good morning. i'm paul allen and sidney. we are under one hour away from the market open in australia and south korea. shery: good evening from bloomberg's world headquarters in new york, i'm shery ahn. welcome to "bloomberg daybreak: asia." paul: here are the top stories we are covering in the next hour. the impeachment inquiry widens. rudy giuliani order to handle -- and over all communications with iranian officials the move

is fundamental to the government who is concerned about the economic fallout. i'm tom mackenzie in chatham in square where china is celebrating 70 years of the people's republic and communist party rule. paul: just want to get you to some breaking news out of south korea. we have consumer prices for the month of september. they are coming in weaker than expected. cpi on year declining by 4/10 of 1%. readingfollowing a 0% in august, which up until today, was the lowest reading in history. now we have a new low. a contraction in cpi of 4/10 of 1%. that is the first drop on record. auth korea is not facing deflation according to the finance ministry, which made comments moments after the

release of these figures. we have oil prices weighing on the picture and south korea. the bank of korea has reduced its inflation forecast to 7/10 of 1% from 1.1%. well short of the 2% goal. this contraction in cpi two 4/10 of 1% sort of adding fuel to the idea that we might see the bank of korea cut ranks -- rates on october the second. more data from south korea later on. we will have those numbers for september at the top of the next hour. shery: let's take a look at the markets in asia and how they are reacting to those numbers. we are seeing kospi futures at the moment under pressure, down to tenths of 1%. we have seen the korean won gr -- gaining ground. as we awaited the cpi numbers which are showing for the first time that drop that paul mentioned. take a look at kiwi stocks at the moment. the market -- the only market trading in asia, under pressure after two sessions of gains.

in new zealand, business confidence sinking to the lowest in more than a decade. sidney futures, not a lot of movement when it comes to the future market including the nikkei, not doing much. the big event today of course in asia and monetary policy will be the r.b.i. -- rba rate decision which is expected to cut their cash rate to .75%. let's take a look at how markets closed in the u.s. we saw the s&p 500 gaining half -- gaining two point -- gaining .5%. a rally led by tack with the nasdaq gaining a 10th as of 1% as we had the trump administration denying the report it would target chinese capital. the s&p 500 advancing for the third quarter in a row while u.s. futures are gaining to tenths of 1%. is marking the 70th anniversary of the people's republic and communist party rule today. to speak later on

and a national parade to showcase the country's military might. our cat -- our chinese correspondent tom mackenzie and selina wang join us paired what can we expect today? we have already seen rehearsals behind us from the military here preparing for a massive military parade. it will take 80 minutes. prior to that parade will be a speech by president xi jinping where he is expected once again to underscore the role of the party and governing china. this will be one of the largest mass events celebrating china's rise over a 70 year period. the communist party here has ruled a longer than the communist party did in the soviet union, one year longer. they are celebrating that, there military clout, and the economic clout of the country. the parade will be in focus. we are expecting to see 15,000 soldiers marching behind me from

east to west. we are expecting to see hundreds of tanks and pieces of military hardware including missiles. we may get the first glints of one of the most powerful intercontinental ballistic missiles in the world. which can target anywhere in the world. china may unveil that today for the public. this is really about portraying a vision, not just of the communist party and of china, but also if president xi jinping as well, for his country, the domestic body and's, the global audience as well amid a number of domestic and external challenges. shery: as tom mentioned, this coming at a very good time when theomes to emphasizing importance of communist party rule in china. what is the significance of today's event? as you heard tom say earlier, what xi jinping wants

to portray today is strength, power, confidence, and unity. and highlight china's massive transformation from an impoverished state that was war-ravaged to the world's second-largest economy at the cutting edge of technologies from 5g to artificial intelligence, upgrading its military as we will see on display at the parade. xi has cemented his power. he is the world -- the country's most powerful leader since malls little. he does face a very challenging time, the most challenging time he is facing now since he took over party rule. he is dealing with a slowing economy, the trade war with the united states, as well as long-term demographic challenges. you have a rapidly aging population in china. externally, they are dealing with a u.s. that is becoming less interested in seeing china as a strategic partner and viewing china as a strategic adversary. you also have the hong kong protests that are continuing,

despite these massive celebrations. despite the fact that xi doesn't have any concerns about losing his power, he is facing many challenges in terms of maintaining the party's legitimacy moving forward domestically and on an international stage. paul: tom, i want to get back to you. what has xi jinping been saying ahead of today's event? tom: we actually saw some remarkable photos of president xi jinping in tiananmen square which is behind me yesterday, paying homage to someone who took to, the square to proclaim the foundation of the people's republic of china. the first time a chinese leader has plate -- paid homage to him in that way. the mausoleum is on tenement square. president xi and other senior leaders when there and made that move, strong and symbolic

he also gave a speech later in the evening and addressed hong kong, some of the broadest comments he has made about hong the oneing the need for system, one country to systems, to continue to enforce the one country, two systems plan. and saying he sees a bright future for hong kong within mainland china alongside mainland china, for hong kong and macau. country, twoe one systems idea and under forcing that. we have seen 17 straight weeks of protests in hong kong. sophie will be bringing us the latest from the unrest that is potentially expected to take place in that city. it could overshadow, or at least undermined to some extent the image that president xi is trying to portray here with the 70th anniversary celebrations and an image of economic strength. of course, the economics are very much in future whether you look at the manufacturing side, consumer side, or food prices

where pork prices are up 70%. domestic economic challenges are there. they will want to be papered over today. the challenges are very clear. internationally as well, the trade war grinding the economy lower. the conflict with the u.s. in terms of trade, the undermining of china's major companies like huawei, those are all issues that president xi and his team will have to square up with. this is the most challenging period for this chinese president since he took power in 2012. mackenzie in tiananmen square and selina wang in beijing, vegas oh much for joining us. we will have plenty more coverage throughout the day from beijing as though celebrations of the 70th anniversary of the prc continue. let's get the first word news with jessica summers. jessica: thanks, paul. there's a new warning about global growth, as the expansion of the world economy will decline next year to the slowest rate since 2012. that's because of a

deteriorating effect of the trade war. growth is seen at 2.6% this year and 2.5% next year, down from 3.2% in 2018. it haslso says it is -- downgraded forecasts for 16 countries in june. china has repeated a pledge to further open the economy, adding it will act as a safeguard to multilateral trade here the vice premier spoke ahead of negotiations in washington next week. he reports he said the governmental -- government will work on cooperation and innovation and will protect intellectual property. he also said measures will be taken to make it easier for foreign companies to work in china. the sales tax rises in japan tuesday. a fundamental government policy, but one which may cause the economy to stumble. the levy climbs from a percent to 10% in an attempt to rein in the world's largest public debt. previous hikes have triggered a

