>> china is setting economic targets as the national people's congress gets underway. growth is seen at around 6.5%. tariffs and trade wars casting a shadow over the two week event. beijing says it will always defend its interests. exit polls show berlusconi's center-right group leading the race, as traders assess implications. i am rishaad salamat in hong kong. this is bloomberg markets. ♪

rishaad: half an hour to go before the trading day gets underway right here in hong kong. well.nghai as people have their eyes on what's going on right here. this is the scene at the moment in beijing, as we have china setting a 2018 growth target of around 6.5%. did not mention whether they would hit a faster pace if possible, the leadership intensifying its push to ensure financial stability. we have our eyes on this target, released ahead of li keqiang's report to the national people's congress, that gathering you can see there in beijing. we have this 6.5% target, same as last year. the statement did not include growth to be higher if possible in practice. as it did in 2017. all against this backdrop of she jinping intensifying his push to curb pollution and poverty and

deal with debt, all at a time when this economy is on a long-term growth slowdown. we have that. we will be visiting beijing through the course of "bloomberg markets." let's get to the markets overall, and a look at the mixed bag. david ingles with a look at what's going on. what have we got? david: we opened lower, and over the last few minutes we have turned lower. not quite session lows. several markets still bidding up, and a more -- more of a push to the downside on the mainland. , 105.46, a weaker dollar leading to moderate gains across commodities right now. quick look at futures, .3% lower on the s&p 500. weif on your bloomberg -- down 7.25 points. 55 ing at china futures, up

points, indicating we might see a slight bid at the open. lots of subplots to the lines coming out of beijing today. we will flesh it out for you. a potential cut in tariffs when it comes to autos, further cuts in overcapacity, all those other things, we will look at the early market indications. the other big story, italy and what has been happening there. topsy-turvy session in euro-dollar. 1.23 is the session low. we are halfway back to the top there, an indication of where bond markets are likely to go. italy over german ten-year, 131 bips at the moment. we did a survey a few days ago, non favorable result could see a doubling of current levels

or a movement back down to about 118 basis points, give or take 13 basis points from where we are now. worst-case scenario, it goes all the way back up to 260, levels last seen about five years ago. our reportering to on the ground there in the next couple hours. we have been reporting the growth target from china, 6.5%, intensifying the push to ensure financial stability. thout really hurting the economic expansion taking place. let's get straight to beijing and tom mackenzie, at the great hall of the people in tiananmen square. tom? the toph, as you said, lines are the growth target, 6.5%, drop in the line "or higher," which they included in 2017. we got the deficit target at

2.6%, below what bloomberg reported. below the 3%.9%, we saw in 2017. we also heard from premier li keqiang, he is about to address the delegates and read out this report as i speak. we saw from the details this morning that they will also be targeting money supply growth, pretty much in line with what we saw in 2017. ing yourg economics say are expecting about the same amount here in 2018, but the deficit target is being reduced to 2.6%, something to bear in mind. we heard they are hoping to see retail sales growth at a clip of about 10% in 2018. also some moves potentially to open up some sectors, including health care education,,

telecoms, new energy vehicles. we will have to wait to see. the devil is always in the details with these announcements, but these are sectors many have said need to see greater foreign participation. interesting to see that flagged in this report. they will be spending an additional close to 20% on tackling pollution, so watch out for some of the green stocks in china. they rose when president xi said he wanted to up his campaign against environmental degradation. on the property sector, moves to develop rental markets and potentially a tax on property in china. addressing the delegates, almost 3000 of them here in beijing, the great hall of the people behind me. we will get more details from the report and the next few days. who will be taking over as the head of the bpoc -- pboc? rishaad: lots on the agenda.

the debting of china, being reduced, and against the backdrop of the tariffs on steel and aluminum likely to be imposed by donald trump this week. what does it mean? did we get anything on that? retaliation? well, it's interesting that you talk about steel. we have had some lines up from the reportds, that they are planning t cut -- plenty to cut steel capacity by 20 million tons in 2018. 50 target in 2017 was million. we see they are targeting a cut of 150 million tons of coal for 2018, part of trying to cut and tackle pollution here in china, but also potentially trying to of course reduce overcapacity and potentially ease tensions

with the u.s. we are not expecting premier li keqiang or any of the senior officials to directly address these tensions with the u.s. over the next few days, but certainly there are conversations going on in the corridors of power, something that will be on policymakers' minds. what we have heard over the weekend, they want to see collaboration with the u.s., they want to see talks, they want to defuse the tensions rather than adding fuel to the fire. about not it is being distracted from the important domestic agenda and the challenges they face. rishaad: thank you, tom. tom mackenzie in beijing, at the great hall of the people. we will listen to li keqiang thevering that report as national people's congress gets going. .> consumer production

increased by 66 million. reached, achieved the basic good former level. service sector increased 51.2%..3% to it became the main driving force of the economy. production reached 12

trillion, and more than 80 million peasant population turned to city population. research investment increased by 11%. our aeronautical flights, our research, and advanced -- rishaad: we will leave things there as we monitor the headlines coming out of li keqiang's work report. we already got some headlines, but let's get analysis on what

this will mean for china. tim was british counselor general in china from 2004 to 20 07. tim, set this all out for us. we got the basics. i am not saying they will be -- they are not saying they will be about 6.5%. more spending on green initiatives. a maturing of the economy, is everything being set out is indeed transparent? tim: obviously from the economic targets we have already heard about this morning, there is a large degree of continuity in chinese policy planning for the next year. that's not really surprising, because we had the big party congress towards the end of last year. halfway through the planning cycle. for continuity, overall economic targets, not very surprising. aim by 2020e was to double gdp from 2010, so 6.5% is pretty much what they

need to achieve that on-time. what will be more interesting over the next couple of weeks is the changes politically, the governance changes, constitutional changes, personnel appointments, and this is really important f, because this national people's congress comes after the big party congress last october. rishaad: how much is it a rubberstamping body? tim: it is pretty much a rubberstamping body. we don't see much dissent from the national people's congress. the three gorges dam in the 1990's was the last time a significant number of people raised their hands in opposition, but it still passed. we are not expecting anything to be really challenged over the next couple weeks. rishaad: so no pushback on xi jinping's plans to have an indefinite grasp on the reins of power? tim: the deal on the constitutional revision is only done. this is the highest organ of

state power, but above this sits the party organ, where the real decisions are made. plenary meetings of the central committee, which happened just before this party congress, the reform was approved. it is going through. jinping wills xi stay on for life or just longer remains to be seen, but it looks certain he will do at least a third term. rishaad: stick around with us, through because of this hour. let's go to sydney and get the first word news headlines. china's biggest internet companies making headlines. wechat has over one billion users around the world. china to useants technology to improve links with hong kong.

he's calling for a system linking id's with phones to boost trade. ma also called for policies to enhance security in online financial services. >> the scale of money market funds have been grown increasingly bigger, and any strong volatility will cause substantial risk. many cash loan providers pose huge risks to the financial stability of the country. therefore i made the proposal suggesting the government improve financial regulation technologies using ai and big data to detect and prevent the illegal conducts. >> south korea is expected to send two high-level envoys to pyongyang, trying to persuade the north to open talks with the united states. the visit is aimed at the denuclearization of the divided peninsula, as well as improving ties between north and south. seoul says it will brief ndshington after the trip a

work closely with china and japan. theesa may has spoken to first ministers of scotland and wales, repeating her desire for a deal that would allow frictionless trade with the eu and ensuring no hard border between northern ireland and the republic, but the prime minister did not lay out how that will happen when the u.k. leaves the bloc in just over one year. angela merkel moves closer to a fourth term as chancellor with her official nomination on monday by the german president. frank-walter steinmeier will recommend her to the bundestag, putting an end to months of political paralysis. merkel's position strengthened when the social democrats voted to support her in a renewed version of the so-called grand coalition. global news 24 hours a day, powered by 2700 journalists and analysts in 120 countries i am paul allen. . this is bloomberg. rishaad: still ahead, we delve deeper into the key things from

the national people's congress, and how traders can possibly make money from it. this is bloomberg. ♪

rishaad: these are live images of what is happening at beijing, at the great hall of the people, as some call it, the hall of one voice. chinese premier li keqiang delivering the report at the start of the national people's congress. a growth target of 6.5% in place. on top of that, essentially curbs on pollution, curbs on reducing poverty and debt at the same time, when this economy goes on this long-term growth slowdown, which is of course ultimately where we are in the dialectic process of economic growth in the longer term.

