About this transcript: This is a full AI-generated transcript of US Envoy: Nvidia Affair Shows US Should Stay 'Diligent' on China from Bloomberg Television, published November 11, 2026. The transcript contains 17,055 words with timestamps and was generated using Whisper AI.
"9am in Shanghai, Shenzhen, and here in Hong Kong, you're watching The China Show. I'm Yvonne Mann with David Inglés. Good morning. We're counting down to the open-up markets in greater China. Let's get to your top stories today. Stocks across the Asia-Pacific making cautious gains as Corby's..."
[00:00:00] Speaker 1: 9am in Shanghai, Shenzhen, and here in Hong Kong, you're watching The China Show. I'm Yvonne Mann with David Inglés.
[00:00:06] Speaker 2: Good morning. We're counting down to the open-up markets in greater China. Let's get to your top stories today. Stocks across the Asia-Pacific making cautious gains as Corby's earnings ease concerns over the AI trade, but Treasury yields holding losses after hotter-than-expected U.S. inflation numbers.
[00:00:23] Speaker 1: Anthropik targets a $1.4 trillion valuation in its blockbuster IPO. Defiant recent jitters led to a sharp sell-off in AI stocks.
[00:00:33] Speaker 2: And we'll be watching shares of Alibaba today on plans to list its chip design unit, T-Head, that's to help fund its own AI ambitions.
[00:00:44] Speaker 3: And I'm Stephen Engel at the Citi-China conference here in Shanghai. We'll be speaking exclusively with the U.S. ambassador to China, David Perdue, as NVIDIA's spying investigation no doubt adds to tensions ahead of next week's next Trump-Xi summit. This time it's going to be on the sidelines of APEC in Shenzhen.
[00:01:19] Speaker 1: Yep, who let the hawks out? That certainly is a big thing to watch here overnight. When you talk about that hot CPI print we got out of the U.S. as well, kind of cemented some of those repricing that we're seeing when it comes to markets now. You have the likes of the Fed speak and really this chorus of governors saying that, look, we need to hike and possibly, you know, even 50 basis points now.
[00:01:40] Speaker 2: Yeah, and I think there's now a 12% chance that they might actually do a bigger hike. Next month. 50 basis points, right, December 8 and 9. The other big change to the rate expectations curve is there's an additional hike now price for next year. So we went from two up to three. And I think it's just indicative, really, of how unpredictable this inflation story continues to be. Borderline disturbing was how Goulsby underscored this inflation print. So on your screens, right, we're at 28 basis points priced. We've gone from two to three, looking at the curve going through to 2027.
[00:02:12] Speaker 1: It's so much that David's lost his voice.
[00:02:14] Speaker 2: Yeah, well, my kryptonite as an island boy who grew up in very hot temperatures is cold weather.
[00:02:21] Speaker 1: Coming at a time when there has been more of this sort of bullish positioning around treasuries in particular, right? When you're talking about how, you know, how much we've repriced now. Is this just the start of this repricing here? And do we need to start factoring in a deeper sort of tightening cycle from the Fed as well? That's certainly one thing to deal with as well. But, you know, we've heard from not just Austin Goulsby, but there was just a whole slew of Fed officials there, including what started off was Chris Waller, right? Really kind of opening that door before the CPI, opening the door for a jumbo hike. Take a listen.
[00:02:54] Speaker 4: If you look at the SEP, we had two to three rate hikes. That's not dramatic, right? So it's not it's not that we're going to jack up the policy rate 150 basis points or 200 basis points. So we are looking forward and saying we need to do something at a minimum, probably take back the three insurance cuts that we put in last year. Those were good decisions. We ex-post didn't necessarily need them.
[00:03:21] Speaker 5: It remains clear to me, given the current outlook, that the FOMC needs to implement at least two more 25 basis point rate increases. After two more increases are in place, it would make sense, in my view, to pause and examine economic and financial developments to determine what further action may be appropriate.
[00:03:44] Speaker 2: Now, the good news is risk assets, I think, in the form of U.S. futures are higher right now, six cents of one percent. Aussie yen is also trading to the upside, which might mean, of course, there might be a limit to losses we're seeing currently in cash markets across some parts of the Asia-Pacific. To the point Yvonne just made earlier on, right, it's the worst timing, really, for people who went into bonds amidst the sort of pullback we're seeing in AI equities, right? And, of course, now they're getting sort of flushed out because of the inflation story. Anyway, twos and tens coming up on your screen. Japan 10, Aussie 10 as well. And, of course, as you look at the Chinese Open today, A50 futures, we'll talk about Alibaba. There's also the moonshot story to get into in a moment. And we are in the window for credit numbers to come through as well.
[00:04:29] Speaker 1: Yeah, you have, of course, what's going on with CoreWeave. I mean, that earnings seems to at least ease some concerns about this whole AI slowdown, the light. They're talking about demand. I mean, they're basically sold out until through 2027 as well. So, certainly, that built well. But then you look at a company like SoftBank and that massive write-down that they had to really book in when it came to data centers, this whole repricing of AI valuations and the like, they swung to a loss. And there you go. We've come off some of the initial lows, but we're still down 6% for SoftBank here this morning.
[00:04:58] Speaker 2: Yeah, we're down 10% at one point there on SoftBank. And, of course, the Anthropic story might be helping things along. You have TSMC, of course, looking to put some money into that as well. Asia-Pacific, this Thursday, we're up half of 1%.
[00:05:10] Speaker 1: Yeah, let's bring in Monica Schau, founder and CIO at Triada Capital. I want to get your take on the inflation numbers. It seems like this goes beyond the energy story now. Should we be, in some ways, you know, this repricing that we've seen, should we be repricing more of a deeper Fed tightening cycle?
[00:05:28] Speaker 6: So, I think that, first of all, it's a very easy do for the Fed to reverse the insurance cuts. So, I think that will now happen, like, more quickly. And, you know, the truth is that the market priced in quite a lot in the last, you know, seven sessions because of Trump's words, because of Vance's words on the de-escalation of the war. And there was so much focus from all of us, frankly, on energy-related inflation. And now you see the broadening of the components. And very worrying is, of course, grocery being up, you know, food produce up over 5%. So, I do think that they're going to have to act more quickly. It's, I think it's 50-50 whether December's going to be at 50 bips. But certainly the next two more hikes is reasonable to assume. And then beyond that, I do think they'll wait and see. And we do have PPI coming up later. There's that. And then, as you can see, the futures and the risk sentiment is very much influenced by the perception of the growth ahead. And, you know, I think it's because of the worries about the growth ahead because of rates moves that the curve actually flattened so aggressively. So, you could see that very clearly in 230s.
[00:06:50] Speaker 1: So, you think there's more pain ahead now that the macro picture seems to be not as rosy or not as, you know, dovish as we thought?
[00:06:58] Speaker 6: So, yeah, I mean, look, I think that for treasuries, certainly we're going to see a lot of vol ahead. That's not going to stop. There's still a lot of uncertainty, including what the auction picture looks like. Right now, you know, the assumption is that you're going to be, the Fed is going to be funding primarily through T-bills. And that's also something to watch as to the demand absorption there, because currently, as of this year, you're looking at 23 percent of outstanding debt of the government being in T-bills. And that's looking to rise to up to about 30 percent in 2000 by 2029. So, this is also a picture to watch. And then what Besant decides to do in the long end. So, I think the curve shape is going to be something that people will focus on.
[00:07:55] Speaker 1: How's the factor how you look at Asia now? And, of course, your coverage.
[00:07:59] Speaker 6: Well, you know, first of all, I think that the deflationary dollar story has completely gone away. And this does spell some, you know, caution for all emerging markets. Asia credit has been relatively resilient, all things considered. You do have a lot more dispersion, as in idiosyncratic stories coming to play a lot more. And then you're looking at the commodity headwinds now, as you look at oil coming down so much and the related commodities that has to do with the growth picture. So, Asia, it will be mixed based on, you know, each region, whether they are an exporter or importer of energy. But, you know, overall, so far, Asia credit, of course, widened with global credits, but has held in relatively well. Again, you know, the same story in the last couple of years is really that we have tight, overall tight supply.
[00:09:01] Speaker 2: What about SoftBank, as an example, on the credit side, the riskiest parts of the AI credit curve? How do you look at that space?
[00:09:09] Speaker 6: Well, SoftBank certainly is one that people can completely range trade because that behaves, that whole bond curve, first, it's quite a large curve, and there was a lot of supply. But secondly, it's really used as a beta indicator and almost trading as though it's equity. So SoftBank is one that's really a trader's instrument. So that actually is almost like a story unto itself because you do see days when the rest of the bonds may be moving up because of rates, but SoftBank will still move down. And that is super sensitive to any kind of AI-related story. Of course, you know, as Yvonne mentioned, there is the write-down, the data center. But even before that, you see that any time, you know, NVIDIA or any other, you know, like CoreWeave get hit, then SoftBank will be, the bonds will be the first to get hit.
[00:10:05] Speaker 1: How do you look at post-midterms, right? The Dems taking back Congress, there seems to be this narrative that they're going to oppose the build-out of data centers and the like. Does that in some way slow down the amount of financing, the AI sort of debt boom that we saw in credit markets?
[00:10:22] Speaker 6: Well, you know, it's interesting because even as that happened post-midterms, immediately we see jumbo issuances, right, including meta and so forth. So I think that the credit, you're still going to see more supply in that space. That's not going to stop. The pace may slow down a bit, but overall, I would say that there is a natural caution anyway. When rates go up and your cost of funding goes up, you know, there should naturally be more restrictive liquidity there. And you have just a lot of competition for demand. So this was the case even before the midterms. Now, post the midterms, you know, first of all, I do think there was a bit initially an overreaction, which is why equity markets came back a bit. But it's still going to be a matter of first, we're going to, everybody's going to be watching how Anthropic IPO goes. You know, I don't know if you noticed, but yesterday there was a bit of a mix-up of headline. At first, Anthropic was coming out saying it was like going to be, you know, the low end. And then now it's back to something more normal of like a valuation of $1.4 billion. And that gave people a little bit of a sigh of relief as to what they're still able to gun for. And I think everybody's just, you know, going to watch to see how the stock performs. So, you know, in terms of what the Dems really can do, at the end of the day, you're looking at a gridlock government. And the existing data operations are still going to be going. I think there is a moratorium and it is going to be decided at the state level. But eventually, I don't think that the goal of the Democrats is really to stop AI, you know, growth. It's really going to be with guardrails, in my opinion.
