30/09/2016 World Business Report


30/09/2016

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Now for the latest financial news, with Aaron and World Business

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The credit boom that could cripple China.

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Its economy is recovering, but the cost is a $25 trillion

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Plus: From Brexit fears to electric dreams, we hear from the boss of car

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giant Nissan at the Paris Motor Show.

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If you are tuning in for the first time, stay where you are. It is

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eight minutes, and it is a bite-size snapshot of all the latest in the

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world of You'll Know It's Christmas and money. -- all the latest in the

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world of business and money. We will hear from Carlos Ghosn

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in just a moment. We start in China, and that huge

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slowdown in the world's second-largest economy that has been

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felt across the world, There is more evidence

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the economy is stabilising, thanks to massive amounts

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of stimulus from the government But it is not all good

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news, by any means. A private survey of manufacturers

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out in the last few hours suggests China's factories continued

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to recover in September, after returning to growth in August,

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this ahead of official data out tonight that is expected

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to confirm the same thing. Last week the global

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central banking watchdog, the Bank of International

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Settlements, warned China that it faces mounting risks

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of a financial crisis. Borrowing by companies

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and individuals hit $25.6 That is 250% of GDP, in other words,

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2.5 times the size of the whole It is something that

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can't be ignored. China's currency is becoming central

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to the global financial system. From Saturday the Chinese

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yuan will be included on the International Monetary Fund's

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list of reserve currencies, joining the US dollar, the euro,

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the Japanese yen and British pound. But the US treasury secretary,

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Jack Lew, is among those who have expressed concern about the move,

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saying that China still has work And remember, earlier this week

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the former chief economist of the IMF told us of his grave

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concerns about China. There is no question it is really

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China that is the greatest risk. China has been the engine of global

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growth. The US is sort of picking up but China has been really important

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and China is going through a big political revolution, there is no

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question about that. I think the economy has slowed down much more

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than the official figures show, and if you want to look at a part of the

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world that has a debt problem, look at China. They have been a credit

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fuelled growth, and these things don't go on forever. Everyone says

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China is different, the state owns everything, they can control it.

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Only to a point. So I definitely worry about China.

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Jinny Yan is chief China economist at ICBC.

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That is the Industrial and Commercial Bank of China.

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Thank you for coming in at this ungodly hour. Chinese factories are

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making more stuff, it appears. They are doing better which suggests

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around the world we are buying more stuff from China. And importantly

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suggest that China's produces a more confident about the climate in

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China. That is the key thing. They are replenishing industry so they

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are purchasing more commodities, they are purchasing more in order to

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produce more goods. . You, so they are looking around the world and

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feeling more confident. What does this growth, this stabilisation, a

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return to better times in August so September is also proving to be

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decent, is that simply off the back of the stimulus that Beijing is

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pouring out? I am trying to work out, is it real, or is it sort of

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smoke and mirrors. The good news is obviously that the economy is

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stabilising so that doom and gloom that market really did think that

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was going to happen, or the hard landing, as it were, didn't really

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happen. We had a soft landing in China. Things are stabilising. That

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is the good news. The bad news is that this continual restructuring

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and rebalancing of the economy is starting to slow down a little bit.

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Omentum is not strong enough. So while momentum in new sectors are

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building, the old sectors and industries are still being relied

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upon -- momentum is not strong enough. The real estate sector has

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really been the driver of a lot of pick-up in activity in the recent

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months. And we should remind people around the world, or the

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uninitiated, the rebalancing of the Chinese economy is not going to

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happen overnight. You can't go from the world's factory floor to a more

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services oriented economy. It took 100 years for the United States, or

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something like that anyway. You mentioned good news and bad news in

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your last answer. The bad news, $26 trillion of debt. That is a lot of

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debt. Is that sustainable? That has to be serviced, as we pay off our

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mortgage. It is a huge amount of debt, that is not a surprise to

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anyone. However, not all that is bad. If it does produce growth, if

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it also means that growth is stabilising in China, then that is a

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good thing. And key in China is that a lot of that debt is actually

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sitting on government's balance sheets. What that means is that a

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lot of it is in control of the government. So they are like a

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guarantor, almost. That is correct. Not like a lot of advanced countries

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where it are sitting on that debt and maybe they will not be able to

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pay off that debt. In China a lot of that is actually sitting in state

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banks, which is ultimately controlled by the government. So at

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this stage it is very much sustainable. However, the bad news

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is that household debt is starting to grow. So coming down the line we

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may hit some problems. So there are a lot of challenges with that debt.

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The bullies in my ear are telling me to wrap it up because we only have a

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short programme, but it is good news that the Chinese yuan has fallen

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into the IMF currency basket. It is good news. They are going to beat me

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up as soon as the programme is over. You might be smiling, I am terrified

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now. Thank you for coming in. We are also continuing our coverage

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of the world's longest-running motor show, in Paris, which

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opens officially today. Nissan boss Carlos Ghosn has

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been taking time out from launching his latest models

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to speak to our correspondent Theo He started by talking

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about his growing concerns about Britain's departure

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from the European Union. The UK is of course a major

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manufacturing hub for Nissan. Frankly, I think what we are looking

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for is not to interfere into the situation which is maybe a national

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situation. What you want is to make sure that when you have a European

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plant based in the UK, where more than 80% of our products are being

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shipped from Sunderland to Europe, that this decision which has been

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taken by the people of Great Britain does not translate into a handicap

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for Nissan. As long as we don't have a handicap and we can continue to do

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business the way we were doing business before, we have absolutely

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no problem. Which means that what we would like is that whatever decision

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will be taken in terms of Brexit, that the move of goods between the

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UK and Europe Diaz fluid as it is today. Leaving Brexit to one side

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for minutes, it is clear the car industry is undergoing profound

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change at the moment. Where do you see headed? Well, it is going to be

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everything. It is going to be autonomous, it is going to be

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connected. You are going to have a lot of mobility services, and this

:09:10.:09:13.

is not going to be in substitution of the rest, it is going to be in

:09:14.:09:18.

addition to the rest which means the car has to be safe, the car has to

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be easy to drive, nice to drive. You are going to have a lot of

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constraints. That is why I think, and this is something that we

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welcome, because we are moving away from the commodity business and more

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into the added value hi-tech kind of product.

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In other news: Deutsche Bank shares slumped almost 7%,

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after Bloomberg reported some hedge funds had taken out cash

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and withdrawn positions held with its investment bank.

:09:43.:09:44.

There has been speculation that Deutsche Bank may struggle to pay

:09:45.:09:47.

a $US14 billion fine for miss-selling mortgage-backed

:09:48.:09:49.

In a statement, Deutsche Bank said it was confident the majority

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of its clients have a full understanding of our

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We will talk about Deutsche bank more when we come back to look at

:09:56.:10:19.

the newspapers. It has been described as too big to fail.

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Don't forget, you can get in touch with me and some

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Are you ready to take over? I will be back to take a look at the papers

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from around the world. People born in the 1980s have

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about half the wealth those born in the '70s had at the same age,

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according to a new report The Institute for Fiscal Studies

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survey echoes what many people in their 30s have felt anecdotally,

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as personal finance correspondent

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