monetary policy will remain neutral this year, ensuring liquidity is at reasonable and stable levels there. we will be getting in and out of what premier li keqiang has to say. moving to one other geopolitical story, affecting europe in particular, the euro swinging as exit polls show serv silvio berlusconi's center right bloc turning the majority of seats. the five star movement did better than expected. no group, this is italy after all, is seen winning an overall majority. annmarie is in rome. tell us what's going on at the moment. bring us up to speed with these developments. rish.ie: good morning, serious gridlock and a hung parliament, that's what italy's future holds right now. according to the polls and

latest projections. great note from soc gen, saying we need to remember these are just polls and projections, and in the past they have been very unreliable. i and at the five star party headquarters in rome. a bit of celebration here. lots of leaders of the party saying, now other parties need to come to us, no party can form a government without us, and that at the moment is correct. five-star having an incredible showing, just under 35%. rish, one really big point to make in terms of what this means for the whole of europe is half of italians, more than half of italians at this moment voted for antiestablishment, populist, eurosceptic parties. that is where italy stands right now. if you are on the merkel waking up for your fourth term, i imagine italy is top of the agenda. rishaad: she got her coalition organized, getting the spd

onboard. it has been notorious discord over the years. hugely difficult for italy to form a government with an outright majority. we have that difficulty. let's go to the key issues people were voting for in this campaign? annmarie: yes. speaking of political instability in italy, this is italy's 65th government since world war ii. soyears, 65 governments, political instability seems to be quite the norm in italy. some of the key issues, im migration, migrant crisis flowing into italy, one of the biggest issues. stagnant wages, and effect maybe there have been some reforms in the labor market, but a a lot of them were for temporary jobs, not long-term jobs. you see the youth fleeing italy,

going to other major cities for jobs. these are huge problems affecting italy. one of the biggest things happening in this election, one of the biggest points of contention was what we make of the european union referendum. the five star party wanted a referendum on the euro. they dialed back that tone. areut some parties campaigning on euro skepticism. in the business community, that has been a big talking point. rishaad: thank you so much. we will be back with her a little later on in the program. back to our guest, tim summers from chatham house. what happens in europe affects what goes on in china as well. tell us about the linkages there . tim: europe is quite important for china. rishaad: biggest trading partner. tim: although that will change. the asean southeast asian bloc is rapidly catching up. biggest trading partner, mature

businesses, mature brands. these are good partners for china. rishaad: china does not want to see instability, hence why -- tim: china, i think china wants to see a stable and strong europe. brexit was a little shocked to them. there are populist pressures in other countries. europe might be strong enough to pull through this, which i think is what the chinese are hoping. this is an important partnership. not something brought up in the national people's congress. tim: not specifically, but what we have seen from xi jinping, they will be some rhetoric about greater opening in the chinese economy. we after the party congress, greater stakes in financial businesses and so on. there may some more measures along those lines that would fit. rishaad: let's look at the way

china needs the eu, and vice versa, if we have this world going into a more protectionist phase, given what donald trump is doing with steel and aluminum just being the first salvo in a trade spat, hoping it is not a trade war. tim: since trump's announcement, eu and china again have been aligned on something in response to a u.s. position. we saw that previously on climate change, when trump said he would withdraw from the paris accord. this may bring the eu and china slightly closer together. the politics are quite difficult for china and europe at the moment. we have seen a shift in germany, more concerned, hawkish approach toward china. we have seen these debates about whether the belt and road is pushingxi jinping is really in europe's interest ot n -- or not. it will not be easy for china to develop a stronger relationship

with europe. rishaad: even though they have common interests. think anything will be mentioned with regard to what donald trump has done? the timing of him making this move is quite something as well. tim: we will not see anything for example in li keqiang report this morning, i don't think. we may see more general references to the international environment being complex and challenging, the sort of phraseology you get in these reports. that i expect we will see comments by government ministers, by spokespeople on the sidelines. after today's report, we have a couple weeks where there's a series of meetings, provincial delegations, ministerial briefings, and so on in beijing. that's the sort of platform where we will see chinese officials making comments about this. we already saw this yesterday with comments introducing the national people's congress, saying china doesn't want a trade war with the u.s. the may message. -- main message.

rishaad: what can china due to retaliate against washington? tim: i suppose it could engage in like for like measures. i kind of feel the chinese leadership wants to avoid doing that. rishaad: steel and aluminum don't make up much of the exports toward the united states anyway. tim: it will affect certain businesses, certain interests within china may be particularly hurt by that, but those are interests that are declining in the chinese system, rather than rising. we sea from the numbers this morning, faster growth in retail sales. we have seen they want to cut steel capacity anyway. this is not hitting at the heart of china's current forward-looking policy agenda. this is heading at the old china industries. rishaad: no doubt we will be discussing more on this over the course of the next half-hour. tim summers from chatham house. let's go back to what we have coming up.

it is about the national people's congress. going to look at some market reaction to some statements coming out of there. we also have, that time of the day, the start of the trading week in hong kong and china. this is bloomberg. ♪ mom you called?

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moment. as9 a.m. there, as well right here in hong kong as we count you down to the start of the first trading day of the week. npc, something market participants will have one eye on. on top of that, more protectionist pressure as donald trump continues to talk tough on trade. we also have italian elections, the results filtering through, looking like we could see some more from that man, silvio berlusconi. germany's std joins the grand coalition, meaning contin -- germany's spd joins the grand

coalition, meaning continuity there will we have more hawkish tones from the members of the fomc? let's not forget, a decision on interest rates in europe. on top of that, the all-important data in the united states as well, on friday, the jobs report, nonfarm payrolls. here is david. david: hong kong down, china up. it is early days. we will be watching out for a lot of individual sectors coming out of beijing, but broadly speaking hong kong seems more in line with what we see across the region. we will see what happens with shanghai a little later on. other thing i want to mention, let's look at these other spots and sectors we are watching out for here. beijing, things on the overcapacity side, they are looking to cut steel capacity by 30 million tons,

coal 150 million tons, and looking to increase defense spending, so one group of stocks he will want to watch closely. steelmakers a little higher, and coal. quickly checking in, property. a few lines coming out on this spcae, look -- space, looking to create or name an institution looking at housing, further clamping down on speculation. we are looking at automakers, t akes you back to the trade tariffs of jewish and, looking to -- traded tariff situation, looking to cut tariffs on areas in the consumer space. china mobile down .4%. china looking to bring down substantially the cost of internet on the mainland, whether those are roaming fees or mobile internet fees, 30% drop is what they are targeting there, and a lot of that comes

down to them wanting to develop further. tencent is a good example of that. they say wechat now has one billion users. very quickly, a look at the other big story we are following, italy. euro trading at the bottom of your screen, 1.23 and change at the moment. i would imagine the market reaction we will see from this, rish, really happen when the bond markets open up later on in london in europe, whether we see widening in that spread, italian over german. 10-year at 131 basis points. that could blow up to about 260 basis points, worst-case scenario, double the current level. a love to talk about when it comes to markets, and a big week ahead -- lot to talk about when it comes to markets, and a big week ahead, job numbers coming out on friday in the united states. , the big thing

dominating headlines in the united kingdom. we have moves on that, or do we? here's the first word news courtesy of pollen. spoken toesa may has the first ministers of scotland and wales after her latest speech on brexit, repeating her desire for a deal that allows frictionless trade with the eu, as well as ensuring no hard border between ireland -- northern ireland and the republic. the prime minister did not lay out how that will happen when the u.k. leaves the bloc in just over one year. the australian trade minister says tariffs like those proposed but i'm a on steel and aluminum will only reduce global prosperity. he told sky news australia is seeking an exemption from the proposed levies, but it is unclear if it will be granted. the australian industry group says the export dependent country could be among the biggest losers in a global trade war. nafta negotiators are said to

have reached a deal on transparency in a seventh round of talks in mexico city. they also wrapped up discussions on chemicals industry issues. however, president trump's latest trade threats could derail process -- progress. canada is the top exporter of steel and aluminum to the u.s., while mexico is the fourth biggest steel provider. black panther remains on top of the north american box office the third straight week, holding off new movies from jennifer lawrence and bruce willis. it took almost $66 million in the u.s. and canada, the third-best third weekend on record. black panther has now earned more than half $1 billion, surpassing that mark today's faster than star wars: the last jedi. global news powered by more than 2700 journalists and analysts in more than 120 countries. i am paul allen. this is bloomberg. rishaad: having a look at the national people's congress, a

look at what's happening at the moment in beijing. we have the growth target, and there has been an announcement they will be looking at a development plan for 2018 for the greater area surrounding shenzen, macau, hong kong as well. let's see what we can make of all this, head just outside where those pictures are coming from, the great hall of the people, joining tom mackenzie. om: really the top line is the growth number. 6.5%. about 6.5% for 2018. slightly different from 2017 in terms of the language. last year, they said about 6.5%, or above. they removed that last line, bloomberg economics suggesting the focus is on stability. the focus on deleveraging and d risking -- derisking, suggesting

policymakers are comfortable with a little more softness in the growth picture. most economists see 6.5% for 2018. the deficit target has come in %, to .6%, from 3% -- 2.6 from 3% last year, and a couple important lines in li keqiang's report, suggesting they may cut chinese tariffs on sutos, and that -- autos, and that they plan to open up some sectors, health care, telecoms, education. those are some highlights we have had so far. rishaad: military spending also on the up, tom? tom: yes. military spending coming up, 8.1%, up from last year. the chinese say over the weekend they were putting procurements

in place. though china does not threaten any of its neighbors, this will cause some concern. many analysts will say the real number is significant we hire. there is a lack of transparency, many would say, about military spending here in china. that has been summoned to watch. what else we are looking for in the days ahead are details around who might be heading up the new regulatory body we are expecting to be announced, the focus on trying to cut out some loopholes that have led to risks in the system, as well as some nominations, particularly to the pboc. li keqiang is still addressing the delegates in the great hall of people here behind me. rishaad: we will be back with you. the national people's congress, a key opportunity to gather valuable trading intelligence about the economy there. almost 3000 delegates there in beijing. how do you make money from the event?