[00:12:14] Speaker 2: I mean, with the inflation print and the tension between, the tension around supply, you know, before the midterms, as you were pointing out, you know, Scott Besson was already pushing these hyperscalers not to issue too much on that part of the curve. Does that story continue next year at a higher level, I guess, is the other part of that question.
[00:12:33] Speaker 6: So, you know, I think one of the challenges now for the hyperscalers is really how they can push to issue higher duration. And so the rate curve, this is why the rate curve shape matters even more so than how many hikes. You know, the irony is that the more hikes they do, I think that the more you have an anchor on the 20-year, the 30-year. And the 20-year has another technical, which is, you know, people still have to see whether that 20-year eventually gets cancelled out. I don't know if that happens. But basically, people do want to see that there's credibility from the Fed. And the more they're showing that they're taking the bull by the horns and really controlling inflation, the more you will have that appetite for duration coming back. And therefore, you know, the hyperscalers can come out with tranches that can extend, you know, their their maturities. You know, like I said, I think that the proportion of the U.S. investment grade that is in tech is, you know, going to be a test next year. Because next year, you're really going to see the greatest need on in terms of how much supply they need to come out. So, you know, we'll see on that. But I think that there is also you're starting to see a divergence across general investment grade and by regions a little bit based on the demand absorption in of that category. So that and then, you know, that's really why Asia has been performing better in terms of the containment of volatility and credit spreads.
[00:14:12] Speaker 1: Monica, thank you for having join us here. Monica Schau, founder and CIO at Triada Capital. Coming up, we're talking about Anthropik here, seeking that $1.4 trillion valuation and what could be the biggest IPO on record. We'll look at appetite for the deal with investors already paying a premium for access to those shares. And we're kind of on the open of trade in Shanghai, Shenzhen and Hong Kong. We are looking at futures here this morning looking like this on a chillier day here in Hong Kong. Futures are also looking a bit chilly as well. This is The China Show. Alright, the latest when it comes to Anthropik, right? So what we're hearing, they could be seeking a $1.4 trillion valuation, what could be the biggest IPO on record. And some backers are already shopping portions of their allocations with fees of as much as 5% on top of the offer price. Let's get to our deputy managing editor for APEC Equities, Balazs Penns. He joins us now for more. Obviously, I mean, there was so much confusing headlines yesterday about how much they were raising and what the valuation. I mean, give a little bit more clarity. What do we know at this point?
[00:15:39] Speaker 7: There are very big numbers around the Anthropik IPO as we've been used to it. There was a bit of confusion yesterday, but now everything is clear. So the headline number, I guess we can say, is $100 billion. That's how far they can get, including the IPO, the private placement that's happening concurrently, and the green show after that. So that would make it the biggest share sale in history. That's why we're talking about historic share sale. The other big number we're looking at is $1.4 trillion of valuations. So those numbers are somewhat below SpaceX, but this is the first pure play AI company coming to the market like this. So it is a very historic event, and given what happened in the market over the past week, you know, last week we were hearing about valuations as low as $1.1 trillion, perhaps. So they were able to come back up closer to what they were originally seeking. So I think this is, no doubt, a very, very high number, a historic number.
[00:16:37] Speaker 2: Tell us more about this. You know, people are shopping some of their pre-allocations out for, what, is it 5%?
[00:16:44] Speaker 7: So we heard about 3% to 5% premium on these, and this is a new thing that emerged. The first time we heard about it, I think it was during the SpaceX IPO. These are very, very coveted IPOs, and not everybody will be able to get in on it. So some people, some big investors are saying, look, we know we're going to get some allocation. Here's one way for us to monetize that and also lower our own risk and give some people access to this IPO who otherwise might not have it. Obviously, this is banking on these shares doing really, really well out of the gate, as we saw with SpaceX as well. And that's something that people might expect for Anthropic 2. And this is capitalizing on that demand. You know, finance is always innovating. Here's the latest for IPOs.
[00:17:28] Speaker 2: Tell us about, I mean, separately, Alibaba and T-Head.
[00:17:31] Speaker 7: Yeah, so this is one for the Hong Kong pipeline next year, which is shaping up very, very nicely. So T-Head is Alibaba's chip design unit. They designed their data center chips. And Alibaba is one of the biggest spenders in Chinese AI, and they are pushing a lot of money into a lot of various different things, including T-Head. And there's been a lot of demand because their chips allow them to be less reliant on video. So that's why this company is so interesting. We heard that some other people reported that they might be aiming to raise about $2 to $3 billion next year.
[00:18:08] Speaker 1: All right, Balazs, thank you, our deputy managing editor for APEC Equities and, of course, for ECM, Balazs Penz there. And tech is really doing a lot better in the region than what we saw in the U.S. and the price action that we saw overnight, right, after what we saw. Corweave results, that certainly did reassure investors, but then we have to contend what's going on in SoftBank in Japan. Let's bring in our market supporter, Anthony Stevens, who joins us with more. How do I look at a story like SoftBank and Corweave? It seems like they're kind of two different stories right now.
[00:18:36] Speaker 8: Yeah, and they're similar companies, right? So that's what's interesting. You have two companies that borrow a bunch of money and execute AI growth. And you're seeing that differentiation execution being the key driver here. Corweave did a lot better. Corweave is a lot more confident about what the future holds. They say they're booked out until 2027. They say that they don't see any impact from the political drama in the U.S. around data centers. Then you have SoftBank, which has taken an absolute knife to its U.S. investments. They'll take a $3 billion-plus markdown to those U.S. investments. So very bifurcated in terms of what they're executing and what they're seeing on their individual products and their individual services. And you see that bifurcation in Taiwan, in Korea, in Japan. SoftBank is getting blitzed, but not the semiconductor space in Japan. That's doing reasonably well because they're like, okay, well, if Corweave is going to be okay, then so is IRN, so is Nebius, they will be fine. And then we have more people to sell to. SoftBank is an isolated problem. Then you have the execution from TSMC that is super strong. If you look at Taiwan's overall exports and TSMC sales growth, they are almost identical numbers, 59% year-on-year. So the TSMC ecosystem is lifting all boats in Taiwan. Local retail has been absolutely fearless in front of a wave of foreign selling that's almost $100 billion year-to-date. So this is the setup for markets now.
[00:19:58] Speaker 2: What about China? Not just today. What's the setup for China in the next couple of days?
[00:20:02] Speaker 8: So China, you have this juxtaposition of great value opportunities, which the local papers continue to talk about. They're doing buybacks. They're doing dividends. Valuations are really good. Star 50, ChinaX, have come back all the way down. It's a great opportunity to pick up AI at a discount. On the other hand, you see listings are not doing well. You know, Bella's talked about the fact that there is a full pipeline, but there is a lot more price kind of discipline around that pipeline, right? People are bringing down prices. We saw mixed performance from the IPOs that listed yesterday. You know, one was down 7%, one was up 20%. That's a far cry from when you guys were sitting here in summer and every secondary listing in Hong Kong was up 40%, 50%. So completely different environment, a lot more circumspect investors. Retail, you know, is not as interested in the market as you see in Korea and Taiwan.
[00:20:53] Speaker 1: All right, Anthony, thank you. Our markets reporter, Anthony Stevens, there. Happening now, we're taking you live to pictures out of New York, where you are hearing from the U.S. Secretary of the Treasury, Scott Besson, speaking in New York at the National Committee on U.S.-China Relations. What he was talking about is what's going to happen next week. So he did confirm that President Xi and President Trump will meet next week in Shenzhen, then again in Miami, and also repeated that the U.S. aim is to de-risk, not decouple with China. So some at least positive sentiment there when it comes to what we could expect next week, given just what we've been hearing with NVIDIA and this whole controversy around that. They said expect talks with China on handling AI models pre-release. So maybe some more dialogue before China actually releases some sort of AI model, which is quite interesting as well. We'll bring you more coming up. This is Bloomberg.
[00:21:46] Speaker 9: People already discovered how to do business. Before diplomacy gave this relationship its shape, the flow of goods gave us its force.
[00:21:57] Speaker 2: All right, welcome back. Index levels, a bit of weakness as we go into the open today, just under four minutes away. Although I think when you look underneath the hood, you have standouts like CHEL, to the upside, BABA, and HSBC to the downside on the Hang Seng Index. And of course, within that, the macro story of higher rates means rate-sensitive sectors, like precious metals, are really feeling it.
[00:22:26] Speaker 1: Yeah, gold took a dip here, right? We're just around that 4,000 level once again, and you are seeing some of these miners falling in tandem here this morning. So certainly that's one thing to watch. 40, 35 for spot prices here right now. So yes, the whole macro picture seems to have changed overnight here as well. When you talk about these Fed officials leaning much more hawkish here, even flagging possibly a 50 basis point hike next month, we certainly have seen the repricing in the bond markets here. We'll see how China fares. The open is next. This is Bloomberg.
[00:22:53] Speaker 2: Good morning and welcome back. You're watching The China Show. Well, first off, I'd like to apologize for this huskiness and the tone that's coming through. My weakness in kryptonite is very simple. It's cold weather. And once we get the cold and dry weather out, this is what happens to David's voice. The other thing we do get out as well when the temperature drops is boots on the ground in Hong Kong. I would imagine more than a few pairs are now strutting around central given the drop into mercury today.
[00:23:48] Speaker 1: A mere 16 degrees out there, Dave.
[00:23:51] Speaker 2: And yeah, that's just how the stereotypical Hong Konger does, right?
