Daybreak Weekend: Tech Earnings, UK Elections, China PMI Preview
38:56 Share

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on emirates.com. Fly Emirates. Fly better.

When you're with Amex Business Platinum, you have the card that helps businesses dream bigger. Get a flexible spending limit that adapts with your business and earn 1.5 times membership rewards points on select business purchases so you can stock up on what you need to take your business further and get rewarded for growing bigger. That's the powerful backing of American Express. Not all purchases will be approved. Terms apply. Learn more at AmericanExpress.com slash AmexBusiness.

Bloomberg Audio Studios. Podcasts. Radio. News.

This is Bloomberg Daybreak Weekend, our global look at the top stories in the coming week from our daybreak anchors all around the world. And straight ahead on the program, a look ahead to the April jobs report here in the U.S., how that may impact Fed policy moving forward. I'm Tom Busby in New York. I'm Carolyn Hepka here in London, where we're keeping you up to date as the U.K. heads to the polls. I'm Doug Krisner looking ahead to China's PMI data, the first reading since those higher U.S. tariffs took effect.

That's all straight ahead on Bloomberg Daybreak Weekend. On Bloomberg 1130 New York, Bloomberg 99.1 Washington, D.C., Bloomberg 92.9 Boston, DAB Digital Radio London, Sirius XM 121, and around the world on BloombergRadio.com and the Bloomberg Business App.

Good day to you. I'm Tom Busby, and we begin today's program with a look ahead to the April jobs report with non-farm payroll numbers out this Friday, 8.30 a.m. Wall Street time. Now, for more on the strength of the U.S. labor market, how Friday's numbers may impact Fed policy, we're joined by Michael McKee, Bloomberg International Economics and Policy Correspondent. Well, Michael, what do you expect to see this Friday in the April jobs report?

Well, we expect to see a slowing in hiring, but we don't really have a good idea, a good handle on what the overall number is going to be, because we're not really sure at this point how companies are reacting to all of the news that we have seen about tariffs and the economy. The Beige Book, which was out last Wednesday, used the word uncertainty 80 times and mentioned that companies tend

didn't seem to be laying off people, but seem to be making plans to do so if the tariffs go into effect and start to hurt their business prospects. So we may see a ratcheting down, but the expectation is we won't see a fall off the cliff. And we're not expecting at this point, according to economists, a big change in the unemployment rate still supposed to stay at 4.2%.

So by all appearances until now, the labor market has remained pretty resilient. But that uncertainty caused by the Trump tariffs, I guess the question really is how long can that last? I mean, the Independence Day from President Trump was this month in April. So we probably won't see any damage or much damage reflected in this report, correct?

That's correct. We may see some increased unemployment or increased job losses in some of the defense contractor consultants that will lose jobs because of the Doge firings. It isn't clear how many actual government workers we'll see fall off the payroll because it isn't clear how many.

have been let go. So it's all kind of up in the air. And we won't know necessarily what the full impact of the tariffs are until July 1st, because Trump put a 90-day hold on that. And I think you go back to the Beige Book, and it suggests that companies are waiting to see the impacts, because, of course, it was hard for them to hire workers coming out of the pandemic. So they're

if they need to, to retain their margins, but they just don't know yet. So I don't think we see much change. Yeah. Even though all the ingredients are there, we've seen consumer sentiment decline, consumers and businesses pulling back spending, but it's almost like a hurry up and wait. We've got to see what happens with these tariffs and the impact on companies.

It's a little bit like, you know, when you'd be out playing on the sidewalk and mom would say, don't step into the street. I mean, you're right on the curb there. And we could fall into the street. And that's what worries everybody. That's what worries the kids.

folks at the Fed. I spoke with Chris Waller, a Fed governor, on Thursday, and he said they can only model scenarios, a possibility of a lot of tariffs, the possibility of lower tariffs. But if unemployment starts to rise, they will have to react. You know, I heard that interview. Put another way, he said tariffs are a tax. And, you know, the fear is higher taxes will lead to a slowdown in hiring.