can you make money from the event? let's discuss that with bloomberg editor emma o'brien. the first little tidbit coming out via the work report from li keqiang today. he covered a lot of ground, but one of the main things was the deleveraging drive, as tom mentioned, a key theme for china over the last year.it has really been rattled the bond market, benchmark yields nearing 4% last year. we due see a lot of specific commentary and policy on this front coming out of the two week meeting we just entered, that could exert even more pressure on that bond market, on debt trading, which has been squeezed a lot by the liquidity measures and the focus on deleveraging. we had premier li talking a lot about it this morning. he says the macro leverage level stable,kept basically

and there will be new regulatory moves to crack down on shadow banking and police web financing. keep an eye on the bond market, but also the insurers and big banks, they tend to benefit from talks about deleveraging because of the reform idea bolstering their asset quality. rishaad: emma, what about the provincial sessions? are there any highlights to be gleaned from there? emma: we have a raft of provincial sessions, both public and private, where lawmakers and other representatives from those regions, including businesspeople, discuss issues of importance to those various provinces and regions. some more interesting than others. obviously the bigger, richer ones, guangdong will be quite interesting. but this year all eyes are on

thean, the home to embattled and indebted conglomerate shedding assets to deal with debt problems. talksn the heinan front, may openther heinan up the gambling industry there. casinos are band on the mainland except in macau. that could have a significant impact if we get any development on that front, on those hong kong listed macau casinos. rishaad: emma o'brien in beijing for us. let's bring in dickie wong. tim summers is still with us. what do you make of what has happened at this npc so far? dickie: it came to knows surprise that chinese officials said in another round of 6.5% gdp growth like last year. this year --

rishaad: they did have a caveat saying they might exceed it. dickie: exactly. they set a lower target and an achievable target. i think that's a good thing for the stock market. if you put your investment strategist hat on, any take away from this? about donaldow trump's policy on steel and aluminum tariffs. nothing can stop donald trump's policy now. another thing i would focus on, the u.s. dollars and the renminbi in the future. i think the renminbi will remain stable in the long run, but might pull back a little bit in the short run. i do think the chinese government and the officials are optimistic and able to shift the economy from export driven to private sector. so i think they are doing a

better job in the last two years. tim: the new sectors -- rishaad: the new sectors, how exposed are they to what might be going on between the u.s. and china? dickie: huge difference, even compared to hong kong. most of my friends can use their mobiles for everything, basically on everything, taxis, etc. overseas, weent, have to bet money in those tech companies, because they are moving very fast. even compared to hong kong. they do notmy, if, pay cash anymore. rishaad: well behind in many regards. dickie: we are way behind. that's the problem. there are so many companies like tencent, alibaba.

rishaad: what tim was trying to allude to, we have all these companies in china, but many of them have been kind of blocked in the u.s.? dickie: that's the problem. buy thehy we have to chinese version of amazon, ebay, etc. rishaad: because the reverse is also true, is it not? dickie: they are protected. tim: there is a different picture across some of these companies. some have been more proactive. jack ma has been very proactive, huawei, so on. not allowed to operate in china, so quid pro quo. issuesse trade influence what you are doing? dickie: definitely the trade

tariffs trump's administration is saying on steel and aluminum will hurt the chinese economy. not very much. rishaad: one of the least exposed countries. dickie: exactly. so they are now setting a lower percentage of gdp growth, export on steel and aluminum, so they are cutting production to meet the target. i do think maybe some kind of negative effects on the overall chinese economy, but they are aware of this, so they are paying more attention on the private sector, especially the internet and technology sectors. rishaad: predicting retail sales growth of 10%. that's where the new china belongs, that shift toward qualitative rather than quantitative. dickie: they are not chasing the numbers, 7.5%, 8% like the past. they are not chasing that gdp

.rowth number they are chasing quality gdp growth, like last year. rishaad: consumer related as well. that is now bigger than the manufacturing side. this is where the new china belongs, ultimately. dickie: exactly. i do think the private sector, especially the consumer sector, are picking up. we saw tendencies last year. i was an overseas investor, i would bet my money not only into internet technology related companies, but also the private sector, consumer related as well. rishaad: dickie wong from kingston securities. tim summers stays with us. we at compass had pmi, 53.3 -- composite pmi, 53.3. we knew this would be a bit weaker.

54.7 the previous month, so slight move to the downside. pointing to a hung parliament in italy after the election on sunday. we will be in rome in a moment or two. this sis bloomberg. ♪

rishaad: exit polls show silver berlusconi's -- silvio berlusconi's bloc winning the most seats. the antiestablishment five-star movement doing better than expected, but no group is seen as winning an overall majority. that is pretty standard for italy. do tell us what the latest is at the moment. rish.ie: good morning,

standard for rome, for sure. this is their 65th government since the end of world war ii. prettys, 65 governments, normal to have instability in terms of politics here. we will have what looks like a hung parliament. italy, butdlock in not quite business as usual because you have more than 50% of italians voting for antiestablishment, eurosceptic, anti-migrant parties. a huge wave of populism we see tonight, if these projections and polls are confirmed, rish. rishaad: is there any fear for greater europe? how closely will angela merkel, now that she has secured her fourth term, how closely will she be looking at this? it was getting a little loud here.

angela merkel did just secure her fourth term. she will probably wake up and call emmanuel macron. these leaders fended off their own rise of populism in their respective countries, macron with le pen and merkel with the afd. there is this wave of populism that i am sure will spark some concern for the european leaders, but in italy there needs to be some sort of coalition to form a government, and the new election rules promote coalition building, so it is not like the five-star can take power. but you are seeing numbers that i am sure are very surprising. that's why it's not business as usual. you are seeing italians get out and vote for antiestablishment parties. star, they look like they could be one of the biggest parties at the end of all this, given some of the polls we are looking at? annmarie: that's right.

five star is likely to be the biggest party. berlusconi's center-right bloc is multiple parties, so in terms of one single party, the five star party is looking to be the leader, and that's why we are seeing at this headquarters many leaders of the party coming in to say, now other parties need to talk to us, and no one can govern without us. they are claiming a lot of seats. we are here still waiting for the leader of the party, demaio, wholuigi calls for a referendum on the euro, that he has been diving that bakley -- darling that back lately. dialing that back lately. we are awaiting an appearance here, a triumphant victory really for him and the five-star party. they were only founded in 2009,

and the first time they ran for office was 2013, so they are quite young. rishaad: indeed they are. thank you so much. you can also turn to your go to get t live commentary and analysis from bloomberg's expert editors. tim summers is with us, from chatham house. politics will be something, is something right at the heart of what's going on at the moment in beijing, is it not? tim: this national people's congress is really important, because of the political changes we are likely to see. we have an amendment to the constitution which will move the number of terms the president and vice president can do. although xi jinping gets his power from being the head of the party and head of the military commission primarily. there is not formal limits, but consensus norms built up that

leaders should not hold onto power for too long. so we kind of have a new world of chinese politics. expect xi jinping to stay on for longer. not quite sure how long that will be. rishaad: tell us about the personal changes? they are deeply political, some would argue. tim: the other thing we expect he vice president was someone who stood down from the politburo because he was too old in october of last year, succumbing back, possibly with -- so coming back, possibly with an important role managing the difficult u.s.-china relationship. we will see the reappointment of premier li keqiang. rishaad: has his power been eroded over the years? tim: the premier, the power is more in terms of implementing, working through the detail of policy. some of the government ministries are pretty important. the people's bank of china, the financial regulators. we will also see some new vice presidents -- vice premiers

appointed at this meeting. an important economic advisor to she jinping -- xi jinping. rishaad: definitely his profile has been raised. tim: he went to davos this year as china's representative. he has just been to washington.he could be a vice premier, even the head of the central bank. tohaad: his term is coming an end, so there we go. tim: it is time for a new head of the pboc, and it has been difficult for the leadership, to work out how to manage that transition. a a few other names have been in the fray. he seems to be on the rise. rishaad: is it just moving the deck chairs, or sending a message? tim: a couple messages. one is a sort of political message that governance needs to be improved. xi jinping saying we do not have

the right structures in place, still too much inefficiency and corruption in the system. the other message is about reform, and that is partly reforming government, but i expect we may see more of an the excel ration of the implementation of those reform of thes -- acceleration implementation of those reform measures. the fiscal system, for example. the fiscal deficit might fall next year, but the more interesting question is how money flows around within china's, located central, provincial, local government systems. more power might devolve to the local level. rishaad: at the same time, more power in the hands of one man given the changes to be allowed to remain indefinitely. are spinning this to something good, but there are road bumps ahead. we had supply-side reform.

where does that go? tim: there's always risks with longevity in politics. chinese recent history can tell us something about that. moreessage from xi is that time is needed to put in place the reforms he thinks are necessary. the chinese political system basically has not changed for the last 20 years, so some shifts may be are needed to deal with new challenges. we have a much bigger, more complex, more diverse economy, china with a bigger role on the from stage, as we can see the relationship with the u.s. and others providing new challenges for chinese leaders going forward. rishaad: military spending, very quickly, big news there? tim: military spending has gone up at a similar rate for a while. china is spending more relative to others than it was in the past. the more difficult question, what is the military capability? chinese armed forces have not seen action for a long time, and

warfare is changing, so what can china do? rishaad: tim, thank you so much for sticking around. tim summers from chatham house. we have a load of big names in the next hour on the bloomberg markets. ♪ ♪ mom, dad, can we talk?

