00:00I just want to start with the latest news we got out of geopolitics because we know China has added
00:05some U.S. defense firms, rare earth firms onto an export control list.
00:10Do you think this could derail the detour we are seeing between U.S. and China?
00:14No, I don't think so. I think this year the relationship has been improving.
00:21And you see that both parties have honored the deal and Chinese export to the U.S. has actually surged,
00:30increased a lot.
00:31That's actually all good signals.
00:33But I think the relationship is very clear.
00:36Just as some U.S. government officials said before, the area where we can cooperate, we cooperate.
00:46Where we can compete, we compete.
00:48So where we can fight, we fight.
00:52So it's a very clear definition.
00:54Certain areas, both parties can cooperate.
00:57Especially this year the commercial relationship has been improving.
01:02And China has imported also quite a lot of soybeans.
01:05So the Chinese exports, other goods.
01:08I think the Chinese ambassador in the U.S. just said that the deal was 30 billion U.S. dollar
01:15to reduce the tariffs.
01:17So you increase the export imports.
01:20Now it actually can expand.
01:22Yeah, not only 30 billion U.S. dollar, it can be much higher.
01:25So all to me is quite clear, you know, this relationship has been improving.
01:30But of course, you know, the certain areas, there are still areas for competition.
01:33So it's not that we have to look at the Chinese, Sino, U.S. relationship into big context.
01:42Yeah.
01:43Certain area, you know.
01:44Yes.
01:45And China is now just coming back from the Dragon Board Festival holiday.
01:49We did see the travel data remaining flat from the previous year.
01:53Last month, last week, we had the economic data showing retail sales contracting as well.
01:59Do you see this trajectory continuing the weakness in the consumption?
02:03I think there's a huge divergence in the Chinese economy.
02:06And I put into three different divergencees.
02:10First is, you know, external demand versus domestic demand, right?
02:15External demand is pretty strong.
02:16And the Chinese exports, you can see Chinese exports are growing like around 10%.
02:21And we also see Chinese foreign reserves has been increasing, right?
02:26To around close to 3.5 trillion U.S. dollar.
02:30So the current account surplus has been also rising.
02:35So that's actually one part of, you know, so-called external environment.
02:39But the internal demand has been retail sales for some investment.
02:43From this May data.
02:46Actually, we already see quite a softening in April data already, right?
02:50But, of course, you know, first quarter is pretty strong, right?
02:53Then some people say, oh, this will continue.
02:55But at that time, I already say, you know, it will be, you know, quite a one-off, right?
02:59Maybe second quarter will see slowdown.
03:01So because I can see domestic demand has been still yet to recover.
03:07So that's the first divergence.
03:08Second divergence, I think, is the new industry versus old industry.
03:14New industry, like, you know, high tech, right?
03:16We can see chip industry, a lot of new energy industry.
03:20EV cars, for example, are doing very well.
03:23But the old industry, we can see, you know, quite clearly, like real estate, right?
03:30Still, the investment sales have been declining.
03:33So that's the second divergence.
03:35And I think the third also is related to actually, you know, to mostly to investment, you know, this versus
03:48consumption.
03:50You know, certain part of investment, like government infrastructure, has been, I think, improving.
03:56But the real industry sector, the consumption sector, so now.
04:03So as we look ahead to this July Politburo meeting, are you expecting a policy put from the government?
04:10I think definitely, you know, July is very important, you know, the month to actually look at the overall picture
04:18of what's been going on in the first half, right?
04:21So I think, because, you know, interesting thing, you can see the April, you know, Politburo meeting, right?
04:29So the first quarter data is very good.
04:31Yes.
04:31Then we are only in the second month of the second quarter, right?
04:34So after, in July, we see the whole picture of the second quarter.
04:38Then probably will be a more, you know, comprehensive assessment of what's going on in the first half.
04:44Do you expect more fiscal policy?
04:45Definitely. I expect more policy to support the economy because, you know, we are seeing really softening in the second
04:55quarter.
04:56What do you think is needed?
04:57Because so far, actually, we have seen the consumption subsidies work, but then now we are experiencing the payback because
05:02all that demand has been pulled forward.
05:04There's only so much cars, so many home appliances you can buy, right?
05:08So what else do you think the government needs to do now?
05:11Yeah, I think, when I talk about divergence, another divergence, very important divergence is, you know, supply side, very strong.
05:19You know, it's production side, like home appliance.
05:22We are, JD, we just opened a new mall in Hong Kong, very good sales.
05:28And you can see, because the Chinese producers are making a lot of progress, they are producing the best, you
05:36know, the most fixated home appliance now in the world.
05:39But the demand side, right? That's actually the area I think in July, the government will focus on.
05:46For example, service consumption, right? As you mentioned, the tourism, what I can see is tourism is booming.
05:52A lot of people are traveling, you know, the hotels are not, it's quite a good business, but actually the
05:59price, the purchasing power has not catch up, not catch up.
06:05So that's an area that's going to do.
06:08I'm going to get you to put on your JD.com hat for a while.
06:10And because we have seen a lot of unhealthy competition there, do you think we are close to an inflection
06:16point to see margins recover to a healthy level?
06:19I think so, yeah. The government has been very, very keen to stop all this unfair competition, right?
06:26So, Jenny, we are actually, you know, very, very supportive of this policy because this kind of too much competition,
06:35you know, that's unfair competition sometimes.
06:37I'm not very good for the industry and not good for the recovery of the whole consumption.
06:42But the one thing is very good, you know, the Chinese economy, I can see, is the disappearance of deflation.
06:49Right. Right. You can see that compared to last year, we are seeing 0% growth in the price index.
06:56It's mostly important inflation, though, not really demand-led.
06:59You are right. You know, we are seeing the oil price arising.
07:03This is also, you know, be supportive of the rise of CPI inflation.
07:09Also, PPI has been positive, you know, for the first time in four years.
07:13But I think it's very, very important to change the mindset this deflation expectation has now gone.
07:21I think that's the way I see the first positive sign from that, right?
07:25People used to think, oh, the price will fall, you know, why should we consume now?
07:31It doesn't seem like the corporations and companies are actually able to pass on the higher cost to consumers, though,
07:38because there's still a divergence between PPI and CPI.
07:40You are right. But we are seeing the first sign, the first, you know, only, yeah, exactly.
07:47When we are seeing this, the first, you know, few months, we are seeing a positive CPI and PPI.
07:52Even though, you know, there are some divergence, but both have been positive now, right?
07:57So that's a very, very big change, in my view, especially PPI.
08:02PPI has been, you know, negative for four years. Now we see a positive.
08:06So that's, I think, will gradually change the mindset of both consumers and producers.
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