00:00Brendan Han is Chief Investment Officer at the investment management company Crane Shares.
00:05Great to have you on the program.
00:07So is this what investors were waiting for?
00:11We continue to see the Chinese government enact a lot of economic stimulus to help support the domestic economy.
00:19And as part of that is this monetary policy, the easing cycle in China.
00:24And so a lot of that is going to be geared to one, to help the real estate sector, that you're going to see the mortgage rate lowered, which is, again, part of a bigger picture effort to stabilize the real estate market.
00:40So in general, yeah, the world's largest economy is both stimulating as well as cutting interest rates.
00:47We think it's a strong tailwind for both the economy as well as Chinese equities.
00:53And in terms of the challenges that loom, would you say the big concern now is deflation rather than inflation?
01:01Yes, certainly. Certainly. We've seen that, you know, post zero covid because as well as additionally because of the real estate situation that you see deflationary pressures in China.
01:13And again, I think an element of what the Chinese government is trying to do is to get Chinese citizens to open up their wallets, to spend some more money.
01:22And so by by lowering the interest rates, you're almost disincentivizing, putting money into bank accounts.
01:29And hopefully that gets people out and about and spending a little bit more money via domestic consumption.
01:34So you're talking about consumer confidence and business confidence.
01:38But what impact would you say that Trump's tariff war has really been having on China's economy?
01:43Well, I think I think one is that China is far less reliant on the United States in terms of exports than I think many, many, many people realize that that exports in general as a percentage of China's GDP has fallen from 36 percent 20 years ago down to about 19 percent.
02:04And then within that, only about 15 percent of Chinese exports are to the United States.
02:09So so one, the China is very is going to be a very difficult negotiator, as I think the U.S. is discovering, because it's not nearly as dependent on on the U.S.
02:21And at the same time, the U.S. economy, two thirds of of of GDP is actually consumer consumption expenditures.
02:30So so I think, hey, you've got a situation where the U.S. is highly exposed to a trade war.
02:38And yes, there's parts of China geographically, economically that are very geared to export driven manufacturing.
02:46But it's not nearly to the extent as I think it was many, many in Washington, D.C. would think.
02:53So these cuts are the first for seven months.
02:55And what's your take? Will there be more great cuts to come?
02:58One hundred percent. I think I think there's a lot of belief that the Chinese government, PBOC, is worried about RMB weakness,
03:08which is why, you know, back in September, we had a lot of policies geared to the real estate sector, cutting rates, cutting mortgage rates.
03:19And then we've seen a little bit of backing off because I think just kind of concerned about being labeled potentially a currency manipulator from the U.S.,
03:27which is why I think you'll see further rate cuts later this year in tandem with the U.S. Federal Reserve cutting rates here in the United States.
03:37Brendan Ahern at Crane Shares Management. Thank you very much.