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rishaad: china says the people's as the target is underway. beijing saying that it looked always defend its interests and over in europe, exit polls berlusconi silvio is leading the race in italy. traders assess the implications. i'm rishaad salam. this is "bloomberg markets."

rishaad: straight to the shape of the trading day. this is the any kay and the shanghai. composite saying they have another week lerching lower and lerching towards that technically and important 30,000 level. lots of news today. it's being reflected on what's being traded elsewhere. having a look at the performance in singapore. last time we checked we were down there. the jakarta composite just coming up online. it's up by .1 of 1%. kospi under a bit of pressure. lots of news. the national's people congress getting way in shay bing. we've got tensions as donald rump continues to talk trades. angela merkel is secure.

the italian election result coming through is we've got the polls showing that most people voted for populace parties. more from the fed this week. we've got liga shang. and we've got the reserve bank of australia. the e.c.b. we see the payroll report. let's take a look at the market at the moment. mark joins us. mark? mark: yeah, absolutely. this morning we are seeing a little bit of nose in the euro with the italian elections dominating the headlines. it will take time there. populist parties are getting more in the vote than expected. there's a slight tone of negativity but there will be a lot of noise in both directions and that overshadows the news which means america can lead for

a fourth term as experted. as you mentioned there are a lot of other events, e.c.b., e.o.j. and the payroll and the e.c.b. and china which they are looking positive so far. rishaad: thank you, mark. the euro at $1.23. look at our bloomberg blog. get a market rundown. there's commentary and bloomberg's expert editors. you can find out what's affecting your investments all the time. let's find out more on what's going on first word newswise as we go over to sidney and join paul allen for the latest events in beijing. paul: thanks, rish. the nationals people's congress opens in beijing. the annual reported admitted

last year's intention to hit a faster pace if possible he's signaled plans to rein the growth of death and the target at 2.6% of g.d.p. military spending will increase more than 8%, the most in three years. the euro is swinging as traders digest exit polls suggesting berlusconi is winning the most seats in italy. the five-star movement is seen better than expected. no group is seen winning an overall majority. however, exit polls are often wrong. angela merkel moves closer to a fourth term as chancellor later on monday with her official nomination by the german president. frank walter steinmire will bring an end to months of political negotiation and paralysis. merkel's position strengthened when they supported her in the

renewed version of the grand coalition. nafta gauchors have been said to have reached a deal in mexico city. the source says that also wrapped up discussion on chemicals industry issue. however president trump's latest trade threats could derail it. mexico is the fourth steel provider. global news 24 hours a day powered by more than 2,700 journalist and analysts. i'm paul allen. this is "bloomberg." rishaad: i'll bring your attention to one feature. it is our tv interactive function. you can also have a look at some of the functions that we do actually use or talk about. you can become part of the conversation by using in the instant bloomberg two messages during our programming. this is for bloomberg

subscribers only. do check it out. tv go.

rishaad: let's have a look at the latest headlines. china eastton has submitted a plan for partial private tiesing. the chairman said that the airline wants a more diverse ownership and says the plan would strengthen their position on the global stage. he also said that the carrier's 100% holding had yielded some ood results. indi will push ahead. it says the levies could negatively affect current production and expansion plans rising costs and ultimately prices. hyundai warned tariffs would

make the vehicles costlier but stopped short of saying that they could affect production plans. staying with the automotive world. volkswagen could be looking at options for a bond sale by its truck business. also since the meeting last week discussed way to give the unit access to capital markets including potentially changing the legal structure to a limited company. they've told bloomberg they're from a all options open start-up to a mature corporation. we've got of course, these results just filtering through very, very slowly. we're seeing just at the moment this grouping of political parties which have berlusconi behind them to some extent. theus it's making up the largest number of seats in the italian

particlement. we're going to be in rome having a look at where we are with all that. our next guest runs one of the biggest conglomerates in the philippines. our correspondent is linda arman is in manila with that gentleman. ms. linda -- or should i say lady? linda: well, it's a lady. we're talking about investments which posted record profits in 2017. can it sustain those numbers? the chair joins us today. kathy, always good to have you with us. record numbers look like you're going forward or not? >> i think it is. we are looking to the volatility of the environment which is more geo political and climate change. so barring that i think we're on track. haslinda: the peso is very week in the last 12 months in asia. how's that playing out in your

businesses? >> we're not worried. we're not worried. it's not -- we take it as part of -- part of the plan. so i think it will -- it will stop. >> you had record numbers last year but when you take a look at the retail sector which is one of the key sectors of your business, it showed a drop, a 2% drop. can you rectify that going forward? >> yesle i think so. i think it's just some accounting entry that we did, we cleaned up. and so i -- the revenue is ok. and it's only the bottom line. so after cleaning up, i think it will be ok next year. >> what's the outlook for retail is now at e-comet prevalent in the philippines. >> we're till doing good numbers. the consumption up. despite all the e commerce we are on track.

people still come to us. and we're going to go into omni channel which be online or off -line. we'll be able to service or customers. haslinda: you terminated goldy lock. are you looking to terminate 12, 20 months down the road? >> depends. depends on opportunities. there might be other tons that comes our way. so we are still -- we're still optimistic. >> because when you take a look at your rivals, they're acquiring companies in a very aggressive way. what do you make of the competition? and how do you see the space developping? >> for us, we have to look at companys that will add value to -- i mean, additional values to our company. we really look at them very carefully. it's not just a matter of just sites. >> how about in terms of the

property sector? >> we're still doing ok -- >> what's ok? >> the revenue and the income are ok. so i guess they'll be doing fine. >> what opportunities do you see because of the government's build, build, build strategy? >> that's a very good program for us. where they build, we will be able to do more property business, property development. >> are you concerned with inflation in the country? >> yes, we are. but you know, we have actually put that into considerations a few years -- a couple of years ago. we know the sprest rate will go up. -- interest rate will go up. we know there will be inflations. we sort of planned with those in -- with those factors. >> what do you see as the biggest risk for the philippine economy going forward? given that we have a weak peso nd a government that's jarring

a lot from its current account? >> well, the consumption is still up. and also the construction is still up. the population is up. so there's still a lot of market. so where -- what we're worried about is more on the global side which is the geo political. i mean, could be on the original site. and also the climate change which storms -- big storms and those -- those unexpected disaster may come in. and we have -- we have been preparing for it as well. we have to take all of those factors into our planning. >> how about this nerms of volatility? do you think the economy is strong enough and stable enough to overcome the volatility we have seen? >> i think so. s long as we don't have a huge bombing in dollar. just like in 2008, we were ok because as a country we don't have a lot of borrowing in

dollars. >> s.m. investments vice champlete she was ranked the 50 most powerful women in asia. rish? rishaad: thank you very much. haslinda there in manila. moving now from manila to rome we're seeing movement in the currency involving the euro mark. -- market. the anti-establishment movement initity is performing way better than anticipated. it could be the largest party there in parliament. we have no group seen winning an overall major. bloomberg reporter is there in rome. what developments have there been? >> good morning, rish. i think the first thing we seen them talk about is the democratic party.

we have the secretary coming out aying yes, we demeet defeat. renzi, the former prime minister will not talk about the result until things are final. these are just projections and exit polls. stock jin put out a great report saying remember in the past these polls have been wrong. but likely right now, everything -- all the data we're seeing is matching up, every hour, all the new data we're seeing. but that is one key thing. the democratic party had a really weak showing. we have a deputy sebtary admitting defeat. i'm here at the five-star party head quarters. it's been a lot of excitement and victory for this party. they're projected to be the biggest single party in parliament. though not enough to govern and form a government. rishaad: what is the role of silvio berlusconi?

he's behind the scenes it seems everywhere. >> yeah, that's right. he's barred from becoming prime nister due to criminal allegations, i guess, you could say. he has been what they're calling the king-maker. he has been behind the scenes back in action, discussing how coalitions could potentially work. but rish, the polls we're seeing now and the projections we're forza now, his party italia did much worse. whoever gets the most votes out of these two partys that make up the majority of the center right coalition will be able to put their person ahead for premiership. so even though he couldn't run and be the premier anyway because he's barred from

governing, his party is likely not to see premiership either because the league has done so well. they're another standout party to remember from this night. and actually steve bannon is in italy to support salvini, the leader of the league. rishaad: investors -- let's get to stock and trade. they've been pretty sanguine during all these elections, right? >> yeah, they have been. but i mean, if you look at italy's government over the past 73 years since the end of world war ii, they're voting on their 65th government. divide that up. that's like what, every year and two to three months? i think political instability is the norm of italy. and the projection that we saw before the blackout happened in early february showed a hung

parliamentary scenario. even though we are seeing populism rise through italy, we are going to see gridlock in the parliament. -- that's the home with the home markets, rish. rishaad: you can comment on the analysis blue our bloomberg expert editors. there we go. this is "bloomberg."

rishaad: back with bloomberg margarets. -- markets. they've got their fingers in real estate to education. the company also looks at disruptive technology. solar technology company.

