Transcript: China hopes for a big economic rebound

This is an audio transcript of the FT News Briefing podcast episode: ‘China hopes for a big economic rebound’

Marc Filippino
Good morning from the Financial Times. Today is Wednesday, March 6th, and this is your FT News Briefing.

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We have a show chock-full of economic policy. First, we’re gonna get a clear picture of the UK’s Budget today. And China wants its economy to grow 5 per cent this year. Plus, Argentina’s President Javier Milei has grand plans for his country’s economy. But is he popular enough to see them through? I’m Marc Filippino and here’s the news you need to start your day.

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Chancellor Jeremy Hunt is announcing the UK’s Budget today. And in it, he’s gonna lay out £10bn in personal tax cuts. But some Conservative MPs will probably feel like these cuts don’t go far enough, because they want to convince voters their party can drag the UK out of recession. Labour has a nearly 30 per cent lead over Tories in the polls ahead of this year’s election.

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China’s National People’s Congress kicked off this week. It’s the country’s rubber-stamp parliament, and people watch the annual meetings for clues about the direction of the economy.

Joe Leahy
These meetings really get the legislative agenda off to a start in China.

Marc Filippino
That’s Joe Leahy, the FT’s Beijing bureau chief. On Wednesday, the country’s premier, Li Qiang, spoke about how to fix the country’s major problems.

Joe Leahy
The key part is what’s called the premier’s work report, where he sets out the targets for the year. And the most important ones are the economic growth target and the fiscal deficit target and other things like unemployment and also, of course, the military spending targets. So all of these things are laid out. And China being a planned economy, these are very important figures. And it basically sets the agenda for the rest of the year.

Marc Filippino
One of the main goals is its growth target, which the work report set at 5 per cent this year.

Joe Leahy
This is still a very low figure compared to the past when China used to grow at much, much higher rates. But it’s seen as ambitious because it’s the same as last year when the economy was bouncing back off Covid. This year, there’s no bounce back, if you like. This year we need to have real growth of a higher base. So the government will have to work pretty hard to get that growth, given a lot of the headwinds that are facing China’s economy. You know, we have a sort of property sector slowdown and consumer and investor confidence is low. So the government’s gonna have to battle a lot of these things to achieve that figure by the end of this year.

Marc Filippino
Investors were looking for some kind of sign that the Chinese government would be willing to juice the economy with more spending. They were hoping Beijing would boost its fiscal deficit target, which is basically an outline for how much debt the government is willing to take on.

Joe Leahy
Yeah. This year the government set the same fiscal deficit target as last year, which is 3 per cent. That disappointed some investors who are hoping for something a bit higher. But it also announced a special central government bond issue of Rmb1tn, which is about $138bn. So this special Treasury issuance is actually a signal that the government is prepared to do a bit more on the fiscal front.

Marc Filippino
But growing the economy isn’t the only thing China has its eye on.

Joe Leahy
Another notable thing that comes out of the work report is defence spending. And the government again has said that they’ll expand defence spending by 7.2 per cent this year, which is the same as last year. That’s also a fairly important signal from the government that it’s not letting down — despite some of its economic problems — it’s not reducing defence spending. That remains a real priority. And it did talk about Taiwan this year saying how reunification remains, you know, a top priority for the government.

Marc Filippino
Joe Leahy is the FT’s Beijing bureau chief.

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Now turning to another struggling economy, Argentina’s President Javier Milei took office with a bold plan to save the country from — let’s call a spade a spade here — bonkers inflation. But three months into his presidency, Milei isn’t getting much institutional support to see it through. The FT’s Michael Stott recently sat down with the president to check in on how it’s going. Hey, Michael.

Michael Stott
Hello, Marc.

Marc Filippino
OK, so tell me about your conversation with Milei. What was it like?

Michael Stott
So we sat down in the Casa Rosada, the Argentine presidential palace in Buenos Aires.

[JAVIER MILEI SPEAKING IN SPANISH]

Michael Stott
And the president, initially, was perhaps a little tense . . . 

[JAVIER MILEI SPEAKING IN SPANISH]

Michael Stott
And then relaxed as we started to talk more and became quite expansive, quite chatty, quite friendly.