slowdown. shinzo abe will become japan's longest-serving prime minister next month, and has twice the sales tax hike along the way. and forecast for growth in vietnam are being upgraded. that is after the latest data shows the economy expanded more than 7% in the third quarter. citigroup is revising its full-year projection by 2/10 to 6.9% while another see 7% full-year growth. vietnam is actually a beneficiary of the escalating trade war with exports in manufacturing underpinning the economy. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm jessica summers. this is bloomberg. shery: still ahead, abe is raising its sales tax to 10%

today. we will cross to tokyo to assess the impact. paul:, the rba will probably lower rates today. doing what they can to keep investors guessing. market analyst kyle water will give us his outlook. this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery ahn in new york. paul: i'm paul allen in sydney. australian shares are said to edge higher at the open bolstered by gains on wall street. possibly checked by pre-rba caution. most economists are betting on a 25 basis point cut from philip lowe and his team. let's discuss that with ig market analyst kyle rotter in melbourne. from the alive meeting rba today. what are your expectations? for: it is going to be hard

the rba not to cut today. the market is pricing and 80% chance that that will occur. such is the pricing that if the rba were to fail to deliver on this cut, i don't think the knock on effects in terms of broader financial pricing and what they can do to financial conditions in the short term would be favorable. i think the market has probably gone more aggressive than i would expect it to have in pricing in a kind. last week around this gentle turning point notion should have dampened things. markets, 80% there. like i said, it will be hard for the rba to not cut today given the knock on effects. paul: there was a gentle turning point speech. we have seen house prices taking up. -- ticking up. there is an argument to be made that maybe they will wait. to what extent have they been backed into a corner by other banks around the world? banks andhe central

by the rba's own admission, probably quite a bit. they made the point in their recent conversations with the market last week that the governor said that given the fact that interest rates are falling across the globe, that they will have no choice but to cut rates in line with other global central banks at the risk of driving the currency higher. i mean, it's very difficult in these situations where the system lends itself to a policy-setting. it is looking likely that we will continue to see cuts from the fed, and other central banks in the region. it is unfortunate that is at the size of the scale. i think it is cutting rates begrudgingly. they will have to cut rates to keep in line with the rest of the world. shery: so far, the australian dollar has me -- remained competitive. much of that helped

corporate earnings in australia so far? kyle: it has quite a bit. our export side of the economy much of that helped corporate earnings in australia so far? has been well supported, obviously by a number of factors in the last six to 12 months. if you look at what has happened in that period of time, what has underpinned the strength we beenseen, it has probably the mining, the energy sector and thehas been well like, expon parts of our economy and our markets, keeping up size in the stocks and in the stock market. is probably expected to weigh in as a global growth outlook dams, and that weighs on commodity prices. it has probably been the market saving grace. it could turn into a headwind going forward as commodity prices continue to fall. shery: that's very much dependent on what happens in china. growth seeing finally bottoming out in china and what does that mean for the equity markets with mainland shares having performed so well so far?

i think a bridges -- it creates this gap between fundamentals and sentiment. it probably makes a greater. what you could take away from the data yesterday is there are signs that manufacturing activity in china is starting to bottom out. it is the third or fourth print in the manufacturing pmi in china that we have seen float around the 49.5 level without dipping much further. concern, andrime it is tied to what we are seeing from a central banks from the is's conversation today, there is still this confidence gap that exists in the global economy where we have this trade war overhanging us, there's less confidence now that there will be a resolution to the trade war. and that is keeping business investment on the sidelines. it's also keeping -- starting to withup in consumptions some notable exceptions. is.ink that

really where it sits now we could see it bottoming -- bottoming the situation. we could see fundamentals stabilize somewhat if the speed up the slowdown, to use a clumsy phrase, is probably slowing down. the big concern will be that gap in terms of the uncertainty generated by the trade war. it is unlikely businesses will invest, given that backdrop. that will probably weigh on risk assets going forward. they want to see growth returned to the normal until that supposed gap is breached. in terms of catalysts, is an outcome of the trade war, one way or the other, and we do have toxic week, will that be a bigger catalyst than what central banks can do in the next couple of months? kyle: it will be in particular because all that central banks have done in the last six or 12 months anyway rather than stimulate growth, and we have not seen signs that it is turning around yet, there is the gap where we have seen an easing

of monetary policy conditions across the globe. businesses have not been investing en masse in the way that central banks are trying to encourage them to. that's because of this uncertainty around the trade war. in terms of central bank policy the fed will probably continue to cut more because markets will start to fret if they don't in the next 12 months. they will be forced to come to the table. the diminished effects we are because -- the core element theentral bank policy in last six to 12 months has been to improve valuations on a relative basis. it is not stimulated growth. it has not improved the earnings outlook. the we are seeing that we are getting to the end of the road of that policy tool. it will get to a point where it will rely almost solely on the trade war turning around for there to be a resolution in the

trade war so we can see earnings growth. really, at thiswe are seeing ths pretty much hindering on the street -- on the trade war. resolution, the fundamentals are bubbly will not turnaround. there is probably a limited arete -- amount of what central banks can do to arrest is a dimming and the global growth outlook and the knockoff affected is having. shery: given the uncertainty you are talking about, we have seen a trend in the third quarter. this chart on the bloomberg showing how we have seen this our performance of haven assets. we are talking about gold in yellow here, and also treasuries in white. outperforming the stock market. will this pattern of trading continue going into the fourth quarter? kyle: i believe it will. on the basis that i don't think we will see a turnaround in the growth outlook until we see the trade war disappear. it comes down to the fact that businesses will be reluctant to invest across the globe with the

uncertainty around the trade war. not only that, the distinction has to be created through this not necessarily the bad news about the trade war, but it is the uncertainty brought about by the on-again, off-again trade relations and trade talks by the u.s. and china. there is left -- less confidence when one side or the other says we are coming to the table or not coming to the table, it happens to be the truth. less of an impact on those discussions going forward because business want -- businesses want trust. case,that remains the global economic activity is probably going to continue to grind to a bit of a slowdown. we are already seeing secular factors behind that anyway. as a result, we will see it play into safe havens as preservation becomes more important, especially as the earning outlook does not improve. shery: kyle rodda, great having you with us. analyst joining us from

melbourne. you can turn to your bloomberg for more on the rba meeting later today. go to tliv to get commentary and analysis from bloomberg expert editors. this is bloomberg. ♪ ♪

paul: this is "daybreak: asia." i'm paul allen and sydney. shery: i'm shery ahn in new york. it's official. wework is pulling the plug on its ipo. at least temporarily. the new co-ceos of the office sharing start say they want to focus on its core business before going public, which they still plan to do at some point in the future. bloomberg technology reporter alan you it has been covering this drama from the beginning and joins us now from san francisco. inevitable,a way given all the skepticism that has surrounded this ipo? ellen: well, we knew that the