lead to a slowdown in hiring and lead to higher prices. And as prices go up, people tend to spend less. So you have an impact on demand as well as the supply talk that people are talking about. So the general consensus is

any level of tariffs are going to be disruptive. It's only a question of how disruptive they are. And then there's a kind of a psychological aspect to it. If people have heard all this, we've seen consumer confidence collapse. Do they react more quickly to the tariffs that

that we do get, whether they're large or small, or do they think, well, we can manage our way through it, we can muddle through it. Governor Waller thinks that small tariffs, maybe we just get the 10% tariffs, would enable people, enable companies to find ways to survive it and keep going. But anything larger than that would probably cause people to pull back fairly quickly because they were scarred by the inflation coming out of the pandemic.

The April jobs report out this Friday, 8.30 a.m. Wall Street time. Our thanks to Michael McKee, Bloomberg International Economics and Policy Correspondent. With the first quarter earnings season in full swing, we move now to some key earnings this week from some of big tech's magnificent seven meta platforms and Microsoft on Wednesday, Apple and Amazon coming on Thursday. For more on what to expect, we're joined by Mandeep Singh, Bloomberg Intelligence Senior Tech Industry Analyst.

Mandeep, well, it was just a quarter ago. I think the big concern for those mega cap tech firms was how much they're spending on AI when they expect all that investment to start paying off. But that was then.

Now it looks like the Trump tariffs and all the uncertainty they bring, putting AI kind of on a back burner along with regulatory pressures. I mean, is that what it looks like right now? Yes, because all the Mach 7 companies are global companies. More than 50 to 55 percent of their revenue comes from outside the U.S. So when you think about the international revenue exposure they have,

I mean, tariffs will clearly play into that. There could be some retaliation in terms of, you know, other countries kind of imposing some sort of a tax or fine on these companies or just a pushback in terms of using their products. So, look, is there any catastrophe lurking for these companies? I would say no.

But on the margin, I feel like the estimates for these companies in terms of growth and profitability are

are likely to go down or sideways simply because of the tariff uncertainty. And even though AI is a big secular tailwind that will remain, I think in the near term, AI won't be enough to make up for any lost revenue due to tariffs or just macro slowdown where companies may pull back on ads or just kind of shelve their IT spending projects for now. Well, back to tariffs.

We've seen that Apple has shifted some of its production, almost 10% of it, to India. And that is really to kind of not rely so much on China. A benefit now that we're in this tariff war. Have any other companies done a similar move?

Well, everyone is trying to figure out how to best kind of relocate their supply chains to deal with the uncertainty. The good things for, you know, meta or alphabet is they have very little exposure to the hardware side, you know, which gets impacted the most in the case of tariffs. I mean, if you're selling digital services or, you know, if you have an online business,

it's not going to get affected by tariffs. At the same time, as I said, you know, they will see the impact in terms of certain advertisers pulling back their ad spending because of uncertainty that is out there. So there are large Chinese advertisers like Timu and Shane who were spending almost, you know, $10 billion plus on digital ads across Google and Metaverse.

So from that perspective, any pullback from them is going to impact the growth rates for these companies. And there is a lot of indirect impact. But in terms of the direct supply chain impact, I think Apple is the most exposed. So you're right. They have to do something about it. They don't have a choice and they are doing whatever they could. Do you see the tariffs benefiting anybody or is it all negative?

Well, I think, again, I go back to my comment about these companies, the large ones being international businesses. So even if, you know, you may say if dollar is weakening, that's somewhat helpful. But on the margin, you know, they benefit a lot more from selling their products outside the U.S. You have to remember, you know, Asia has the biggest population. So because these companies have got large online platforms, they're

more than one third of their users who use meta properties or Google apps, they're outside the US. That's where all of your user growth is. So if there is any pushback in terms of using US based products, that's going to hurt. It's going to hurt. Yeah. If a third of your market. Yeah. Now we've seen reports. I want to talk about AI, which the last couple of times you've been here, that's all we talked about with these tech earnings.