[00:23:56] Speaker 1: Bring out just the puffy jackets, bring out the fur. And yeah, I mean, David still goes out for his run and therefore, hence that his voice is led up to that. But yeah, certainly that's one thing to watch today, right? The chilly temperatures seems to be a bit of a chilly open here when it comes to greater China here today. And obviously it is because of what's happened in the rates market overnight, right? So it was a hot CPI print beyond just really, you know, people would say, look, it's not reflected what we're seeing in oil prices, which have dropped of late. But then again, you look under the hood and you look at core, you look at core services. And this inflationary story has seemed to be have gone beyond just the energy space, right? So that really is what the bond market is contending with. If you talk about the move that we saw in the two year in terms of real yields, I think we shot up some double digit in terms of basis points are concerned here. So stocks, no surprise, are seeing a bit of pressure here just given how hawkish also the Fed commentary has been, right? When you have the likes of Waller and Lori Logan also flagging, maybe we might need to hike 50 in December. Sure, the rates market and repricing seems to have shifted of higher probabilities of that in just a few weeks. So certainly that's one thing to contend with. That's what we are seeing when it comes to, you know, stocks itself, right? We are seeing a bit of a pressure here. We're flat, though, when it comes to the China X. Perhaps, of course, we're getting a little bit more clarity, possibly on the anathropic story here and really how much they're planning to raise. It's a $1.4 trillion valuation, which kind of brings it back to as what Monica Xiao told us earlier, more normal levels here. That may be the reason why people can continue on with the whole A.I. trade. We'll see how this all fares, right? Look at how Hong Kong is doing right now. Obviously, we talk about Alibaba, news about the spinoff when it comes to T-Head, the chip unit. So that's certainly one thing to to look at here today. HS Tech, though, seems to be seeing more pressure. We're down about 1.2 percent and Hang Seng is also lower by one. So we are still seeing quite a bit of retreat when it comes to risk assets here. Baba certainly is that one story against, you know, all this talk about what's going on when it comes to video, you know, the A.I. trade and the like. This announcement of this spinoff might not really be boating too well here right now when it comes to Alibaba. But in terms of unlocking that value, that certainly is one thing investors need to look into when it comes to optical stocks or optical service stocks. We're tracking that here today. So there's a Rota's report citing when it comes to companies like Microsoft. They seem to be pushing the U.S. or at least the Trump administration to halt this ban when it comes to A.I. components from China. So that seems to be getting the market a bit excited about. Maybe there is a potential for that reality as well. So you are seeing the likes of Zhong Zhe in the light up close to four. Yang Zi optical also up more than two percent, Dave.
[00:26:38] Speaker 2: Yeah, you know, that's ahead of the, you know, the meeting next week, which, you know, we just mentioned with Scott Besson a few minutes back. Right. Between the two presidents and at APEC. And I think what's interesting there is you look at the export numbers which came out last week out of China. Right. And all the high tech exports that are headed to the U.S. In fact, we have a special piece in that we'll talk about in a moment. But, yes, you know, the geopolitics of the chip story has really been fun. It showed up in many, many ways. And, of course, I don't have to go into the details of the latest iteration of that. The company, of course, at the center of everything that's been taking place is NVIDIA because you had the U.S. elections and then you had the latest on that separately. So, effectively, what we're looking at here is 1.7 trillion. Let's put that into context, right? That's an entire meta. That's an entire Dutch market. We talked about Anthropic, right, at a 1.4 trillion valuation. That drop that we had in NVIDIA is an entire Anthropic as far as the market cap is concerned. Now, I guess putting this further into context in terms of the drawdown, right, because you don't have a 1.6 handle on the share price of NVIDIA. So, what we've done is we put the share price of NVIDIA on one panel. The next chart's coming up. The drawdown that takes you all the way back about 10 years or so. And then you have the Fed hiking cycle, which is interesting because what we found, if you juxtapose all those two things, all those things together, is you tend to get the biggest drawdown in shares of NVIDIA, like many other growth stocks, of course. NVIDIA is an example. Drawdown here, drawdown here. That's about a 40-plus percent. That's about a 60-plus percent. We're currently at 30%. You tend to get the bigger drops when the Fed tends to heighten, when you get tightening cycles around the Fed. Of course, deeper tightening cycles at that. You had one, of course, from 2016 to 2019. You had the latest one, which was very, very quick and steep, into the 2022s, 2023. And then we have this current conversation right now of how much more, Yvonne, can the Fed actually start to hike interest rates. So assuming the fundamentals, assuming the fundamentals, and he gets to keep his job, Jensen Huang, don't change. There's still the issue of the macro picture of higher rates that might add to uncertainty over the share price of NVIDIA, which, as we were pointing out, has a 1.6 handle as we speak. Now, we have a story on this, by the way, for our Bloomberg subscribers. You can check this out on the terminal. It's sort of a deep dive into this controversy in our tech watch piece today that's on the Bloomberg terminal. The bull case will hinge, really, on whether he does get to keep his job. Yvonne.
[00:29:12] Speaker 1: Yeah, that's the, gosh, trillion-dollar question right now. And certainly that what has been an overhang on the stock, right? You talk about the wipeout we've seen in just NVIDIA alone this week is quite substantial, right? And the fallout from NVIDIA's spying scandal could extend well beyond the chipmaker, potentially making it harder for U.S. companies to do business with China. We just heard from Besant speaking in New York this evening and really at least had some more constructive sort of tone when it came to discussions with China. You know, they were saying that they wanted to have more talks before some sort of Chinese AI model is released, right, that they could have more discussions and negotiations about that. But it does maybe set up the stage for a pretty interesting meeting between Trump and Xi and APEC and Shenzhen next week. And then, of course, they've talked about Miami as a possible next venue for another summit as well. So a lot going on, right? Where does NVIDIA fit into this whole U.S.-China relationship now? Let's bring in our Bloomberg opinion columnist, Julianna Liu. She's arguing that Jensen Huang may be the last major American business leader with the influence to bridge that divide. She joins us now. Is this the end of the era for powerful American CEOs and really kind of being that, I guess, mediator?
[00:30:27] Speaker 10: Yeah, he was really the last of his breed, but he was also a very unusual example of it. So I think Xi and Trump will continue to meet. But I think, you know, the CEO voice is no longer going to really going to be there. And as you know, back in the day, American CEOs used to go to China either in groups or individually to lobby for a kind of access. And they were very public in the way that they did it. Of course, Mark Zuckerberg jogging through Tiananmen Square, Sundar Pichai, you know, playing Go, all those guys, right? I mean, they didn't find fruitful markets. They're kind of not part of that conversation. But Jensen, of course, was. And even some of his contemporaries are no longer as active. Tim Cook left his position not that long ago. Elon Musk is still around, but he's, you know, not as engaged. You know, he's more engaged in the U.S. and trying to fund Republicans. You know, they're not really part. It was really only Jensen that was really challenging the Washington consensus on China. And he was incredibly successful. I think his background had a lot had a lot to do with it. You know, being Taiwanese-American, being a self-made businessman, family man, had a lot to do with it as well. And he played the game extremely successfully. You know, he had Trump's ear. He was traveling with him, you know, a lot last year. And he won that campaign. You know, we saw that. You know, they were allowed to sell their chips. And also, you know, their competitors were as well. So now that I think his voice is going to go silent, no matter what happens with the investigations going on, there isn't going to be that voice anymore.
[00:32:01] Speaker 2: And what will be the implications of that as far as deal-making goes?
[00:32:05] Speaker 10: Yes. So deal-making, as we know, is not what it was in the past. But I think it's going to be even less now. Can you imagine being an American CEO, especially male CEO, going to China on a trip? You know, I mean, you know, they might still go, but you're going to keep it very, very quiet now. Right. And we still have kind of outstanding deals, right? Like Boeing's 200 plane deal, you know, that's been negotiations dragging on for months. These tend to be very tied to political change. Any shift in the wind between the two sides, let's see if that still happens. But, yeah, it's not looking very good for American tycoons and, you know, inserting themselves into the U.S.-China relationship. I don't think they're going to be doing that anymore.
[00:32:48] Speaker 1: How do you think we're going to feel the repercussions of this espionage scandal then? You talked about chip curbs. Where else could we see this?
[00:32:54] Speaker 10: Yeah, so, you know, the Democrats will be retaking both houses very soon, have already come out and said that they intend to impose or they support in principle further restrictions. That's that's an interesting one, because I think, you know, Chinese companies need these chips. The Chinese government is not keen for them to have them. Yeah. So I'm not sure further restrictions will effectively change anything on the ground. But they may there are other ways, right, of getting access to these chips, either through data centers or other ways. And I think it's possible that they will be taking action in those areas.
[00:33:31] Speaker ?: Yeah.
[00:33:31] Speaker 1: And whether I mean, you mentioned about whether they Huang is going to make it to APEC and travel with Trump. I mean, that would be a wild card.
[00:33:40] Speaker 10: I think it's extremely, extremely, I fall off my chair if he turns up.
[00:33:47] Speaker 2: All right. Oh, yeah. So will markets.
[00:33:49] Speaker 1: Yeah. But no, I mean, even Trump didn't give a definitive answer on that as well. All right. Juliana, thank you. Our Juliana Liu there, our opinion columnist. Make sure to check out her piece about Huang was the last tycoon standing when it came to U.S.-China ties. That's on the terminal and on Bloomberg.com. All right. Happening right now, we'll bring you back to those live pictures out of New York at this really good, interesting sort of talk that's going on. The Chinese ambassador to U.S.-China, Feng, speaking at this event. This is the National Committee of U.S. and China Relations, right? We just heard from Bess and Bessie, is now talking about U.S.-China ties have gone through ups and downs, but mutually beneficial. The U.S.-China nature of ties remain. Earlier, we also heard from Besson talking about talks with China on handling AI models. A pre-release could be something that they could talk about here and really confirming that meeting between Trump and Xi next week in Shenzhen. And one following in Miami.
[00:34:43] Speaker 2: Yeah, we had the diplomatic story covered for you on both sides of the Pacific. This is in New York. And in about an hour's time, David Perdue, the U.S. ambassador to China, will be joining the show. This side, of course, with Steve in mainland China. Lots of more ahead. This is the China show.
[00:35:00] Speaker 11: And its future depends on the youth. For more than half a century, from facilitating ping-pong diplomacy, to helping organize the tour of the first U.S. orchestra to China, to hosting the first Chinese journalist delegation visiting the United States.