ipo was likely not to happen this year. this was reporting we had done before today's announcement. after the ceo, adam neumann, stepped down on tuesday. we knew given this leadership shakeup and two new co-ceos coming on and are sourcing said it was unlikely for the company to continue on with its plans for ipo in 2019. even though they had the week before when they delayed the ipo, they said that was something they were committed to doing. this is making official something we knew was coming but it is a dramatic step. so, is the ipo going to happen down the track and will there be investor interest for a second time around? ellen: i think the company is trying to make changes to make sure the answer to that question is -- is yes. they are planning to have an ipo, that is part of the message they put out to their employees in a staff memo. they said we only get one chance

to go public and we want to do it right. we want to make sure we are taking the time to get the business in order before we take it to the public market. that being said, it seems like there needs to be a lot of changes for the reaction and reception from public investors to be very different from what it was earlier this month when things were looking like it was going to go forward. they have changed the ceo, a major change. there will be other things investors are looking for, such as cutting costs, getting those expenses under control, making changes to the business lines wework that has accumulated. shery: wework wework how has this affected's relationship -- how has this affected wework's relationship with softbank? ellen: this was a major rebuke from softbank which had been a supporter of adam neumann. and of his big vision for wework . when you go back a couple years on look at the interviews between adam and masa, you see

that he said he was encouraged to make the company big. this is a big change. in sanllen huet francisco, thanks very much for joining us. still to come, national day in china threatens to spark new protests in hong kong. the latest next. this is bloomberg. ♪ this is bloomberg. ♪

paul: this is "daybreak: asia." i'm paul allen and sydney. shery: i'm shery ahn in new york. breaking news out of japan. we are seeing the job arrays for the month of august coming in at 2.2%. this is slightly better than expected. the estimate was for the jobless rate to take up to 2.3%. it did not. it only stayed at 2.2%. the same level as the previous month. the job to applicant ratio coming in at 1.59 as well. this is in line with estimates, and also the same level as we have seen in the previous month of july. 159 jobs available for 100

applications. this coming at a time when we are seeing a stronger yen and potentially a slowdown in the manufacturing sector. putting pressure on the labor market when it comes to demand for temporary workers. still, the number seems to be better than expected when it comes to the jobless rate, staying at that 2.2% level. joining us from tokyo is university professor of economics and a former bank of japan monetary policy board member. great to have you with us. first atour reaction these better-than-expected numbers. now, i think the labor market has been very tight. when the jober applicant is dropping, the company still wants to hire more. for many years, we have a very tight labor market. i'm not very surprised we see this unemployment data. shery: does that also mean give

them that we are going to see the consumption tax hike go up, we could get more support in the month of september? sayuri: just because people can get the job, doesn't maple -- doesn't mean people are happy with their current life. wages are not going up. a greater number of housewives and senior citizens are working, so they can supplement their income. israll, disposable income not growing so people are very much concerned with consumption tax hike. paul: i just want to explore that idea more about wages not going up because you would think a tight labor market, 150 nine jobs per 100 applicants, that would prompt wage rises and therefore inflation. why are we not seeing that in japan? sayuri: that is a very unique thing in japan. chappatta -- japan's wage growth is low.

part of the reason is because the labor sort -- labor shortage occupied by part-time workers, so from the housewives, they take a low-wage job. that is really getting a lot of downward pressure on wage growth. shery mentioned it is day one of the increased sales tax. the government has of course unveiled a number of other measures to cushion the blow, low tax on food, newspaper subscriptions, there is other tax breaks, lower tuition fees. is all of this going to be enough to cushion the blow? the 2014ompared to consumption tax hike, i think the adverse impact is much, much less this time. thanks to this government measure. and especially for the household

having children, to get free education for every child. that is really helping them. overall, tax is tax. disposable income is going down. i think from october, we may start to see a weaker consumption growth. shery: that long-term psychological impact, how big will that be? you know, if we look at the trend on the disposable income and household income, it is not really growing much. we have never reached the maximum. income is not really growing. i think consumers feel their life is getting harder, and also they have to pay a greater amount of fees for pensions and social security. the lie for the ordinary household is not very good. there will be a long-term impact

on their consumption. shery: talking about the ordinary household in japan, we had recently the initial trade agreement between the u.s. and japan. do ordinary chat -- ordinary japanese citizens care about this and how will this affect them? sayuri: i think households are quite happy with this u.s.-japan trade agreement, and also other trade agreements. have cheaper meet, oranges, and a lot of other products. we have a very important agriculture sector, so that is very difficult for them to compete with. cheaper agriculture products from the u.s. set asideculture and that agreement, as were auto tariffs. how important was that to

japan's economy, that difficult issue was put to one side? sayuri: do you mean the automobile? paul: yes. sayuri: ok. my understanding is that japan-u.s. trade, this is mainly in 40, 90 states. to u.s. wanted to cut compete with the meat from australia, canada, and europe. so they were getting lower tariffs. so the u.s. was rushing to think about this 2020 election impact. of a goodeally a lot thing for a united states. for the japan -- for japan, there was not a cut on automobile sector. it is the most support and export item in japan. that has not really done anything. i think we have to really see what will happen to the next

round of u.s.-japan trade discussions. at this moment, japanese manufacturers are released because at least 25% tariffs was not imposed on automobiles. paul: all right, in terms of the japanese manufacturer, we will have the third quarter survey out to later. sayuri shirai will stay with us and we look forward to getting your thoughts on that as well. for now, let's check in on first word news with jessica summers. jessica: thanks, paul. south korea's consumer prices fell for the first time ever, as the economy grapples with falling exports. prices in september dropped 4/10 of 1% from a year earlier. that is more than economists were expecting. the be ok says it is hard to maintain its 2.2% annual growth projection. the economy is expected to grow this year at the slowest pace since the financial crisis. saysall street journal secretary of state mike pompeo

also took part in the phone call between president trump and his ukrainian counterpart, that has prompted an impeachment inquiry. state department officials have not commented on pain pao -- on pompeo's role. meantime, rudy giuliani has been ordered to provide documents to the house intelligence committee over his communications with ukraine. australian pm scott morrison told president trump he was ready to help shed light on matters under investigation in washington amid reports the white house sought his help in a justice department inquiry. the new york times says trump asked morrison to help the attorney general gather information that might discredit the mueller investigation. and the british government has completed a text of a new brexit deal and will send it to brussels this week. sources say the draft includes a proposal that would let the u.k. avoid the so-called backstop of the irish border. one of the biggest sticking points in the brexit

negotiations has been eu's insistence that northern ireland would have to remain part of the single market customs union. thenorth korea has used u.n. general assembly to decry the lack of progress and nuclear talks with the united states saying the fault lights -- lies with washington and military provocation. the abbasid are said the movement has followed the first historic summit in singapore and it is up to the u.s. to decide whether the talks will be a window of opportunity or a surge of prices. global news, 24 hours a day, on air and @tictoc on twitter, powered by more than 2700 journalists and analysts in over 120 countries. i'm jessica summers. this is bloomberg. paul: thanks, jessica. let's take you to live pictures from hong kong. this is from the area on hong kong island. small number of protesters there.

