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Davos Latest: China Underscores Message of Cautious Optimism


After a three-year hiatus from its annual January slot, the business and financial elite returned to Davos to discuss urgent global issues including the climate crisis, political stability, the end of the era of cheap money, and food and energy security.

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(Bloomberg) — After a three-year hiatus from its annual January slot, the business and financial elite returned to Davos to discuss urgent global issues including the climate crisis, political stability, the end of the era of cheap money, and food and energy security.

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The overall tone on Tuesday was one of cautious optimism, as reflected in Chinese Vice Premier Liu He’s projection that the world’s second-largest economy will normalize as Covid-19 restrictions ease.

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The roster of political leaders was notably light this year as Russia’s war in Ukraine and tensions between the US and China meant that there was less room for feel-good public appearances.

The only leader from a Group of Seven country traveling to the event will be German Chancellor Olaf Scholz, who spoke with Bloomberg Editor-in-Chief John Micklethwait in Berlin on Tuesday. In that exclusive interview, Scholz said he does not believe Germany is headed for a recession, and that he is in talks with allies about sending tanks to Ukraine.

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Wednesday’s agenda includes conversations with Bank of America CEO Brian Moynihan, Nigeria Finance Minister Zainab Ahmed, Blackstone CEO Stephen Schwarzman, and the presidents of Costa Rica and Ecuador.

Key Developments

  • China Reassures Davos That Growth Will Rebound, Covid Has Peaked
  • Scholz Is in Talks With Allies About Sending Tanks to Ukraine
  • Citi’s Fraser Predicts Mild Recessions on Consumer Strength
  • OPEC Chief Is ‘Cautiously Optimistic’ About Global Economy

(All times CET)

Scholz Says Efforts to Replace Russian Gas Helped Economy (5:35 p.m.)

German Chancellor Olaf Scholz said Germany’s actions to replace Russian gas supplies — including building up gas storage and building LNG ports — have helped limit damage to the economy.

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“We showed that we are able to react to a very difficult situation,” he said in an interview with Bloomberg Editor-in-Chief John Micklethwait. “No one really expected we would easily survive a situation where there would be a complete stop to the supply of Russian gas.”

Scholz Says Germany Will Avoid Recession This Year (5:30 p.m.)

German Chancellor Olaf Scholz said Europe’s largest economy will avoid a recession this year thanks to its efforts to limit the impact of the region’s energy crisis on the economy.

“I’m absolutely convinced that this will not happen,” Scholz told Bloomberg TV on Tuesday ahead of a trip to Davos, when asked about a recession.

Meta’s Clegg Urges Tech Regulation That Doesn’t “Micromanage” (5:25 p.m.)

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Meta Platforms Inc. President of Global Affairs Nick Clegg urged policymakers to police technology companies based on “principles,” rather than an impulse to “micromanage” specifics like content policies or code changes.

Legislators “are not engineers, they’re not technologists, they don’t know how algorithms work or how AI works and so on and so forth,” Clegg said in an interview with Bloomberg TV. “Where things go wrong is where legislators try and impose some sort of static condition on technology that moves very fast. I suspect some of it won’t work very well and won’t stand the test of time and other bits of regulation will make sense and will stand the test of time.”

Engie Chairman Sees Risk to Europe From US Inflation Reduction Act (5:15 p.m.)

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Jean-Pierre Clamadieu, chairman of French utility Engie, said the US Inflation Reduction Act is a threat to Europe. “Europe needs to develop its own IRA,” he said on a panel at Davos. “The EU needs to react. This is something we absolutely need.”

Last year, the US passed legislation providing billions of clean energy subsidies that threaten to divert investment and business activity from Europe. Earlier, European Commission President Ursula von der Leyen said that “to keep European industry attractive, there is a need to be competitive with offers and incentives that are currently available outside the European Union.”

Finland, Sweden ‘Ticked All the Boxes’ for NATO Membership, Marin Says (4:50 p.m.)

Finland and Sweden have “ticked all the boxes” in their bid to join the North Atlantic Treaty Organization, Finland’s Prime Minister Sanna Marin said. Earlier, Swedish Foreign Minister Tobias Billstrom said he’s “very optimistic” that both countries will join soon.

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“We are fully prepared to become NATO members and there shouldn’t be obstacles on the way,” Marin said, referring to objections raised by Turkey.

Bridgewater’s Prince Says Boom-Bust Cycle is Back (4:30 p.m.) 

Bob Prince, co-chief investment officer of Bridgewater Associates, said the boom-bust cycle is back and that more people will need to lose their jobs before inflation will be brought under control.