[00:35:19] Speaker 1: All right. We are listening. Oh, there you go. The ambassador, Chinese ambassador to the U.S. now just stepping out of his speech, really talking a little bit more about when it comes to this mutual beneficial relationship that the U.S. and China have in nature of these ties, he says, still remains. And when it comes to the U.S. and China joint efforts, he says, are indispensable when it comes to the governance of AI. So that certainly is one thing that we're looking at here, of course, as we count down to that meeting in APEC next week as well in Shenzhen, right? Let's kind of turn the page here and talk about what else is going on, which is, of course, it is 11-11, Singles Day. That shopping festival in China is underway. And there's a new CBRE report that says that global brands are expanding their presence in Shanghai. Now, despite an overall decline of retail sales, apparel businesses have continued to grow in 2026 through the month of August. Let's head over to Shanghai. And our North Asia correspondent, Min Min Lo, is there with our next guest. Hey, Min Min.
[00:36:34] Speaker 12: Hey, Yvonne. Yes, and what a day to talk about this because we are about maybe 15 hours before the end of the singles day sales that ends today at midnight. And joining me here is, you know, Helmlinger, the head of retail leasing at CBRE China. As you know, thanks for joining us. I got your third quarter report, which shows that the retail leasing market is still seeing some pressure when it comes to rental price, occupancy rates. How would you assess the overall health of the market right now?
[00:37:03] Speaker 13: Thanks for having me, Min Min. I would say that, you know, the retail is holding steady, right? And actually, there's a bit of momentum lately because if you look at the overall total retail sales consumptions, it's doing about 1.1% year to date. But if you exclude automobile, it's up to 2.8%. And now, if you look into September alone, it's plus 3.9%. All right. Now, look at services, for instance. It's doing plus 5%. That's huge, which means that Chinese consumers are into experience. By that, I mean travel, you know, hospitality, shows, entertainment and sport. So, there's definitely some good news ahead. Now, if you look at the overall real estate situation, how does it translate? Well, overall, I would say that, you know, in the major cities, Tier 1 and Tier 2, we see a vacancy rate that's pretty stable, 7.5% more or less, right? But it's a double-speed market. By that, I mean that prime real estate, it's in high demand. And we actually see some rental growth in Shanghai and Beijing specifically. While suburbs and decentralized locations are under pressure. And by that, I mean that we have a lot of incoming supply. For instance, 2027, we'll see about 4.4 million square meter being injected across eight major cities. But that will decrease up to 2.8 million and then 1.9 million square meter, right? Among that, only 11% of it is actually prime real estate, which means that, you know, all the core downtown retail sectors will be protected and she'll see rental growth.
[00:38:50] Speaker 12: So, how close do you think are we from the bottom of rental prices now? Because your net absorption rate, as you said, I think quarter-on-quarter is down 17%. And you said there's more supply coming through. So, how close are we to this inflection point when landlords can start raising prices again?
[00:39:08] Speaker 13: So, look, it's going to be a little bit of a balance, right? Obviously, if you look at most of the major cities, suburbs and decentralized locations are going to see some rent decrease. And actually, it's ongoing, right? While prime real estate is seeing some increase. So, overall, we only see a bit of a rent decrease of about 1.3% year-to-date, right? So, it's not huge. But it's definitely a decrease. And a lot of tenants and brands are seeing that as an opportunity, especially, you know, for prime real estate because there is leasing demands toward those assets. Brands are coming in and they want to make a statement. So, I'm not too worried about the overall real estate situations right now. I think it's going to hold and it's going to accelerate very soon.
[00:39:59] Speaker 12: I found it very interesting when we were chatting just before this interview, you were telling me that you are looking at the busiest business periods in years. What's going on? And you seem to be getting a lot of inquiries to expand in China now.
[00:40:13] Speaker 13: Okay. Yes. As I said, CBRE retail, we've never been busier, right, for the past 10 years. So, we actually have a CBRE surveys where, you know, we integrate our, we investigate our retailers and 67% of them wants to expand in China right now. While only 4% wants to open less space in China.
[00:40:35] Speaker 12: And are these foreign brands or domestic brands?
[00:40:37] Speaker 13: Foreign and domestic brands all together.
[00:40:40] Speaker 12: Okay.
[00:40:40] Speaker 13: So, we're starting to have a lot of heat regarding China because, you know, there's not much market that can provide depth, scale, and stability right now globally. And a lot of our, you know, clients have understood that. So, they are now planning to further accelerate China or penetrate China. So, yes, lots of heat is starting to come in. And whether you're an international brand with, you know, no portfolio here or whether you already have visibility in most of the major cities, you are looking to expand.
[00:41:16] Speaker 12: This is, it's going against the trend that we have seen, right, when you look at earnings report, a lot of luxury brands are seeing double-digit declines. Retail sales, yes, 1% or so. Actually, it's not that great compared to years ago. Why are companies willing to put money and expand here when the macro data seems to tell us a different story?
[00:41:37] Speaker 13: If you look at the overall segmentations and you focus on luxury, yes, the pictures is not looking good, especially for most luxury brands. But there's a lot of segments that are actually over-performing. By that, I mean dedicated sportwear, extremely hot right now. Again, services, experience, entertainment, travel, sport, right? This is what Chinese consumer wants right now. Light luxury is getting a lot of tractions. If you look at the numbers of most of the players, they're doing double-digit and high double-digit here today.
[00:42:10] Speaker 12: And this is a luxury downgrade story.
[00:42:12] Speaker 13: This is a luxury downgrade story. I think Chinese consumers are readdressing their budget. You know, and obviously, people are a bit more considered when it's about spending. Plus, you know, you have technology brands who are doing well, mobile phones and the like who are, you know, double-digit up. You also have lifestyle, apparel and cosmetic brands who are behaving extremely well right now. So, I will take this with a grain of salt. Yes, luxury is definitely enduring some hard times. But there are some other segments that have good tractions.
[00:42:45] Speaker 12: And you were talking a little bit about how Shanghai is becoming an important test market and almost above place of innovation for the retail space. So, what sort of trends are you observing and what is the role that Shanghai plays for international retailers right now?
[00:43:02] Speaker 13: I will say that right now, if I have to say what is the trends, right, because I've been in this business for the past 20 years almost, it's quality of a quantity. You know, brands are really focusing on key locations. They want to make big statements. So, they get heavier in terms of, you know, rental investment. They take bigger space, right? And basically, they're also more likely to add services and experiential attached to it, right? So, we see a lot of brands that are coming in. And Shanghai is the platform of China. There's a saying that if you haven't succeeded in Shanghai, you haven't succeeded in China. So, a lot of the brands and the landlords and consumers are looking at how you perform here because it's a laboratory here. You have a lot of experiential. Actually, you know, 10, 15 years ago, a lot of the Chinese brands will travel abroad to study all the latest flagships that we're opening in New York, Rome, London, or Paris, in Tokyo. Right now, we see such high injections of foreign international brands coming in with all their board and studying every new flagship coming in here in Shanghai because the level of delivery is so high in terms of, you know, design, in terms of consumer journey, in terms of services, that this is really becoming a bit of a reference, basically.
[00:44:33] Speaker 12: Thank you so much. Fantastic insights there in Shanghai. Certainly, the fast-changing consumer environment here, keeping many retailers on their toes. And that was Zeno Helmlinger, the head of retail leasing, sharing us with his insights from decades of experience here in China at CBRE China.
[00:44:51] Speaker 1: Yep. One of my favorite destinations, Shanghai, for shopping these days. All right, Mumin, thank you for bringing us that interview. You can rewatch that one on our Bloomberg Video Hub. Subscribers can explore live streaming news and interviews, all of our Bloomberg TV shows, documentaries, and reporter analyses, and more. Make sure to check it out at Bloomberg.com forward slash videos.
[00:45:09] Speaker 2: ZAI Drupal up three and a quarter. That's a buyback four billion in Hong Kong. Memory stocks is Morgan Stanley downgrade playing out across these markets. And have a look at some of these names, of course, coming under pressure across the region, really, if you think about it.
[00:45:36] Speaker 1: Yeah, they're talking about demand risks out there, which could actually weigh on, of course, some of these stocks here. But, yeah, certainly that's one thing to watch when it comes to some of the memory chipmakers across greater China here today. Still ahead, we're speaking exclusively with the U.S. ambassador to China, David Perdue, as the NVIDIA spy investigation adds to tensions ahead of, of course, next week's summit between Presidents Trump and Xi. Welcome back to The China Show. Look at the HSI half-hour recession. Yeah, you're seeing a bit of pressure when it comes to equities across the region here today. I mean, it is the rates story. I mean, given just, gosh, the hawkish chorus of Fed officials that have spoken about, you know, December seems to be very much in play now. I believe we're fully priced for some sort of hike in a few weeks as well, and even opening the door for a jumbo-sized hike too, Dave.
[00:46:40] Speaker 2: Yeah, you've got to wonder whether if they were able to, if we didn't have the midterms and they were able to move by 25, how much of a big deal would another 25 be? I guess it's the optics, right, compared to, you know, the 50. Yeah, Austin Gouldsby, of course, describing that CPI report as borderline disturbing, causing much more disturbance across these markets.
[00:47:02] Speaker 1: Almost like your voice.
[00:47:03] Speaker 2: Well, yes, if it's not distracting enough, the huskiness that's coming through this CPI report. Hard to parse, as they say. You just cracked your voice. Well, almost on purpose. Yeah. What are we doing now? But equity markets are doing okay, actually, if you think about it. I think so. Smooth going, given the rat poison that is, of course, inflation. Rat poison to most risk assets, really. Inflation and rates, right?
[00:47:26] Speaker 1: Yeah. I mean, I think there's still optimism and anthropic, right? A little more clarity on the valuation side as we count down to this IPO. You add that to the core we've earnings. That certainly kind of tempered some pressure on, you know, what does this mean for the neoclouds and the like when they talk about their capacity is, what, 10 times bigger than what they have? Or the demand is 10 times bigger than what the capacity they have until 2027 as well. So some of those kind of commentary is easing those concerns out there. But it is really what you're seeing across treasury markets and really bond markets here in general, right? When you talk about how the short end is basically, I mean, the two-year yields basically popped, right? U.S. futures are still punching higher, but bond futures are still slightly in the red this morning as we kind of talk about this repricing coming at a time when people were kind of going a bit long when it comes to bonds, right? So certainly this is what traders are waking up to is this kind of bit of a reversal as well. So, yeah, for a look at what's moving, let's bring in more with more coverage here. Let's bring in our market supporter, Anthony Stevens. Anthony.