we are in manila. haslinda, take it away? >> like you said one of the oldest conglomerates but pogging itself if the future. we talk about future technologies and syntek. it's good to have you with us. >> thank you very much. >> farther down the road ayela could be a technology company. >> not technology company but we are believers to give services to the customer in new ways. technology is changing delivery mechanisms and making things for accessible more cost effective. all our industries have to adapt to that and start using it in productive ways. are we look at acquisitions going forward? >> yes. we have a new company, a.c. industrial. and essentially it has a strong

ocus on the automotive structure. it's based out of the u.s. we bought into that company. has a small manufacturing arm in thailand but we're looking to expand it to the philippines. it's not just an ordinary solar technology. it's a grid-base technology that makes solar panels extremely light but very efficient in the way they transform sunlight into energy. sectors. s across would technology syntek be an important sector, be an important unit within the company? >> yeah, very much so. there are many sectors going through transformation because of technology. it's a big challenge to us of all in both the banking sector and traditional finance sector.

how to access and give services to a whole vast community in the philippines is a challenge to all of us. i think syntek -- and the changes that are taking place will enable us to do that. we've got ment between globe tell com with its small technology and part of the alibaba group to create the new structure that hopefully will give acksose customers in payment systems but on loans in the future at the price point and with the dynamic and infrastructure that's different than what you get today. our own bank is not staying asleep at the wheefment their building up a portfolio to the middle market. on two fronts we're testing out two new ways of doing things. and hopefully become much more inclusive than the way, i guess, we access or give access to

customers to their known needs. >> can you quantify what that would be five years down the road? >> well, right now, you know, we have, let's say, five million customers in the bank of the philippine islands. that should go up to 10 million customers. we were three million for many, many years. on the case of mint our goals are very large. many millions of customers is our goal. with 3 mill yofpbletfe can take that to 10, 15 million. that can give people access to loan at price points that are much more efficient than what they can access now, then we start to transform, i guess that whole industry for the consumer in the industry. >> ayala part of a consortium bidding for the new manila armen:. why not go it along? >> fist of all, the government s open to unsolicitted

services. all of us are capital list that open up the economies in tremendous ways. it's not just about tourism. it's about getting people in and out of the country in more efficient ways. and there's a lot catalytic effect that comes from airports that other companies were a little bit late to the game. so all oufs came together and said this is more than a business in and of itself. this is a key driver. rather than fight over it, let's do this together. but our resources in. be a very serious player and let the government understand they do have to use private funds to do it we hope they will do it in an efficient way. it will be one element where we can be of help to the government. infrastructure goals. >> $1le 0 billion infrastructure plan. very ambitious. here do you see other tons for ayala. >> we do have an infrastructure

group. we would like to continue to the infrastructure goals of the government. we have 6%, to 7% growth goal. if we can fix the network of the country, that goal will move up 6%, 7%. ll of these need much more seamless infrastructure net work. manila is a highly urbanized government. but 70% is driven by this area. we have to make it more flexible and move better ways rather than getting crowded and congestion. >> ayala, we're looking at a country that 7% growth going forward. it's a big challenge. but rish? >> rishaad: thank you so much. we'll be look at country targeting 6.5% that's the national people's congress

coming out of beijing. the rise of retail. do we think inflation calculations? more details on that. this is blootberg.

rishaad: just the time 10:29 a.m. here in hong kong and beijing. 11:30 in tokyo and 9:29 on sunday evening on the eastern seaboard of the united states. let's get straight to the market action as asia sets the agenda to some extent. the first ones who are trading are. -- who are trading. we continue to see pressure when it comes to equity we are heading lower. that regional benchmark about .5 of 1%. we are amid lows. the euro is the sign across the morning. we've seen a little bit of stablization.

we are getting closer to getting more headlines of italian elections. it's been on china in the last couple of hours or so. that growth at our around 6%. perhaps not much of a surprise. but o mitting that higher language seems to suggest that china is slowly but gradually taking away that policy punch bowl. we are continuing to see a bit here when it comes to the onshore and offshore about .3 of 1%. we did speak to the deputy governor lee gang who spoke to bloomberg about whether these trade tensions are going to ave to more depreciating pressuring. take a look at the market. size. seeing down 1 sheng high composite down

ont 10 of 1%. china will push forward with a property tax. that could mean a lot of unoccupied properties would likely be sold. some of the best performers of the past year continue to see more of an upside as much as 2%. trade tensions from china's part seems be abating a bit, rish. there are plans to cut import tariffs. and on a slash, the mobile data roaming fees for the financial, telcoa and education sectors. . but could be seeing some more upside in the future. large blanks likely be the winners of the total crack don of reforms and could improve on the qualities. >> thank you very much irks indeed. the foreign exchange is pretty stable after a few bumps it's

had of late. this as we've got one issue really dominating what's going on. prime minister is at the moment got a hard sell on her plate. let's find out that story from paul allen as we get to headlines. >> teresa may has spoken to the first ministers in of scotland. -- recapped her deal. the prime minister estimate didn't lay out how that would happen when the u.k. leaves the block in just over a year. the australian trade ministers says the tariffs on steel and alumn minute yum will only poverty. it could be among the biggest

losers in a global trade war. nafta negotiators have said to have reached a deal in a transparency due to finish on monday in mexico city. discusses.d up it could derail progress. canada is the top exporter of steel and alumn minute yum to the u.s. while mexico is fourth biggest steel provider. "black panther" remains on top for the third straight week holding off movies from jennifer lawrence and bruce willis. the third best third weekend on record. "black panther" has raked in 3 billion. i'm paul allen, this is bloomberg.

rishaad: china's set this growth target of 6.5% as leaders inyou are shood economic stability without hurting expansion that's where we can find china correspondent tom mckenzie. steven engel let's keep things up with you, tom. and let's go first to the great hall of people. you're just outside there the premier. he's been speak. what were the highlights from that? >> yeah, rish, i'm inside the great wall of the people where premier lee has been detailing the report the policy priorities for the chinese government. as you say the g.d.p. target was top of the list for investors. 6.5%. about 6.5% that's the target for 2018. compare that to 2018 when it was about 6.5% or higher.

and bloomberg economics suggesting then that policymakers are prepared for a moderate slowdown in growth as they continue in this leveraging and delisting campaign. quite significantly below the target that we got in 2017. bloomberg economic suggesting that the credit environment could be moderately less positive as this campaign continues. in terms of some of the sex is where we may see a lot little bit of action. the premier league talked a the education sector where foreign investors may be more welcome. where the doors may be open more widely. another key point, i think was a ne from this work record suggesting that tariffs may be reduced or scrapped. that is something that we'll be looking for more details on.

and in terms of the overcapacity drive and the cut to steel and coal over capacity, they detail lans to cut 30 million tons of steel. the target last year was 50 million tons of steel. a smaller target but this overcapacity cut program is still clearly in focus as part of this crackdown on pollution here in china. those are some of the top lines that will be coming out of this report delivered here in the great hall of the people. rishaad: tom you're inside. but let's go to steve who is utside tiananmen square. we've seen this beyond a second term giving him power. people say this is very significant. and behind you we've got a picture of the chairman. they put that picture with xi jinping next to him.

>> yeah, well, i won't go and speculate that that's going to happen especially any time soon. but xi jinping is establishing himself as a preeminent leader here in china. delegates where tom is huddled with all of those delegates. they have received san an explainer that would abolish the two-term, two five-year terms for the presidency. also keep in mind that the three main roles for the ps she has is not only the presidency but the chairmanmanship of the communist party and also the head of the meltary commission. you can argue that those two hold more weight. and those two positions, by the way, do not have term limits. so by abolishing or changing the constitution to allow them to potentially stay on as president

beyontu terms is in lockstep with his aims many people say to stay on at the head of the party and to stay on as, of course, head of the military. they will be have to voting on that over the next two weeks at the end of the national people's congress. 2/3 majority is needed by those nearly 3,000 delegates to approve that but this is wide wildly regarded as a foregone conclusion, a rubber stamp conclusion making body, if you will. so that is likely to happen. >> let's find out from tom. they're cementing thomas role geo politically speaking and opting in the defense button beyond its borders. >> rish, that's right. in the party back in october there was a clear change when president xi addressed his counterparts, i should say at the party congress back then

where china would take more of an assertive role on the global stage. and then we get this defense budget spending number. an increase of 8.1%. quite above what we saw last year. and a continuing investment in the military here. president xi, one o his key objections in 2012 was to reform china's military. it was something that many analysts would say it would be a difficult task to do because of the different factions involved. it seems he had made progress in that expect to modernize china's military. and clearly spending is a big part of that. spending more money on the air force and the navy and the army itself. a lot of analysts pointed out that that 8.1 number is probably conservative. there's not a lot of conservatory the way they spend on their military. the actual spending could be above that 8.1%. but certainly this ties in

president xi determination to modernize the military here in china. rishaad: let's move outside again, get to steve. steve, what's the air like today? we've got the greening of china taking place. environmental policies are certainly coming forward. that's taking its toll. we have quantitative plus qualitative growth. the same time how do they de-risk the economy? tell us about that. >> it's actually a pleasant day here in beijing. when we flew in here yesterday, over ui quality index was 100. the air has cleared up a little bit. so the pollution efforts going to be intensified. but there are some head winds.