“It is hard to say whether we are done with the tightening or if we will have another tightening,” Prince told Bloomberg TV in Davos. “What we can say is that the next shoe to drop has to be a decline in the economy, in particular, a contraction in the labor markets.”

Unilever Sees Post-Lockdown ‘Revenge Spending’ in China (4:20 p.m.)

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Unilever is gearing up for “revenge spending” by Chinese households now freed from three years of lockdown, Chief Executive Alan Jope said on a panel at Davos. China abruptly began reopening its economy late last year after Chinese President Xi Jinping repeatedly defended the strategy — including as recently as mid-October — despite the mounting economic costs.

“There’s 2 trillion of excess household savings in China right now,” said Jope, the outgoing CEO of the consumer goods group. “That’s going to show up in travel, in domestic consumption.”

Citi Summons Unproductive Remote Workers to Office for Coaching (4:15 p.m.)

Jane Fraser’s lunchtime interview at a Bloomberg event in Davos contained an intriguing nugget about how Citigroup Inc. is overseeing its remote workforce. The CEO said the lender, which maintains one of the more flexible policies on Wall Street, monitors productivity and brings under-performing remote workers back into the office for coaching.

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At the same event, Fraser also said the bank is expecting “mild recessions,” joining other Davos attendees in expressing tentative optimism about the global economy.

“The vulnerabilities that amplified previous recessions around the world are not present,” she said, noting that banks and consumer and corporate balance sheets are “in good shape.”

Germany ‘Doesn’t Have Unlimited Coffers’ (4 p.m.)

German Finance Minister Christian Lindner said his government won’t provide unlimited support to tackle the energy crisis.

“We have to think about an exit,” he told a panel chaired by Bloomberg TV’s Francine Lacqua. “We can’t allow ourselves to continue to spend these amounts,” he added. “Even Germany has its budgetary limits. It’s crucial to return to sustainable sound public finances.”

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Lindner, a fiscal hawk who leads the business-friendly FDP party, said the government likely won’t use all of the €200 billion of subsidies earmarked to cushion the impact of high energy prices on households and businesses.

‘Don’t Choose Extinction’ Dinosaur at Davos (3:30 pm)

Davos attendees are being greeted by a dinosaur warning about the risks of climate change.

The dinosaur bears the logo of The United Nations Development Programme urging people not to choose extinction.

Belgium Warns Against Loosening Aid Rules (2:45 p.m.)

Belgian Prime Minister Alexander De Croo warned against loosening the EU’s state-aid rules in response to the US climate law, after European Commission President Ursula von der Leyen suggested temporarily adapting the program to make it faster and simpler.

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“The answer can never be that we are going to loosen the state aid rules because then it becomes a race of who has the deepest pockets, and by definition Germany has deeper pockets than Belgium,” he said during a panel discussion. De Croo, who last week accused the US of trying to lure green industries across the Atlantic, shifted his tone on Tuesday and praised Washington for putting significant funding behind the clean energy transition. “Welcome to the club,” he said.

HKEX CEO Expects Wave of China Investment (2 p.m.)

Hong Kong’s financial markets are set to benefit from China’s retreat from its Covid Zero policy as retail investors on the mainland look to unload savings they’ve built up over years of lockdowns, according to HKEX Chief Executive Officer Nicolas Aguzin.

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“I do believe the post-Covid reopening of China is going to be the most consequential catalyst to global markets in 2023,” Aguzin said at a Bloomberg event. “With the reopening, the excessive saving have to be relocated somewhere, they can go travel and make purchases. I hope they can spend a good chunk of it in capital market.”

Coinbase Plans Operational Review (1:50 p.m.)

Coinbase Global Inc. will assess its operations this year to ensure they are appropriately-sized for each market, Faryar Shirzad, the crypto exchange’s chief policy officer, said in an interview.

The San Francisco-based firm said this month it would close the bulk of its operations in Japan as part of a move to adjust its international investment. It also plans to cut 20% of its workforce globally, equal to roughly 950 employees.

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Sanctions Aren’t Breaking Putin’s Russia (1:30 p.m.)

Sanctions against Russia will take years to bring Vladimir Putin to heel because oil and gas revenues are holding up, trade is being re-routed and the economy is well managed, according to the chief economist of the European Bank for Reconstruction and Development. Hopes that sanctions from US and Europe would tip the balance of power was “unrealistic,” Beata Javorcik said in an interview.