We've seen reports of some of these tech giants pulling back on leases for AI centers. I mean, are we at an inflection point right now? Or is it just kind of like, oh, let's hold off on this CapEx on AI now and see how this plays out? Well, so two of the four big hyperscalers have reaffirmed their CapEx plans for the full year. And, you know, Google and Amazon, they said,

Even with all the uncertainty, and this goes like two weeks back. So we had all this tariff turmoil going on, but they reaffirmed their CapEx, which goes to show that everyone is still very bullish on AI. You're still in the very early innings.

They see a lot of potential with AI driving a lot of their revenue growth down the line, and they want to be ahead in terms of investment. So I think what will be reassuring this quarter is just companies coming out and saying, we still will continue to invest in AI.

Could there be a digestion period in terms of building these large scale data centers? Possibly, that's what all these pauses and leases are suggesting, that there could be a small pause here and there.

But the trend is still intact. And I think you will see a very quick rebound the moment this uncertainty clears out. Just a pause. Just a pause. One last thing I want to talk about. A lot of ramped up regulatory pressure on these tech giants, not just the U.S., but the EU especially. And how will that impact things?

Well, right now it feels like regulatory side may take a backseat because of all the tariff situation. And just, you know, this week, Meta and Google were slapped a fine by the EU. But that was a drop in the bucket. We're talking about 700 million euro, whereas these companies have paid billions in dollars of fines. So from that perspective, it feels like, you know,

you may see regulatory stuff take a backseat, but there is that pending case for Google in the US, you know, the monopolization case where they're asking for Chrome divestiture.

I mean, to me, that is the big one and the meta FTC. So the regulatory overhang is more within the U.S. than outside the U.S., whereas previously, you know, these companies were kind of paying more fines outside the U.S. Wow. Well, there's a lot going on and a lot to look forward to. Our thanks to Mandeep Singh, Bloomberg Intelligence Senior Tech Industry Analyst.

Coming up on Bloomberg Daybreak Weekend, we'll look ahead to local elections in the UK. I'm Tom Busby and this is Bloomberg.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better. Big news! Verizon Small Business Days are here from April 21st through 27th. Book your appointment today to make our experts your experts. Get a free tech check, special deals, and personalized advice. Call 1-800-483-4428 or visit verizon.com slash smallbusiness.com.

We got you covered. Verizon Business. This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York.

Up later in our program, a look ahead to a key economic reading from Beijing amid the uncertainty around U.S. tariffs. But first, just over eight months since the Labour Party's emphatic victory in the U.K. general election, voters will have their first real chance to pass judgment on the party's progress. Polls around the country will open in the coming days as local elections get underway.

But has Prime Minister Keir Starmer done enough so far to convince the British public? For more, let's go to London and bring in Bloomberg Daybreak Europe anchor Caroline Hepker. Tom, when Keir Starmer was elected the first Labour Prime Minister in 14 years last summer, he said that a burden had finally been removed from the shoulders of this great nation.

But in 2025, almost a year into his tenure, his government might be feeling more burdened than ever. Part of that weight comes in the form of concerns about limited economic growth.

Just recently, the International Monetary Fund released a, quote, significant downward revision to its UK growth forecasts for the next two years, cutting them more than for any other leading European country. And that's amid increasing uncertainty about what President Donald Trump's tariffs will mean for the country.

Despite the gloomy outlook, Bank of England rate setter Megan Green has told Bloomberg that there could be some bright spots whilst maintaining that uncertainty prevails. Look, market pricing has moved around a whole lot over the past couple of weeks and it's also worth pointing out that not all of that is focused on what's going on in the UK. So traditionally about a third of the moves in the gilt curve have been driven by things happening outside the UK.

These days it's about half that's been driven by things happening outside the UK. So part of those moves I think reflect what's going on globally. And we're just about to go into an interest rate round, so we'll have to see. But I would highlight that those market moves don't all reflect the fundamentals in the UK. Because of uncertainties? If you look at, there seems to be a lot of disinflationary kind of impact from falling energy prices, weaker dollar, tightening financial conditions, global demand.

Does that point to a cut in May?