they want to maintain the steady pace of growth while the derisk the economy they say. and spending on the cleanup of the environment is going to cost munch as we've seen as well, they're going to lower the percent of the budget deficit as a percentage of g.d.p. down to 2.6%. we were expecting about 2.9%. so you have that fiscal stimulus coming off the front burner as well as monitor stimulus because m.2 supply is targeted to stay the same as it was last year as well. and then you have to keep in mind, rish, that you have the potential of significant trade tedgeses with a significant trade artner and that -- risk with a significant trade partner and the trade wars. thisier's full year growth -- -- this year's full year growth -- which surprised in 2017.

rishaad: thank you so, steve. teve engel in tenman square. -- ten man square. inity yen ackenzie man square. >> reality moment which has been transforming that country but asia as well with generally consumption patents chaining. that's causing the government to reflect as the current measure remains the most accurate. south korea has more than doubled the numbers of products it surveys online. indian look at the yea to nclude online sales into its inflation index. nda what gives here? >> we've seen this before where it's called the amazon effect. but e commerce is booming in asia on the back of asia's

middle-class. we've seen people the way they market goods online. and in truth, policymakers don't know what to make of it. is this having any material impact on prices, on inflation. rishaad: what does it mean? people are trying to get grips ointment >> nobody is suggesting that it's going to transform inflation in a region where the price of oils and monsoons dominate. but it's a factor. roishr rishaad: do we have a policy result. do they have any policymakers on this? >> you mentioned south korea, india. japan has a task force. they're looking at ways to get a handle on this. these asian nations are doing the same. they are trying to measure this in a better way. they're only at the beginning o this structural change and they're trying to figure out

what it's impack. rishaad: thank you very much. our chief asia economic correspondent. coming up, the trump administration showing little sign to water down the trade tariffs despite protests. more on that. this is bloomberg.

♪ rishaad: we're back. president trump showing no signs of backing away from threatened tariffs on steel and aluminum imports tweet tweeting that it's time for a change. william ross defended his boss's actions. >> what the president is trying to do is to level the playing field and bring jobs back to u.s. this is about jobs. that's the real purpose of the whole thing. and it's also about national security as defined by the 232.

that's the legal basis for putting these particular tariffs on. rishaad: let's get more from our editor jody schneider. how controversial are these tariffs and within the republican party? >> yes, they've proven to be very controversial since he was looking at doing this. both the chairman -- both the house speaker paul ryan and the senate of the senate finance committee orin hatch said they wanted the president to reconsider that there could be severe unintended consequences of both steel and aluminum. and then we heard this weekend from kevin brady who is the chairman of the house ways and means committee. he happens to be in mexico city where they're in the seventh

round of negotiating the free trade agreement. he said canada and mexico should be exempted from these. >> who is likely to be exempted? what is the administration position on this? perhaps there are signs throughout that maybe donald trump changing his mind about some aspects of this? >> yeah, there had been some talk that well, maybe he would back-off after making the point that he needed. but over the weekend he had a number of trade advisors on talk shows and they all seem to be saying there are not going to be exemptions or car vows for allies. there may be for certain industries but they were holding very firm to the idea that ithout these -- the u.s. aluminum steel companies are in distress. they are making a america first argument.

rishaad: there's a lot of confusion and apprehension abroad and at home. let's talk to a former u.s. trade negotiator. he joins us from bangkok. what are you making of all of this steven first? steve: well, let's start off by saying for any person who considers to be a supporter of free trade the imposition of tariffs is not good news in the case of steel and aluminum tariffs there are a number of concerns. these tariffs are going to wide variety of industries. i'm thinking about automotive, oil and gas and construction. there's a strong likelihood that the action could result in retalltory measures being taken by u.s. trading partners. this could range from filing dispute cases at the w.t.o. to

challenge the tariffs or it could include taking unilateral actions under domestic trade law. the fact that these tariffs are being instituted under section 232, national security grounds, also at least potentially can open a pandora's box here if other countries feel now that they are permitted to take similar actions on the basis of national security. so all these concerns are absolutely legitimate, but i think it is important to understand how we got into this situation in the first place. and we got here as a result of industry policies which have caused a global oversupply of steel and unfair trade practices which has facilitated that production to get ex-pored into other marks. those are the real issues. rishaad: how real are those issues that some other countries have engaged in these illegal practices? i'm not sure whether that

applies to steal and aluminum. perhaps it doesn't apply to canada. i don't know. >> well, look, certainly we know there are country that are heavily subsidized. they are william to dump abroad. and we've got nominal enterprises that can affect market considerses. rishaad: that's absolutely the case here as well. so what will -- in your view can this mark off a retaliation from other countries? and will that happen? what are chances of this happening in results in protectionism globally speaking in a trade war arguably? >> personally i've never been comfortable with the term "trade

war." but we are looking at an escalation in trade tensions. let's everybody just kind of take a deep breath here. thus far, all we have is an announcement from the president and a fairly general announcement from the president. he has not yet signed any orders. and all of the details on how these tariffs would be implemented. would there be exemptions or not ex-senchingses, carveouts? we don't know any of this. although it's concerning and the possibility that we might be headed to heightened trade sention tensions might be real. let's take a deep breath and see where we go from this. rishaad: canada is the biggest -other. of iron if you impose tariffs coming from canada is nafta dead very quickly? >> i'm sorry?

rishaad: if you impose tariffs on a state of importing to the united states such as canada which is part of nafta, does that kill-off nafta by doing so? >> i see. well, first, you made an excellent point where is the primary steel exporters into the united states are countrys that would typically be considered close partners and allies of the united states. canada, japan, the e.u., etc. which does raise a few questions about the national security basis for implementing these tariffs. in terms of what the possible spill-over effect to nafta would be, i think it would be an overstatement to say that this would kill nafta. rishaad: steve? sorry b we're just out of time. i'm so sorry. steven ohlsson from the henry foundation in bangkok. more on the way. this is bloomberg.

rishaad: let's show you what's coming up ahead? david is going to take over and having some of the big stories so far. lots of politics to talk about. n.p.c., italy and on. >> yes. alicia guerrero has some strong views on the work report.

you know, they didn't exactly address some of the structural issues. that's going to be a big problem. they had a report on what products will hit china if they choose to do so. sometimes the steel, not really so far. sonny dominguez is the finance secretary will join us to talk about looking to raise money in the japanese bond marks. so all those things to discuss tariffs, trade. speech the premier ended as well. that's bloomberg markets. the next hour with david ingles.

david: it is almost 11:00 in hong kong. i'm david ingles. welcome. ♪ david: here we go. center-right group leading. they continue to assess the implications. we did see -- >> i am here at the great hall

of the people at the start of the national people's congress. the annual gathering of china's legislature. it is day one. we will bring you all the details from beijing. in the mcsweeney look at market. all of that when you look at the market. we are still a few hours away from the open in london. about .6%. to let's look at some of the other things we are following. 105.r-yen gold is catching a little bit. lots of news to consider from italy to china.

very heavy. lots of decisions and gdp releases. let's get you an update with the first word news. tencent says more than a billion users around the world want china to use technology to improve personal and business links with hong kong. calling for an id system to boost regional trade. speaking ahead of the national people's congress in beijing, calling for policies to enhance security. >> the skill of money market funds have been growing increasingly bigger. many cash loan providers also pose huge recs to the financial -- risk to financial stability.

to detect and prevent a local conduct. paul: trying to persuade the north to open talks with the united states. president moon says their aim is the denuclearization. they say they will brief washington after the trip. master negotiators are said to have reached a deal on transparency in a second round of talks due to finish on monday. they have wrapped up discussions on issues. president trump's latest trade threats could derail progress areas -- progress. mexico is the fourth biggest still provider. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm paul allen. this is bloomberg. david: our top story is china's

setting a 2018 growth target of 6.5%. annual report, so the key omission was last year's intentions to hit a faster pace. trying to rein in the growth of debt and a slower deficit target. they are looking to up military spending to more than 8% compared to last year. let's get it over to beijing. tom mackenzie is that the hall of the people in the chinese capital. from what take away was announced coming out of china. really, as he summarized and as bloomberg economics has said, this is another move

towards taking the punch bowl away in china. we had expansion that has started to slow at the edges. supply to be in line with what we saw in 2017. the budget deficit target has been reduced to 2.6% from 3%. there will be less credit support for the economy. some of the key takeaways are coming out of these announcements around sector changes. they would be moved to open up the health care sector and telecom center -- sector. the tesla has been fighting very hard to set up outside shanghai. they struggled because they wanted to have full ownership of that facility. today the shanghai government has not agreed on that. will that be a boost for tells of opportunity -- has lot's

opportunity -- tesla's opportunities in china? maybe this is tied to the greater opening around that sector. those in theshing next few days to see if we can get a bit more that investors can hang their hats on. we also heard that potentially they will be removing or tariffs onbsidies or autos. another potential positive for foreign investors and businesses . we also talked about the capacity. they said they would cut back on steel, at least 150 tons. david: tom, this time of the year, housing markets a fairly

hot issue. have they said anything about their plans for the housing market russian mark -- housing market? they reemphasize the property markets will be used as a form of speculation. a couple key points beyond that emphasis were moves to accelerate the development. most important take away is this proposal. factoruld put a cooling on some of the developers. that proposal will be put forward. we will be pushing for more details. potentially significant implications for developments in china. he will be -- david: he will be staying with us. let's bring in our guest for this hour.

