Ep. 379: Paul Cavey on East Asia's AI Tech Boom, Semiconductor Exports, and Macro Dynamics

Bilal Hafeez (0:03)

Welcome to the Macro Hive Conversations Podcast. I'm Bilal Hafeez, Head of Strategy at Macro Hive. Before we dive in, a quick update. Following Macro Hive's acquisition by the BGC Group, BGC has launched a new regulated business called Macro Hive Markets. For the first time, onboarded clients can also access execution services via Macro Hive Markets. This new workflow will allow macro institutional investors to benefit from strategy and insights alongside access to global liquidity. Please contact Andrew Simon or Gail Motibrian on Bloomberg or click the link in the description below for more details on Macro Hive Markets and its service offering.

Now on to this episode's guest, Paul Cavey. Paul is a China-focused Asia economist with 25 years of experience covering the region. He now lives in Taipei and runs East Asia Economics, a firm specializing in macro research on China, Japan, Korea and Taiwan. Previously, he was a macro strategist in the global bond team at Wellington Management. Before that, he was head of China Economics at Macquarie Securities. And before that, he was chief China economist at the Economist Intelligence Unit. Now on to our conversation. Greetings and welcome, Paul. It's fantastic to have you back on the podcast show.

Paul Cavey (1:13)

Great. Thanks very much for inviting me again.

Bilal Hafeez (1:15)

Yeah.

It's unusual that I get somebody back on the show within 12 months, but it tells you how important your part of the world that you cover is. Are you surprised? I mean, you've covered China, Taiwan, Korea, Japan for many, many years. And of course, China has always been a focus, but it's quite remarkable that all four countries that you focus Korea, Taiwan, notably, but also Japan, they're really in focus now for global investors. Yeah.

Paul Cavey (1:40)

And I think in some ways, the smaller economies, I mean, obviously, China is always sort of important to people because it's big, but it doesn't have the same cyclical impact that it did, you know, 10 years ago. So, you know, you remember when, you know, the money supply growth numbers out of China were like one of the big macro indicators that everybody would look at. And now it sort of emerges and sort of, you know, it's just not important in a cyclical way, in the way that it was for like 10 or 15 years. Whereas I think, at least in terms of market stuff and macro sort of dynamics, the stuff that's going on in Taiwan and Korea is just fascinating, right? I think there's market opportunities, but it's also just from a economic development, sort of economic history perspective. I mean, it's fascinating what's going on in these places. So there's both sort of market stuff and, you know, just intellectually and all of that, like it's a really interesting place, places, economies, economic stories. And then obviously, Japan just sort of continues to warm up or, you know, things continue to develop. And so, yeah, so it's good, right? Like it's a good mix of places to be covering. I'm very fortunate in that sense.

Bilal Hafeez (2:51)

And where are you based these days?

Paul Cavey (2:53)

I'm in Taiwan.

Bilal Hafeez (2:54)

Does it feel palpable, like, you know, when you're there, like, located in Taiwan? Because on the outside, it just seems like there's this massive sort of boom going on.

Paul Cavey (3:03)

So there's different perspectives on it. So I think if you just look out, you know, like I live in central Taipei and, like, you look outside and, like, you know, the building quality in Taiwan is terrible in general, right? Like it's improving in recent years, but you can look outside. You know, people come here and say, you know, particularly 10 years ago, like, it doesn't look like high-tech, right? Like, that's not the vibe that Taiwan has. That said, you know, particularly driving around, you see a lot more sort of expensive cars than you used to, right? There's a lot of horses around and so on. So I think there are elements of it, this sort of extraordinary growth over the course of the last two to three years, and it is percolating down.

And then it kind of it will be one of my views, right? Like, I mean, people argue about this and say, you know, in Korea as well, like these semiconductor stories, they're very narrow, they don't affect the whole economy and so on. And I think in both Korea and Taiwan, but for different reasons, that wouldn't be my view. I think there's definite reasons to think these are definitely macro phenomenon and they do filter down to the broader economy. So yeah.