[00:48:24] Speaker 8: It's been an interesting day. We started off on the back foot, you know, kind of weak indications from the U.S., that horrible result from SoftBank. And then we had Covive kind of steady the ship. And what Covive is saying is they do not see any kind of impact from the Democrat victory in the U.S. They are executing very strongly. And it's been off to the races ever since. We're seeing the CapEx trade really reignite. We had some strong numbers from TSMC. That was a given. But what was not given is these follow-on moves from Advantest, Kyokshia, and LazerTech. These are Japanese names that have been under the pump on this AI semiconductor retracement. And it's really good to see this kind of move in Japan, really steadying the ship. Even SoftBank, you know, opened down 10% and is now down only around 3%. So, real change in sentiment. Now, flip the board and you can see the one place where the temperature has dropped and so have the markets, and that is Hong Kong. You're seeing weakness across the board, whether you're talking about big cap China internet place or, you know, the kind of this online shopping place that are looking for a very strong, single-day holiday to kind of draw a line under sentiment because sentiment is really bad on the Chinese consumer. We saw the CPI number really disappoint in China as well. We also see some interesting weakness in the EV space. Some of that is because oil keeps dropping, and now you have this competitive element between the ICE cars and EV cars. Now, flip the board, and you can see how the macro stuff that Yvonne was talking about is playing into the equity market. And that's because we're seeing a lot of kind of rate-sensitive plays trade lower, whether it's the banks in Australia, the gold miners in Hong Kong, the Hong Kong property names that continue to suffer here. You continue to see New World doing all kinds of creative things to raise money. But the blue chip, Sanangka, is down 1.6%. As I mentioned, the EV trade is weaker. But another reason the EV trade may be weaker is because Hong Kong dollar funding is U.S. rates, and you can't afford to take as many risky trades as you can if the U.S. rates keep going up in Hong Kong.
[00:50:20] Speaker 1: Anthony, thank you. Anthony Stevens there, our Bloomberg Markets reporter. Now, let's talk a little bit more about Anthropic, right? Seeking that $1.4 trillion valuation and what could be the biggest IPO on record. And some backers are already shopping portions of their allocations with fees of as much as 5% on top of the offer price. More or less bringing up Bloomberg MLI strategist David Savage. There is this story that's really kind of keeping North Asia afloat, but there's also that rates story that's happening under the hood in the bond market as well. How do I square the two that's going on?
[00:50:50] Speaker 14: Yeah, I mean, definitely getting a couple of cross-currents. And we're seeing that a little bit, I guess, in Hong Kong trading one way and the rest of Asia kind of trading another. Hong Kong being a bit more susceptible to that rate story. But I think on Anthropic, obviously, this is a historic event. But I think the markets in the here and now are going to be focused more on this sort of rate of change dynamic, right? We've seen expectations for this IPO move from $2 trillion to $1.5 trillion and then perhaps not even that. And that corresponds to what we've seen in terms of data on token spend growth, right? We've seen Ramp Economics Lab showed August and September that growth, which had been extraordinary, had suddenly moved essentially flat month over month, right? And so for a company that has been one of the fastest growing companies of recent memory, you know, the prospects that that growth is slowing is really what's hit that valuation. And so that's certainly fed into markets. Obviously, we're seeing a lot of demand now. The EFT reporting that, you know, they're already considering, you know, perhaps bankers already considering raising that IPO price. So obviously demand is very strong and we're seeing that fall through in markets today.
[00:52:01] Speaker 2: And, you know, you couple that with the Corrieve story and I think just a theoretical, you know, exercise. If we remove the NVIDIA complication from this, does it seem like the AI story is fundamentally intact?
[00:52:15] Speaker 14: Well, I think it's actually somewhat of a parallel to what we see on the macro backdrops where if you look at earnings this quarter, absolutely, I think the fundamentals look very strong. But I think it's at what point, you know, are the markets looking forward to quarters ahead and at what point are they saying, OK, yes, earnings are very strong right now, but we're coming off that peak. And on a rate of change basis, that growth is going to slow moving forward as, you know, the earnings comps get more difficult as you get to Q1 and Q2. The macro picture is very similar. Yes, you know, perhaps inflation is still, you know, an issue now, but if we're seeing the energy, you know, complex start to roll over, if prices really are starting to move lower and, you know, that inflation comps also get more difficult as you move forward, you know, perhaps there, you know, inflation will start to slow and perhaps even growth starts to slow on a rate of change basis moving forward.
[00:53:08] Speaker 1: Let's talk about what the Fed, I mean, it seems like it's quite rare. I feel like we hear from Fed officials talking about the possibility of a 50 basis point hike. I mean, how real is that possibility, you think now?
[00:53:19] Speaker 14: Yeah, I mean, market markets are now fully priced, as you mentioned, you know, that that hike in December and, you know, are now pricing at least two hikes by March and perhaps even more. I think perhaps with those comments, and we've seen it continue this morning, you know, Fed speakers Goolsby and Paulson both kind of reading from the same hawkish playbook. I think they wanted to draw the line. We'd seen, you know, pricing on that Fed hike in December and further really start to slip and start to hear discussions of maybe it's a one and done, maybe it doesn't even happen in December. I think they wanted to draw the line there. Whether they actually follow through on a jumbo hike, I think at this point the market's not leaning in that direction, but perhaps we can move further there.
[00:54:01] Speaker 1: Yeah. As our previous guest said, 50% that they're going to do a 50 basis point hike.
[00:54:07] Speaker 2: Yeah.
[00:54:07] Speaker 1: 50-50 on the 50.
[00:54:08] Speaker 2: And removing the three insurance cuts. It's easy, she said. It's a low bar, right? Yeah. So they've got to split the difference. And then they obviously have to hike more, which might mean we could have more than three between December and, of course, next year, which might be a bad thing for markets.
[00:54:25] Speaker 1: Yeah. It really kind of makes it interesting what 2027 is going to bring as well. David, thank you. David Savage there, our MLive strategist on the latest on all things macro and, of course, anthropic. Still ahead, we'll be speaking exclusively with the U.S. ambassador to China, David Perdue, as the NVIDIA spying investigation adds the tensions ahead of next week's summit between Presidents Trump and Xi. This is Bloomberg. Well, House Republicans have blocked an effort to impeach Defense Secretary Pete Hegseth over U.S. military actions in Iran and Latin America. Now, this move effectively kills the push for now, but Democrats are expected to revive it when they take control of Congress in January. For more, let's bring in our managing editor, Jill Deussis. It doesn't seem like this saga is over just yet.
[00:55:26] Speaker 15: No, it's not, Yvonne. I think what you're looking at here with this most recent effort to impeach Pete Hegseth, this was launched by Republican Thomas Massey. He actually lost his primary, the Republican primary, earlier this year. So he's on his way out of Congress. He lost to a Trump-endorsed candidate who is primarying him. So, you know, there's a lot of beef here between Massey and Donald Trump. He's been highly critical of the Trump administration over the last couple of years, is a vocal opponent of the Iran war. What he actually said in this particular instance is the reason why he was trying to bring this impeachment. I think really just kind of to make a statement here about various disagreements with Pete Hegseth. And, of course, as we know, you know, voters pretty summarily rejected many Republicans in the midterms last week, in part because of opposition to the war. So you're seeing a lot of that kind of come up here. Obviously, this effort was unsuccessful. I think now attention obviously turns to what the Democrats are strategizing when they take control of both chambers of Congress next year. Of course, whether they'd actually be successful in convicting him is a completely different matter. But I do expect this issue isn't necessarily going away.
[00:56:37] Speaker 2: I was going to ask, is he in the clear now?
[00:56:40] Speaker 15: Well, I think, again, you know, you are looking at, you know, probably some efforts to impeach him by Democrats next year. But, you know, I mean, we saw this when, you know, Democrats attempted to impeach Donald Trump. You know, it does take actually a lot to get over the line in terms of a conviction. So whether that's going to be successful, I don't think it looks particularly likely that he would successfully be convicted. But, again, still a lot of, you know, heat. I think that you're seeing directed Pete Hegseth's way just over the war, particularly because of how unpopular it was with the American public. You know, I don't know whether or not that actually leads to, you know, additional soul searching within not just the Republican Party, but also the Trump administration. But it does kind of, you know, beg that question of whether this is going to kind of continue to dog Pete Hegseth if that war does not end anytime soon.
[00:57:26] Speaker 1: Jill, thank you. Jill Dees is there, our managing editor, with the latest when it comes to, of course, Pete Hegseth. You know, and it really kind of leads to the whole question about inflation, right? When, you know, oil prices have come down a bit. But really what we saw in that inflation print was still something quite hot beyond just the energy story, which we talked about, right? And so we've been talking to a lot of our guests. The chairman of the White House Council of Economic Advisors is one of them. He's downplaying the need for that 50 basis point Fed hike, even after that inflation print came hotter than expected in October. Chris Phelan tells Bloomberg that falling oil prices could help cool price pressures in the months ahead.
[00:58:04] Speaker 16: Inflation, yes, it did come in hot. What I think is going on is when oil prices go up with a lag, gas and diesel prices go up. And then with another lag, stuff that depends on gas and diesel goes up. So I think that's what we're seeing is higher gas and diesel prices due to higher oil prices filtering through the economy. I guess the silver lining for this cloud, and it is a cloud. I don't want to say that this is a good number. It's not. The silver lining is that so far in November, Brent crude is down 24 percent. And so assuming that stays, we'll basically see this in reverse. Things that depend, you know, oil and gas should come down. Diesel and gas should come down. And then things that depend on diesel and gas should come down in the coming months.
[00:58:57] Speaker 17: Is there enough in this report to really suggest that inflation is indeed becoming more entrenched instead of gradually cooling, as some may suggest?