a lot of different parts. tothing that stands out you? -- they might have been rushed in there. i think this is just the beginning. stay tuned and wait for me. . am coming with reforms i think that is what it is. it is not well thought were organized. -- war organized. what has been announced sounds like u.s. it is not global. response is just a from china. david: in terms of the , thatists -- tariffs

rarely does anything to the trade deficit. what would it be when it comes to the bilateral relationship? >> steel and a little mom did not matter -- and aluminum do not matter much. shows what hurts. china's reaction to that is exactly the same. itically, a component of animal food which hurts texas. they are all playing where it hurts. trump cannot really do that so far because it would hit -- hurt the u.s. economy. of u.s. that the 50%

trade deficit with china. we have two categories. one is input to the production chain in the u.s., so it would hurt u.s. companies. -- it is hard for a country to hurt back because you depend on china. i think that is why the u.s. approach to this trade war is misplaced. david: we heard a little bit about it from the report. they're looking to address the old population. china has 300 million people below 20. we have 600 million above the age of 40. that is a big problem they're having. is it too late for them? >> it is too late for most

countries. china is a developing country with world demographics. it has not yet come up with a pool. external assets. it is important because you do not depend on your low growth, low rates or low returns on assets. understood that. that is why they are buying everywhere. to feed all ofny those. you are right. it is coming too early at a myself -- at a massive pace for china. it is very clear to me that when they talk about opening, they , but open here or there

that is all. they are talking about opening for the world upward. insideed some opening up . this is a bargaining process. they cannot go down. that is what it is. it is about china going out. whoever thinks that process is over, i think they are wrong. it is still at full speed. it has been for many years. tom: this is tom in beijing. many of us have been surprised by the extent of the pollution crackdown in china. they said they will spend about 20% increase on pollution measures. what are the implications for commodities? >> they will not be pleased. that is what is going to happen

with the rest of the world. the strategies, thinking about it, i am happy about that. i am happy about china doing that. the rest of the world will continue to follow. that is where we should all be heading. china has to make sure they are among the leading producers of such energy-saving. it is a win for them as well. david: you are staying with us. tom, out of beijing. it will continue our conversation in a few minutes. we will also be speaking with a philippine secretary live out of manila. that is an exclusive interview. this is bloomberg. ♪

ared: apart from china, we looking at the story developing and italy. we are coming off a live today. the right block winning the biggest seat in the italian legislation. pushing centerleft into third place right now. we are joined from rome with a reporter who has been following a story all night there. a very good morning to you. day for five star. they are starting to die down now.

the leader will not be speaking until later this afternoon in rome. they have been celebrating all night. this has been a victorious night for the five-star movement, the anti-establishment party. other parties come together to form bigger coalitions, but no government can happen with what we are seeing now without the five-star party. a serious gridlock for italian politics. david: what is new? we could be asking the same question in the election going back 50 years. why is it so difficult for consistency there in italy? thing, especially for the selection, they changed the election laws that promote coalition. even though the five-star movement got the most votes as a

party, they do not have enough majority to form a government. promoted coalition building is very difficult. although it is this is as usual in the sense that we have a honk parliament,- hung we saw sweeping antiestablishment populist coming eurosceptic parties come to power, led by the five-star movement. they were calling it his block. he is very well known. the lead is actually another standout party and winner of this election. member of that -- david: she is lived out of rome. let's bring our guest back into the conversation. ia is still with us.

you to put on ask hat and tell us what will change in italy. nothing has really changed. the has always been massive coalition governments. the election allows for more coalitions, which is a pity because it might well be that they do not form the government. whates not really matter concerns europe or italy. they were on a track for reform and they cannot deviate.

i think it is over. we are going to bring up a chart. we did a survey a few days back. essentially what this tells us is the worst-case scenario is the spread -- red. we were talking earlier. >> italy has the third largest after japan. it is pretty high. of a high advantage holding of domestic debt holders. it is more stable. it comes to the point where the is itns may wonder what

up for us? there would be selloffs by italians. that would be a big issue. we have not seen any of that before the election. now we come to the reality that italy is not going to grow or reform. think about what they have announced, which is massive reduction in taxes, income taxes . the other is minimum income for everyone. wherever you go, the fiscal debt will increase. 66 billion in interest payments. the scale is massive. it is not dominated by the hedge fund. we will come back to it.

it is more of a structural issue. they basically have such a large very low growth. it just is not possible. david: they do not have the currency to make them more competitive. a lot of their debt is also held within the country, which is why we are not panicking over the country's debt load. why is governor kuroda talking about debt? least japanall, at has growth, which italy does not. italy is tied to the euro. use -- it is not going in the direction of bringing inflation back to its target. i think they can. and the lower house, i

think they will continue. he has only said that 2019 will be the time of less tax. think in a nutshell -- david: do they have a communications issue or credibility issue? what do they have to pull out of the hat? >> i think they do have a communication issue because they have to targets. they have to communicate. that is a price target and they have a quantity; it. quantity semi-target.

we keep looking at where the rate is. they need to clarify what is their operational target to reach their ultimate goal, which is inflation. the minute they do that, it will be clear. since we are talking about central banks, i want to ask you one last question. the pboc, part of the report came out. they said they will improve the mechanisms. pbocthat tell me that the will not be moving to a rise anytime soon? >> we were not expecting a rate hike is of the mechanisms. more -- whatever the smaller banks, the smaller companies customers or

providers, the rate is so much higher than what the pboc is announcing. why would the pboc make it even harder? i do not think they can afford higher rate. it would certainly harm the smaller businesses. that growthld us will be high. david: the other side of the equation. >> first of all, it is hard to tell. it is not very informative because they do a lot of targeting. banks in china going lend back to--

those starving for liquidity? that is the deal. that is what they need to do. make sure those banks will fail and the quiddity will continue. they need to clarify that no one will go under them. all right. and do so much. the chief economist for the asia-pacific. let's get you a update on the headlines. 50% next fiscal year. the third-largest banking group. institutional investors are stepping up purchases of foreign bank loads. those loans can be harder to manage. shares and retail plunged in sydney after the first half

fell. it is revealed -- it also suspended. on to deals here. thatberg has been told they are in talks. a deal could be announced in the coming days, which would be the biggest since 2015. -- prices begin to increase after last year's heavy losses. we are heading into the lunch break on the chinese day. that the pain is

being most fell in hong kong. down 1.5%. we open also comes next. also comes next. ♪

♪ you are looking at some live pictures from tiananmen square in beijing, looking at the great hall of the people where the powers that the are gathered to map out the country's path. 6.5% is the target for growth. bringre also looking to the deficit down as a percentage of gdp. property, theyt are looking to continue cutting down on speculation and looking to take up overcapacity from steel and coal. ,hen it comes to the internet

keeping retail sales 10% -- they are looking to bring down the cost of the internet 30% when you look at mobile internet rates, so very interesting develop and's coming out of the chinese capital. in the meantime, let's get it over to paul allen for an update of your first word headlines. >> thanks. traders swinging as digest the election in italy. the five-star movement is performing better than expected, pushing the centerleft into third place. no group is seen as winning majority, however exit polls are often wrong. angela merkel holds on with spd

support. social democrats voted to support her in a renewed version of the so-called grand coalition. tariffs proposed by president trump on steel and aluminum will .nly reduce global prosperity cost to is seeking an exemption from the proposed levies, but it is unclear whether it will be granted. theindustry group says country could be among the biggest losers in a global trade war. panther remains on top at the north american box office for a third straight week. $66 million in the u.s. and canada come at the third best third weekend on record. black panther has raked in more than $1 billion. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries.

david: thank you. we are watching president trump and that increase in tariffs on both imported steel and aluminum. it will not affect china. canada might be if the most, probably korea as well. graphedtracked and the amount of imported steel into the united states and where month-to-month. january here, february figures, and essentially canada the orange bar. than is light blue, less two percent of steel imports into the united states. this does not mean that what comes out of china does not impact the u.s. essentially raw materials. when you talk about final steel products in places like mexico,

then export that into the united states, it tells you about how trade policies are given that a lot of these things are simply part of one fairly complex global supply chain. this is 2565 on your bloomberg. you can track this month to month. we will say this for you and revisit it to see how things change. speaking of trade, president trump's latest trade threats could derail progress in the latest round of nafta fo talks e to finish today. mike mckee has the latest from there. >> the nafta negotiations exist in a parallel world. in washington, they are talking tough. on sunday talk shows, officials defended the tariffs and offered veiled warnings about nafta's future. >> the president has made quite clear that if it comes to a dumb

deal or no deal, he is likely to opt for no deal. he does not need to take the terrible deal. that terrible deal is how we got here. >> in mexico city, the work goes on. negotiators have completed two more of 30 treaty chapters, slow, but it is progress. tariffshe president's and talk of a global trade war are casting a shadow over the talks. of theand mexico are two biggest suppliers of imported steel to the u.s. there is a broad call to exempt those countries from the steel and aluminum tariffs, but trump says trade advisor says they will be included. forhe exemption procedure particular cases where we need to have exemptions so business for some, butrd

at this time there are no country exclusions. and mexicansans have vowed to retaliate if they are it included, which would bode badly for nafta. arrived withizer his counterparts today. they will meet tomorrow to discuss the state of negotiations. to prevent that from trade, let's look at the philippines, a number of gas from in the lead today which we will hear from in a few moments, but to set this up and looking at the macro picture in the country, it is one of asia's brightest economies, but that has showed up in the currency because of this record trade deficit, record after record after record, that widening trade gap. at importsing surging and a weaker currency does not help the case, but it is also reflective. 51-50 twoding at 51-52 dollar-

peso. that tells you the incremental pain this long peso trade has been under for the last few months. widening deficit, not necessarily a good signal for the currency. on the philippines this morning on bloomberg tv looking at the business and the economic outlook. >> we are still doing good numbers. the consumption is still up. e-commerce is growing fast. . peopletill on track still come to us, and we will go into on the channel, which will -- omni channel, which will be able to service the customer online or off-line. >> there is a catalytic effect that comes from airports that other countries have understood.