a few scuffles broke out earlier. one protesters was a rest -- was wrestled to the ground by police. it appears to be reasonably quiet there now. not a large-scale of protests that we are used to seeing from hong kong. seeing live pictures therefrom that area. sophie kamaruddin is there in hong kong for us at the moment. sophie, looks pretty quiet right now. what are we expecting today? quiet except for that pocket of activists you just noted. we may see other pockets emerge throughout the morning. for now, quiet as we count down to the flag raising ceremony that should take place at 8:00 a.m. we will have attendees watching from inside the hong kong convention center similar to the july 1 hand over we saw. authorities are aiming to avoid disruption. here around the convention center, barricades have been erected with police in position along with the perimeter and also on patrol. groups are guarding this walkway

where i mixed -- where i am standing. they have stopped one person dressed in black for questioning. thee's a patrol shift on water and motorcycles have been going down below where we are headed toward the convention center. heightened security here. across the city with several stations and malls closed as part of a precaution given the heightened risk. shery: this coming at a time as chief executive carrie lam is out of the city, headed for those celebrations in beijing on national day. what has beijing policymakers said so far? far, in a speech on wednesday, xi jinping and his most -- in his most extensive remarks, he talked about the need for national unity and the need to uphold national unity and the two countries, one -- one country, two systems principle with hong kong people

administering hong kong. china will want to ensure there is no drama this week. they may look to really seek to address the tensions after the golden week celebrations. here in hong kong, the chief executive, carrie lam, and battled. the pressure is on for her to meet all five demands of protesters. even so, these protesters have been undeterred when it comes to pushing for those demands. there may be more unrest leading to november 24 district elections in which the public may vote. that is another avenue to express their discontent. organizederms of protest action today, what can we expect to see? least sixere are at districts that may have unauthorized rallies across hong kong island, calhoun, and another territory. one place will be the site of one of these gatherings as the

club is to hold a national day race. we are seeing increased security there. as you noted earlier, a group of activists have gathered in one computer center. later this afternoon, protesters are expected to defy police bands to march along the route planned by the civil human rights front. 50,000 should turn out today, given the frustration that continues on the ground in hong kong. shery: sophie kamaruddin, thank you, joining us from the streets of hong kong. in beijing, the 70th anniversary of the people's republic of china is being marked with a military parade and mass pageantry involving at least 100,000 people. president xi jinping will also speak later. here's a quick look at china's economic development. the people's republic of china in 1949 after years of civil war. the 70 years since has seen the

nation struggle through extreme poverty to become the world's second-largest economy with a political reach far beyond its borders. in the late 1970's, the reform of socialism kick started china's remarkable economic growth. that led to milestones including its succession to the wto in 2001. u.n. joining the elite club of imf global reserve currencies. china's gdp today is about 90 times bigger than in 1978. the 21st century has been marked by an increasingly assertive china on the world stage, leveraging economic power, building alliances through initiatives like its belt and road program. as the people's republic turned 70, it is dealing with a trade war, a slowing economy, and unprecedented political protests in hong kong. president xi jinping has urged the communist party to brace for

long-term struggles extending even beyond the p.r.c.'s 100 year anniversary. here's the thing about managing multiple

shery: this is "daybreak: asia." i'm shery ahn in new york. paul: i'm paul allen in sydney. saudi aramco has said to approached asian state oil producers including sinopec about potential investment in its ipo. talks are in the early stages but it shows aramco is trying to move on from the missile attacks last month. in an exclusive interview, aramco trading ceo says outputs has reached a fraction under 10 million barrels a day. back -- we will be back to capacity by september. we reached capacity. inventoryplenish our that we use during this interruption. >> can you tell me how much more a little more will be? >> a little bit.

it will give us a comfortable inventory level. >> you obviously had to draw a bit of inventory to cope with the situation. are you prepared to see saudi arabia produce up to 10.3 million barrels, which is your opec plus agreed quota? >> you know, typically, our protection is guided by the government. >> but do you think to replenish the stocks -- >> the stock is at a level that we feel comfortable for our operation because we use inventory. our inventory plan is to build our inventory to ensure smooth operations, not only the kingdom, but also storage outside the kingdom. and to ensure that is being fulfilled with that. >> is that the real priority, to replenish the stockpile? >> we want to go back to the

normal levels so that we are not really building inventories, we are going to the normal level we have been at. reporter: when do you think you can get back to that level? >> with this healthy production, i think we will cover that in due course. not so long. it will not take us long. reporter: if we are at. tack levels in terms of production, can you update us on this supply that you are shipping for exports? -- let'spercentage call it almost 10 million barrels, how much of that are you exporting? >> we are exporting in september around a 7 million. reporter: and is i very comfortably done? -- and is not very comfortably done? >> that is driven by supply and demand by our pricing. reporter: have you had to buy much product from the open market to supply your own refining? that is another story we have covered quite a bit of. the media isere

mixed up on aramco, which we do every day. and they link it -- it has nothing to do with it. has nothing to do with the attack because we are long in defined products. we export. we don't need to import products to satisfy the local demand. really -- from the product side as a result of the attack. we neverer of fact, canceled or deferred any of our customer's during september. we give them whatever they ask. that is the testimony that we have in aramco for the last 85 years, never stopped producing oil. and that is the brand we have. we are the most reliable supplier of oil. aramco'sat was saudi

trading ceo speaking exclusively to daybreak middle east anchor manus cranny. breaking news out of japan. we are seeing the survey coming in with a large manufacturing index, coming in at five for the third quarter. this is much better than expected. the expectation was from a one. this is still a slowdown from the previous quarter. the nonmanufacturing index also better than expected, coming in at 21, still a slowdown from the second quarter. the manufacturing outlook, better than expected, the number is two, which is a slowdown from the previous month. better than expected. when it comes to the nonmanufacturing outlook, coming in at 15, which is slightly lower than expectations for the third quarter. the capex which is important because this is how much businesses are planning to invest is coming in at 6.6%, which is below expectations and also a slowdown from the second

quarter. let's bring back sayuri shirai, university professor of economics and a former bank of japan monetary policy board member. it seems like the numbers are better than expected. a bigstill a slowdown in divergence between the manufacturing and nonmanufacturing sectors. what do you make of this? so, it was better than expected but it is clearly slowing down. and that weaknesses there. at the same time, the whole japanese economy is still is growing more, because of the nonmanufacturing sectors are doing ok, because there are lots of activities in big cities. the conception and other sectors are doing fine. also we have a lot of tourists. there is a lot of hotels, shopping centers. because of that, although the