[00:59:05] Speaker 16: Well, I think that I have been saying for a good amount of time, so I want to be consistent, that month to month moves around. And we should not make too much out of month to month changes. But as you've mentioned in your run up to me, it has been three consecutive months of core inflation being higher than we would like it to be. And again, I think that what we're going to see is that reverse once world oil prices decrease. And like I said, they've gone down 24 percent, which is a huge amount, just in November.
[00:59:37] Speaker 18: Well, to your point, Chair, part of the concern maybe with this report is that even if oil comes down, I should say the price of energy, while still higher by 0.7 percent, was a surprise to the downside. That it's becoming entrenched, that it's spread to other parts of the economy that causes it to be more sticky. And this is where Fed Governor Chris Waller perhaps comes in. He made it clear before this report that should it come in at 0.3 percent for core, that he would suggest a hike, a bigger hike in December of 50 basis points. How would this White House view a 50 basis point hike at the next Fed meeting?
[01:00:10] Speaker 16: Personally, and I've been in a Fed advisor for decades, not anymore. Personally, I've always followed the Revolutionary War doctrine of don't shoot until you see the whites in their eyes. The whites in their eyes yet for a 50 basis point increase, as far as I'm concerned, isn't there yet.
[01:00:32] Speaker 1: That was the White House Council of Economic Advisors Chairman Chris Phelan on Bloomberg's open interest earlier today. Let's talk a little bit more about what this impact could have on airlines in particular, right? The rise in fuel prices and the like. Well, Sing Air reports second quarter earnings after the close today. And analysts are expecting an increase in operating profit on strong demand and a decline in jet fuel prices from recent historic highs. Also recently unveiled an overhaul to its long haul aircraft, which has sparked a bit of a debate, needless to say, online. Let's bring in Averil Hong. She's been joining us now with, of course, a preview to the earnings. And Averil, what are we expecting?
[01:01:11] Speaker 19: Yeah, the debate on the business classes that you're alluding to is one interesting factor. But in terms of the earnings, we are seeing analysts expecting a rise in the second quarter operating profit. Bloomberg Intelligence sees this both on an on-quarter and an on-year basis. And as you say, this is thanks to the decline in jet fuel prices from historic highs. And don't forget, Sing Air is among the most hedge operators in the region. Bloomberg Intelligence put out a great piece today on how this actually makes them better placed to weather fuel price shocks if they're coming down the line in the future. Now, it's not just the element of jet fuel prices or hedging for Sing Air. It's also against the backdrop of strong passenger and air cargo demand. And this is an airline that has been benefiting from the rerouting of traffic through Singapore. And Bank of America, for example, sees this continuing even if tensions de-escalate. Now, with that in mind, the carrier is making its biggest ever investment into the customer experience, upwards of US$1.6 billion. And they will spend this on upgrading its long-haul aircraft. The hope is that this will build on revenue growth that has already been strong at a time of soaring jet fuel prices. Now, to those that are wondering what this could potentially mean in terms of the investment's impact on airfares, take a listen to what the Chief Commercial Officer had to say.
[01:02:41] Speaker 20: Airfares are a function of demand and supply. We are not looking to charge more in airfares just because we have launched a new product. Ultimately, our revenue is based on how much our customers like us and how much they love us and how much they keep coming back to us.
[01:03:03] Speaker 19: Now, as to the other thing that it has had to address that has been the public's initial reaction to the colour scheme of the business class seats and grey and yellow, that is something that has not sat well with the public. A lot of people have been talking online about how this does not align with the SIA look that they've come to know and love. The carrier has responded saying that they were going for a fresh and modern look. I think overall, this controversy just speaks to how highly anticipated this upgrade was because the last time we saw such a major upgrade to its long-haul cabins was way back when in 2013.
[01:03:46] Speaker 2: That's a long time.
[01:03:48] Speaker 1: Very controversial, right?
[01:03:51] Speaker 2: Yeah, because that's the reason we won't get into business class, the colour or senior business class. It's the colour of the seats that's keeping me, that's restricting us from partaking of that seat. Well, Abel, I mean, maybe back to the business, the equity stake in Air India. So, investors will certainly be looking at that specific financial performance and how that informs them of what Singapore Air's bottom line could logically look like.
[01:04:21] Speaker 19: Yeah, absolutely. Sing Air's stake in Air India is perhaps the biggest overhang when it comes to the flag carrier for Singapore. I mean, you think about how Air India has had such a rough time, not just because of that fatal air crash, but also the closure of Pakistani airspace to Indian carriers and, of course, the impact from the conflict in the Middle East. And Singapore Airlines, of course, owns a 25.1% stake in Air India. So, that has been a drag on its net profit. But we have the likes of Bloomberg Intelligence or also some of these other analysts on the street that think that the impact could be moderating. This is because of meaningful cost curves that Air India has been putting through and also the impact from the moderation in jet fuel prices. So, we're going to watch very closely the extent in which Air India is weighing on Sing Air's bottom line.
[01:05:21] Speaker 1: All right, there's that. I mean, the overhaul certainly is interesting. Didn't they spend like two billion Sing dollars on this whole upgrade? And I think it's interesting that people say it doesn't really fit the brand.
[01:05:31] Speaker 19: Yeah, more than two billion Singapore dollars that were being sent.
[01:05:35] Speaker 1: Yeah, and then they're saying, but I mean, get this, right? I mean, it sounds pretty good to me, too, right? When you say you can move the seats together, they can be synchronized to turn into like a queen-size bed, right? Measuring 60 by 80 inches, that's the largest in terms of commercial aviation ever, right? I mean, that sounds pretty good to me, Dave. I don't know. Yeah. But the doors, right? The doors were also a big debate as well.
[01:05:59] Speaker 2: Because it adds to the privacy office, right? And I think, you know, you do have a business class product there where you have some of the Japanese carriers. I mean, the Middle East carriers do have, of course, that feature. So on top of the collar, they did add some hardware. I mean, Averill, would you get in on this or are you? Is the collar turning you away as well?
[01:06:18] Speaker 19: Can I just say that it being the largest double bed in the sky, which is, I think, what you were just alluding to a short while ago, that is for first class. I mean, I'm not sure I'm getting into first class anytime soon. Not sure about you guys. But business class, I mean, the concern, I think, is also that the seat width has been narrowed a little bit. So apart from the aesthetics, which some people have been talking about, you know, when you get into the cabin, you're sitting down. Maybe you're not watching out for what color your business class seats are. It's really the width of the seats as well, right? So, you know, the extent in which this is going to perhaps still entice people into flying with Singapore Airlines, which, of course, is such an important brand here.
[01:07:08] Speaker 1: You don't mess with the aviation geeks, I tell you that, right? And the travel bloggers out there. Well, obviously, what Danny Lee thinks about this, right? He's been posting a lot about this as well. Well, I mean, okay, if... Wait, they can fold the tables so you can eat in a group, like, four people. Functionality, I'm fine. I'm all about practicality. Face-to-face, yeah.
[01:07:25] Speaker 2: If you're too worried about the color of your business class seat, you're living a good life. If that's what worries you, you have a good life, right?
[01:07:35] Speaker 1: We spent too long on this already. Anyways, Averil, thank you so much. Of course, we're going to look at the earnings, of course. But, yes, I think online everyone's still talking about this whole overhaul. You can rewatch, of course, all that and kind of dig a little bit more deeper into what it all looks like here, right? Bloomberg Video Hub has much more when it comes to, of course, not just the Singer revamp, but also what's happening within video. Subscribe to explore live streaming news and interviews and all of our Bloomberg TV shows, documentaries, reporter analyses, the like. Check it out at Bloomberg.com forward slash videos.
[01:08:20] Speaker 2: Welcome back. About an hour into the Cash Market Session. And, oh, okay. So, we're down 3.5%. We've completely just wiped out some of the early pixie dust that was sprinkled on. There was a buyback story, of course, on Jirpu, 4B Hong Kong. Speaking of heavy metals, gold is what is weighing on the equity complex today. Obviously, real rate-sensitive assets that is gold, and as you can see, it's playing out across the mining space today. The early reaction already showed up in the spot price, of course, where we are at about $4,000 as far as that's concerned. But the silver lining, oh, no pun intended there, is that U.S. futures are now stable. In fact, slightly higher. So, it does seem that there is somewhat an end to the tunnel here on the sell-off.
[01:09:11] Speaker 1: Especially NASDAQ futures. Look at that. We're punching about close to 1% gains here right now, of course. When it comes to the whole valuation of Anthropik, that might be keeping things still afloat here. Maybe we could see a bit of a bounce back here as well. Gold stocks certainly, one thing of focus here, just given the gold price as well. We've got plenty more to come. This is Bloomberg.
[01:09:34] Speaker 9: Of course, the U.S. trade imbalance with China has long been a source of friction. And unlike a political class that tolerated this, President Trump has taken decisive steps to address them. Let me state firmly and unequivocally tonight, as we work toward a more balanced relationship, our objective is to de-risk, not to de-couple.
[01:10:03] Speaker 11: The China-U.S. relationship has also gone through quite some ups and downs. Nevertheless, the mutually beneficial nature of this relationship remains unchanged. The desire of our two peoples for friendly exchanges remains unchanged. And the international community's shared aspiration for our two countries to coexist in peace remains unchanged.
[01:10:32] Speaker 1: China's ambassador to the U.S. Xie Feng there along with Treasury Secretary Scott Besson speaking at an event in New York hosted by the National Committee on U.S.-China Relations earlier. But even as both sides talk up the need for stronger ties, the spying allegations surrounding NVIDIA does remain a key flashpoint as well. Here's how China's foreign ministry responded.
[01:10:56] Speaker 21: We have made a response to this before. The so-called Chinese spy allegation is substantiated. It is nothing but smears against China.
[01:11:08] Speaker 1: Let's go back live to Shanghai where the city-China conference continues. Day two and our chief major correspondent, Stephen Engel, is there with our next guest. Hey, Steve.
