more productive way, three times more productive in the case
of AI. What is the impact of not doing that?
(12:02):
And so you see very very few organizations today that
don't enable broad fast internet access to their organizations and
to their teams. We'll see the same thing with AI.
Most organizations will want for upskilling and retention and for
hiring the very best people and keeping productive the people
they've already got. They're going to want the most robust
AI intellectual infrastructure inside their organization, similar to networking.
Speaker 1 (12:25):
How advanced of companies been in the US and adopt
adapting to some of these new tools Given the fact
that it is quickly evolving, the bigger have an advantage
with respect to data, with respect to resources. How much
is this really bifurcated this sphere from big to small companies,
it's not.
Speaker 7 (12:41):
So much big to small. It's actually again the little counterintuitive.
So those organizations that we see moving the quickest are
actually the regulated industries, so financial services, insurance, healthcare, manufacturing,
those sorts of domains where the compliance with the regulations
around that they've had to live with the past twenty
years and maybe have felt like a bit of a headwind,
(13:02):
particularly around data governance and data quality. Those are all
the things that you need to get right to be
successful in artificial intelligence, and so whilst that headwind has
been there, it's actually driven all the right investments for
those organizations to be successful with artificial intelligence. And as
a result, the aipiece is just a small incremental lift
on top of that and they're able to move much
(13:23):
more quickly.
Speaker 1 (13:23):
Matt Word of PwC, thank you so much for being
with us.
Speaker 4 (13:26):
Welcome.
Speaker 1 (13:35):
Republican Congressman Andy Barr of Kentucky voted in favor of
the President's bill last month, and he joins us now. Congressman,
thank you so much for being with us today.
Speaker 4 (13:43):
Morning, Lisa, Good morning.
Speaker 1 (13:45):
So I want to start with asking about the deficit,
and I'm watching that thirty year bond yield as everyone
on Washington in Washington, DC is do you believe what
President Trump said on his truth social posts last night
that this doesn't add to the deficit, even though you
have a whole host of different estimates saying that it
will add three trillion dollars to the deficit over the
(14:06):
next ten years.
Speaker 8 (14:07):
Well, Republicans are also watching the thirty year We're watching
the tenure, We're watching instability in the bond market. We're
looking at weakness in demand for treasuries, but blaming the
Big Beautiful Bill for weakness in the treasury market or
instability in the treasury market is like blaming the firefighter.
(14:29):
The arsonists blaming the firefighter for the inferno. We just
went through four years of a drunken sailor spending spree
by the Democrats that put.
Speaker 4 (14:40):
Us way behind the eight ball.
Speaker 8 (14:43):
Also COVID, and there was some bipartisan spending associated with COVID,
But it's very rich for Democrats to accuse Republicans of
fiscal irresponsibility when we just went through this spending binge
that produced forty year high inflation, twenty percent increase in price.
Speaker 4 (15:00):
Look, the bottom line is, we know we have to.
Speaker 8 (15:03):
Achieve a greater fiscal discipline and frankly, we need some
bipartisan work on mandatory spending reform. But we also need
is economic growth. We will never balance the budget, we
will never get our fiscal house in order without robust
economic growth.
Speaker 4 (15:17):
I believe, as Kevin.
Speaker 8 (15:19):
Hassett has argued, that this legislation, this one big beautiful
bill could produce, along with the deregulatory project, along with
more energy production in the United States, that we could
achieve that three to four percent GDP growth. That's the
kind of dynamism that is not accounted for by the
Congressional Budget Office and some of these static scores.
Speaker 1 (15:38):
So let's talk about that why it's not being accounted
for that in places like the Committee for a Responsible
Federal Budget that expects us to increase the deficit and
says it only cut spending by zero point eight percent
of GDP. Where are people not including growth that you
see as being part of this bill.
Speaker 4 (15:57):
Well, I mean, the CBO just doesn't.
Speaker 8 (15:59):
They were off a trillion dollars underestimating revenue reflow that
came as a result of growth from the Tax Cuts
and Jobs Act in twenty seventeen. The CBO has a
terrible track record of not including the dynamic impacts of
these tax cuts. And in this bill, not only does
it make key features permanent, providing that certainty instability for
(16:20):
private sector investors, but the business tax cuts are really
the rocket fuel that are included in the bill. So
bonus appreciation for five years pulling forward all that capex.