Russia’s resilience is visible in its economic performance, with the ruble currently 5% higher than before the war. Shortly after sanctions were announced, the International Monetary Fund forecast an 8.5% contraction in GDP in 2022. Its latest forecast from October was a fall of just 3.4%. For 2023, it expects the economy to shrink 2.3%. The EBRD has also upgraded its Russia outlook.

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The slow impact of sanctions is frustrating Ukrainian politicians. Oleksii Goncharenko, a member of the Ukrainian parliament who is in Davos, called for the assets of the 1,200 sanctioned Russians linked to the Putin regime to be seized and the money used to help fund Ukraine’s defense and reconstruction.

BlackRock to Set Up Ukraine Reconstruction Fund (1 p.m.)

Ukraine’s government hired BlackRock Inc. to help build a reconstruction fund for the country and the fund has “the whole team tasked,” Chief Executive Officer Larry Fink said in an interview with Bloomberg TV.

“Our job is to make sure that the opportunities for private capital can come to Ukraine, and we will have a fair and just return on that,” Fink said, adding that the fund is also helping Ukraine to hire the right team. “Our job is to make sure that the new Ukraine is an open society, open economy and capital will be there.”

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Ukrainian President Volodymyr Zelenskiy last year discussed having BlackRock provide free consultation to his government on both a fund and support for the country’s economy and also spoke with Fink at the end of December.

Regulation Is the Hot Topic for Crypto (12:35 p.m.)

At an event space branded by stablecoin operator Circle — signs touting that they solve “real-world problems” adorn the walls — panelists discussed their expectations for UK and European regulation over the next 18 months.

In the UK, “there’s going to be a real emphasis on consumer protection,” said Isabella Chase, senior policy adviser at TRM Labs. She noted the prevalence of frauds and scams that have affected investors there as a key consideration for regulators.

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Teana-Baker Taylor, Circle’s VP for policy and regulatory strategy for the UK and Europe, echoed the expected focus on consumer protection. She said she anticipated European regulators would also be paying close attention to market integrity, centralized trading platforms, and stablecoins.

Fink Says ESG Debate Has Turned Ugly (12:30 p.m.)

BlackRock’s Fink said the narrative around ESG investing has become ugly and is creating “huge polarization.” The 70-year-old has been outspoken about investing with environmental, social and governance goals, making it a focal point in his annual letters to the industry. 

BlackRock has become a political punching bag from forces on both ends of the spectrum, with some on the right alleging its policies harm the fossil-fuel industry and others on the left arguing it’s not doing enough to respond to climate change.

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“I’m taking this very seriously,” Fink said in a Bloomberg TV interview. “For the first time in my professional career, attacks are now personal. They’re trying to demonize the issues.” 

China Eyes Economic Normalization (12:25 p.m.)

China’s Liu took advantage of an international audience to explain where he sees the world’s second-largest economy heading as Covid-Zero restrictions are lifted. 

Liu spoke hours after economic data came in stronger than expected, but with most China watchers still anticipating a bumpy recovery. Liu said he expects the economy to return to normal, with imports and investment among the drivers. He acknowledged risks remain in the property market.

Winters Endorses UK’s Sunak (12 p.m.)

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UK Prime Minister Rishi Sunak won a ringing endorsement from Standard Chartered CEO Bill Winters. Speaking on the fringes of the meeting, Winters offered hesitant support for the UK but backed the premier.

The decision to leave the European Union was a “huge negative” but “given the disaster of Brexit, it’s getting better,” he told Bloomberg. On Sunak, a former fellow financier who is not attending the meetings, he said he was “ten out of ten.” Winters’ comments follow positive news on the UK from a survey of global chief executives by PWC this week. Britain is the third most important country for investment, equal with Germany and behind the US and China, the poll found. The UK has moved up the rankings over the last three years.

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Fed Rates ‘Won’t Return to Pre-Crisis Levels’ (12 p.m.)

Sticky inflation above the 2% target will force policy makers at the Federal Reserve to keep interest rates higher for longer, according to Harvard University professor Kenneth Rogoff.

“Inflation will eventually come down — maybe just to 2.5%, not to 2% — but interest rates aren’t going to come down to the same level as they were before,” Rogoff told Bloomberg TV. “I wouldn’t be surprised to have a Fed funds rate of 3.5% for quite a while from now.”

US Tank Decision Would Help Germany (11:45 a.m.)

A decision on sending Leopard battle tanks to Ukraine will be easier for Germany if the US sends equivalent vehicles to the war zone too, according to Economy Minister Robert Habeck.