[01:11:20] Speaker 3: Hey, Yvonne. Yeah, absolutely. We're very honored to bring in the U.S. ambassador to China, David Perdue. Ambassador, great to see you. A very timely time to have you on Bloomberg Television, no doubt. We just heard your speech. You talked about the U.S.-China relationship after at least three summits between Xi and Trump over the last year, starting in Busan, then Beijing, and then, of course, Washington, D.C. And now, in a couple of weeks, we're going to get in Shenzhen, possibly. And also, you said, in Miami coming next month. You called the relationship bumpy but on the rise. Well, from riding in the back of a pickup truck, I know when you bump up, you bump back down. How much of these, you know, spy allegations with Jensen Huang and NVIDIA, allegations at this point, how much has it potentially damaged the relationship?
[01:12:08] Speaker 22: Well, first, under President Trump, the relationship, we have improved it quite a bit. And it's also based on engagement. President Trump directed all of us to improve the engagement. We've done that. I think the situation with NVIDIA is another reminder that we have to stay diligent. National security is part of this economic conversation because economic security is national security. And so what we're doing with China is bumpy right now. We have some areas of disagreement. But we have engagement. As you said, we could potentially have five top-to-top engagements within 15 months. I can't find a time in history where we had two presidents of two great countries get together that frequently.
[01:12:44] Speaker 3: Now, what's been going on behind the scenes? Because other media have reported that perhaps this was made available to the United States, this suspicion of this relationship and the potential espionage aspect of it, back in May, at the time when Donald Trump was here for the previous summit. Have you had dialogue, and can you reveal whatever dialogue you might have had with Chinese authorities on this issue?
[01:13:07] Speaker 22: I have no information on that. What I do have is a conversation, an ongoing conversation I have with the Chinese about what we're trying to do. You know, we're trying to diversify, not decouple. I think this is a major part of our disagreement. China has, over 25 years, built up a dominant position in key strategic industries like rare earth elements, magnets, commercial shipbuilders, pharmaceuticals. We're trying to regain our independence of that so we can't be coerced. There it creates some friction. But I'm very optimistic we're going to find a way through here. The Board of Trade is intended to do that. The Board of Investment is helping, as you just said. So we are finding ways to investigate better cooperation.
[01:13:47] Speaker 3: One more follow-up on this one as well. Specifically, has there been anything that you can share with us that prove that this relationship, if you will, did compromise national security or even circumvent export controls?
[01:13:59] Speaker 22: Yeah, I can't speak to the specific case, but I can tell you that we are diligent. We're on the wall out here. This is a competitor and somebody that has a history of getting information in different ways. And so we are definitely on our – we have a watchful eye on all that. So we're diligent, and that's what we have to do in economic spheres, in the political sphere, and also in national security.
[01:14:23] Speaker 3: How does the tech rivalry, which you've talked about, no doubt, here at the city conference, how does the tech rivalry essentially amplify the nature of such threats as industrial espionage in technology and AI?
[01:14:35] Speaker 22: I think the difference is, I think governments have always had an intelligence dimension in their national security efforts. There's nothing new in that. However, in the last 30 or 40 years, some players internationally have developed an espionage or an intelligence capability toward commercial interests. And that's where we draw the line. And so one of the things that we've been very careful about is in strategic industries, making sure that the U.S. government is not naive in terms of the challenges that we have and those key strategic industries that do affect national security.
[01:15:08] Speaker 3: Generally, what would be the advice to the business community in China to basically be forewarned and also be prepared for any kind of amplification of industrial espionage?
[01:15:19] Speaker 22: Well, I've been asked to speak to several of these investor groups out here, and our advice is, look, don't disengage, but measure risk appropriately. And that's what maybe hasn't been done over the last 30 years. You have a federal government in the United States that now is looking at that risk in all parts of our involvement with China. They're a competitor. There's no question about that. But so are our allies and partners, and we have great relationships with them. There's no reason we can't develop the same relationship with China.
[01:15:45] Speaker 3: Has it undermined trust going into this next summit?
[01:15:48] Speaker 22: You know, I think trust is a big word. We talk about developing a constructive relationship of strategic stability based on respect, fairness and reciprocity. Trust is a big part of that. And so we're working on that every day. It's a challenge because, you know, both sides are a little bit skeptical of the other. And so we have to work through that. After COVID, you know, the relationship is down. The number of visitors here is down. So we're working through that, and it's part of what we do diplomatically to renormalize, really, the relationship.
[01:16:17] Speaker 3: You mentioned the state decrees in your speech from China that put in place in April, right before this summit was well implemented. In July, there's 834, 835, 837, 839, 841 in particular, ranging from, you know, protection of their supply chains, exit bans, protection of, and also sort of the licensing process and doling out of rare earths. A lot of areas that are at the heart of the relationship and the contentious issues between China and the United States. What signal does that send to you, and how does America respond to these steps that are basically codified into Chinese law?
[01:16:54] Speaker 22: Well, yeah, they're codified. It's law, and penalties are codified there as well. But this is another step of weaponizing, really, a single-source dominant position they have in key strategic industries. It really started when Trump came out here and put a tariff on to try to level the playing field. But it started actually 20 years before when China started taking advantage of state-owned subsidies to undercut industries in the United States. And so what we saw with the decrees is a culmination of what they did with the export licensing regime on magnets. The second thing was October 9th when they weaponized it and said anywhere in the world you have to come here in technology and get a license to do it. And then they weaponized it further by saying it's a criminal offense if you diversify away from China or if you honor a U.S. sanction. And we think this is tremendously escalatory and endangers all the investment we're talking about here. And it's one reason why foreign direct investment, frankly, is on the decline. It's down 45% in the last three years alone, when the United States is enjoying right now an influx of foreign direct investment soon of $10 to $23 million. Donald Trump has really opened the door for capital investment into the United States right now.
[01:17:57] Speaker 3: You're Trump's man on the ground. Have you seen actual implementation of these state decrees, in particular exit bans, which is something that you, I understand from others, you're quite concerned about. But also there's certain penalties that have been codified into these decrees for moving supply chains elsewhere out of China, not providing data when requested and the like.
[01:18:22] Speaker 22: Yeah, actually they have. And you're the only media person that's asked that question that has any information on that, Stephen. 835, state decree 835 is being used right now with two companies in Europe and the people that work there. And what these decrees do, it criminalizes by saying they can arrest and investigate and prosecute criminally individuals inside China or anywhere and bring them here. They can exit ban their families. They can seize property. This is the most onerous escalation I've seen since I've been working out here since 1984.
[01:18:52] Speaker 3: How much of this will come up in the summit coming up in the next couple of weeks? Because from our understanding, from sources is that on most part, because it's maybe going to be a very short trip for Donald Trump in Shenzhen, they want to find areas where they can reach consensus rather than the contentious issues. Is that your understanding?
[01:19:10] Speaker 22: Well, these top-to-top meetings are basically to lay out the plan for the rest of us. We have two great channels of conversation, Scott Bessett, Holly Fung, and Jameson Greer on the economic side, trade side, and on the SI side. And then we have Marco Rubio and Wang Yi on the diplomatic and political side. So those are the two channels. We have our law enforcement people working together. Our militaries are beginning to talk again.
[01:19:33] Speaker 3: That's an interesting point, too.
[01:19:34] Speaker 22: The engagement is out there. We want a crisis mechanism. In SI, we want a crisis mechanism. In military, we don't want a mistake in this relationship. And that's what we're working to avoid.
[01:19:44] Speaker 3: What do you think, sorry to use state parlance, state department parlance, but what are going to be the deliverables on a short visit this time? And just a few weeks after Washington, D.C., and just a few weeks before Miami?
[01:19:54] Speaker 22: You know, I've said that all along. Busan was just a two-hour meeting. It was supposed to be an hour. We extended it at the time to two hours. I was outside waiting for the deliverables, right? You know, the biggest deliverable here is the engagement, in my opinion. Now, you saw some trade deals done in Busan. They're not to be minimized. We're trying to make sure China honors those now. And frankly, they're not in many ways. We're not getting the flow of magnets that we want.
[01:20:15] Speaker 3: Well, that's an interesting point, because Jameson Greer has talked about, even before they announced that extension of the trade truce until January, he was like saying, we're not talking about an extension. Sort of, they want to hold their feet to the fire, China's, on making sure that they approve the export licenses.
[01:20:29] Speaker 22: We made an agreement, and we kept our side of it. We lowered the tariffs. We have not threatened to raise them, and yet we're not getting magnets at the level we should. We've been waiting for months on some of these very important elements that go into data centers and aircraft engine manufacturing and so forth. So the biggest deliverable, though, is the communication between presidency and President Trump. They set the stage and the priorities and minimize the noise around the things that we don't need to focus on. They've talked about things like wrongful detention. We have two U.S. citizens we believe are wrongfully detained now, so that'll come up. I think there are other topics that will continue from Beijing and Washington. And so this is an ongoing conversation. So deliverables, in my mind, are what you see every day by the interaction of people below the president, down in the interagencies of both governments. And to me, that's what's been missing for the last decade or so.
[01:21:23] Speaker 3: Do you feel at all that the midterm elections diminish the president's ability to use executive order on tariffs and trade, or it might water down some of the attempts that he might have to level the playing field?
[01:21:37] Speaker 22: Well, the Chinese look at our politics. They study our politics. But this is democracy in action. That's why I try to explain to them all the time. They have a hard time understanding that. We have split government now, which is really, we've had that many times. I think Reagan lost the majority, I think, in the Senate and the House. Clinton did. Several presidents have. So what we have now is a functioning federal government. The foreign policy to China, though, if you look back over the last decade or so, has been fairly consistent. And so I'm telling the Chinese, don't think there's going to be a radical change with our foreign policy. It's certain in the next two years as long as Donald Trump is in the White House. And then going into the next administration, whether it's Democrat or Republican, I can tell you the one thing that's unifying Washington right now is the malfeasance that we see in the trade area from China right now. These decrees are uniting our political bases on both sides of the party in Washington.
[01:22:24] Speaker 3: Yet another in excess of $1 trillion trade surplus coming from China in the latest numbers, right? So that's going to inflame as well. And how does that not deter the topics and the discussion in Shenzhen from the contentious parts of trade?