japanese economy is still not bad. but once we look at the export sector, it is really dropping from late last year. i think the manufacturing sector profit is dropping. maintaining the current exchange rate is important for japan. paul: let's talk about that exchange rate. reste is outperforming the -- the end is outperforming the rest of 2019, gaining 3%. how much is that dragging on the economy? sayuri: at this moment, japaneseng 108, 107 yen is still ok. i think it works positively to the manufacturing sector's profit. around 104, then i think the boj would have to consider to take

additional action. the current exchange rate is still ok. paul: all right, sayuri shirai, university professor of economics and former bank of japan monetary policy board member, thanks so much for joining us today. plenty more ahead on "daybreak: asia." this is bloomberg. ♪

shery: this is "daybreak: asia." i'm shery ahn in new york. paul: i'm paul allen in sydney. let's get a check of the latest business flash headlines. trade tensions are not stopping chinese tech companies trying to list in the u.s. start up tracker website 36 kr is planning to join the nasdaq and has filed an offering at $100 million. pushing a u.s. ipo for its e-learning company, they couldn't raise at least $300 million. chinese companies priced at

about $3 billion this year, less than half the amount at this time in 2018. shery: initial hearing into coleman sachs alleged involvement in malaysia scandal has been postponed as prosecutors seek to move the case to the high court. no further details were given but it is seen as an indication of the seriousness of the case. the union -- the unit faces charges when they are raised more than $6 billion of bond a sales on knowing the funds would be misused. goldman says it wants to resolve the case in an appropriate way. almostoeing says it is ready to return the 737 max to the commercial market after two deadly crashes prompted a global grounding more than six months ago. the ceo said the playmaker is fine-tuning a software upgrade in an in simulation lab and is preparing for a certification flight with u.s. officials. the faa would be able to lift of

the flight ban. shery: happening now, we are seeing the hong kong government hosting a flag raising ceremony. this to mark the 70th anniversary of the founding of the people's republic of china. this is bloomberg. ♪

paul: as major markets are about to open portrayed. shery: good evening from new york. welcome to "daybreak: asia." paul: our top stories this tuesday, china marks 70 years of the people's republic in beijing and hong kong. impeachment inquiry widens. handgiuliani is ordered to over all communications he had with ukrainian officials.

japan braces for a rise in the a rise in taxes but there is concern about the economic fallout. paul: some breaking news out of south korea. export numbers for september. not a huge surprise they are not fantastic. export contracting by 11.7%. worse than expected 9.6%. export contracting by 5.6%. there was an expectation of a narrow gain of 8/10 -- .8%. the trade balance coming in better than expected. $5.9 billion. the export numbers were the disappointment. contracting 7.7%. we did know something unpleasant was coming. the numbers were down 21.8%. semiconductors hit hard. this comes on top of the cpi numbers we saw move into

contractionary territory for the first time, -.4% now. just to recap, korean exports weaker in the month of september by 11.7%. shery: a data heavy day in asia. let's look at how markets are reacting at the moment. seeing the south korean cost be under pressure. this coming after we already saw record low inflation print coming out today with inflation coming in -.4% year on year. japan's nikkei gaining .3%. japanesehen we had economic data beating expectations. still a slowdown from the previous reason -- readings, but still a beat. when it comes to their jobless rate at 2.2%. kiwi stocks not doing much. under pressure after two sessions of gains. the asx 200 unchanged but in

australia, with to keep a close eye on what happens with the rba as markets and economists are expecting the rba to cut rates. that's from the record low 1%. kong whereto hong the flag raising ceremony is happening right now. the is in order to mark 70th anniversary of the founding of the people's republic of china. we are expecting chief secretary to deliver a speech. iss as the chief executive leading a delegation to beijing in order to process a pate and celebrations there. let's bring in sophie kamaruddin, who is live on the streets of hong kong. we are seeing this flag raising ceremony. as we can see on this picture, it is indoors. it is different from the previous years. it is. there is a somber and more

orderly tone being taken toward october 1 this year. seehe background, you can the statue gleaming in the distance. we had helicopters passing by with flags denoting china and hong kong. with also passed by water display as part of this routine. earlier we heard the singing and chanting. you will notice part of the ceremony is taking place indoors. dignitaries and government theers inside to watch ceremony via strains -- screens. carrie lam is not here. that is different from how she spent last year's top first, where she extolled integration but the mainland banished his like the belt and road project. today, a muted ceremony. there has been heightened security.

you can see perimeters have been set up along the convention center. we are on the walkway here with other media. we are observing these proceedings today. police have patrols the along the walkway and around the surrounding neighborhoods earlier, they were questioning one person who is dressed in black. rallies take place throughout the city and hong kong island territories. that, this is a celebration that is a touchstone for protesters in hong kong. what can we expect in that regard later on? sophie: leading up to the october 1 celebration, we had the 17th weekend of protests that let authorities to uphold a ban on a rally held for today. pro-democracy activists are calling for to still take place.

that would go to central. across the city, you can anticipate other demonstrations given the tactics they have adopted to make sure they maintain momentum. earlier today, there was a madeontation as activists a stand on hennessey road. i believe one arrest was made. while it is very quiet. quiet, you will expect there is more energy on display. paul: paul: what is paul: beijing's position on the situation in hong kong? in a speech on monday, we had xi jinping outlining a better future for hong kong and macau when it comes to ties to

the mainland. unity whilenational saying people should have a hand administering hong kong. this is around intervention. leland miller expects a ramp-up what it comes to addressing the tensions. he doesn't see a happy resolution. there has recently been a buildup of mainland troops in hong kong. they have doubled the number. even with heightened conversations, protesters remain undeterred. thanks for joining us. let's check in with the first word news with jessica summers. >> south korea's consumer prices fell for the first time ever as the economy grapples with

falling exports. job .4% fromtember a year earlier. there was more than economists were expecting. hard tosays it is maintain its annual growth production. -- projection. it is supposed to go -- growth the slowest pace since the financial crisis this year. fitch has any warning about global growth. it's's expansion in the world economy will decline to the slowest rates since 2012. that's because of the effects of the trade war. growth is now seen a 2.6% this fromand 2.5 next, down 3.2% in 2018. fitch says -- i set it downgraded forecast for 40 country since june. china has repeated a pledge to further open the economy, adding it will ask to safeguard multilateral trade. to reviveed