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The Green Party politician, who is also the vice chancellor, told Bloomberg TV that he is in favor of authorizing the shipment of the tanks, and also some belonging to Poland and Finland. “If America will decide that they will bring battle tanks to Ukraine, that will make it easier for Germany,” Habeck said. “You know our history, and we are little bit more reluctant there for understandable reasons.”

Ukrainian Minister Sees Chance for Growth (11:30 a.m.)

Ukraine may record a small amount of growth this year after the nation’s economy shrank by less than initially expected in 2022, Economy Minister Yulia Svyrydenko told Bloomberg TV. She pegged last year’s contraction at just over 30%, less than the 50% plunge forecast by economists.

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Authorities should find a way to bring back Ukrainians from abroad, Svyrydenko said, adding that the country still needs power generators to help with electricity shortages caused by Russian missile attacks.

CS Bonuses ‘Won’t Look Great’ (11 a.m.)

Credit Suisse bankers ought not to expect significant bonuses after last year’s performance, Chairman Lehmann said in an interview with Bloomberg TV. “Obviously we had such a poor year, it was a horrifying year for Credit Suisse so I think people will have realistic expectations that it will not look great.”

Bloomberg reported last week that the Zurich-based bank is weighing cutting the bonus pool by about half compared with 2021. After a string of quarterly losses, the bank was forced to raise $4 billion in capital to fund a broad restructuring. The bank also suffered historic outflows of client funds, which Lehmann said had now “basically stopped.” “I’m rather optimistic for the remainder of the year,” he said.

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Downturn ‘Playing on Minds of CEOs’ (10:50 a.m.)

The size of the looming downturn is the biggest worry for company bosses this year, according to the head of professional services group Marsh & McLennan Cos Inc.

“Everyone’s worried about the risks of a recession — not just a mild recession but a hard landing later in the year,” John Doyle told Bloomberg TV. “Things look OK right now but it’s quite obvious that central banks’ top priority is tamping down inflation and that’s going to have an impact.”

OPEC Chief ‘Cautiously Optimistic’ (10:40 a.m.)

OPEC’s top official said he’s “cautiously optimistic” about the outlook for the global economy, as a recovery in oil demand in China is tempered by signs of fragility elsewhere.

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“China is a big economic powerhouse” and there are “good signals” as it ends Covid-related lockdowns, OPEC Secretary-General Haitham Al-Ghais said in an interview with Bloomberg Television at the World Economic Forum in Davos on Tuesday. The oil producers’ group will do “whatever it takes” to keep world crude markets in balance, he said. 

China Stirs Hope for Growth (10 a.m.)

China’s reopening and the resilience of advanced economies provide hope for the world to weather 2023 even if some struggle to grow, according to a panel on the prospect of a recession.

“If we look at the key event this year so far, definitely the reopening of China has to be the major event,” said Laura M Cha, chair of Hong Kong Exchanges and Clearing. “The lockdown of the last three years has created pent-up demand domestically, so I would see increased domestic consumption and of course the manufacturing sector will pick up. All those will be good factors for global growth.”

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Hamers Says High Inflation Here to Stay (9:40 a.m.)

UBS CEO Ralph Hamers said that 2023 will be the year of inflation and that even as it recedes each month, he expects it to remain much higher than in the past.

“Higher inflation rates are here to stay,” he told Bloomberg TV, adding that if Europe does fall into recession, it’s likely to be short and shallow. The Swiss bank is still in hiring mode, even as some competitors cut jobs, though is looking more at filling its most important vacancies, he added. “We are not in retrenchment mode on staff, we are hiring for critical jobs,” Hamers said.

Man U Targets the Davos Crowd (9:30 a.m.)

Manchester United is trying to score in Davos by taking over one of the shopfronts on the promenade, usually home to Wall Street banks and tech companies. The football club — a partner with the World Economic Forum since 2019 — is bringing goalkeeping legend Peter Schmeichel to meet delegates at a Tuesday nightcap this year.

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The American Glazer family that owns the club is looking for an investor and might be prepared to sell up, but that doesn’t seem to be the purpose of the Red Devils’ Alpine adventure. “We’re in Davos to explore ways to maximize the impact” of the team’s global fan base, a spokesperson said.

Lehmann Doesn’t See Recession (9:15 a.m.)

Credit Suisse Chairman Axel Lehmann said that the bank’s high net-worth clients still have plenty to invest, and he’s optimistic that a global recession can be avoided, with China reopening and “huge growth” coming from India.

“We are entering into a multipolar world, it is not a global recession,” Lehmann said on a panel with Bloomberg TV’s Francine Lacqua.

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