[01:22:39] Speaker 22: Well, they actually do. I mean, China right now has about a third of global manufacturing. The United Nations estimates they're going to 45%. That is a strategy to dominate other areas of strategic importance. And so this is of great concern to us. And it's a derivative of the imbalance. The WTO was supposed to correct that and create a level playing field, and we haven't seen that in the last 25 years. So this is an area of major concern. Look, we've reduced our trade deficit with China by about 40%, a little less than 40% over the last year and a half. But the rest of the world has increased their deficit. Europe? Yeah, primarily. Primarily, yes.
[01:23:14] Speaker 3: Let's talk about AI dialogue as the topic we talked about at the beginning. How does this help or deter what the two nations can and should be talking about in the AI, or as you say, SI dialogue?
[01:23:27] Speaker 22: I don't think it affects it. I think the next two years, I'm really optimistic that President Xi and President Trump both recognize this as a potential threat. It's an asymmetric potential threat. We're trying to measure it now, not just with governments, but with corporations and individuals who are investigating some of the things that came out with the anthropic issue earlier this year and so forth. So this is an area that we're in. Distillation theft. That's correct. We're working on the idea that what we're going to try to do is create a crisis mechanism so we can control and try to draw some sort of oversight, if you will, into the development of it. Now, it's also a competitive weapon as well, and we recognize that, and we're trying to make sure that, again, national security is in the forefront of anything we do with China relative to AI.
[01:24:12] Speaker 3: We're also hearing, of course, that there might be a trilateral down in Shenzhen that will include potentially Vladimir Putin. We're hearing that maybe some of the issues about, I guess, the safeguards on the nuclear front would be more of a consensus-reaching topic rather than the war in Ukraine, the war in Iran and others.
[01:24:34] Speaker 22: Well, when you put leaders together, you don't know what they're going to talk about. We try to script it, but they have their own mind. So President Trump has said publicly he would welcome a conversation with President Putin and President Xi on nuclear issues. And so this nuclear proliferation and nuclear arms control is right at the forefront of our engagement. It's a topic that Trump has brought up several times. It's close to his heart, and he wants to see some progress there. So, yeah, he said publicly he's more than willing to talk about that.
[01:25:02] Speaker 3: Now, Iran is also coming out and saying that China is playing a more significant or more prominent role in helping find peace. What are you hearing from your Chinese channels? And what would that prominent role be?
[01:25:15] Speaker 22: Well, the first thing is in the Beijing summit, one of the deliverables, we had agreement on Iran between China and the United States that Iran would never have a nuclear weapon, that we would open the strait, and there would never be any tolls. Well, that was a major accomplishment. So China did participate with that, and we appreciate that. We've had concerns publicly about any indirect benefit coming from China into the Iran war effort that damaged or put in danger American service people. And so we voice those concerns. We continue to ask for cooperation and help with regard to ending the war in Ukraine, ending the war in Iran. Are you getting that cooperation? Not to the degree that we would like, to put it bluntly. I think President Trump has been very diligent in asking for help. You know, this is something that President Trump wants to end. He wants to end the war in Iran. He wants to end the war in Ukraine, but in the right circumstances. And so President Xi could play a role in that. They buy a lot. Half their oil comes from China. Donald Trump has offered to replace some of that with oil and gas from the United States. So more to be seen and more to be done there.
[01:26:21] Speaker 3: Do you think there's more of an impetus now for China, now that the war is seven months plus, plus, China has more skin in the game, really, because they just saw it pick up in inflation as well, largely due to energy. I think they're trying to restock some of their strategic supplies, which they leaned on in the early parts of the war.
[01:26:39] Speaker 22: Yeah, the last oil shipment has already been received, I think, from Iran into China. They get about 15 percent of their oil from Iran, but they get a third of their oil from the Gulf states, coming right through the same strait. So, yeah, the strait issue is very important to them. We're looking for cooperation. We'd like to see that improved.
[01:26:55] Speaker 3: How about Taiwan? I mean, it's been no doubt that it's a red issue, red line issue for Xi Jinping. Not a lot of readouts, though. And the readouts were a little different from the Washington summit between what the U.S. and what Beijing said on Taiwan. It's almost as if it wasn't necessarily an issue. With Democrats in control of Congress starting in January, they tend to be a little bit more supportive of the Taiwan issue. Do you see that creeping up as being a contentious issue, regardless of what consensus Xi and Trump might have on Taiwan issue?
[01:27:27] Speaker 22: Well, for decades, the United States has had a one-China policy. President Trump was very firm in this, is that we're not changing the one-China policy. He backs up the Taiwan Relations Act, the three communiques, and the six assurances. We're not changing the language of those, which is what was discussed earlier. And so he's been very consistent. He's also sold more arms, 50 percent more arms than any other president, to Taiwan in his two administrations. So I think he's shown a lot of support for Taiwan. I frankly don't think, again, the foreign policy relative to China is going to change much, regardless of who is in the administration after the next presidential election.
[01:28:05] Speaker 3: What about the stalled or the postponed arms package that is sitting there proverbially on the president's desk?
[01:28:11] Speaker 22: Well, you know, Taiwan's got to pay for it first. Second of all, you've got to look at priorities. President Trump has told President Xi he's going to sell arms to anybody he wants to. And so there's nothing held up right now. It's just a matter of what goes when and if it goes. So President Trump's in control of that. And again, I say this, he's been more supportive than a lot of presidents. He's sold 50 percent more arms than any other president. So I think that speaks tons in itself.
[01:28:39] Speaker 3: Finally, where are we on the boards of trade and board of investment? Board of investment may be a little bit more contentious because of the strategic nature. You're finding this 30 billion for 30 billion, like for like, on less sensitive issues. How much is the reparations on trade going to be furthered with the summit and then also into Mar-a-Lago or Miami?
[01:28:58] Speaker 22: Well, Scott Besson and Jameson Greer have had eight meetings now with Holly Fung. We operationalized after Beijing and D.C. We operationalized the board of trade and the board of investment. The board of trade has defined the 30 billion dollars of non-strategically important categories and that we can agree on. Now we can go focus on the other several hundred billion dollars of trade that we have with China to make sure that we are protecting national security, creating a level playing field and avoid it being weaponized. And so I'm optimistic that the board of investment will begin to get that same clarity coming after we have these next few meetings.
[01:29:33] Speaker 3: Ambassador, thanks so much for running through all the issues of the day with us exclusively on Bloomberg television. Okay, that wraps up our conversation with Ambassador David Perdue here from the Citi China Conference. Back to you guys in the studio.
[01:29:48] Speaker 1: Fantastic conversation there, Steve. Thanks for bringing us, of course, that conversation with Mr. Perdue, the ambassador to China from the U.S. There are much more ahead. This is Bloomberg. All right, we're checking SoftBank shares here right now. I still love them. I come off from the initial losses there. We're now down by close to 3% after it was a pretty of a surprise sort of net loss that was reported in that earnings there, right? So that $7 billion loss really attributed to the write-downs that we saw when it came to some of these data center projects and as AI valuations dipped around the world. Let's get more now on the outlook with our Bloomberg Intelligence senior analyst, Kirk Boudry. Two issues here that came out of the quarter. There was no profitability, then there was a net asset value. But that loss was steeper than expected. What drove that, you think?
[01:30:42] Speaker 23: Yeah, I mean, the biggest driver and the one that's gotten the most headlines is the impairment on the power generation assets for data centers. I mean, that really came out of left field. No one was expecting that. And so that pushed losses way more than they should be. I mean, as far as the data center issue goes, I mean, it's risky to build data centers, right? I mean, it's just a lot that goes into it. But, you know, they're taking a write-down on, like, their sort of reservation payments. That's not the riskiest part. So that's why people, I think, were a little concerned. In terms of profitability, you know, this offsets all the gains they made in first quarter. So they're exiting, you know, the first half with net losses. The AI trade is volatile, so we don't know if they're going to be able to generate, like, returns on their investment portfolio. Having said that, and the reason why maybe, you know, the stock is doing a little bit better today is that people are starting to focus on open AI again. And there is market word reports that there's going to be a new investment round, which would allow them to revalue their current stake higher and then generate profits. So people might be moving past, you know, the second quarter loss already.
[01:31:56] Speaker 1: Okay, what about when it came to the second issue, falling net asset value? What are the implications for that for SoftBank now?
[01:32:01] Speaker 23: Okay, so these are bigger issues in a way. So net asset value comes down. I mean, that is directly visible in the share price. You know, that people are like, okay, you know, what they own is less, so share price doesn't go down. You know, the other issue is that their leverage ratios are based on net asset value. Like, the loan-to-value ratio is something people talk about a lot. And at the end of the September quarter is 16%, which is relatively safe. But with the declines that we've seen, even over the last six weeks, that ratio is probably closer to 23%. And their red line, you know, is 25%. So you're getting to this point where you're like, hmm, you know, we have to do something. And one of the issues that, or one of the changes that's come out of the quarter, we think, is that SoftBank's going to be more conservative going into the end of the year in order to make sure that that loan-to-value ratio remains in the safe zone.
[01:32:59] Speaker 1: Kirk, thank you. Kirk Boudry there, our Bloomberg Intelligence senior analyst, who covers SoftBank for us as well. So, yeah, why are we seeing a bit of a bounce back, or at least we're coming back when it comes to that stock. The rest of the region is looking like this, right? So Hong Kong, China, that's where we're seeing a bit more pressure. But really, when it comes to the North Asia benchmarks there, you have Taiwan, Cosby are still catching a pretty decent bid here, despite the dip we're seeing in Chinese stocks. Perhaps it was around the AI enthusiasm, right, what we saw from CoreWeave and really the guidance there. And then, of course, Anthropic, that IPO, a bit more clarity when it comes to the valuation and the like. Asian stocks, there you go. We are around those session highs. Come off just slightly here, but we're still up about close to eight-tenths of 1%. It's almost different what you're seeing in the bond markets, right, because what we're seeing now is this debate about, you know, how much is the Fed going to have to hike in December now? It's not just 25. Even 50 is becoming a near possibility, too.
[01:33:54] Speaker 2: Yep, and it's not yet fully priced, too, so I think that's going to be the key issue. Anyway, U.S. features are up, which is a silver lining as we wrap up the show today.
[01:34:06] Speaker ?: Thank you.