negotiations next week. they said they will work on cooperation and innovation and will protect intellectual property. they say measures will be taken to make it easier for foreign countries to work in china. as the sales tax rises in japan on tuesday, a fundamental government policy, but one which may cause the economy to stumble. it climbed from eight to 10% in attempt to reign in the largest public debt. it has triggered a slowdown and derailed political careers. shinzo abe will become japan's longest-serving prime minister next month and has twice -- has a latest sales tax hike on the way. forecast for growth in vietnam are being upgraded after the latest data showed the economy expanded more than 7% in the third quarter. citigroup is reviving its full-year projection by -- 26.9%, while commanding see 7% full-year growth. vietnam as a beneficiary of the

escalating trade war with exports and manufacturing underpinning the economy. global news 24 hours a day on air and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. shery: president trump's personal attorney, rudy giuliani, has been subpoenaed to provide documents of his medications with ukraine as the impeachment inquiry to the president accelerates. let's bring in jody schneider. it's not just mr. giuliani, it looks like we have more people around the president being drawn into this inquiry. >> that's right. we are not seeing just giuliani, but bill barr in the secretary of state, mike pompeo, being drawn more deeply into this impeachment increase. -- impeachment inquiry.

the details of the administration's foreign contacts are becoming more clear. mr. giuliani has been subpoenaed. his records of any involvement in the ukrainian matter have been subpoenaed by three house committees. has intelligence, oversight and foreign affairs. bill barr'sg contracts with foreign governments that he may have been asking them to help in terms of the justice department probe involved in the mueller report, including his potential knowledge of a call the president trump made the australian prime minister. that is being looked into. out, that theund secretary of state was listening in on that july 25 phone call that is at the heart of the impeachment inquiry. that is the call in which

president trump asked the ukrainian leader to investigate joe biden, the former vice president. we are seeing the spread on are seeingtle -- we this spread to parts of the administration, and mr. giuliani. congress shery: is away on recess for the next two weeks. how quickly are we expecting this impeachment inquiry to move? >> even of they are on recess, they are still moving ahead. the committees are moving ahead. ,he subpoena for records emails, text messages, phone calls, from mr. giuliani, they are moving ahead. they are giving him a deadline of october 15 to provide that information. we have been told the inspector , inral is moving forward terms of getting materials to hearing with the

whistleblower, who had come forward with this info about that phone call. it looks like congress is trying to move quickly. certainly for this kind of probe. she wantssi has said to move expeditiously, but she wants to make sure they get the right information. she was somebody who was reluctant to go ahead with impeachment. call, she wasne pushed to do so. it looks like the house is moving ahead. senate will have to see what happens there. are they areey -- going to look at investigating these kinds -- doing these kinds of investigations in the senate as well.

paul: you mentioned the new york times report about australia's prime minister in the request president trump made to him. what was that call about and how is that handled? >> we don't know when that phone call occurred. accordingts of that, to the inner time story or that president trump asked his australian counterpart for help in looking into the justice the origins ofe, the department probe that led to robert mueller's investigation of interference of possible russian interference in the 2016 presidential campaign. also interesting was that this in the wayandled that the ukrainian call, the july 25 call was handled and that it was handled in a special way, afterwards. basically, the way that sensitive to medications are handled. that is part of what the house

inquiry is looking into. whether there was an attempt to cover up the details of that call. at this point, we don't know, details have just become available. apparently was handled in that same kind of sensitive manner. paul: thanks for joining us. delays, come, after two japan is raising its sales tax to 10% today. we get to tokyo to assess the long-term impact. shery: a record pace of defaulted china's domestic bonds this year. could 20/20 be the offshore market's turn? this is bloomberg. ♪

paul: this is "daybreak: asia." i am paul allen in sydney. shery: some analysts say it

could be the offshore markets turn in 2020. joining us is wilfred wee, portfolio manager at investec. good to have you with us. what are you seeing in the offshore markets? we are hearing about this wall of dollar debt that comes to -- due. wilfred: what you are talking about is a pickup in onshore defaults. have defaulted. that debta concern issued in dollars could be facing a wall. are seeing a healthy correction and pricing in that is translating to uncertainty offshore. ratedf the triple c developers are being questioned whether they can refinance and we are also seeing a clampdown

on the public markets domestically. i think that is something that has to be -- we have to be conscious about. it's also the kind of a system that is more concerning and pricing. many years ago, we complained there weren't enough defaults on china onshore. that is happening now. it's on the whole, a healthy development. paul: you are seeing it more as a cleaning house development in china. however policymakers looking at this? we have not seen any big easing as of yet. what can we expect from them? wilfred:wilfred: the way to think of the chinese reaction function as they are facing a sparring partner that has become more challenging. they are challenging chinese activity. chinese policymakers. the best way to react is to get fitter and leaner and get the

house in order. that is the reaction function of the chinese. fromis to try to move away making noise from the politics and trade tensions. to clean up their own banking systems and focus on what they can deal with prevent systemic risk. the way you get fitter as you don't take sugary drinks. don't ease policy and you don't for the market with liquidity. you tell the market, you guys need to clean up your balance sheets, and we carry on and continue to focus on our economy. paul: more broadly we are seeing central-bank easing. that is the case around emerging markets. how is that affecting your strategy? the best way to think of emerging markets is to just keep calm and carry on. i think if you mentioned -- as you mentioned, emerging markets

have been easing interest rates. there is a global growth deficit. interest rates are not going up anytime soon. we will see bond yields continue to stay anchored. in emerging markets, that just means you carry on clipping coupons and yield. at about 5% yield, versus guarantees negative returns and a lot of develop markets, you're talking about $17 trillion of negative yielding debt. it --ng markets, still decent carry proposition. we saw jack dollar bonds selling off in august. how much of that was profit taking and is a time to get back in again? you have to be selective. when you are in the late cycle of economics, you want to be more discerning. you want to be clear that the companies you are invested in to

have a refinancing strategy. -- of case of geithner, china, there are concerns that all the chinese property developers will be given money to roll the dollar debt. that is our policy we to lean toward. we want to lean towards higher quality, high yield names. we want to be selective. the price differentiation is a positive development. but if you're on the hard -- wrong bond, you want to make sure you get your money back. shery: how much are you factoring in a stronger u.s. dollar as people continue to ease? wilfred: if i put this proposition to your the start of the year that the dollar would be stronger, and there would be massive trade tariffs, which i think a market -- emerging markets did well, i think you were talking about positive

returns of 8% in local markets. 10-13% and emerging-market debt. you've seen a strong dollar. yields have gone down while prices have gone up. if you have a different yield buffer that can help against any strengthening of the u.s. dollar. i think the u.s. fed is cutting interest rates. ofy are in an advanced stage an economic recovery. at some point, the dollar will have to follow economics. if you are running deficits on the fiscal account, you needed to be careful of sticking to one view, which is a strong dollar view. us,y: thanks for joining wilfred wee, portfolio manager at investec. you can get around of others -- of the stories you need to know in today's edition of daybreak. go to dayb in your terminals. also available on the bloomberg