So there are factors that are both inflationary and disinflationary. I'm particularly concerned. We've had weakness in output for about nine months now, and we're trying to figure out what the big driver of that is, whether it's demand or supply driven. I think there are reasons to think it's both, actually. But I'm more concerned about the supply side, and that actually on balance would be inflationary. So that's part of it. When it comes to tariffs and the developments over the past couple of weeks,

there again are both inflationary and disinflationary impulses so when it comes to tariffs in particular for the UK we're a small open economy right you know the US is our biggest single country trade partner but the EU of course is our biggest trade partner overall

So if you have export substitution, then that would tend to push down on growth and inflation. If you have trade diversion from other countries that are trying to find a new home for their markets, that also pushes down on inflation. But we saw during the pandemic that if you have a repatterning of supply chains, that can push up on inflation. And also if we have trade fragmentation writ large,

then that tends to reduce knowledge spillovers, that reduces potential growth, that tends to be inflationary. So something you've mentioned was exchange rates, and those have not gone as the economic theory would suggest. Normally if the U.S. announces or imposes unilateral tariffs on other countries, the theory suggests the dollar should appreciate. The opposite has actually happened. And so that in and of itself could change.

be disinflationary for the UK, but of course, as I mentioned, the EU is the UK's biggest trade partner and the Euro has appreciated. So net-net, if you look at the kind of sterling exchange rate index, the pound's up a little bit. There's a ton of uncertainty around this, but they're both inflationary and disinflationary forces. But are you concerned about the slight recent strength in pound? Does that change actually, you know, tightening financial conditions?

So it does. I mean, the currencies have been moving a lot recently as well. We've also seen off the back of previous kind of structural shift after the global financial crisis, after COVID, the dollar didn't always behave immediately, as the theory would suggest. It weakened and then subsequently rebounded. So I think it's a bit too early to say kind of where the dust is going to settle on currencies. But I will say if the dollar continues to depreciate,

On balance, that would be disinflationary for the UK. And if the opposite happens, less so. So are you worried? And you said in the past, actually, that there's a danger that it could muddy the water on inflation.

the moves in pounds. So are you worried that there could be a reverse and then it becomes an upward pressure on inflation quite quickly? It could be. That's right. You know, currency forecasters have the hardest job, second only to energy forecasters. And like I said, it's been really volatile. We're not quite sure where the dust will settle. So that was the Bank of England policymaker, Megan Green, speaking to the Bank of England.

to Bloomberg's Francine Lacroix. Now, an economic resurgence was the central promise the Labour Party staked their whole election campaign on. But now, as the prospect of growth moves further off into the horizon and the public face growing cost pressures, can the party count on keeping that support? It's something I put to Bloomberg opinion columnist Rosa Prih

a prince. We started by talking about Labour's track record so far. It's fantastic.

It's fair to say that they haven't had a great start to their time in office. Almost straight away, their opinion poll ratings kind of fell off a cliff. You'll remember that Labour was elected on a bit of a landslide last summer, partly, I think, because the Conservative government, which had been in beforehand, was extremely unpopular. So lots of people voted Labour to kind of get the Tories out.

and I think maybe didn't fall massively in love with Labour. And that was borne out when just a month or two into their time in government, their opinion polls started to go south as well. To be fair, they've had a really tough hand. The economy was in all sorts of trouble. They had to deliver a budget that was very unpopular. People are feeling the pinch. So although they are doing pretty badly, the Conservatives haven't recovered either. So kind of everyone's doing badly at the moment. Well,

What's at stake during these elections then? Why do they matter? Well, I think they're fascinating elections. There aren't a huge number of seats up for grabs. It's 1,641 council seats. That's the local authorities who kind of run things on the ground. There's also a by-election to a Westminster seat and some mayoralties. So not a massive change of power. But I think it's just going to be so interesting to see what the new politics of the UK is because...