There's a reason why the Atlanta Fed is projecting four
percent GDP in the second quarter because business businesses and
business optimism is increasing because of anticipation of R and
(16:44):
D interest deductibility, increasing the small business pass through deduction
from twenty to twenty three percent, making that permanent. So
these business tax cuts are really increasing business sentiment and
I think again pulling forward that investment that can really
allow this economy.
Speaker 4 (17:04):
To take off.
Speaker 5 (17:05):
Congressman Eastid on the House Select Committee on the Strategic
competition between the US and Chinese Communist Party, what is
going on between President she and President Trump? Where are
we with that relationship right now?
Speaker 8 (17:16):
I think President Trump is the first president Republican or
Democrat in our lifetime who has taken the threat from
China seriously. Under this president, no more unfair trade deals,
no more Chinese fentanyl poisoning our people through the southern border,
and no more spy balloons coming across the continental United
States deterrence, peace through strength, that is the idea the
(17:39):
Big Beautiful Bill. To the extent we increase spending in there,
there's more military modernization dedicated for the Western Pacific theater.
Speaker 4 (17:47):
That's what we need. We need to win this competition.
Speaker 8 (17:51):
We need to be the best version of ourselves. We
need to enhance, of course, our investment in defense, but
we also have to be strong economically, and we have
to grow. China has its problems, we have a debt problem,
but we can produce growth by being free market capitalists.
Speaker 1 (18:08):
There is a question, though, in your quest to be
free market capitalists of both getting revenue from tariffs that
have to do with continued trade, albeit with something of attacks,
versus decoupling in its entirety. And what you see from
a lot of the data right now is that trade
is going down quite considerably and exports from the US
(18:29):
are going down quite considerably. So how do you account
for some of the revenue and the growth from some
of these tariffs if you're also talking about potentially decoupling
in certain key industries between some of the biggest economies
out there.
Speaker 8 (18:42):
I liked what Jamie Diamond said at the Reagan Economic
Forum in California.
Speaker 4 (18:47):
When he's said.
Speaker 8 (18:50):
When he talked about, you know, strategic de risking from
China on those national security sensitive industries, not complete decoupling
on things like tennisuees or basketball shoes or apparel or
things that do not implicate national security. What I would
say about that in general as a free trader, why
I support President Trump's agenda is because of the enormous
(19:12):
potential that this has to actually open up markets for
American exporters. If we can open up India, for example,
and reduce their protectionism and their trade barriers against our exporters,
that is massive. And if you think about it, from
where we were on liberation data, now we're back in
basically a bull market.
Speaker 4 (19:31):
With a correction embedded.
Speaker 8 (19:33):
Every trade deal that is inked from here on out
is again jet fuel for the economy. We get the
certainty of trade deals in place with more market access
for American exporters, plus deregulation, plus the tax cuts.
Speaker 4 (19:46):
I do see four percent GDP.
Speaker 1 (19:47):
What do you think the Senate is going to do
to change the bill that you would be okay with
in terms of cutting salt tax deductions, potentially adding back
and potentially even increasing some of the CBO's score for
the deficits with respect to medicaid. What are you going
to be okay with?
Speaker 8 (20:04):
Well, look, we've got to get this done. I think
we have to have an ability to compromise on some
of these details, whether it's salt, whether it's Medicaid.
Speaker 4 (20:14):
I welcome fiscal.
Speaker 8 (20:16):
Hawks in the Senate saying hey, we need to do
more on the spending restraint side. So Ron Johnson, my
colleague Ran Paul from Kentucky. Good for them for asking
for a reduced size and scope of the federal bureaucracy.
I like that, let's codify some of the doughe savings.
But at the end of the day, we have to
get this done and deliver this. Seventy seven million Americans
(20:39):
voted for this pro growth agenda. I think at the
end of the day, we'll come together, we'll get it done.
Speaker 1 (20:44):
Congresspin, thank you so much for being here. Great to
do with Congressman Andy Barr here in New York.
Speaker 2 (20:49):
This is the Bloomberg Seventans podcast, bringing you the best
in markets, economics, angiet politics. You can watch the show
live on Bloomberg TV weekday mornings from six am to
nine am Eastern. Subscribe to the podcast on Apple, Spotify,
or anywhere else you listen, and as always, on the
Bloomberg Terminal and the Bloomberg Business app.
Speaker 1 (21:12):
Mm hmm.
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