anywhere app. customize your settings so you only get the news on the industries and ask that you care about. this is bloomberg. ♪

paul: this is "daybreak: asia." shery: let's get a quick check of the latest business flash headlines. the initial hearing into goldman sachs' alleged involvement in the malaysian scandal has been postponed. prosecutors seek to move it to high courts. it was seen as an indication of the seriousness of the case. goldman units of faced charges of misleading investors when they arranged more than $6 billion of bond yields -- deals knowing the funds would be misused. they want to resolve the case in an appropriate manner. paul: the contractor for credit suisse who hired private detectives to fall you

executives has committed suicide. only asntified the man t, took his own life last week. fears detectives because would incur other bank staff to go with him to ubs. the banks met on monday to discuss the issue. in shery:buying entry to china with a bio and mainland -- a by the mainland payment company. a mainland payment company. it makes paypal the first companypayment service in china. shery: we returned to tiananmen square for more coverage of the people's republic of china's as president xi jinping hopes to show the political, economic and military might of cap -- of modern china.

this is bloomberg.

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asia." the people's republic of china's marking at 70th anniversary with the military parade and mass peasantry involving 100,000 people. president xi jinping will speak later. here's a look from china -- of china's economic development. >> mao zedong declared the people's republic of china in 1949 after years of civil war. the 70 years since have seen the nation struggle through extreme poverty to become the world's second-largest economy, with a political reach far beyond its

borders. latee late -- the mid to 70's, there was reform which kick started china's remarkable economic growth. that led to milestones including the acceptance into the wto. in 2016, the yuan joined the elite club of imf global reserve currency. the gdp today is about 90 times bigger than in 1978. the 21st century has been marked by an increasingly assertive china on the world stage, leveraging economic power, building alliances with the belt and road program. as it turned 70, it's dealing with the trade war, a slowing economy and unprecedented political protests in hong kong. president xi jinping has urged the communist party to brace for long-term struggles extending beyond the pr sees 100 year anniversary. tom mackenzie is in

tiananmen square for today's big parade. already, state media have dubbed today a day for mass peasantry. -- pageantry. tom: you can hear behind me the brass playing. about anrehearsing hour to have before things are kicking off officially. troops marching behind us as well. practicing their set ahead of this military parade. xi jinping is expected to stand and give a speech at around 10:00 a.m. local time, where he will underscore the role of the claimand what he would are the achievements of the communist party over the last 70 years. celebration,sive probably one of the most massive organized events in china's

modern history. focus,l see in terms of the military parade. 15,000 soldiers and hundreds of tanks and pieces of artillery. there will be a flyby by ralph j. -- by a fighter jet. be shown as expected. icbms are expected to be unveiled for the first time. this is about underscoring its economic, military and political strength at a time when president xi and his team are facing some of the strongest challenges since president xi took over power in 2012. paul: president xi will be speaking later on. what can we expect to hear? on thee focus will be centrality of the party.

the role of the party. the focus will also be a what they see as a positive legacy of the party. mentioning anye of the major concerns around the challenges to the private sector. human rights abuses, of course. none of that will be on the agenda. this is trying to glorify the party, the country and himself. we saw him at a number of his team taking about in front of zedong andt of mao proclaimed the founding of people's republic of china. whether it is those continuing anti-china protests in hong kong, and of course this vicious trade war that china is now in

and confronting with the u.s.. we will have to be confronted. today, the focus is on the political, economic and military might. shery: president xi jinping speaking at the gate of heavenly peace. that's where mao zedong proclaimed the foundation of the people's republic of china. president xi jinping, tell him about tosh -- tell us about his grip on chinese society and politics. tom: this was the first time we saw president xi, president chinese leader making his homage to mao zedong yesterday. here is the current president trying to draw a clear line between himself and mao zedong,

the founder of modern-day china. it was interesting to see that being underlined by president xi. he sees somehow -- himself in the mold of mao zedong. he was also responsible for the formation of the country, but also the greatest numbers of deaths. died duringeople the greatly forward and the famine that followed. millions of people were killed, tortured and beaten during campaigns like the anti-writers campaign and the cultural resolution. -- revolution. here in beijing, they prefer to focus on what they see as positive achievements. president xi was trying to channel that. he is the most powerful leader since mao zedong. he has been written to the chinese constitution is the core of the party. the propaganda machine will be ramping up today across all of

the front newspapers and state television to underscore president she's centrality in the party and for the future of the country. that is how the communist party is trying to portray this. paul: thanks for that. we will be hearing from him throughout the day. for now, let's check in on the first word news. journal the wall street says secretary of state mike pompeo also took part in the phone call between president trump and ukrainian counterpart that has prompted an impeachment inquiry. state department officials about comp desk commented on his role. president trump's personal attorney has been ordered to provide documents to the house intelligence committee over his medications with ukraine. morrisonn p.m. scott

told president trump he was ready to shed light on matters under investigation in washington. that is amid reports that the white house saw his help -- sought his help in the justice inquiry. he helped the attorney general gather information that might discredit the miller investigation. british government has completed the draft text of a new brexit deal, they will send it to brussels this week. sources say the draft includes a proposal that would let the u.k. avoid the so-called backstop of the irish border. one of the biggest sticking points in the negotiations is been the eu's insistence that northern ireland would have to be -- remain part of the single market customs union. nonoil growths accelerated in the second quarter, a sign economy is surviving the austerity measures that have had to the collapse of crude prices five years ago.

oil gdp shrank due to production cuts as opec looks to stabilize prices and that caused economic growth to slow 2.5%. two .5% -- to .5%. they say the fault lies with washington's political and military publications. movementr kim said the had for the first historic summit in singapore, and that it is up to the u.s. to decide whether the talks will be a window of opportunity or a further crisis. global news 24 hours a day on air and on @tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i'm jessica summers. this is bloomberg. shery: the japanese government is finally raising the national consumption tax to 10% after twice postponing the move over

concerns about its impact on the economy. our reporter joins us from -- tokyo. how much frontloading a purchases have we seen from japanese consumers to -- until today? days leading up to this tax hike, we saw restaurants and stores luring customers and, trying to get them to buy big-ticket items or dine in before the tax rises to 10%. of customers going into local shops and buying toilet paper. many stores are already sold out. expect economists do that the consumer burden this time around will be less on them. add has argued that will $46 billion a year to help with the social security cost.

shery:shery: it's not all of the purchases that will get taxed. tell us some of those items that will not get taxed -- tax. -- taxed. >> it's the first time ever in japan the different rates will apply to different goods. foods for example, will be remaining at 8%. when you dine inside this restaurant, all alcoholic beverages will be taxed at 10%. when it comes to goods like tissues and diapers, those will be taxed at 10%. prescription newspaper -- newspapers will be 8%. there will be a few tricky instances. it has some people confused. paul: why is the abe government doing this now? isn't it a risk economic climate?