As I said, no one party is really breaking through. You've got the Conservatives kind of bumping along on about 24 percent, their usual Tory rivals doing a bit worse on about 21 percent. And the real story, I think, of these elections is whether we can see a breakthrough for reform. That's the kind of upstart, quite

right-leaning populist party headed by, you'll remember, Nigel Farage, who was the Brexiteer-in-chief during the Brexit wars. And not to forget the smaller parties. The Liberal Democrats did better than they had ever done before at the last election. They're on around 14%. And you've got some Greens,

doing well and some kind of protest and independent candidates, particularly on issues like the Gaza war. How do you think that the kind of bigger picture is going to affect the local elections? How do you think that there's going to be that interplay between the local and the national? That's such a good question. How do we know how anyone votes? I think often

Often what happens is that people, maybe they don't pay attention to politics all that much. They've kind of got the party that they believe in and that they always vote for. So they'll tend to vote along those traditional lines that they would do, say, at a general election, unless something has happened in their area that they're particularly unhappy about.

less commonly that they're particularly pleased about. And then it does come down to the performance of what they've been used to. So, for example, there's a terrible strike going on among refuse workers in the second biggest town of Birmingham. I think the people of Birmingham may feel differently about their Labour Council than if they hadn't had rubbish piled up outside their homes for weeks.

On the other hand, say a party like Reform, Reform is quite new, so they don't really have hardly any councillors. So people won't be able to vote on their record. And it'll be whether they think that they can actually trust Reform to run things. You know, Reform hasn't got that record of managing things. Will people...

continue to see them as almost a protest vote or will they actually trust them to run local services? I mean, thinking about Birmingham, reports of gigantic rats as a result of that strike and the rubbish in streets that we've seen for weeks now. In terms of the campaigns, what have they looked like

for the major parties? I mean, how much effort do they put in? Just to give you a bit of context. So the last time these elections were held, they're held every four years, Boris Johnson was the Prime Minister and he was doing very, very well. It was Boris Johnson was seen as being responsible for rushing through the COVID vaccine and the Conservatives did well. They were

they sort of swept the board to the extent that they are now defending most of the seats. Now, the problem with that is that they've got a long way to fall. And given that, as I said, the last government was very unpopular, the party doesn't seem to have picked up any popularity since the election. If anything, it's gone the other way and is losing ground to the Tories. It looks like it will be a bad night for them. Now, that

has meant a rather odd campaign because you've seen Kemi Badenoch, the new leader of the Conservatives, kind of going around saying, yes, it's going to be bad, we're going to lose lots of seats, which to the extent that you wonder if it'll become a self-fulfilling prophecy. Nigel Farage, on the other hand, he sees an opportunity here. So he's really going for those parts of the country where the Conservatives are unpopular. For example, he is a

around now campaigning in in kent in the town of dover where the reform think that they can pick up votes the liberal democrats are often strong in local government often stronger than they are nationally so they've been uh having their leader davy going out and doing his usual he likes to do lots of stunts for the television cameras and labor they're kind of

of keeping a low profile, hoping that their current woes aren't translated and they don't lose too many seats. The expectation at the moment is that they did badly last time these seats were fought. They'll probably do about the same. But it's so hard to know because of that reform factor. And how much do you think that the wider economy is going to affect the

the elections effectively. We know that employment is still very strong in the UK, wages a bit more difficult for people, cost of living crisis for some people still continuing. How much do you think the economy and the economic backdrop will affect people's vote? I think the economy always affects people's votes. I think people are feeling the pinch

And it's going to come down to who they blame for that. Now, the reason that the Conservatives became so suddenly unpopular and did so badly at the last election, I think, can be traced back to the disaster that was Liz Truss and her brief premiership. And the Conservatives never really recovered from that. Now, Labour has spent their eight months in power kind of pointing to her and pointing to the last government and saying, it's not our fault. We inherited a mess and we're doing our best.

And I think what it comes down to is whether people on the ground believe that or whether they're fed up enough to shift over to reform. I don't see much sign that people are ready to trust the Conservatives again. My thanks to Bloomberg opinion columnist Rosa Prince. Now we will have full coverage and analysis of the local election and its outcomes right here on Bloomberg and on our Bloomberg UK politics podcast in the days ahead.