some of us got together and said this is more than a business, this is a key driver to the country's growth. rather than fight over it, let's do this together and be a serious player and let the government understand they don't have to use public funds. we believe the private sector will do this in an efficient way. david: that was the chairman of ayala. now a quick check of the markets across the region. , risk off, at my gmm equities down, dollar down, commodities up on the back of a weaker dollar. we are pushing to $65 on brent come and broadly speaking it is a steep decline across the region, led by hong kong, just entering the last 20 minutes of trading there. s&p futures bottom right of your screen trading lower, .5%. indian markets open in a few

minutes. we will get to that when the cash market comes online. not exactly the best start to the week for equity markets. more coming up here. stay with us. this is bloomberg. ♪

david: welcome back. let's get a check of the business flash headlines and start with a look at noble, struggling, an understatement. the company losing a record of , abillion, but noble ceo

down 4%.hares macau.down 3% for wynn sellrt said he could not shares. wynn stepped down last month as wynn resortsceo ofwyn after allegations of misconduct. i up shins tomining russian consider a sale of its truck unit. include changing the structure. b w told bloomberg that is keeping all options open as it transitions from a startup to a

mature corporation. hyundai iscars, looking to rethink its u.s. operations as the president pushes ahead with steel and aluminum tariffs and levees could negatively impact expansion plans, raise costs and prices of its cars. hyundai's comments go beyond others, saying tariffs make vehicles costlier, but stop short saying it could affect production times. we will have the corporate news on top of the macro, politics, tariffs, trade, and taxes, let's see how that is filtering through into markets at this point. yvonne man is standing by. >> we're still seeing risk off. china the big focus. therts economic targets, index down. the biggest loser. we are heading lower. is original benchmark

slightly off the session lows, but we are seeing haven buying into the yen. indian rupees trading, some upside here, so raw dollar weakness and a little bit of wine into the chinese renminbi. looking ahead to the indian markets, some results coming through from northeastern states over the weekend. the bjp and its allies are showing gains and remote areas that have been under the power of the communist party in india for 25 years, so perhaps that could add to that could add to the sentiment in india today. nifty futures up .3%, the rupiah at 65.16, strong momentum ahead of national elections next year. these states only make up five seats in the lower house. we are looking ahead to trade tensions as well and how that inld impact india

particular, looking at steelmakers in the country. we see continued pressure tatably from the likes of at steel. they are a significant producer and both of these metals, so the that it will be expanded and used as a tariff barrier. margins. erode export is so complicated. india is not a big part of that, but it might be the start of something more serious. the other story is china. lots of lines coming out. his neck in a6.2% help the bond market. >> we have seen some respite in the bond market leading up to the national people's congress.

there were reports they would be cutting back to 2.9 percent, so 2.6% is a bigger cup than expected them a so perhaps this could ease some of the selloffs in bonds we saw last year. the question is how much longer can this actually last. most traders are saying this could be quite short-lived given c is over,the np liquidity constraints could come back into the market, so perhaps 4% yield could come back at some time. we've been talking about the buy ofby of the yen -- the yen. this is going to be a big cross to watch given how important the carry trade is. we are seeing it breach below that 200 day moving average. perhaps given political tensions and uncertainty in italy with of

this hunk parliament, we could see euro more weakness when it comes to the euro and it could lead to some trouble when it comes to the carry trade's. >> that is the risk trade. thank you so much for that. if you are a bloomberg subscriber, you can catch up on those two charts and some of the interviews you may have missed. function. her you can send us instant messages during our shows. check it out to her tv on your bloomberg. stay with us. this is bloomberg. ♪

of continuityree in chinese policy planning next

year is not surprising because we had the party congress towards the end of last year and we are halfway through the planning cycle, so for continuity and those overall economic targets, it is not surprising. >> following the 19th party congress and the working meeting , the pboc will put more emphasis on stability and reforms in that regard. we will see efforts to contain leverage and policies trying to diffuse some of the buildup of debt problems among financial and some of the off-balance-sheet activities. >> china was meant to be in the u.s. crosshairs, but the countries hit mostar canada and europe, both considering hitting back against the u.s. just at a time when canada, europe, and japan would like to work with the u.s. for further market openings inside china, so all going in the wrong direction

really. david: some comments from our developments in beijing and renewed trade tensions between the u.s. and china china now tok to tiananmen square and outside the great hall of the people. what will be the highlights from the speech. -- the speech? >> let me set the stage, the of the workreading report, a two-hour-long affair. last year it was 15,000 words in english and the so it takes a long time to go through. he finished the reading of it an hour ago. we have been waiting for the waterfall of cadres to come down the steps of the great hall of the people over here. someoors have opened and 3000 delegates are starting to trickle out.

we are hearing on the ground that they stayed a little longer inside the great whole of the people to hear great further talk and discussion about the constitutional changes that were blocked -- brought up last week. delegates got an explainer note about the constitutional changes to allow president xi jinping to stay be on the mandated two-term limit, the five-year term limits for each year. some extra discussion going on we are hearing right now, and then all these buses over here will start getting filled up with the delegates who will go off to lunch with their marching orders for the year. that sets the stage right now. it is an interesting one because the top line number, the gdp isber, of about 6.5% growth the same target as last year. however, they have oh minted the extra line that says -- omitted

the extra line that says we went alright higher growth like they did in 2017. they got 6.9% and surpassed the it. this year, no additional verbiage says they will take the excesses in the economy very seriously this year. david: i guess slightly more appetite if you will for pain. what is going to happen now? right now, again as i said, they will get their marching orders and start digesting what they have to do to meet the goals. there are a number of things that are very interesting. be relaxing the barriers for entry for foreigners into the telecom .ector, new energy vehicles the defense budget was higher than expected. we will run through these during the rest of the day as we continue our live coverage. david: right.

steve life out of beijing. let's cross over to manila, where we are joined by haslinda amin. this is an economy that is growing north of 6%, but there are challenges. inflation is one. let's speak to the finance secretary of the country. good to have you with us. inflation hit the highest level since 2014. are you concerned about inflation? the market seems to be. >> thank you for having me on your show. is one thatn figure has been anticipated. when we were discussing the tax reform package, we did mention to the public to expect an .7%.tion uptick of roughly that has happened. it comes from several factors,

but not really all from the tax reform. all, there has been an increase in oil prices that has boosted inflation rates. bit,eso has depreciated a basically caused by the increase in interest rates in the u.s. plus bad factors weather have affected prices of vegetables. season haszing affected the price of fish. strangely enough are successful efforts in collecting taxes from cigarettes has actually boosted our inflation rate .2%, so all have cost -- caused of the slight uptick. >> you talk about the peso which

has depreciated a bit, but it is the worst performer in asia over the past 12 months. are you not concerned about a depreciating currency? >> we have about 12 million people working abroad and they have families back home. they send their hard earned foreign currency back home. i think it benefits them a lot that the peso value has dropped a bit. when you save worst-performing currency, you look at a very short period of time. over 10 years, we are average for the whole of asia. , would like to repeat it probably we have 50 million foreignho rely on workers earnings. we have a very healthy business

process outsourcing industry, which brings in around $25 billion a year, and that helps us be more competitive. our exports have become more competitive in the world and have gone up significantly since the peso value has gone down. 6%philippine growth has been , but when you look at foreign direct investment, it is lagging nations like vietnam. why is that and will that be revised? problems isr basic we have been falling behind how a neighbors in infrastructure. it is very expensive to move goods in and out of the philippines, so that is why we are spending a lot in proving our logistics. we have better ports, airports, roads, bridges.

we think we will see a large increase in foreign direct investment. last year, we exceeded our so we hadalmost 10%, a $.7 billion come in last year. so we think that trend will improve. >> to pay for the infrastructure plan there are plans in the is -- for bond issuance issuances. when and how much? >> 25% of our plan infrastructure will come from increased taxes. the balance will come from borrowing. do, weborrowing we will will source about 75% locally from the local peso market and allow 25% from abroad. there.ave to leave it

thank you so much for that. secretary of finance for the philippines. this is bloomberg. ♪

♪ is china taking its foot off the gas yousef: as the national people's congress gives underway in beijing. the world's second-largest economy reduces the budget deficit target. we are live with the latest. voters punish main street parties for years of pain. what would a hung parliament mean for the euro? theresa may expressing concerns