[JAVIER MILEI SPEAKING IN SPANISH]

Michael Stott
And at the end, he revealed to us his passion for the Rolling Stones . . . 

[JAVIER MILEI SPEAKING IN SPANISH]

Michael Stott
And showed us a book that David Cameron, the British foreign secretary had sent to him, which was a Rolling Stones book.

Marc Filippino
OK, so it sounds like not your typical interview with a newly elected leader, and I guess that fits. So most people probably remember Javier Milei’s campaign because he used to go to these massive rallies with a chainsaw, like a literal chainsaw, saying he was gonna take a chainsaw to the Argentine state and cut spending. So I’m wondering, since he took office, Michael, has he, I mean, what kind of policies has he put in place since December?

Michael Stott
Yes, Marc. That’s right. He has. He’s been as good as his word on this, and he’s embarked on a radical programme of austerity to try and heal Argentina’s economy, which was in dire straits when he took power. He’s halted new public works, he’s frozen budgets, he’s almost halved the number of government ministries, devalued the peso 54 per cent. So he’s been quite radical. And clearly, that’s caused some pain. So quite a lot of the adjustment that’s happened so far has happened because pensions, for example, have not been uprated by inflation and government salaries have not been fully uprated by inflation. And when you’ve got inflation running as fast as it is at the moment — so for example, in January, prices went up by something like 20 per cent in one month — then there’s quite a lot of pain.

Marc Filippino
Twenty per cent in one month is just really hard to wrap your head around when it comes to inflation. That’s insane. Michael, what did he have to say about the pain his policies are causing?

Michael Stott
So Milei’s proud of being unconventional and his election owed a lot to his skill on social media. He ran a very successful campaign on social media, presenting himself as the champion of the ordinary man, which went down very well. He’s now doubling down on that in office and really believes, I think, that his ability to talk to the people directly, inspire them and rally them behind his programme is gonna be able to allow him to carry things through and allow him to sort of avoid having to seek too much support in congress, where he’s far short of a majority and has big problems in getting legislation passed. So far, it’s holding up. I mean, his public supporters is still fairly close to where it was when he took office, sort of just over 50 per cent. And the austerity hasn’t bitten into that yet. The big question is whether it will as time goes on.

Marc Filippino
Yeah, I was gonna ask. You know, public support is great and all, but he still has to work with congress. What could cause Milei’s plans to fall apart?

Michael Stott
Well, I think that there’s a couple of big risks. One is that his economic stabilisation plan doesn’t succeed. So he’s very dependent on getting inflation down quickly to show results. That’s quite a risky proposition because you can be blown off course by any number of things. Then on the political side, of course, he’s upsetting a lot of vested interests — he’s attacking a lot of people, politicians, unions. And the risk for him is they all get together and they form a sort of ad hoc coalition and decide that they may disagree about certain things among themselves, but the one thing they all agree on is that they wanna get rid of the president. The other thing he’s trying to do is govern by decree, but congress can overturn them, and they haven’t yet voted to do so. But the risk for him is that that might happen, too. And that would leave him essentially with no legislative achievements so far at all. So I think those are the two big risks he faces, one on the economy and one on the politics.

Marc Filippino
Michael Stott is the FT’s Latin America editor. Thanks, Michael.

Michael Stott
Thanks, Marc.

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Marc Filippino
Before we go, the prime minister of Singapore is in the hot seat over a deal his country made with Taylor Swift.

Lee Hsien Loong voice clip
Taylor Swift is performing in Singapore. We negotiated an arrangement with her to come to Singapore and perform, and to make Singapore her only stop in south-east Asia.

Marc Filippino
Singapore’s neighbours are not happy about it, but Lee Hsien Loong is telling them that they all need to shake it off.

Lee Hsien Loong voice clip
I don’t see that as being unfriendly. Sometimes one country makes a deal, sometimes another country does, and if that’s what’s needed to be done, not just to grow the economy, but also to bring in visitors and goodwill from all over the region, I don’t see why not.

Marc Filippino
Swift’s global tour has been a boon for economies all over the world, with many countries begging the superstar to play in their cities. So Singapore is willing to risk a little bad blood with its neighbours.

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You can read more on all of these stories at FT.com for free when you click the links in our show notes. This has been your daily FT News Briefing. Make sure you check back tomorrow for the latest business news.

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