I'm Caroline Hepkett in London. You can catch us every weekday morning for Bloomberg Daybreak Europe, beginning at 6 a.m. in London. That's 1 a.m. on Wall Street. Tom. Thanks, Caroline. And coming up on Bloomberg Daybreak Weekend, we'll look ahead to a key economic reading from Beijing. I'm Tom Busby, and this is Bloomberg.

When you have bars in the sky, onboard showers and award-winning in-flight entertainment, it's no surprise that Emirates was recently named the best airline in the world. We fly you to over 140 destinations and with partners across the globe, we connect you to another 1,700 cities across six continents. So when we say we're also the largest international airline, what we really mean is...

If you're going there, so are we. Book now on Emirates.com. Fly Emirates. Fly better. Big news! Verizon Small Business Days are here from April 21st through 27th. Book your appointment today to make our experts your experts. Get a free tech check, special deals, and personalized advice. Call 1-800-483-4428 or visit verizon.com slash smallbusiness.

We got you covered. Verizon Business.

This is Bloomberg Daybreak Weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby in New York. A key economic data point from Beijing this week as uncertainty lingers over the U.S. tariffs. Now for more, let's get to the host of the Daybreak Asia podcast, Doug Krisner. Tom, in the last week, the International Monetary Fund revised its annual growth forecast for China to just 4% this year. And it came with a warning that

The outlook could deteriorate further due to those U.S. tariffs. Now, in the week ahead, we'll get China's official PMI data. These readings will provide a measure of sentiment among businesses and how they view overall economic activity. The PMIs can provide an early indication of growth. And for a closer look now, I'm joined by Bloomberg's Chang Xu. She is the chief Asia economist there.

For Bloomberg Economics, Chang joins us from our studios in Hong Kong. Thank you for making time to chat with me. There's a lot to cover. I want to begin with the PMI data, Chang. What do you think we're going to learn from these numbers in the week ahead? Thank you, Doug, for having me on the program. Yes, the PMI rating for April is going to be very important.

That's going to be the first reading since the elevated tariffs came into place. We suspect we're going to see a dichotomy between the manufacturing and non-manufacturing readings. On the manufacturing reading PMI, we could see damage, quite noticeable damage from the tariffs.

At this point, we don't have very conclusive data from various sources. We could be looking at shipping data, for example, for prices and volumes in terms of shipping between the U.S. and China. There are only volumes.

showing something with a significant lag and perhaps there are some indications but not quite conclusive. We do hear a lot of stories of Chinese factories not taking any further orders from US customers and some may even have stopped production.

So those data we don't have yet. So the PMI rating is quite important. And we do see potentially manufacturing PMI see a quite significant drop in the activity. At this point, we're projecting the manufacturing PMI to 2%.

to drop into contraction territory from expansion of 50.5 in March to perhaps around 49.8 sort of reading. So that's on the manufacturing side.

But if we want to go into the non-manufacturing side, we do see expansion to continue. Are we going to get any clues as to whether supply chains are being reconfigured in a way that China would be able to divert some shipments elsewhere into jurisdictions that don't have

tariff rates as high as China does coming into the U.S. market? It's a good question, but a very tough one to answer. We hear again on the ground lots of stories, firms on the ground that are trying to diversify the supply chains, maybe

accelerating the move out of China, the move of the production facilities out of China. I think it's very hard even over the longer term to look at the shift of supply chain.

But it's going to be even tougher to pick up those trends from PMI data. So it's something that we'll keep looking out for. But unfortunately, we don't have sufficient data to give any clarity on this issue. So when I think of the Chinese domestic economy, what I really think of is just a lack of demand. Is it too much to think that

Beijing could try to stimulate demand in a way that would compensate for the reduction that the export economy is faced with right now? Or is that just entirely out of the question? Is that an impossibility?

It's very tough. It's very tough for the government to purely, by stimulating the domestic economy to offset the shock from the external demands. Certainly in the short term, that's even tougher, right? You have to think of different ways. The firms are trying different ways. Certainly they're diverting some of the intended to be exports into

to divert some of that product domestically. And as you alluded to, they may think of rerouting the exports, but the offsets will not come that quickly. I think the government has suddenly realized the importance of domestic demand, and it has been doing something over the past few months, and that's showing that

Some improvements we do see in the first quarter, China's GDP growth was stronger than expected. And if we look into the March data, there's improvement certainly on the production side, but also on the demand side, as we saw quite noticeable improvement in consumption in retail sales.