-- in the current economic climate? >> it is a major risk. in 2014, at the last sales tax i, -- of the last sales tax hike, it showed -- it shrunk the economy by 7%. help shorehis will up the revenue of $46 billion a year to help her social security cost amid the aging population. again, to ease the national debt, which is quite massive, to counter some of these risks, japan has been incrementing new measures, including free education for pre-k and childcare services. other things that they are providing. transactions if you use the government program.

paul: thanks for joining us. hong kong is desperate to rebuild its image after months of protests. it's falling short. this is bloomberg. ♪

shery: this is "daybreak: asia." paul: i'm paul allen in sydney. prison xi jinping is stressing national unity on the 70th anniversary of the people's republic. he said relations with hong kong would improve. asthat he -- he says this the city braces for more street protests. with us is mark michelson, senior counselor at apco worldwide. chairman of the american chamber of commerce in hong kong. thanks for joining us. we understand hong kong is eager to rebuild its tarnished reputation as a result of 16 or

17 weeks of protest. in terms of rebuilding reputation, isn't that getting the cart before the horse, don't issues need to be dealt with first? think mark: mark: it is. hong kong has a rotation that is deserved. it's an oasis of stability. at the moment, it doesn't look like that. some major issues have to be resolved before i think we can move forward with rebuilding our image. i hope we will move in that direction in the next few weeks. i think it's important we do. paul: it's understood the government has pitched with -- met with eight public relations firms. someone developed someone criticize the government for trying to build a pr situation in the streets are on fire. it's difficult to diffuse this the protester's

demands are just the antithesis of beijing policy. there may be a middle way. there may be a middle way. people want things" -- economically, and they also want a say in what happens in hong kong going forward. does that mean universal suffrage? it might. there might be steps you can take that will at least calm the situation. it's more difficult now than it was three months ago as you suggested. steps how soon do those have to come before foreign firms rethink their basis in kong?ong -- bases in hong mark: i think october will be a very important month. we could have major demonstrations in hong kong today and elsewhere. the policy addressed by the chief executive's later this

month. maybe there will be some ideas there. district council elections are supposed to be coming up in hong kong. they are real possibilities if there are suggestions moving forward, nothing will be solved right away, but we need leadership and communications, both of which have been missing the past few months. shery: what are international businessman telling you? , hong kong will be incorporated into mainland china. will these businesses want to hedge ahead of that? mark: different views. in some ways, hong kong is still attractive. we have a low and simple tax system. we still have a loop -- a rule of law and the free flow of information. people, et cetera, goods and services. that is important. paired with other places, not just within china, but it still

looks pretty good. if those areas start to deteriorate, the so-called one -- one help, to systems country, two systems, so coverages are being canceled or postponed. they're going to other places. people are afraid. we really have to turn that around very quickly. otherwise it will have an impact. paul: let's move to another challenge for china's leaders. trying to find some sort of a trade deal with the u.s.. we have seen more limited deals between the u.s. in japan in recent weeks and have set the thornier issues to the side. is a small deal the best hope for a here? -- a resolution here? mark: it might. it's about trade on the surface, but it's more about ip and technology. in the end, it's a struggle for

-- a struggle for global leadership. there could be a short-term deal. it's unclear whether that will happen. the two sides are talking again. the next few weeks will be decisive. both sides are being pushed by domestic forces. bipartisanhere is a feeling against china in many ways. there will will make it difficult to find a deal. you paul: mention this being more about ip than trade. is this a fight for global supremacy? mark: it's for global leadership as i said. it's really about that. it won't end quickly. that would be hard to do.

for both sides to deal with each other and for one engagement. what are the alternatives if you move away? you can go to other places. you can go to parts of europe. at the same time, they don't make up for what china provides. shery: you can seal this talk coming from the trumpet administration that perhaps there could be moves toward decoupling. you can see what has been inpening the u.s. markets terms of restricting chinese access to u.s. capital markets. what with the global applications of this be if we get that bifurcation between the chinese and the u.s. economies and financial markets? mark: this would be a slippery slope.

it has already affected supply chains. they are very much linked. there should be steps taken in that direction. think about this quite seriously and what the applications are. politics are driving this very strongly. pressures iner china and the rest of the world. are the onlychina places that have had problems. -- or not the alipay's that have had problems. -- are not the only places that have had problems. it's a big disruption. it will take some cool leadership. it's hard to do that right now. they are being pressed on -- in all different directions. from the u.s. side, there are

many states and cities that are interested in chinese investment, financially and foreign direct investment as well. at the same time, they don't know what direction to go because they will get pushed back in the u.s., because they will be thought of as trying to encourage china. situation thatt i think we have to stop and take stock and move forward. things have to be changed, but they have to be changed within idea of what should be done in the future. i'm afraid that's not being done right now. shery: thanks for your insights. mark michelson, senior counselor at apco worldwide. thisu missed part of conversation, tv is your function. you can catch up on past interviews and watch us live and dive into any securities or bloomberg functions we talk about. become a part of the conversation. send us instant messages during our shows. this is for bloomberg subscribers only.

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in this process, how to continue to move away from the traditional investment that growth and debt fueled growth. >> continuing the domestic reforms as it switches away from

manufacturing base to services. >> moving to services. >> continuing to see and upgrading of consumption. given what is going on externally, that is a bigger challenge. >> china has a somewhat different growth model than other countries. >> you can say it is a growth miracle. >> an economic miracle. >> now we are having a growth slowdown in the demographics are also turning more challenging. >> i would keep the faith. the chinese have a lot of expertise in their toolkit. they don't -- don't rule them out. paul: those were guests on bloomberg tv on china's biggest challenges as the people's republic celebrated 70th anniversary. coming up a bloomberg markets: asia, we will continue our coverage of the 70th anniversary of the people's republic of china. our guests include judy blanchette and anna action --

ashton. shery: let's get a quick check of the latest business flash headlines. oil storage fell after announcing that the managing director is to step down after quarter of a century in charge. he will leave in february to be succeeded by the head of the country -- companies alaska business. oined thef work-- rej company four years ago. her test was funding the gas expansion project in papua new guinea. paul: aramco is said to have investors asia state to talk about cornerstone investors in its ipo. this is bloomberg.

>> 9:00 and a.m. -- a.m. in bridging. welcome to bloomberg markets. >> china marks the 70th anniversary of the people's republic. >> protests continue as the mainland celebrates. xi jinping says cross-border relations can only get stronger. >> japan and braces for a sales tax. there is concern about the economic fallout.