So we can see some positivity there, but I think it's too big an ask for domestic demand to immediately offset the external shock. So I mentioned that the IMF revised down its annual forecast for Chinese growth this year to around 4% annualized, and in the last week...

Your colleagues at Bloomberg Economics found that based on a review of previous IMF forecast, the fund tends to underestimate the depth of these economic downturns. So are you beginning to model a growth rate that is below 4% for 2025? I mean, clearly that's below what the government is shooting for. Is China really at risk?

of seeing something that is sub 4% growth? - We have already downgraded our China forecast from 4.5%. We projected at the beginning of the year to 4.2%.

And the reason for the relatively modest downgrades of the forecast reflects a couple of considerations. First of all, as I already mentioned, in the first quarter, the growth was decent. It was above, slightly above our projection. So that provides a bit of a cushion for the

for the year as a whole. And secondly, we do see the government to strengthen its support for the economy and that should help. But as we again discussed earlier, we don't think the support can fully offset the downturn in external demand. So taking account in order

all those considerations, we have a modest downgrade of the projection. But we can come to the discussion clearly what the government is going to do, how they are going to support the economy.

and how effective those policy stimulus will be, will be very critical for China's growth trajectory going forward. It seems as though China is in a very vulnerable position right now, given the fact that these tariffs are so biting. Is there anything that could come out of this upcoming Politburo meeting that would give the markets a sign that Beijing is

is willing to endure a long period of negotiation? Or is this something that is out of the question and it's more likely that China, over a short period of time, will capitulate and kind of give in a little bit to what the U.S. is demanding of it?

Yeah, it's a very tough question. I think the Chinese side certainly is willing to talk and it has sent various signals, but it also laid down the conditions for discussions, the respect and that.

I think the government, it's something we have written in our reports. There are various considerations why it's taking on this very tough stance. It can be a simple sort of face issue. You come back down. And one thing it could be that China doesn't know at this point.

what the U.S. wants. So those are the domestic issues, considerations. In the meantime, there's also the international dimension to it in this particular case. Unlike in the First Street War, China was the only one, more or less the only one of

affected by tariffs, but this time it's a wide range of countries, or indeed all the countries are facing tariffs, and all the countries except China are trying to talk to the U.S. So from, again, theory perspective, there's a risk when everybody tries or every country tries to talk to the U.S., China will end up

having a worse deal, which is why China kind of takes these particular stunts to push back strongly. So for various reasons, China is holding strong stunts at this point, but I think it's still hoping to...

at some point to be able to sit down to talk to the US and get a trade deal to cut down the tariffs. But in the meantime, the Chinese economy certainly will suffer. There's costs certainly from the US side.

But on the China side, the hit can be quite immediate on the export sector, which could spread to the rest of the economy. I think the government suddenly is prepared for that. And in terms of the Politburo meeting, we think you will have to send quite strong signal that is going to support the economy. And I think

Possibly, like you alluded to, suggest this is going to be a long, enduring standoff with the U.S. and the government is prepared to support the economy. Chang, thank you so much for joining us and helping us understand more of what's going on in the Chinese economy these days. Chang Shu is Chief Asia Economist at Bloomberg Economics. She was joining us from our studios in Hong Kong.

I'm Doug Krisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast. Tom? Thank you, Doug. And that does it for this edition of Bloomberg Daybreak Weekend. Join us again Monday morning at 5 a.m. Wall Street time for the latest on markets overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now. Big news. Verizon Small Business Days are here.

From April 21st through 27th, book your appointment today to make our experts your experts. Get a free tech check, special deals, and personalized advice. Call 1-800-483-4428 or visit verizon.com slash smallbusiness. We got you covered. Verizon Business.

Learn more about the technology, insights, and support available at AmazonBusiness.com.